I was going to hold this for the next MicroISV Digest, but it’s too good to let sit. It’s an engrossing story of how one man on a nearly impossible quest, betrayed by feckless promises made by huge companies, fights through adversity, never giving up, and ultimately succeeds.

No, I’m not talking about the latest cookiecutter novel turned out by one of the mega-authors. I’m talking about Ash Maurya’s post today, “From Minimum Viable Product to Landing Pages.” If you’re a microISV you’re going to want to go to this post, print it, and start turning pages – because unlike the $9.99 potboiler novels, this read is going to show you how to make Honest-to-God Real Money.

[Speaking of real, will all the 13 year-old ankle-biting script-kiddies sending fawning emails to me to sponsor them in Microsoft BizSpark with fake names, throwaway email addresses and startup descriptions made by slapping techno mush buzzwords together in the hopes of scoring free software they can sell on eBay kindly cease and desist? I am Not Amused. Neither is Microsoft - which as you read this is tracking each and every one of you down with the remorselessness of The Terminator and will make you wish you'd done something safe instead - like eating lead paint chips. Thank you.]

With that off my chest I can return to the subject at hand – Ash’s excellent post detailing how he created – and tested, and iterated – a Unique Value Proposition (UVP) for his photo and video sharing application, CloudFire. Ash lays out each twist and turn as he evolved his UVP – and how when it came time to drive traffic through his a/b testing StumbleUpon, Facebook and Google AdWords completely failed to work.

I won’t spoil the ending by telling you how he found a way to realistically test his evolving UVP: you should go read his post. You will profit from it. And if you’re too busy to read it now, bookmark it in the folder in your browser labeled “how to do it right” – this one is a keeper.

The MicroISV Digest for the week ending November 2nd, 2009.

(If you have an announcement of interest to your fellow microISV, indies or startups, please email me at bob.walsh@47hats.com with the word digest in the subject.)

News and Announcements

• Nick Koranda, MeMo, is looking for feedback on their redesigned web site for their text message reminder service. (via BOS.)
• Dmitriy Gorbachev, Accio Intellectum LLC, is looking for feedback on their web site and their just-released product, IMAlerts for SharePoint. (via BOS.)
• Show #43 of The Startup Success Podcast is up. Pat and Bob interview Renn Vara, co-founder of SNP Communications about the challenges and opportunities startup founders now face when it comes to dealing with the media and communicating their message. On iTunes.

Relevant Blog Posts, Podcasts, Videos and Articles

• Nothing stands out this past week, but I’ve started reading Matthew Cornell’s “Where the !@#% did my day go?” ebook. While I was an early beta tester, I’m really impressed with how professional, useful and thought-provoking the finished ebook is. I plan to review it soon here, in the meantime…

And…

• This week’s microISV Digest is sponsored by StartupToDo.com: Focused action and discussion save you precious bootstrapping hours. Be Successful Faster with StartupToDo.com.

[The following is a free sample from my ebook, MicroISV Sites that Sell! - Creating and Marketing your Unique Selling Proposition. You can get the rest of this ebook designed to substantially improve your software/SaaS sales for the introductory cost of $19 USD. Or, during the Bits du Jour Sale October 29th and 30th you can get this ebook for only $10 on those two days.]
—–

Before we can get to the good stuff, we need to do a bit of garbage collection. We need to take a look at six mistakes microISVs often make. These are mistakes for one simple reason: they turn off sales.

Mistake 1: Where’s your Hook?

We will talk about the Hook in much more detail in the next section, but the lack of a Hook is easily the number one mistake I see developers who sell software make. Simply put, the Hook answers the question, “Why should I spend another second on this web site?”

You have to put yourself in the mind of someone who for the very first time arrives at your site. They may be coming from Google search results, your Google Adwords campaign, your signature line in a forum posting, a blog post that mentions your product and three others or who knows where.

The first time visitor has no emotional investment in staying on your home page or landing page whatsoever. Yet. What you sell is completely irrelevant to them. For now. They have no reason to believe you actually sell something, let alone something that they want.

