Startup BlenderAdam Berrey’s startup blender

Introduction to the Glories of Product Pricing

2011-10-25T01:23:34Z

Repeat after me: I love pricing! Yes it’s true. If you don’t already, you should fall in love with pricing because pricing is one of the great art+science of business. Get pricing right and you can work all kinds of magic in your business.

Most startups pick a price out of a hat without a strategy or process. It’s not surprising since pricing is a relatively esoteric area even in the mainstream of marketing. The pricing literature tends to be dense and academic. Worse the advance techniques call of the expertise of PhD statisticians.

But don’t lose hope. As an entrepreneur you can become good at pricing — at least a whole lot better than throwing darts at the wall.

My goal here is to break it down into some more simple terms, and more importantly a framework with some tools you can apply to figure out your pricing. Other posts will go into depth.

There are several different pricing strategies, but they can be broadly grouped into two:

Value- Based – You price based on how the customer values your product or service.
Cost-Plus – You price based on a markup on your costs.

Not surprisingly value-based pricing will generate more profits and if done correctly, drive more market share. But, it’s more difficult to do well. Even when we you are doing value-based pricing, you of course have to take costs into consideration, since selling products for less than it costs to produce them is not ideal. (Don’t start getting confused with freemiums, etc. We’ll tackle those soon enough.)

The Steps to Pricing

There are 7 core steps to pricing a product:

1. Segmentation – To maximize market share, revenue and profitability you have to segment your market into sub-segments based on how much they value your product.

2. Value Analysis – In order to price properly, you need to have a deep understanding of how customers will value your product including reference prices and either a low-price or premium strategy.

3. Defining Price Fences & Editions – Most products benefit from having different prices based on segments, but in order to that you have to create “fences” that move each segment into the right product at the right price. With technical products this is usually done through features, but there are other mechanisms.

4. Defining Price Metrics – Price metrics answer the price per x question. In technology products you could price per user, CPU, GB, etc.

5. Defining Price Levels – When you put your analysis of value together with your price metrics and your editions you get your price points.

6. Checking On Costs – This approach is about pricing based on how your customer values the product, but as you go through the exercise, it’s important to also go back and double check against costs. Even if you’re selling software as a service which has low marginal costs for additional usage, you need to account for the cost of customer acquisition and support.

7. Everything Else – On top of the five core steps, there is generally a bunch of other detailed work such as discount curves for volume, regional pricing differences, pricing policies (e.g. how much room a sales rep has to negotiate), sales and market tools, etc.

So that’s a quick outline. I know it’s not a lot to work with (I’m rushing this post out, because I have a goal to have one post in every category), but I plan to write more diving into these different topics and giving a bunch of real world examples.

For more books on the topic, I’d suggest starting with: The Strategy and Tactics of Pricing: A Guide to Growing More Profitably by Thomas Nagle and John Hogan. Most of the credit for the framework above goes to them.

A Quick Intro to Your Competitors

2011-10-25T00:50:36Z

In the simplest terms, competitive strategy is business strategy. All companies face competition. If your company doesn’t have competitors, then you’re not in an interesting market. (Investors get particularly annoyed when entrepreneurs claim they don’t have competitors. It shows a failure to understand business fundamentals.)

Michael Porter has done most of the seminal thinking on competition, and everyone still riffs off his work. With out restating the whole treatise (which would make for an absurdly long blog post and a case of blatant plagiarism), let me hit a few highlights to get us started on this topic.

(I try to write most of my posts so they could apply broadly to a wide range of early stage businesses in a variety of industries. For purposes of this post, I’m going to focus particularly on software companies, but the principles still apply in other categories.)

Startups usually see competition from three sources:

Direct Competitors
Substitute Goods
New Entrants (e.g. someone who is not in the market but moves into it)

Let’s look at each briefly…

Direct Competitors

This is what everyone first thinks of when you say competitors, and many entrepreneurs translate this into something very literal such as: “Is there a company that is perfectly identical to you?” Then they can answer: “No… well there is one other company but they use a lot of blue on their website and we use green.”

