Free Products are Online Marketing

freeJohn Battelle has got a series of very good articles on online marketing on his blog. Check them out here and here. A third post is yet to be published.

Both articles are on building brands online. Basically what John is saying is that online advertising works well where you have very strong brands that attract a particular type of user that can then be marketed to. These brands can command higher CPMs that generic publishers, for example. The yet to be solved problem (solution probably to be revelead in his third article) is about the fact that online formats for marketing don’t really work that well, or not as well as online formats (he uses TV ads and magazine ads as examples). An example might be that car ads on TV or in a magazine leave a much bigger impact with the viewer than banner ads do.

Two things came to my mind when I read this.

The first one was that it is logical (and actually obvious) that when you attract a certain type of viewer to a site you can command high CPMs. After all, it simply means that one can target ads better to a more relevent audience. The key problem is that one actually doesn’t know who is looking at what on generic sites, making targeting difficult.

My second thought was that at least one format that works extremly well for advertising online has already been invented. It is called free products. Why do you tink does Google have some 50-100 free products out there? Just for fun? Or because the revenue avalanche is going to hit them via these products? No, the reason is much simpler. It attracts users. Google embeds their brand in their brains every day. They then go out and use Google search. This is a great way to build a brand online.

I believe there are many ways in which publishers, manufacturing, and service companies can build their brand online. One way to do it is via free services. I am sure people will come up with other ways. I think John is right to say that the classic online banner ads won’t do the trick. But look at the bright side: if it was that easy, what would you need great marketers for?

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Be the Customer

BAAPutting yourself in your customer’s place is the key to good product planning, design, development, and also, marketing. If you cannot see your product and its marketing from a customer’s perspective, it is likely to not go very far. However, I think just seeing your products by putting yourself in the shoes of your customers, probably doesn’t go far enough. You should actually be the customer. What do I mean with that? Let’s use a few examples to illustrate this.

I am a frequent traveller at several of the UK airports. There are so many things wrong with these airports. Most of these problems are probably very easy to fix and would cost little money. But they still persist. Examples are:

  • No screens displaying departure status where people actually sit. Examples are the sitting areas in Heathrow and in Gatwick airport. Essentially, there are few screens where there are seats and where there are screens there are few seats. What is that good for?
  • Total lack of clarity surrounding what is to be done at the X-ray machines. Laptop in the bag or out? What about liquids? Do I need to take off my belt? How about my shoes? So, why are there no big boards that explain it to people? Why do different lanes operate different procedures?
  • Why are the drugstores selling only bottles that are larger than 100ml when you are not allowed to take them on the plane on your return trip? Why should I buy a 250ml bottle of shampoo just to throw it away two days later? Particularly when all customers are continuously looking for smaller bottles and asking for them?

Don’t get me wrong, I am not complaining about the airports. These are just examples I am using to make a point. Let’s use another, completely different example.

When Lou Gerstner joined IBM as CEO in 1993, the company was in huge trouble. It was at some point probably only a few quarters away from being either broken up or going bankrupt. You can read this very interesting story in Lou Gerstner’s book: “Who says Elephants can’t dance? Eventually, the company got turned around and today is very successful again. There are a number of important steps that were taken to get to that point. Read them up in the book. What is interesting for this article not what these steps were, but why these steps were implemented.

The major reason for why the company was turned around was that Lou Gerstner came to the company as an IBM customer. He didn’t actually understand the technology. Or the industry. Or the company itself. But he had been a senior executive at American Express for a long time and there, he was a very significant IBM customer. He actually understood what customers wanted because he was one. Using his experience as a customer, he turned the company around by refocusing IBM on customer needs. He basically rebuild the company in a way that he as a customer would have been happy with it.

So, the point of this article is not just to say that companies need to be customer focused. Of course they need to be and I also believe that most companies are customer focussed. The point I am making is that in order to be able to execute this, the people that operate the company have to have the customer experience themselves. They need to be the customers.

The easiest way to put yourself in your customers’ shoes is to be a customer.

I am sure that if BAA executives travelled just like their customers do, then their airports would be much better. I am also sure that if the people who worked at the airport used it as their customers do, the airport would work better. It took a customer of IBM to arrive to fix the company. Let’s hope BAA management fix the airports before that needs to happen.

Update: Heathrow Terminal 5 has opened today. Here are some impressions of the first users. I just love the comment about the Terminal not being very user friendly.