The Hook is your initial statement which answers why your product is relevant to them, why you might be credible as a solution provider and how exactly your solution is in one or more ways better than either continuing to have the problem or whatever they are doing or using right now.

Note: Initial means just that. It not everything about your product; it’s just enough to get them to read the next paragraph of your copy on your home page.

Second Note – it has to be the very first thing on the page that gets their attention – because if it’s not, either because it isn’t concise enough, compelling enough, big enough – most first time visitors will leave right then and there.

Mistake 2: Ugly hurts.

The bald fact of the matter is that most programmers suck at graphic design. Making a web page look good is hard work – you can do it, but it’s not a trivial effort.

If your site is ugly, no matter how much time you put into it, no matter how long you’ve had it, no matter who made it, it’s ugly. And ugly costs you sales.

I have seen this particular anti-pattern among more than a few attendees at both the Software Industry Conference and the European Shareware Conference: Joe has been a microISV longer than that term has been around. He did his site ten years ago when blinking text, frames and five different fonts for tons of text were cool. Joe gets emotional and upset if anyone tells him his child web site is ugly: he resists any and all suggestions to update it and thereby improve his sales.

If Joe sounds a bit like you, it’s time to get over it. Your web site is nothing more than a way to sell (and possibly deliver) you software. It is not your child, your puppy or a part of your anatomy. If it’s ugly, it’s ugly and it’s costing you sales.

Mistake 3: Too many words.

Consider the following. If I convince you my software will let you code five times faster and better than you can right now, really convince you of this, how much time and effort would you put into learning how to use it? A lot. You’d read every page of my documentation, my web site, my support forum. You’d watch every screencast, checkout every function, try every example.

But you’d only do all this if you were convinced it was worth your while. Enter Mistake #3. Maybe it’s the 23 bullet points of features, or the 14 paragraphs that explain 28 different functions you can perform in your app, or even the 12 paragraph testimonial from “A Customer”.

Too much text before you’ve convinced that first time visitor that you are worth their precious time drives away customers in droves. That visitor (it’s too early to call them even a potential customer) takes one look and without reading a single one of your 14 bullet points clicks off your page. They have no reason to put the time and effort into reading all your text, so they don’t.

Mistake 4: Google AdSense on your site.

Just as there is no better way of reaching your target market presently than Google AdWords, there is no better way of convincing visitors to forever leave your site than running Google Ads on it.

Text ads fine if you are running a professional blog – they are your revenue model. But if you are selling a product, it breaks trust with the visitor to sell them other people’s products and services when by happy circumstance they’ve come looking for what you have to offer. You want – you need – their undivided attention for at least a few seconds if you are going to have any hope of selling what you have to offer.

Text ads also poison your business credibility: If you don’t have enough confidence in your product to not try and make a few bucks advertising other people’s products on your site, why on earth would I consider buying from you?

Mistake 5: The Invisible Man.

“Psst! Wanna to buy some software that will solve your problems? Just give me your credit card number and we’ll get it out to you in a jiffy. Never mind who I am – what do you care? You want that problem solved or not?”

If this sounds like what you’d expect to hear in a dark alley or in a badly done online scam, you’re right. It is most emphatically not what you want your customers to be hearing when you’re selling your software to them.

The lack of an easy to find, clear legal identity in the real world is a sales killer. Other than drug addicts and spies, we all want to know who we are dealing with, who exactly is asking us to give them money for the promise they will give us something we want in exchange.

Yet at software site after software site, the identity of the seller is either buried 3 clicks down, missing key information like a physical address and telephone number or cloaked in corporate-speak.

I think for developers in North America, Europe, and elsewhere in the developed world this mistake is born from naively thinking that just because all the companies you know and interact with are anonymous “thems” with no visible people involved, you can be too. Leaving aside companies who succeed bucking this trend, you need to remember those companies are a hundred to a hundred thousand times your size, have been consistently selling their products for years if not decades. They have established trust – you need to earn it.

Not being able to find a physical address, telephone number and business name within one click of the home page is a deal breaker for me when shopping for software: most people feel the same.