The point is there is a pretty good chance there are some direct competitors, even if you have something that is different or original. Moreover, in the world of tech startups, where seed funding is wild and loose, it’s no surprise if you don’t find several copy-cat start-ups hot on your trail as soon as you see a little success.

So the starting place for your competitive strategy is with your direct competitors. We’ll go more into this kind of a strategy in other posts, but it’s good to note there are lots of examples of startups facing very real direct competition and winning.

For example, Google entered a market with lots of search competitors and annihilated them. Salesforce.com came into what most people thought was a totally oversaturated CRM market and crushed it. Many people thought it would be crazy to launch a new airline given all the consolidation and the huge costs, but Southwest and JetBlue did it successfully, and they sustained it when United launched TED and Delta launched Song to compete.

Substitute Goods

The second source of competition is the one that most entrepreneurs overlook entirely. Before you’re amazing product changed their lives, your customers were probably already addressing the same needs your product meets, but not as well.

Before we had Facebook friends, people just had friends. We shared photos when we dropped by each other’s house (or we emailed them), and we chatted or emailed. You can go back hundreds of thousands of years and you’ll find a Facebook news feed. It will just look more like a group of people sitting around a cooking fire or a meal swapping stories and updates about their lives: “Did you see the size of that elephant?”

Facebook took these fundamental human activities, and they changed the way we do them. For a class of our friends who we didn’t do much with before, Facebook has become radically easier, faster, and more scalable than the substitute goods. But not everything works out that well.

Substitute goods can be distantly related or products that solve the same problem in a different way (e.g. sharing photos with Flickr rather than Facebook). Pay attention to the substitute goods, for many startups they are the not obvious at first, but they matter.

New Entrants

The final major source of competitors for startups is new entrants. Generally, this will be a big company adjacent to your space or a copy-cat startup.

The giant notices what you’re doing when it starts to get poked a little. For example, they realize they are losing some big customers. Then they try to crush you by releasing your product as a feature (ouch), building a direct competing product, or buying one of your competitors. The best case is they buy one of your competitors, since this almost always goes badly.

The copy-cats come running after you, and you end up in a foot race for market share and product differentiation. Sometimes the new entrants come in with something disruptive that takes you out at the knees. Ignoring entrants is a mistake, but getting to wrapped up in their threat is also a problem. As Andy Grove would say, “Only the paranoid survive.” So be worried, but win by out executing.

In other posts I’ll write more about how you compete against direct competitors, substitute goods, and new entrants. In the end competing is about creating sustainable differentiation, which is the heart of creating great businesses.

The Difference Between Users and Customers

2011-10-20T02:25:49Z

There is a difference between users and customers. Miss it at great peril. Understand it and wisdom is yours. Or something profound like that.

Practically, creating distinction between users and customers will help you understand your business better and build a better product. The distinction is simple, but the implications are significant:

Users use your product. Customers buy it.

Let me embellish, at the risk of detracting from an already elegant summary.

More about users…

Users use your product. They register, login, push the buttons and move the pixels. They are the people who day in day out decide if they love it, hate it, or lie somewhere in between.

Different users use different aspects of your product, so they fall into different classes. For example, you might find sales reps, sales mangers, marketing managers, and administrators all as users in a CRM system.

Users have needs (both challenges they want to overcome and aspirations). And for many products the users can be divided into segments based on their needs. For example, new users aspire to start quickly and not hit roadblocks. Power users want those complex features that give them control front and center. Get in the way of either need and you have at least one group of unhappy users. A lawyer, who needs powerful reviewing tools to manage revisions, and a high school student, who would find those same tools an absurd waste of menu space, might both use a word processor.

More about customers

Customers buy your product. They find it. Evaluate it. Decide to purchase it, and ultimately pay for it. No customers means no business so they matter a lot.

