MarketingFree

Postmarketing - New principles for a new age

Soapbox time!  I've been thinking a lot about how the dramatic changes in the global economy might affect my job as a marketer, and I have had the privilege to speak to a number of companies about how they are rethinking marketing.  So, I thought I would share my ideas with you via a SlideShare preso.

Please check it out, send it to others who might like it, and rate it.  I would love to hear your comments and feedback here, or in SlideShare.

*Disclaimer:  this is a preso, meant to be presented, so it leaves a bit to the imagination.  I will delve deeper on some of the concepts in the coming days, in blog posts.  Enjoy!

Postmarketing - new principles for the postmarketing age

View more presentations from tbarr. (tags: media social)

Must read: Enough of Too Much

I've been thinking a lot recently about how these drastically different economic conditions are going to change marketing, and I came across this must read:  Productivity:  Enough of Too Much (free registration required - sorry!).  The author, J. Walker Smith, is President of a marketing research company - but, more importantly, has more degrees from UNC than I do (which means he must be right).

Key takeaway:  Less is the new more.

Stay-tuned to marketingfree, as I will be publishing a lot more thoughts on post-meltdown marketing.

Marketing vs. sales is so last year

I came across a biased, uninformed, largely inflammatory (but otherwise a great read!) BNET post today called How Technology Killed Marketing.  While Geoffrey James's description of how the Internet has changed marketing is largely on-point, the conclusion is dead-wrong.

James contends that the ability to track the effectiveness of every lead (closed-loop marketing) has exposed, and therefore killed, marketing.  Sorry Mr. James, but the opposite is true.  The ability to track the effectiveness of every lead ALL THE WAY through to every sales channel and person only make marketing both more effective and more strategic.  Now, good messaging, positioning, creative and programs can be more easily and more quickly distinguished from bad... and good sales channels and sales people can easily be distinguished from bad - based on the right metrics.

At a previous company that I worked for, sales continually pined for "more leads".  But once we had the right closed-loop marketing systems installed and integrated into SF.com, we began to uncover interesting truths, like: the good sales people indeed did need more leads, but the bad (and quiet) ones actually were sitting on leads that good people could have closed; some leads were going into "black holes" because of empty territories, cherry picking, or someone's assumption that "all trade-show leads are bad"; etc.

Armed with the right tools and data, marketers helped sales come up with better lead distribution (including pushing many to the channel), improve programs to improve lead quality, and actually expose under-performing sales resources.  Not exactly what Mr. James had in-mind, I think.

For smart companies, marketing vs. sales is not an issue any more.  As I have often said, marketing is just selling to many, while sales is marketing to one.  The skills might be different, but the goals are algined.  Let's bury the hatchet.

WFH: Weapons, Fear & Hopelessness

Ever since I have been of the house-buying age, I’ve been on a quest for the perfect home office.  Quiet, secluded, spacious... with large picture windows overlooking a natural scene... deer and bunnies munching on natural grasses surrounded by wildflowers, and a babbling stream feeding a waterfall gently cascading into a koi pond within a peaceful Zen garden. My office would have an eclectic mix of vintage antique finds in an office motif - an old credenza, with an antique typewriter... a quill and various-sized jars of ink... brass scales, and a Newton’s Cradle - and a functional, oversized modern desk, with lots of brushed steel and glass.  I would have a sitting area, with a lamp, vintage leather chairs, and a small table with brain-stimulating toys like a Rubik’s Cube and one of those Pin Art things that looks like a little tiny version of Uncle Fester’s bed.  I would have old, but not too old, copies of Inc., Fortune, and Wired (I’m still a Gen-X’er) laying neatly on an ottoman, and a small wooden bookshelf filled with classics like Art of the Deal, Crossing the Chasm, the Goal (I’m a big Herby fan) and Glengarry Glen Ross (just to make any sales guys squirm).  The lighting would be exquisite, with counter-balanced swing arm lamps and recessed halogens on a dimmer, and I would have a motion-detector so that when I entered the room, the lighting would ease on as I settled into my Aeron chair.  I would have a speakerphone with a wireless headset so that I could walk around the room on important calls, spinning stainless steel baoding balls in my hand and gazing into my nature scene, looking like a man at the helm of the universe.