For developers trying to sell to North Americans and Europeans, the widespread perception (based on the effects of years of spam more than anything else) that software from Eastern Europe, the former Soviet Union, the Middle East or Africa is also dangerous is a huge, real issue. But the solution is not hiding your identity – it’s making it abundantly clear who you are.

Mistake 6: Customer as Circus Animal.

For some reason, some microISVs think that just because “real software companies” treat them like crap, that they should do the same. So they spend time and effort creating ever more complex hurdles between what their customers want to do and what they are selling.

Here’s a couple of examples:

• Requiring people to register before you will let them download a trial.
• Requiring people to register before they can send you a pre-sale question.
• Requiring people to complete a form and surrender their email before you tell them what your software costs.
• Requiring people to email you before you will tell them what your software costs.

If by some great good fortune (and maybe the help of this ebook) people actually are prepared to trust you and spend their time on your software, why would you slap them in the face and make them jump through various hoops?

Again, this is an attitude and a worldview you’ve probably been subjected to – it’s not the way a microISV or startup should function if they want to succeed. More often than not in those large companies, collecting data becomes a goal onto itself with nothing but bureaucratic inertia going for it.

Wrap up.

In preparation of getting to the meat of this ebook, we’ve just eyeballed a lineup of mistakes fledgling microISVs often make. Most of these mistakes stem from one of two sources: thinking your microISV or startup should act like a “real” company or assuming that because you’re a developer not a marketing suit or copywriter you can’t create a web site that’s attractive, engaging, professional and effective and that that’s okay.

These six mistakes:

• Not hooking your first time visitor before they can punch their next hyperlink,
• Forgetting that attractive attracts and ugly doesn’t,
• Drowning your visitor with words,
• Dividing their attention with other people’s ads,
• Not leveling with them as to who you are,
• Making them jump though hoops that from their point of view has no benefit…

…will all cost you significant sales. But clinging to either of the two attitudes I mentioned above will likely doom your efforts.

The good news is you don’t have to be anything you’re not – a new software company bravely coming to market to make people’s lives better. And by approaching the marketing you need to master to sell not as some dreaded poison that will turn you into a phony suit-droid but as a programming problem, as a way of “programming” your site to get the outputs you want, you can succeed beyond your hopes.

In the next section we’ll dive into that programming problem – marketing your software. It’s not the first time people have needed to solve this problem, so why not do what savvy and experienced programers do: apply a design pattern to solve the problem?

The MicroISV Digest for the [several weeks] ending October 26th, 2009.

(If you have an announcement of interest to your fellow microISV, indies or startups, please email me at bob.walsh@47hats.com with the word digest in the subject.)

News and Announcements

• Apologies are in order. My apologies for not getting the last 3 issues of the Digest out. My new startup, StartupToDo.com, suffered a near-fatal financial blockage requiring an immediate transplant of its payment processor (replacing PayPal and Spreedly.com with Amazon Simple Pay Subscriptions). Happily, the operation was a success, the patient (see image) is alive and kicking and I can get back to putting out the Digest.
• Steven Cholerton, Arten Science, have just released a new freeware application – ooSooM – a cross platform task management and secure digital filing application. ooSooM does not attempt to force a predetermined ‘methodology’ on you, rather it’s very free format and open allowing you to use it however you like, but with enough structure to ensure that once logged, information can retrieved easily and readily. (via email)
• Cathy Tullysmith, opscotch.com, has come up with a neat, fun way of getting her bootstrapped SaaS customer management application some well-deserved attention: Tech eCards — e-Cards for people who work in tech. We finally have greeting cards for those special moments in our lives. (via email)
• Scott Gerold, Elms Software,  has released ELMS Advantage Online.  ELMS Advantage is a management system for remodelers, contractors, and the service trades.  ELMS Advantage is an end-to-end management system starting with tracking sales leads, creating estimates, generating contracts, processing change orders, and project scheduling. (via email)
• Tom Markiewicz is looking for additional beta testers and feedback for his new application, StatsMix. A web stats aggregator, StatsMix provides a daily overview of all your web stats. From Google Analytics to Twitter to FeedBurner, monitor all your sites in a single view. This sounds like something I need! (via email)
• Three new episodes of The Startup Success Podcast since the last Digest:
  • Show #40: Derek Sivers, CDBaby and MuckWork. Derek tells all and tells why he built CDBaby into an key element of the independent music world, how he saved several million dollars in taxes when he exited and what he’s working on next.
  • Show #41: Windows 7 on the Startup Grill. In this episode I put my co-host and Microsoft Evangelist Pat Foley on the hot seat about what, if anything, Windows 7 means to startups and microISVs.
  • And posted today, Show #42: Rob Walling and Mike Taber, the Micropreneur Academy. Rob, Mike, Pat and I discuss this new, exciting and valuable resource for developers ready to cast off their chains and become startups.