Your users may be the customers. For example, if you have an online backup system for personal files, the person using it is likely the only one who makes the decision to pay for it. At the other extreme, you might a have a CRM system where the key purchase decisions are made by people who will never actually use the system themselves.

To understand your customers, you have to understand who is making the decision to buy your product, and it’s often a group, which in common parlance is called a decision making unit (DMU). Fo example, you may think that you are selling your toy truck to the kid. The kid is definitely the user, but the DMU includes the child, mom and dad. The kid won’t want the toy if it isn’t cool and fun. But dad passionate about the environment, won’t buy it if it is made with plastic that uses BPA (one of the many toxic chemicals in every day products that mimic hormones in the endocrine system, but I digress). Finally, mom has the check book, and she is out of the picture if the truck is poor quality or costs more than 23.99. One user, a bit more complex customer (the DMU).

Just like users, customers will fall into segments based on needs. (You will see that I right a fair amount, or at least I plan to, about needs-based segmentation.) But the customer needs may look very different than user needs. Customers are often concerned with purchasing factors like price, company viability, product leadership, etc. — issues that are not about the usability or the user experience.

Ok I buy the difference, so now what?

I’m glad that you are still reading, and you seem to be taking well to the idea that users and customers are different, important, and overlapping in interesting ways. There are some interesting implications, and I’ll dig into these in other posts.

The biggest implication is how this impacts your market discovery work. You need to be thinking about how you do both customer discovery and user discovery. Often you will have different people doing these activities, different objectives, and different research tactics.

The goal of customer discovery is to find a market for you product and to build a product that prospective customers will buy. The goal of user discovery is to create a product that delights users. Products that users love get far more traction than ones they don’t like.

Customer discovery will use tactics such as:

Needs exploration with the DMU
Product validation with the DMU
Pricing analysis and testing
Marketing sizing
Etc.

User discovery will use tactics such as:

Contextual interviews
Walking through a prototype
A/B testing on a site
Scrappy usability tests
User diaries
Analyzing usage data
Etc.

Start thinking about the both users and customers and you’ll start building a better product and a better business.

Bringing Product Management Into Your Company

2011-10-20T00:02:11Z

In the early days at most startups (unless a VC accidentally dumped $5m on you before you were ready), a handful of people are sitting together in a small cramped space. The barriers to communication are VERY low, and hopefully everyone is engaging with prospects and customers. Information is flowing in a freewheeling and fun way.

But it doesn’t take long, often after the first minimally viable product is shipped, that it becomes necessary for a slightly more formal process to develop and it’s time to think about product management. As the customer base grows, the product becomes more complex, and the company gets bigger, it’s harder and harder to make good decisions about what to build.

The Product Management Discipline

At some point I’ll write more about trying to unravel the terminology between product marketing and product management and project management and program managers, etc. Everyone uses these terms differently, which accounts for a ton of confusion.

For now, let’s just assume the product management is the discipline associated with systematically getting market information into the product development process.

It’s important to start out with the thought that product management is a discipline, not necessarily a person. Fundamentally, it’s a set of activities, techniques, and processes that result in companies building products customers actually want. Product marketing is the bridge between market research, sales, customer service and support, internal stake holders and the engineering team.

The test of a good product management effort is pretty simple. You get product management right when you have a consistent way to prioritize features/requirements/user stories that results in a product which is delightful to use, bought by customers, and competitive. Ahh but the details of making this work are irksome.

Where to start?

Start with engineering. This will be a bit sacrilegious to the ardent “market driven” believers. But all my experience is that if the product management team does not mesh into the engineering team, it doesn’t work. And engineering teams tend to be less flexible.

Yes it starts with leadership. (A recurring theme in this blog.) The leadership in engineering both formal (VP, etc.) and informal (whoever people actually respect) have to believe that the product management work is great. They have to believe that building products based on insight from customers matters. Most importantly they have to respect the people (person) doing product management.

So the first step to building a product management discipline is to start thinking about how that effort will work with engineering. When it’s not the genius founder in every meeting, what will the product manager bring to the table that will garner respect and how will everyone agree that it matters?