It would be such a fabulous office that I would actually wake-up, take a shower, dress business casual, and put on loafers before entering the home office.  I would say to my wife, “Darling, I think I’ll work from home today so that I can get some things done without people bothering me.  I’ll be in ‘the home office’.”  She would respond, “Okay, sweetheart.  I’ll bring you a skinny latte and some steel-cut oats in a little while, and I’ll make sure that the kids don’t disturb you.”  And I would proceed to enter my sanctuary of commerce, where I would produce copious amounts of completed work in mere hours of undisturbed serenity.   I would be so productive in that office, that the IRS would ask - even beg - me to deduct 100% of my office expenses, because it is so clearly a thriving hub of economic activity for the nation.  My work colleagues would stop by “just to say hi”, when indeed they were on a religious pilgrimage to lay their eyes on the Mecca of productivity.  As they walked in, wide-eyed, awestruck, I would fix them a scotch on the rocks from the office bar, as they would gush, “Soo, this is the place where your best ideas - the best ideas - come from.  No wonder you work from home so often... I would too if I had an office like this.” And I would beam proudly behind them, secretly winking, pointing, and mouthing, “you-da-man” at the commissioned self-portrait above the mantle (did I mention the office has a fireplace?).

The unfortunate reality is that, absent the aforementioned home office, working from home for me consists of a laptop, an internet connection, a cell phone, juveniles who keep wanting to try-out their latest joke, a dog who wants walked, a lot of things to do around the house, a constant source of snacks, ESPN, espn.com, the Wii, a comfy bed, and good music.  In fact, that description sounds eerily like WFFH - working from frat-house - and I am indeed about as productive as when I was WFFH (which is to say, just barely productive enough).  Yes folks, it’s time to own-up to the truth:  WFH is not good for you or your business.

As near as I can tell, WFH has simply replaced the concept of “sick days”, but with a more flexible definition of acceptable use cases.  Here is my best, most comprehensive list of the possible meanings of WFH:

Working following Hibernation (I’m tired today, so I’m going to stay home and sleep awhile)

Waiting for Handbags (I ordered some stuff over the Internet, and it’s going to be delivered today)

Wasted from Hangover (I overdid it a bit last night)

Winner! Free Holiday! (I just freakin’ need a day off, so I’m takin’ it)

Waiting from Hell (I just ordered cable service, and the cable guy said he’d be here between 9 and noon, and it’s now 1pm...)

Wind for Hammock (First day of spring weather and it’s beautiful outside).

Wheat Farmer Here (Okay, if you are a farmer, working from home is okay.  But be sure to get to that feed store once or twice a week.)

But if lack of productivity isn’t enough to justify stopping WFH, consider this:  isolation drives people crazy.  Humans are social creatures, meant to interact together in order to grow and thrive.  Yes, people in cities sometimes go postal - but the really dangerous people live alone, way out in the country, and are much more prone to building bunkers, stockpiling weapons, and thinking the government is about to invade them.  When your only connection to the outside world is network TV, bunkering down seems like a pretty good idea.

Working from home has similar mental hazards.  If e-mail and conference calls are your only interaction, you begin to read subtle messages into every email and every conference call comment.  What did he mean by that?  What did she really mean by that question?  Why did he copy my boss?  Is he out to get me?  Next thing you know, you’re going to be sharpening all of your pencils to a lethal point and stock-piling Slim Jims in your desk drawer.  Folks, it’s just not worth it.  Get up, get a shower, kiss your spouse and kids, pet the dog -  and get your butt to work.  Humans just weren’t meant to work from home.

I'm initiating coverage on RHT: Strong Buy

*DISCLAIMERS*
- I am not a registered, certified, credible, gifted or even competent securities analyst. I wouldn't take stock advice from myself.
- My recent track record commenting on stocks is suspect.
- I used to work at Red Hat, but there is no insider information here. Just opinions.
- I really want RHT to go up to about $25 by next week. I have a small truck-load (a hand-truck) of options at $23.50 that expire next week, and the kids need new shoes.

OKAY, now that we have that out of the way (and if you're still reading, bravo!): I am initiating coverage on Red Hat (RHT) as a Strong Buy, with a 3 day price target of $25. Yesterday's sluggish MSFT earnings put me over the edge on this - as Red Hat said a couple of years ago when it acquired JBoss, open source is "changing the economics of IT in favor of the customer", and I believe it is starting to show-up in the earnings of proprietary-only software companies.

More importantly, though, the macro-economic conditions are worsening (trust me... I'm trying to sell a house right now), which is a perfect time for low-cost replacements that can help corporate IT organizations cut costs without losing performance. In fact, when Red Hat first launched Enterprise Linux back in 2002, the economy was slow - the message of replacing Unix with Linux resonated because CIOs needed a new approach, and RHEL launched like a rocket (a million servers sold in the first 3-ish years!).