  As always, you’ll find the Startup Success Podcast at http://startuppodcast.wordpress.com or on iTunes where we really need your comments!

Relevant Blog Posts, Podcasts, Videos and Articles

• Bryan Smith, Orion Seven Systems, has put up an excellent post on the perils of forcing customers down the Long Tail: Forced Long Tails. Definitely something you should read.

And…

• This week’s microISV Digest is sponsored by StartupToDo.com: Focused action and discussion save you precious bootstrapping hours. Be Successful Faster with StartupToDo.com.

Over on answers.onstartups.com today someone posted an interesting question:

what happens when you made a product for an industry that doesn’t exist? i mean it sells, it makes revenue but the industry cannot be defined ?

is this a bad sign or a good sign ?

When you start looking at who is buying or subscribing to your software, you might start asking yourself this same question. Don’t. Because it misses what I think is a key reality of Internet-disrupted economics: What we used to call industries don’t exist anymore.

Once upon a time….

Once upon a time (say 1800 to 1999) when the logic of industrialism defined developed national economies, everyone (except children, “homemakers” and the unemployed) fitted neatly and firmly in very specific categories. You were in the steel industry because you worked for a company that made steel. You lived in a city, a small town, a suburb or in the country. People and businesses tended to fit in well defined categories that made mass production, mass consumption, mass education, mass culture possible, feasible and desirable. People who didn’t fit the mold were labeled as “bohemians” or “hippies”. Businesses that were neither fish nor fowl – like supermarkets that sold hot coffees or snow tires were thought to be a best “odd” and soon went bankrupt.

But a funny thing happened to all this standardization: it went post-industrial. Almost overnight the rules of the game changed. Cheap to the point of free global communications, computing power equal to everything NASA had to get to the moon can now be found in any mobile phone, and first a generation that did not like being categorized and boxed and now a new generation that looks at standardization and says, “what’s the point?”

This is not a kumbaya moment.

This is not a kumbaya moment brought on by the rise of the internet where we will all join hands, that is those of us who haven’t already got an iPhone glued to one hand. Brave new world = brave new problems and lots of them. Nor am I’m suggesting that there are no more well-defined lines between different industries – just that more and more companies and people happily jaywalk across those lines – and you should too if you want your startup to succeed.

Two statistics I happily swiped from this excellent post sums up the situation:

• For decades the norm would be that 9 out of 10 new businesses (that means you) would fail in their first few years. Now, at least in the U.S., 74% succeed.
• The number of zero-employee businesses (that’s you again) rose from about 15 million to over 21 million between 1997 and 2006.

Looking at internet-disrupted industries as the monoliths they once were, or hunting for your One True Market are approaches that hurt rather than help your business. They are maps that no longer reflect the reality of what’s happening out there.

Don’t draw within the lines. It doesn’t work.

Startups and their less-respected but much more numerous siblings microISVs succeed best when they disrupt the most. Want your startup to crater or your microISV to fail? Just do what someone else has already done.

Want to succeed? Profile what your customers have in common, regardless of “industry” or “market” and find more people with the same problems and circumstances. You don’t sell to an industry or market – those are just convenient, and increasingly misleading – labels. You sell to people. Understand how your product or startup will help them in an increasingly de-massified world and your odds of success will improve.

Back  in this post I lamented a lack of greeting cards for those special moments in the life of startups and microISVs. Like condolences on your crashed hard drive, happy server uptime for six months and the ever popular best wishes for your startup launch.