In addition to the people in engineering, good development teams have a methodology. There are a variety of different methodologies (Scrum, agile variations, waterfall variations, random chaos, etc.) and the specific process is not important. What is important is that the process will dictate to a significant degree how and when market insights will flow into the product development effort.

In other posts I’ll go into detail about different ways that product management activities can synch with different engineering processes, but that is for another time.

The Product Manager

The product manager (and that might not be her title) is the person responsible for making sure the company is doing the right activities to drive market insight into their products.

Your best product managers are going to be the ones that first and foremost fit well with the engineering team. If you’ve got engineering leadership that is very process driven, then PM will need to be process oriented. If they only respect other developers/engineers, then your PM should have been an engineer.

The next piece is to have a PM that fits into your business In companies with tons of actionable data about customer behavior (e.g. e-commerce) you’ll want a PM who has the skills to work with that data and with analysts or statisticians. If your business depends on deep domain expertise, then look for that in your product manager.

I’ll say more about writing product manager job descriptions, hiring, etc. in some future posts.

A List of Marketing Communication Tactics

2011-10-20T01:55:47Z

Time to open up the marketing communications box and see what we have to work with. Other posts will go into how you pick tactics and deploy them, but it’s good to start with a basic list. Think of these as the tools in your toolbox or the weapons in your arsenal (if you prefer violent war metaphors).

There are many marketing communication tactics, and this is hardly a comprehensive list. In fact, almost any item on this list could be broken down into more detail, but it’s a start.

Also, I didn’t judge. It goes without saying that many of these tactics don’t apply to start-ups and some of them are legacy marketing tools that don’t apply to most businesses.

That said, it’s a list. Please jump in and add more in comments, and I’ll periodically revise the list.

Here goes…

Account Management – People assigned to farm existing customers provided some value-added service like strategic advice at the same time that the work to develop a relationship to drive more sales into the customer or to drive renewals.

Analyst Relations – Working with industry analyst groups like Gartner and Forrester to build an understanding of the category and product in order to drive inclusion in reports and consulting.

CRM – A tool like salesforce.com that keeps track of prospects, leads, customers and opportunities as they move through the customer acquisition process.

Custom Development/Services –Using professional services to pull a product into an account.

Direct Marketing (Print) – Sending print pieces, gifts, and other items to prospective customers using lists you rent or get through partnerships or build yourself.

Direct Marketing (Email) – Generating emails to prospective customers using lists that are rented or through partnerships with other companies or through lists you’ve built yourself.

Educational Content – Any content on your website that is designed to educate prospective customers about the value of your product. This includes product information, feature lists, product tours, customer case studies, testimonials, etc.

Executive Events – These could include breakfasts, golf trips, etc. that are designed to reach senior executives.

Field Sales – A sales team that is in the field and goes onsite directly with customers to work them through the sales process and close new business. They may hunt customers with their rolodex or handle leads.

Free Product – A free version of the product that customers can use, putting them in a good position to be sold upgrades to premium paid products.

Inbound Marketing/Content Marketing/SEO – Creating content and tools (like ROI calculators) on your website that is high value, key word rich, and indexed by search engines making it easily discoverable. Generally newsletters are also included in this category.

Inside Sales – A sales team that does not travel, but processes leads that are coming through other marketing mechanisms to help close them. Sales people move customers through the buying process including managing trials, generating quotes, and pushing deals to close.

Landing Pages – Creating pages on your website that are specifically designed to convert prospects in trials, registrations, etc. Landing pages are usually tied to other tactics.

Lead Nurturing – (Really should be called prospect nurturing) the process of remaining in touch with prospective customers through automated emails, information, etc. as they move closer to the point at which they are ready to buy.

Lead Scoring – A process of formally scoring prospects based on their profile (e.g. purchase time frame) and their behavior (e.g. time spent on website) in order to identify the best leads for sales.

Loyalty Programs – Rewards in a variety of forms for customers that show loyalty and repeat purchasing of a product.

