Monday, October 25, 2004

Product Marketing - consider hiring some outside perspective

Goodness me, sorry for the delay in posting! Lots of new clients and lots of activity going on. It certainly isn’t the quality of northwest football that’s keeping me distracted from this Blog, that’s for sure. So to make up for lost time, I thought I would write-up and interview between another interim provider that entrepreneurs can take advantage of – John Browne of Workpump – who provides product marketing strategy, typically for early stage companies. John is a terrific person who is always good for an insight and a laugh, and he’s someone I’d recommend entrepreneurs who are trying to figure out their product strategy to take a look at.

I started by asking John what are typical services you provide in an outsourced manner (i.e. how does it work)? His response:

“As an entry point, we typically work with the company to create or revise their marketing strategy and plans. Tech companies in particular typically can't answer the question, "What compelling, urgent, and unsolvable problem do you solve for your customers?" We help them do that. Creating a value proposition and message, that's the foundation of effective marketing. A lot of our work is marketing execution--building marketing communications like web sites, data sheets, white papers, direct response campaigns, and so forth. Additionally, we're doing a lot of web analysis these days--looking at search engine optimization (SEO) and search engine marketing (SEM) as well as mapping campaigns to bread crumb trails through a website.”

I asked what the advantages are to startups in outsourcing Marketing to a firm like Workpump. His response:

“Most of the companies I talk to are focused on their technical core, whether it's software or hardware. They think in terms of features, not customer benefits. We come in as a fresh set of eyes, totally focused on how to find the sweet spot in the market and get traction quickly. We think customer benefits, not product features. Ultimately more features won't sell product--solving customer problems will. Sadly, most startups can't afford the whole orchestra; they can only afford one or two musicians. Workpump provides a deep and wide bench of very experienced people who have done this many times before. By renting their talent instead of buying it, they can get better quality at an affordable price.”

Having a tight budget is something my clients face as well, and is often an objection to using an outsourced solution. John added “I think startups fall prey to the idea that they need to emulate bigger companies right from the start. So they want to hire every key position, not rely on service providers. Interestingly, this concept of "I have to do it all myself" is not at all part of more successful companies. Microsoft, for example, has systematically relied on outsourcing or bringing in service providers through its history. Another objection we run into concerns the degree to which people are willing to invest in growth. Everybody wants more customers, but how many startups are really committed to investing in marketing and sales? Again, this is something you see less and less of in successful companies. Think of any big, successful tech company, and go look at their SEC filings to get an idea of how much their total S&M investment is vs. their R&D budget. To use Microsoft again, their total S&M budget is approximately equal to R&D.”

With that in mind, how do clients convince themselves that outsourcing is the way to go with certain early-stage management roles?

“Our current clients are the best proof point for the first objection. In many cases Workpump has augmented the in-house capabilities of a company's marketing department; in some cases we've done it all. In both cases our clients love the results they get, so usually having a prospect talk to a current or past client is enough. In addition, we have always fully guaranteed our work, so we believe that takes the risk out of the equation. I have no use for service providers who take the line of "you pay your money and you take your chances." The gold standard for customer satisfaction is Nordstrom. The story (often repeated) of the guy who returned four tires and got his money back from a clothing store is priceless. At Workpump we strongly believe that we want zero unhappy customers. We've never had anyone ask us for the money back, so we must be doing something right."

With regard to the degree of investment, there's not much I can do about that. Certainly I've talked to CEOs who state very ambitious plans for growth but won't provide any resources to achieve it. I think people don't really understand that anybody can buy customers. The trick is to do it profitably. But no-investment means no-growth. It's as simple as that. Finally, I think technology companies fall into a mental trap that I call the "mousetrap myth." They believe the old adage that if you build a better mousetrap, the world will beat a path to your door. Tech people translate this myth into thinking that if they just add enough features; somehow sales will take care of themselves. Well, anything's possible, but I can't think of many cases where this turned out to be true.”

I asked how John helps the startup company grow and not be dependent on you long term?

“Although we have some clients who really want to outsource their whole marketing function, most of the time we're involved as a transformational agent, not a replacement to doing it yourself. Sure, there are some key specialties that companies should always look to buy from outside until they have sufficient economic justification to bringing it in-house. I don't have a full time corporate attorney--I have an outside lawyer. I don't think of myself as being "dependent" on him. I think of him as a high-value resource that I can "rent" when I need that specialty. Even when companies grow to the point that they bring functions in-house, they still typically use outside service providers either for their fresh viewpoint or for overflow work. “

Any other parting thoughts, John?

“I'm deeply committed to entrepreneurship in the Northwest, and am troubled by the number of business failures in the tech community. Technology is one of the few areas in the world where we have the opportunity to actually improve people's lives, and for great ideas to fail due to poor management is painful to watch. Tech entrepreneurs are--as a class of people--incredibly smart, but they can also underestimate the difficulty or complexity of areas that they are unfamiliar with. Over and over I see companies struggling with the same problem set: lack of any clear value proposition, inability to focus the marketing effort, lack of understanding about appropriate sales strategies and channel development, inability to hit development milestones, lack of in-bound marketing/product management, weak or confusing customer communications and sales tools. Those same tech entrepreneurs all too frequently can't tell the difference between developing a product and running a business."

"Early stage companies should build out their core team with seasoned, committed individuals who share the entrepreneurial drive and spirit. But beyond that core team it is hard these days to attract superstars to young companies for all the other functions. The odds of your stock options really being worth some significant amount are pretty slim in this new post-bubble era. Acquisitions are still a viable liquidity event for tech companies, but at greatly reduced multiples relative to a few years ago. This new, tougher, economic climate makes it harder then ever to fill out your team with high-quality people. Outsourcing with companies like mine and Athena is a great way to solve that problem.”


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