Now the good people at opscotch – a hosted help desk software company – have taken the idea for fun and run with it at techecards.com – “E-cards for people who work in tech!” They are hilarious and painfully funny, but only your IT friends will really appreciate them. Send one today to that certain someone today!

A short post to let you know that:

• The MicroISV Digest will return here Monday October 26th.
• The Startup Success Podcast for this week is being worked on at this moment by our Executive Producer, Francesca Amari. Francesca has been the reason the last 6 or shows have come out like clockwork – The issues with the current show are mine and Pat’s, not Francesca’s. Bottom line: it may be Monday the 26th before the next show airs, unless Francesca can work a miracle.
• StartupToDo.com is back in action after a major screwup left it launched, but without a working payment processing system. As of last night, we are now integrated with Amazon Simple Pay Subscriptions and will be adding a second payment processor which accepts PayPal as well as credit cards worldwide, soon.
• Already, three new Guides (on Twitter, Google Analytics and getting into and making sense of Microsoft’s BizSpark, Empower and new WebsiteSpark programs) have been added.

Now that I’ve rebuilt our payment system, I can get back to giving you very good reasons to spend some of your money and more importantly, some of you time, with StartupToDo.com.

Between launching StartupToDo, and immediately finding myself in need of a new subscription processing system, MicroISV Digest will return next Monday.

Here’s – in my opinion – a huge unmet need: online greeting cards for IT people. I have all the usual traditional e-cards covered at Jacquie Lawson, but what about those special moments only we IT/Online people have?

For example Marcus M. just informed me that I was successful a couple of nights ago getting http://startuptodo.com to render right in Chrome at the screen resolution he uses. Perfect Hallmark Moment! Here are some other e-cards out there I’d like to see:

• Our Deepest Sympathies on the loss of your Hard Disk
• Congratulations on your Startup’s Launch!
• Happy Your Server has been up a straight 180 days.
• And of course the ever popular, Twitter will Get Well Soon – Hang In There!

What cards would you like to see? And is anyone going to start this as a microISV so I can pay them money?

FYI, Alain Raynaud, CEO of Fairsoftware.net (which you should check out) just posted a very nice review of The Web Startup Success Guide at his blog: Book Review: The Web Startup Success Guide.

Also, Pietro Polsinelli wrote an awesomely detailed review of the Guide here:
A review of “The Web Startup Success Guide”. Pietro is working full-time on the Teamwork project management software, which has become a quite successful project, adopted all over the world, and used daily by more than 2000 people to manage their work.

The MicroISV Digest for the week ending September 28st, 2009.

(If you have an announcement of interest to your fellow microISV, indies or startups, please email me at bob.walsh@47hats.com with the word digest in the subject.)

News and Announcements

• Edwin Yip, WritingOutliner.com, has released a new Microsoft Word add-in: Writing Outliner. This add-in supports writers working on book-length projects in a variety of ways: multiple document projects, mind map-style brainstorming and research material management. Where was this when I needed it?! (via email)
• Steven Cholerton, ArtenScience, is looking for feedback on his new CRM application that he releasing soon. (via email)
• Jay Cincotta, Gibraltar Software, has integrated with PostSharp to enable post-compile instrumentation injection – logging and application monitoring without having to write any extra code. (via email)
• Bob Walsh, 47Hats, has launched StartupToDo.com (a training/productivity community for startups and microISVs). StartupToDo.com is all about helping you succeed faster by providing specific and detailed Guides that save you time and frustration, Site Reviews that make the process easy and valuable to both reviewers and review requesters, and connecting you with other startups and microISV who share your values and interests.
• Ian Hunter has released his new Windows photo cropping and printing application, PicCrop, and is looking for feedback (via BOS)
• Liam McLennan, Eclipse Web Solutions, is looking for feedback on his new web app, TheFastWay.net. (via BOS)
• No show this week, as we mentioned in last week’s show #39 of the Startup Success Podcast. We will be posting a mercifully short interview with me re StartupToDo.com. Regular shows commence again next Monday.