Online Display Advertising – Banner ads, interactive ads, badges on blog sites like TechCrunch, etc.

Out of Home – Ads that are placed on bill boards the sides of buildings, bath room stalls, etc.

Print Advertising – Advertisements in publications, newspapers, and magazines as well as paid placement in catalogs like skymall etc.

Product Pilots – Working with customers to deploy pilot projects that are fully functional before they expand into larger deployments.

Product Trials – The ability for customers to trial products for a period of time before they need to buy the product. The goal is to get them hooked on the product.

Promotions – Contents, sweepstakes, discount coupons, sales, etc. that engage prospective customers in the brand and encourage them to buy.

Public Relations – Garnering press coverage including articles, mentions in blogs like TechCrunch, feature stories, customer case studies, mentions in trend articles, interviews, product reviews, etc.

Sales Collateral – Datasheets, demos, decks, etc. that the sales team can use to answer questions and give prospects to pass along internally to help through the sales process.

Sales Engineering – A person that is able to work with the sales team to put together custom product demos and prototypes as well as answer technical questions freeing the engineering team to code.

Search Engine Ads – Called Search Engine Marketing (SEM) ads that run along the search results I search engines and optionally distributed through networks to other websites. The most popular is Google AdWords (or AdSense the network approach).

Self-Service Sign-Up – The ability for customers to sign-up, put in a credit card and use the product without having to talk to sales.

Seminars – In person presentations of the product and information that would be useful to draw new customers.

Social Media – Creating and participating in online communities including building twitter followers, FaceBook fans, Linked-In followers, YouTube subscribers, podcast subscribers, participating in discussion groups and forums, and leveraging other peoples communities.

Sponsorships – Sponsoring sports events, exhibits, awards programs, and other programs that reach your target audience.

Telemarketing – Having an outbound calling team that is trying to identify prospects and leads building a database of prospects to target.

Telequalifers /Business Development Reps (BDRs) – A team that is responsible for qualifying prospective customers before they are passed on to a sales team.

Tradeshows – Exhibits sponsorships and pay to play workshops and presentations.

TV Advertising – This can include both 30 second spots as wells as infomercials that present the product in more depth.

Webinars – Online seminars often done with a media partner that has a list, which can be targeted to build an audience for the webinar. After the live webinar usually a recorded version is used for Inbound Marketing.

Website – For most companies the website is the most important marketing tool. A lot of other tactics leverage the website, but there are also specific tactics within website like internal adds, calls to action, promotions, etc.

The Case for User Development

2011-10-11T02:58:15Z

With Steve Blank’s seminal book Four Steps to Epiphany and the growth the ideas in the lean startup movement championed by Eric Reiss, startups are starting to understand the ideas behind customer development (The process that you use to identify customers and figure out how to market and sell to them.)

Unfortunately, in the new found fervor for customer development, the needs of users have been left out of the limelight, so I’m proposing we should be as focused on “user development” as we are on customer development.

The first step of user development is user discovery. In days gone by we would call this user-centered design, human factors research, user experience design, and a variety of other terms, which have been around in the software and technology industry for more than 20 years. There are a lot of great books written on the topic, which are worth a read. But all the books and terminology aside, the starting place is to decide as an entrepreneur that you’re going to have discipline around product development, customer development, and user development.

In the first phase, separating customer discovery and user discovery, at least in your head, will help you to focus your efforts and ensure that you’re deploying the right tactics with the right goals to solve the unique challenges associated with understanding both users and customers. In another post, I go into the differences between users and customers in some depth.

The goal of user discovery is create products that delight users. Great user-centered design makes products disappear and only the activity and results remain for the user. Apple has become legendary for their incredible user-centered design, but they are not alone in the industry. And not every product and user would be delighted by a product that looks and works like an Apple product.

Just like customer discovery, user discovery is an iterative process. Often users don’t even understand what they want from a product, how they’ll use it, and what it can do for them until they start using it. This is especially the case for ground-breaking new products.