I suspect that cutting costs will rise to the top of the list again for CIOs toward the end of this year, and into next - which is the perfect environment for a strong Red Hat (and other open source players) to accelerate adoption of low-cost, open source replacements for virtualization, proprietary middleware (like JBoss), databases and developer solutions (like Ruby on Rails). At FiveRuns, we are seeing acceleration in adoption of Rails for some of the same reasons, I think.

So, buy RHT. And fast (like today, or early next week would be good).

Google App Engine tanks Google's (GOOG) stock price

When Google launched the much anticipated App Engine last week, I immediately sold all of my GOOG shares... uh, I mean, share (I'm diversified). Why you ask? Recently, I had a very interesting conversation with an old Red Hat colleague of mine, rPath founder Erik Troan. We were talking about EC2, Joyent, Mosso, and the like, and I asked him why Google hadn't yet come to the hosting party. Erik pulled out his UVA economics degree, and wisely pointed out that hosting would "kill their margins." A week later, enter Google App Engine.

If you think about Erik's comment, he's right. Google's operating margin is 30+%! I challenge you to find any hosting company who has operating margins outside of single digits, no matter how efficient they are. Hosting is a competitive, cut-throat business, and it's only going to get more competitive as anyone who has an under-utilized "cloud" will try to enter this space. Conversely, Amazon's operating margins are in the 5% range, so it's a fair bet that better utilization of their IT assets just might improve their margins. Unless Google figures out how to drop ads into every app in App Engine, you can bet that they will be giving away a lot of free hosting so that they don't materially affect their margins, so drink up.

And if that's not enough to make you short the googster, here's the kicker: App Engine doesn't support Rails apps. Python is sooooo 2005.

(Seriously, though - Larry or Sergey, call me if you want FiveRuns to help you with the whole Rails support thing. We don't want to see your stock price tank or anything.)

Early adopters love free stuff

A colleague pointed out an interesting conversation by Savio Rodrigues and Matt Asay about marketing, sales models and growth in open source companies.  Since I work for the referenced company, I'll steer clear of specific responses.  But I think Savio is on to something when he talks about the growth hurdles.

Honestly, I don't think start-up OSS sales & marketing challenges are much different than any start-up's challenges.  The issues around inside sales vs. outside sales have much more to do with cost-to-serve and deal size... OSS software is generally a fraction of the cost of proprietary alternatives, so your deals are smaller compared to your proprietary competitors.  You just don't have the luxury to send out expensive direct sales people and hope to get to profitability quickly.

The subscription model adds to this challenge.  When you sell proprietary software, you generally book all of that revenue now.  When you sell a subscription (the predominant OSS model, thanks to RH), you recognize the revenue over the course of the subscription.  While it's a great business model for cashflow and building predictable future revenue, it means your expense threshold is much lower than a license company - even though you still have to *book* the same amount of business each quarter.  The effects are particularly throttling early in the ramp of the business.

So, start-up open source companies necessarily need low-cost, high-impact marketing tactics.  And, by golly, providing awesome software to download for free is a great tactic - it drives a lot of web traffic, builds your brand, helps you get your early adopters, and quickly builds a community of advocates that might buy your value-added services in the future.  But the free download tactic is less relevant to the challenges of a mid-sized company: converting the early majority (especially big companies), upselling existing customers, expanding your product portfolio, and doing it all profitably (and without early adopter discounts).  That's when you begin to think seriously about your channel strategy and business plan, and start to figure out that you aren't all that much different than other software companies - except for the crucial fact that customers inherently want the value you're selling, which is a great place to be.

(Almost) Every sales problem is a marketing problem in disguise

No, I'm not being an enabler to the oft-heard "marketing sucks" claims from sales.  Quite the opposite, in fact.  I'm talking about marketing going on the offensive.  I think about it this way:  as a marketer, my job is to "sell" to the masses.  Sales' job is to "market" to the individual (person, organization, whatever).  We have the same job - our scope is just different.

Another example:  marketing's job is to understand customer needs in the aggregate... a sales person's job is to understand individual customer's needs.  We are both matching solutions to customers - the scope is just different.

You might argue that sales people also have to "close" (which wrongly implies that marketers don't).   If you define "closing" as walking people through the buying process (like a realtor does), then I buy that.  But if you accurately match customer needs to a solution offering, you don't have to pull out your bag of super secret "closes".  The customers will close themselves.