Relevant Blog Posts, Podcasts, Videos and Articles

• nothing worth noting.

Finally!..

• Thanks to the over 100 people who helped me better execute the 1.0 version of StartupToDo.com!

I’ve got something new for you. Something that will take a lot of the pain, delay, frustration and wasted time out of bootstrapping your startup, microISV, mISV, indie game house or microlight: StartupToDo.com.

I created StartupToDo.com to solve a couple of huge challenges I’ve seen literally hundreds of skilled developers struggle with over the years:

• You can spend as much time trying to figure out what you have to do and researching what’s the best way to do it as doing it. Put another way, half the time you carve out of the rest of your life to work on your startup gets wasted.
• So say you spend 3 hours researching how to do some marketing, or operations or development or business thing, do it, only to find the information you relied on was out of date, overtaken by new tools on the web.
• Or, you’re about to launch, but you know your startup’s web site needs improvement. Up to now your options have been a) As for help at forums like Joel on Software Business of Software (lots of good feedback, but uneven and can be seen by a prospective customer if they Google you) or b) read books and ebooks on the subject – helpful, but not specific to you, or c) Hire an expensive consultant (like me!)

Now there’s a better way, and it will cost you less than a dollar a day.

In StartupToDo.com:

• There are Guides that walk you through doing something you need to do, step by step. Guides are rated by the community and commented on. You can request Guides, and that request is rated by your peers.
• You can request Site Reviews – and other members can do a Site Review quickly, providing you with meaningful quantitative data, useful suggestions, and likes/dislikes. Why should they bother? Because the more Site Reviews you do, the higher your Request is in the listing. Think of it as enlightened self interest.
• Tips, Resources and Events for and by startups help you with information you can actually use.

The image for this post is a capture of http://startuptodo.com/startupmaps which you can visit right now (as to why a page of a subscription-only site is public, see this post here for the gory details). These are some of the locations of the first 35 members with public profiles (you can stay stealth to avoid your boss): it’s fascinating to see the variety out there in the Startup World.

Please visit StartupToDo.com today: I think you will be very glad you did. And if you’ve already joined, thank you!, and please tell your startup-minded friends about StartupToDo.com.

<warning: mushy personal note>While I hope to build a profitable business, changing the number of startups that succeed from something around 2 or 3 out of 10 to 6 out of 10 is my real objective with StartupToDo.com. It’s the most important thing I’ve ever done. Come join me in it. </warning: mushy personal note>

The MicroISV Digest for the week ending September 21st, 2009.

(If you have an announcement of interest to your fellow microISV, indies or startups, please email me at bob.walsh@47hats.com with the word digest in the subject.)

News and Announcements

• Chris Randall, Devenius, Inc., has launched a new tool for SQL Server DBA’s and developers: SnipStorm. SnipStorm lets users store, share and recommend T-SQL code. (via email)
• Liam McLennan, Eclipse Web Solutions, is looking for feedback on its mobile routing solution, (via BOS)
• Justin Vincent has launched Tweetminer, a new Twitter utility, and is looking for feedback on his site and product. (via BOS)
• Ruben Gamez, is currently in beta with his product Bidsketch (http://www.bidsketch.com), and has just acquired a complementary product, SixCentral with the goal of combining the two products. (via email)
• In show #38 of the Startup Success Podcast Bob and Pat talk with Gabriel Torok, founder and president of PreEmptive Solutions, a Java and .Net obfuscator company that’s going in a new direction: instrumenting your software so you can really see how customers use your app without running afoul of privacy concerns. Gabriel has some excellent advice for startups in general; this is one episode not to miss.

Relevant Blog Posts, Podcasts, Videos and Articles

• This news post, Feds launch Apps.gov; Cloud computing players salivate, caught my eye: when the federal government adopts a trend it truly has reached the late adopters.

Further (mostly relevant) Reading

• Three years ago Aaron Patzer had a prototype and an idea that VC after VC turned down flat. A week ago, he sold Mint.com to Intuit for $170 million. I’m totally not surprised: Aaron was kind enough to let me interview him about how he built Mint for The Web Startup Success Guide. Here’s the short version of the story of how he did it, in his own words.