For most products, the heart of the user experience is a core gestalt – a way the product works that is central to the experience and usually only changes incrementally. In Facebook it’s the news feed. In the iPod it’s the dial. Discovering the gestalt breaks open the passion that users have for products. This gestalt is ultimately the experience you’d like in your MVP. If you get it right every other well designed feature is a bonus. No amount of research will tell you the answer to this question, but soaking in the stream of users will put you in a position to have the a-ha moments.

In other posts I’ll write more about the tactics and techniques for user development, especially user discovery, but for now simply recognized that customer development is not enough is a good starting place. At the same time that you are figuring out who will buy your product, you need to be figuring out how to delight the people who will use it.

PR Messaging Brief Template

2011-10-11T02:25:09Z

Download PR Messaging Brief

Solid messaging for PR, including working with the traditional media and with bloggers, is critical. The best coverage comes when you are “on message.” A consistent message across all your communication for any announcement will help make sure the story you want told is effectively communicated to the journalists and bloggers who are writing it.

I’ve used this template for more than ten years across a broad range of announcements from product releases to crisis communications. The template is simple, but the work to make the decisions and get the content right takes time.

As with all templates and any written plan, the most important aspect is not to write a document, it’s to go through the process of coming up with creative solutions to the problems and making hard decisions. The document is merely a way to capture the results of this work and to communicate it to others.

So let’s break down the components of this template.

Section 1 – PR Announcement Summary

The first section is a summary of the key decisions that go along with any announcement:

A) What – What are you announcing? (e.g. a product launch, a funding round, a new hire, etc.)

B) Where – Where are you doing the announcement? (Most often this is just online, but many times it’s at an event.)

C) When – When are you doing the announcement? (It’s key to have everything aligned around the announcement date, and picking that date is a critical factor for any announcement.)

D) Who – Who are the spokespeople? The people who brief the journalists and bloggers need to be credible, on message, highly articulate, and, ideally, high-profile. Being clear on who will be the face of announcement is important.

Section 2 – PR Messages

The next section is the heart of the brief — the messaging. Most announcements should have 1 – 3 messages. More than 3 messages will make your story too confusing. Each message is broken down into four sections:

A) Message – A 10 word or less phase or sentence that communicates the message you will ACTUALLY SAY. The last point is the most important, and the hardest to achieve. Each message needs to be a phrase or sentence that you literally say over and over again. As you are asked questions, you need to consistently use the key message phrases in your answers to get your point across, so they should be short, simple, and natural.

B) Facts – All stories are built on facts, so giving writers facts they can work with is very powerful in terms of helping them build out there story. The best facts are specific; they have third party citations or numbers you can back up; and they are relevant.

C) Analogies – Analogies are one of the most powerful ways to make complex technical issues real for people. Good analogies are colorful and clear. They bring to life what you mean in your message. For example, when we had a security problem with an application server we were selling we had a message: “We provide tools for building websites, but we can’t control how they are used.” Then we had an analogy: “We sell a great hammer but that doesn’t mean people will use it to build good houses.”

D) Examples – The last section for each message is a concrete example. Usually this is a reference customer for whom you can describe what they actually did and the writer can follow-up and confirm it with the customer directly. For example, “the state department built a very secure site by using our tools properly. If you want I can put you in touch with them.”

Your messages should flow together as a story with a logical order. Instead of using slides, I do most press briefings by simply saying:

Today we’re announcing FOO. There are three things that are important about this announcement. First, [message] [facts] [analogy] [example]. Second… then at the end summarize.

When it’s a product announcement, usually the second message is about what makes the new product so groundbreaking, and it may have a few sub-messages that are the heart of the benefits or differentiators for the product. I’ll usually illustrate this with a quick product demo.

In a crisis communication interview, or when I’m giving background or input to a writer working on a feature or trend story, I’ll just put the brief in front of me and pepper the answers with the key messages, facts, analogies, and examples that get my point across. No matter what gets asked, I try to weave the messages into my answers, at the same time that I actually answer the questions.