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Elements of a Successful Start-up

FosburyThis weekend has seen an eruption of emotion in part of the blogosphere. It all started with Jason Calacanis posting some of his thoughts on how to run a start-up company here. This has resulted in many articles on the topic, including Duncan Riley from TechCrunch, and there was another follow-up article by Michael Arrington at TechCrunch.

All of these discussed various aspects of ‘how’ to run a start-up or a start-up business. Arrington says that the two most important aspects of a company are hiring the right people and managing your cash extremely well. I think these two aspects are important, but they are not everything.

For what it is worth, I believe there are three fundamental aspects that will determine the success of a company. They are what the company does, how it does it, and who actually does the work. The diagram below shows what I mean with this.

strategy

In my view, the founders of a company, and at a later stage the hired senior managers as well as the board, will determine the strategy of a company, its operational structures and processes as well as some of the tactical details on how things are done. They will also hire new staff into the company.

Let’s have a brief look at these three aspects.

Strategy -“The next bounce of the ball”

There are obviously many aspects of strategy, but this is a short blog post. If I had to pick one thought on strategy, it would be “the next bounce of the ball”.

I have borrowed this phrase from Ronald Cohen and his book: “The second bounce of the ball”. The concept behind this thought is very simple. Cohen explains this phrase using his personal history of founding Apax Partners, the private equity firm. He started out doing corporate finance work, managed to transition into venture capital when that became ‘hot’, then transitioned into buy-ins and then into leveraged buy-outs. Basically, Apax rode the subsequent waves of the European private equity industry and managed to grow very substantially with each of them. The point here is this: you need to be able to ride markets as they appear and expand; it is the easiest and fastest way to achieve substantial business growth. For Apax, that was the transitioning through the various phases of the private equity industry. For example, let’s say you create the best video-sharing site in the US right now, you would have a hard time to grow to a substantial size: you would be too late. If you set up the same company six years ago, you wouldn’t have been able to achieve growth either, Internet access was probably too slow and digital cameras not widely enough spread by then.

So, if you can predict the next bounce of the ball in a significant market and focus your company on that bounce, you will probably do well, provided you can execute.

Operations & Tactics – Execution: How to get it done

With operations, I mean both organizational design and the processes that flow along that design. For example, you will create different operational divisions in your company. These divisions will have different objectives and there will be ways in which they communicate with each other.
It is very easy to get this wrong. For example, should the marketing function be aligned with product management? Or with sales? Who manages customer support? How do does the sales staff interact with engineers? How do engineers interact with customers?

I have embedded a good podcast (audio only) where Andrew Frame, founder of Ooma describes, amongst other things, his thoughts on organizational design.

Overall, I find that there is very little good literature on organizational design out there. Each company will have different requirements, too. In my mind there are two important aspects here: Think it through and keep it very simple. As a start-up, don’t do the fancy stuff like matrix structures. They will slow you down and add little value at an early stage.

When Jason Calacanis talks about buying cheap tables and expensive chairs, he is describing tactical elements of how to run a company. Other such examples are going staff flexible working hours, buying them free coffee, etc. you could call these the tricks of the trade. Tactics essentially describe how small groups of people interact with each other and use their resource to achieve very specific goals. These tactics are useful for those ones that will make it happen, the people in your organization.

People – “Making it happen”

I fully agree with both Arrington and Calacanis on this point. People are the ones who will make it happen. Taken from Arrington’s post:

“The most important part of hiring correctly is to not hire the wrong people. The second most important part of hiring correctly is to hire the right people. What that means is that it is better to not hire anyone at all if you can’t find the right person. And if your startup fails, all the perks, time off and general coddling that many outraged commentators called for isn’t all that useful.

So who are the right people and who are the wrong people? It’s not that hard to tell. The right people are the ones that really, really want to work with you. You can tell they’re excited to be a part of the team. They actively look for problems to solve, and then solve them. This is a personality type that is very easy to spot once you know what to look for – they have fire in their eyes. They’re warriors.

I’ll take the fired up warrior any day over the more experienced but otherwise meek alternative. Skills can be learned quickly on the job (excluding certain specialized skills, which mostly means developers for a young [software] startup). But if you aren’t already the kind of person who’ll just get the job done no matter what, you’ll likely never be.”

A former boss and mentor of mine said to me that the people you want to hire in a start-up are the ones you would have wanted to have next to you in the trenches in Word War I. The ones you just trust to help you through this. I think that sums it up.

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