Finally!..

• The private beta of http://startuptodo.com (a training/productivity community for startups and microISVs) continues; hopefully between today and the next MicroISV Digest we will launch!

The MicroISV Digest for the week ending September 14th, 2009.

(If you have an announcement of interest to your fellow microISV, indies or startups, please email me at bob.walsh@47hats.com with the word digest in the subject.)

News and Announcements

• Dan Gravell, elsten software, is looking for feedback on its music management application, bliss. They are also looking for beta testers. (via BOS)
• Milos Tanasijevic has launched DupeTrasher, that will identify and locate duplicate files on your Windows PC. I’ve got 4 pcs and three networked hard drives I need to run through this! (via BOS)
• Scott Carpenter, InvoicePlace, found a nifty interactive “expert system” online for (Australian) startups/microISVs who need to broaden their working knowledge of Intellectual Property Laws as they pertain to them. 1Place expert system ( via TechNation Australia.)
• Atul Godbole, LogicNC Software, has launched Crypto Obfuscator For .Net. Here’s the gist: “Crypto Obfuscator combines powerful techniques such as symbol renaming, control flow obfuscation, resource and assembly encryption and decompiler & disassembler protection to provide the very best protection to your .Net code against reverse-engineering. Additionally its metadata reduction, assembly & resource compression and dependency embedding functionality simplifies and reduces the deployment of your software.” (via email)
• In show #37 of the Startup Success Podcast Bob and Pat talk with Ginevra Kirkland, Six Apart Community Manager, about how to care for, nurture, advocate for and grow an online social community. Ginevra has been a Community Manager at Six Apart (makers of the TypePad blogging service) for over five years and is way ahead of nearly all of us on the Social Media curve. Note: Ginevra was kind enough to offer a 15% off discount code for TypePad for Startup Success listeners.

Relevant Blog Posts, Podcasts, Videos and Articles

• Brian Swanson over at Purple Ant pointed out a post over at Rands in Repose: Your People. I gave it a quick read, stopped, and read it a second time with my brain set to ‘record’. Also check out from the same source: Managing Humans. And the Nerd Handbook!

Further (mostly relevant) Reading

• Don Dodge has an excellent post out, Rules for evaluating startups and suspending disbelief. Want to know how VC’s/Angels look at your startup? Read this post.
• A good wrapup on the state of self-employed health care insurance availability today: Do Health Insurance and Self-employment Mix?

Finally!..

• On a very personal note, after 2+years of working on this idea, the private beta for http://startuptodo.com (a training/productivity community for startups and microISVs) began today. Wish me luck!

By Brett Ryckman
Product Developer
www.brettryckman.com

Which market segment to target? Do you go after “mass” markets, focusing on a broad set of customers, or target “niche markets” — or do both? Software companies creating new products or just starting-up must make these complex and perilous decisions. What must you consider in those decisions? Wikipedia states:

The mass market is a general business term describing the largest group of consumers for a specified industry product. It is the opposite extreme of the term niche market.

A niche market is the subset of the market on which a specific product is focusing; therefore the market niche defines the specific product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that it is intended to impact.

Often this is an inherent decision. If your company produces bank security software for ATMs, your market is already well defined. Companies with broader products or aspirations have more of a challenge. For example, if you have a Web CMS product, do you target anyone that needs a Web Site or just attorneys or accountants, then tailor your product for those professions?

The lure of mass market revenues is so great that many software companies cannot resist. Unfortunately, mass-market products typically require vast resources to develop and market.

In The Business of Software, author Michael Cusumano provides an example in recounting the adventures of SkyFire, a maker of wireless networking software. First, several years of development time were required for SkyFire software to work on any type of device and any operating system. Second, the mass market for wireless products was slow to adopt and then still in its infancy. Rather than going after a few niche markets and deliberately growing into the mass market, SkyFire went straight for the masses. The company spent most of its time and resources making the technology suitable for a general-purpose solution. In 2001, the money ran out, and SkyFire closed shop.