Being on message has an incredibly powerful effect. You see the coverage for your announcements consistently communicating exactly what you want, and you help writers get the real story across without getting confused.

Finally, I want to be clear: the goal isn’t to “spin” or trick reporters and bloggers with a fancy or deceptive message. The goal is to be clear and honest. As Edward Murrow said, “…truth is the best propaganda and lies are the worst. To be persuasive we must be believable, to be believable we must be credible, to be credible we must be truthful. It is as simple as that.”

Who Should Do Strategic Marketing?

2011-10-11T02:07:50Z

A question that often comes up for startups is who should do the strategic marketing / business strategy? (See What is Strategic Marketing? for an explanation of this work.)

The answer is probably you. But the nuance depends on the stage. From inception through growth the responsibilities for different aspects of developing a business strategy will shift between people, but in the end everyone in the company should feel responsible for contributing to the creation and ongoing evolution of a company’s strategy, and no one is more responsible than the CEO.

Many of the most successful early stage start-ups combine the talents of a founding team with someone who is more oriented on the business and someone who is more oriented on creating the product whether that is a piece of software, a manufactured good, or a service. (e.g. Jobs and Wozniak, McNealy and Joy, etc.) The other way it works, is you get a brilliant entrepreneur who sees a path for both the business and the technology and then builds a team that can achieve it (e.g. Gates, Benioff, etc.)

In great startups, the work on the product and the work on the business are deeply intermingled one influencing the other through multiple iterations as the concepts evolve and solidify into a successful business.

The pattern that doesn’t work as well is when one or the other of these tasks is “delegated” to someone who is not part of the founding team, someone more junior, or worse a consultant. This approach rarely works.

Even when there is a clear division of skills and responsibilities between developing the product and figuring out the business, early stage companies should make the process of answering the fundamental strategic marketing questions something that everyone participates in. Without this discipline, it’s easy to have the product begin to drift or to have the business strategy loose alignment with the reality of the product.

As a startup matures from the early days, the responsibilities start to break up, and the most common activity is to bring in someone who does “product marketing” or “product management” or both. (The usage of the terms product marketing and product management are inconsistent across the industry. For sake of this discussion, I’m just going to use product marketing as all inclusive. In other posts I’ll tease out different ways of organizing the responsibilities.)

The product marketing manager usually brings a bunch of business planning and execution skills to the team. Hopefully with some real-world experience they can help drive the ongoing process of strategic marketing. When this works best, the product marketing manager is not simply operating alone in their office. They are facilitating a process that engages people from across the company.

In the end, even as the tasks for strategic marketing are delegated, the responsibility ultimately ends up in the CEO’s inbox. If the business sucks, the CEO takes the hit.

What is Strategic Marketing?

2011-10-11T01:54:22Z

Strategic marketing goes by a lot of other terms: business strategy, customer discovery, business planning, etc. But regardless of what you call it, the fundamentals are the same.

One way to dive into the question “What is strategic marketing?” is to think simply define marketing. The American Marketing Association defines marketing as:

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

To me the AMA definition sounds like something written by a committee. My definition of marketing is simply:

Marketing is a conversation with customers and users about value.

This definition has many layers. As with all good conversations it starts with listening. The process of listening to customers can be as simple as reading comments on a blog and as complex as a Bayesian clustering exercise combined with a conjoint pricing study. Ultimately, your tactical tool box for listening should include a variety of techniques that you can deploy in different situations.

The other side of the conversation is communicating value to customers. From the decisions on features and functionality to the basic positioning of your product to how benefits are articulated, content on a website, press coverage, pricing and graphical design, there are wide range of ways that marketers communicate the value of their products.

A good conversation goes back and forth — as everyone learns about each other and about themselves. It’s the same with good marketing. The conversation goes back and forth developing and changing over time as each party’s understanding of value shifts.

Getting into this conversation can be systematic, and that’s how this blog is organized. Each section has posts on the fundamental topics of strategic marketing:

1. Customer Discovery
2. User Discovery
3. Competitive Strategy
4. Product Planning
5. Pricing & Editions
6. Positioning & Messaging
7. Customer Acquisition
8. Communication Strategy

1. Customer Discovery

Customer discovery used to be called market research and analysis, and it still is in most industries. But the tech start-up world has started calling it “customer discovery,” which conveniently mirrors product development.

The term was coined by Steven Blank in Four Steps to Epiphany, a great book and a must read. Steven defines customer discovery as a process of “finding a market for your product.” The idea is that most start-ups being with a product idea, and to make it successful they need to find a market.

Whether you call it customer discovery or market analysis and do it before you build the product, after, or during, the questions are the same and they include fundamental issues:

Who are your customers?
What do they value?
How can you segment them?
How do acquire them?

Understanding the answers to these questions is the very bedrock of creating a business strategy. If this foundation is weak, the rest of the house will never holdup. There is a common trope that some of the greatest innovators distain market research. For the most part, they just miss that they are doing it in a different way, and I’ll talk more about that in other blogs.

2. User Discovery

In another post I break down the difference between users and customers. Simply put: users use the product; customers buy it. Of course, the reality is more nuanced.

Before “customer discovery” became the de jour term for understanding markets the process of figuring out what users wanted was usually called user-centered design or user experience design, or any range of other similar terms. Now “user discovery” fits nicely with customer discovery, and the techniques are critical to building products that people passionately love to use.

3. Competitive Strategy

Some might argue that business strategy and competitive strategy are one in the same — the plan for how you’re going to win in the market. But it’s convenient to break this out and look at how one researches competition and more importantly builds a strategy for beating the competition.

Ultimately, growth and profitability come from creating sustainable competitive differentiation, and all the other aspects of a business strategy lead to this core achievement.

4. Product Planning

One way or another, your product needs to create value for customers and meet user needs (it’s even better if it delights users). Product planning is all about the mechanisms that help get market insight into the product design.

5. Positioning & Messaging

In the remarkably over saturated world of information we live in today, no product can survive if it is not clearly positioned in the minds of potential customers. While it may be your whole world, your product isn’t the only thing your customers care about. For them to give it attention, they need a place for it in their mind. They also need to quickly and simply understand its value, and that goes to the very heart of good messaging.

6. Customer Acquisition

Almost all good businesses have customers. So how do you get them? What is the structure of your sales force? Do you have a channel that carries your product? How do prospective customers learn about your product and then become converted into buyers and passionate advocates? Answers to these questions will lead to a customer acquisition strategy (also sometimes called a “go-to-market” strategy).

7. Communication Strategy

Marketing communications is the other half of the marketing equation. It’s as rich and complicated a topic as strategic marketing. Understanding the nuances of how to implement ever tactic is not something that the business strategy needs to make sense of, but driving a mix of the right tactics and the right levels of investment is critical to successfully participating in the conversation with customers.

Every one of the 7 components of developing a business strategy involves research, analysis, innovation, decision making, and ongoing trial and error. Often the best answers are simple, but getting to them may be hard. In the end the work pays off. If you want your company to succeed, learn the techniques and use them wisely.

What to Tweet

2010-09-29T14:19:41Z

Confession: I’ve had no idea what to tweet.

I’ve struggled to find a way to actually create value for readers. Some people basically tweet their life, and for most people I simply don’t care to know. Others put out what amounts to a form of haiku. Some essentially RT a wide range of stuff that is already posted somewhere else, which quickly becomes noise.

I’ve been at a loss.

But I woke up this morning with an idea. I’m going to try tweeting one useful, relatively timeless tip for entrepreneurs and managers in high-growth companies per day. This reflects the strategy I’ve taken with my blog: one well crafted essay per week.

Tell me what you think. Of course, if you have good ideas for what you want to see or some better way to add real value on Twitter, please comment or drop me a note.