Bigger Isn’t Always Better

One thing is certain, niche markets are certainly easier to overcome than mass markets. I think a lot of companies initially lean toward the mass market because of the revenue potential. I often hear comments from executives like, “There are 15 million small businesses out there so if we can just get 1-percent of them, we will be golden.” Well, it is true mass markets have much greater sales potential, but that is counterbalanced by the extensive resource requirements for developing and marketing the solution. (Even if you raised 6 million in VC funds).

Market segment decisions also affect how software companies should price software. Software that is targeted at niche markets tends to be more expensive than software that is targeted at wider audiences. This is partly driven by lower demand, which requires higher pricing. Niche software may be designed and tailored for a particular industry, and therefore not easily replaced by a generic or mass market product, even at a lower price. With larger per sale dollar amounts, the sales cycles are often longer for the niche software vendors, a factor which must considered in revenue forecasting.

It is also not uncommon to have niche providers competing with the mass market vendors. In the CRM software arena large vendors such as Salesforce.com and ZohoCRM are competing in a wide range of industries and niches. For example, niche software vendor Dendrite, which makes CRM software for the pharmaceutical industry, often finds itself competing with the big boys such as Siebel and SAP.

Niche software vendors often look outward in the market to determine what competitors are charging in order to position their own software pricing. This view includes large vendors that have low prices. The niche vendors may think “Hey, Salesforce.com is charging $45 per month, so we need to be at that price point." The failure to see the mass market difference may lead to their downfall.Without sufficient customer volume, the low profit from low prices may result in insolvency.

Large CRM vendors must devote substantial resources into being “all things to all people.” The niche vendor can really develop industry-specific features to meet their customers’ needs, giving them a competitive advantage. Salesforce.com has attempted to hedge that by developing the “App Exchange” which allows companies to develop or install sub-sets of applications tailored for their industry into Salesforce’s application.

Catching the Long Tail

Targeting niche markets is commonly referred to as “Long Tail” marketing. The concept originally debuted in Wired Magazine, in October, 2004 by Chris Anderson. He argued that products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters. His research showed that a significant portion of Amazon.com’s sales come from obscure books that are not available in brick-and-mortar stores.

The same concept of “Long Tail” can be applied to software vendors. Companies can develop long-tails by creating software products that solve specific problems or fill special needs. The historical approach to software is to overdevelop features to address enough customers’ needs so that they sell millions of licenses to the mass market. This trend is dying as more and more niche software vendors enter the market, offering customers a greater selection of specialized products. This is partly due to a significant reduction of the barriers to entry, thanks to Web-based software platforms such as software as a Service (SaaS) and the widespread market acceptance of Web-based software.

Niche Markets Pros and Cons

Pros

• Targeting niche markets allows focus and specialization in that sector
• Easier to take a large market share in a niche market
• Typically it is less expensive to develop software targeted to niches
• Easier to market the software in a niche with less competition ñ without having to go up against the large vendors like Microsoft or Seibel.
• Target a niche, exploit the lack of competition, and you can gain a large market share.
• Gaining a large market share makes your company an attractive candidate for acquisition by a larger provider looking to get into that niche market.

Cons

• You might put the golden handcuffs on. Once you have established yourself as a niche vendor, it may be difficult to transition into mass markets. Strong brand perceptions are hard to change.
• May limit how big you can grow
• Some niches may require large resources to develop
• May takes significant resources to penetrate a particular niche market

Conclusion

The allure of mass markets may be irresistible, and can lead companies into peril. In reality, start-ups and companies that currently do not have mass-market products should think carefully and cautiously before going there. Research shows that generally a software company is better positioned for success to start in a niche market, prove itself, and grow its way up to the masses.

About the author:
Brett Ryckman is a product developer and entrepreneur. Recently he founded DisputeSuite.com, a software as a service (SaaS) vendor that was acquired less than a year after launch. Prior to launching DisputeSuite, Ryckman worked as a web & UI designer for companies such as Kforce, Verizon, Catalina Marketing, and Perficient. He currently showcases his work at http://www.brettryckman.com.

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No matter how much you think you know about starting up, there’s so much more to learn from the book.

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