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Put Your Money Where Your Mouth Is…

April 1, 2013 by David

One of my clients recently clued me in to what I believe is one of the secrets of increasing sales, social media marketing, and brand promotion. Yep, all in one tidy package.

Most of us know from Malcom Galdwell, Seth Godin, and other erudite observers of the human condition that word-of-mouth is one of the most effective methods of promoting a business or product ever imagined.

And most of realize that that the power of social media, applied to commerce, transforms geographic distance and can even restore an “Olde Time” sense of community. Angie’s List has acquired more gravitas, more impact than the Better Business Bureau (remember them?). And as generations can attest, the vendor your distant cousin used, is the one you will use, if you have no other input on the matter.

So how does this matter to entrepreneurs?

Your customers are your ambassadors. The statistics are obvious: celebrities and athlete role models can absolutely drive brand and sales. But when you can’t afford these famous people, there’s nothing better than a paying customer.

So why would a paying customer even bother to Like you on Facebook (or join your Network on Linkedin, for the business-to-business set)? Why would they help you sell your next widget (or sign your next deal)?

The cruel answer is that they won’t.

(Coke and other established brands just can’t seem to understand this, despite research that proves their customer social media chatter doesn’t help them).

They’ve already purchased. They’ve already had their needs met. You’ve satisfied your part of the vendor-customer relationship. They’re done.

Anything after this… is a favor. Frankly, if you ask, you’ll owe them. (dirty little secret: it’s the asking that implies the favor… even if they don’t follow through, you’ll owe them. Ugh.)

And that’s after you have convinced them that you’re worthy. And then pushed them to take action… on the favor you’ve asked them to do. And risk annoying them.

But: there’s another way.

It’s called gratitude, and it is universal. And it’s worked for centuries… despite the more “recent” research that helps defend this essential human emotion. You may find yesterday’s fascinating article in the New York Times illuminating: it describes the Professor Adam Grant and his research on empathy and the gift of giving.

How does this work?

My client, struggling to promote his awesome but expensive products, realized that he can increase sales, promote his brand, and reward his customers by a simple concept: he invites his presumably happy customers to personally convey to their specially-chosen friends… a substantial and significant discount with a special coupon.

And he doesn’t discount. Ever. He owns a luxury brand, and there is absolutely no point in discounting, ever. Well, never is a long time, but I can tell you I can’t remember the last time I saw BMW or Patagonia discounting. Yes, retailers offer Patagonia on discount (picked up a tasty sweater a few months ago) but I and everyone else attribute that kind of discounting to the retailer, not the brand. The Patagonia and BMW brands are definitely not discount.

But you can get one of his products on deep, deep discount… if you know someone. Like a dear friend. Who already bought. A happy customer. That’s the only way.

And there is the genius. Rather than the vendor being magnanimous and generous… he empowers the customer to be generous.

The customer is the hero, not the brand. The customer gives the gift, not the company. The reward for buying… is to be able to give.

And the customer thinks carefully (only one coupon is provided) about who is the worthy recipient…

Which:

Increases the likelihood the coupon will actually be used, i.e. gets another sale
Rewards the customer’s initiative to buy in the first place
Reinforces the customer’s buy decision with special recognition, now they are the member of a club
Supercharges the Word-of-Mouth, with a call to action (coupon expires soon)
Expands the network (both giver and recipient emails are captured; coupons are uniquely numbered)

The recipient receives this gift from a friend, from an intimate. This gives the coupon itself a kind of gravitas that far out-weighs the endorsement provided by a celebrity, a review service such as Angie’s List, or even a product review by a branded media outlet. And it is far, far beyond a mere Facebook “Like”.

Ultimately this is about broadening the customer base, spreading good will. It isn’t about discounting. In fact, I recommend against providing current customers discounts (how exactly would that be a good idea?).

And broadening the customer base with positive interaction is how you build a great brand.

This method works for products or services. And especially well for any differentiated offering. Seth Godin in Purple Cow goes farther and says that the product or service must be remarkable, a purple cow in a sea of brown cows. And that it can’t be “painted purple after the fact” – it has to be inherently and authentically unique. And that this will drive explosive Word-of-Mouth.

If you offer unusual quality for your market segment or geography (e.g. custom home building, top-tier outdoor apparel, a tree-trimming service staffed by botanists), or if your offering is relatively expensive (e.g. BMW automobiles, yachts), or if your customers are highly selective because of the nature of your offering (e.g. hair stylists, massage therapists, highly-ranked legal counsel) you will benefit from this method to broaden your customer base and deepen your relationship with your customers. I’ve seen it work.

Help your customers give you to your next customer. And be sure to thank them.

Further research:

Profile Your Customer

December 18, 2012 by David

I first was taught to use a “customer profile” in 1993, as an entrepreneur attempting to delight CD-ROM users with high-quality content. It was invaluable, as I’ll explain…

The exercise then was to create a group, a series if you will, of customer profiles that included demographics, psychographics, and even a “face” (clipped from a magazine) to make the profile more “real”… a methodology one of our advisers brought from Microsoft.

We found the technique invaluable, because it provided a shared vocabulary for the factors that would affect the customer’s experience of our CD-ROM. In fact, just following the methodology itself was a way of focusing on the customer’s experience, rather than the product in and of itself.

This had the effect of reducing the internal conflict in the organization as our staff debated “what the customer really wants” — as opposed to the old “I” statements. “Well I think it will be much more compelling if it was in green instead of blue” became “I wonder if Molly (name of one of the customer profiles) would find that compelling?”

So it shouldn’t be any surprise that my friend Jim Ewel, also from Microsoft, reminds us this month of the modern methodology for this (19 years later) with a far better name… the “Persona”…

I advise that you click through to his discussion here, which is in terms and process used in Agile Marketing.

Why Big Data Matters

October 21, 2012 by David

Recommended reading for all entrepreneurs… is this article on Big Data from the Harvard Business Review while most startups in the early stages don’t have ANY data to analyze, let alone enough data that you could call it “big data” and derive any meaningful insight from it…

It won’t be long before many “startups” have data stores filled with information (if you choose to collect it, even 500 customers will provide you with rich data)…

and analyzing that information, deriving insights from it, and acting on it (a three-pronged skill set that few people have… thus the article’s focus on how to find Data Scientists) will be ESSENTIAL.

I’m not talking about being competitive here, I’m talking about survival.

One retailer assumed from their extensive hands-on experience, that service person turnover was a key metric… that would determine customer satisfaction. Makes sense intuitively, eh? You want great service/counter staff, and you want them to stay.

Once they truly questioned their assumptions, re-ran their analysis and plumbed their sales per store… they determined service staff was irrelevant. Store manager turnover, however, absolutely determined if the location was profitable or not.

I’m sure my clients can relate, even though some of them have “smaller” businesses right now. Read and heed!

Doctor Heal Thyself

September 20, 2012 by David

I love that Norm Brodsky, long-time columnist and startup expert for Inc magazine… turned his formidable skills on himself, to diagnose the need for experiments and metrics in his own startup, the recently launched Kobeyaki.

Read this to get a taste of why (and how) they measured their new restaurant in order to establish profitability… and next they will experiment with location, in preparation for expansion.

Moore’s Law

July 4, 2012 by David

If you don’t know what this is, you need to know it. Really.

Whether you’re in the technology markets, or raising grass-fed beef cow in a pasture, you need to understand the implications of this simple but powerful factor that affects what we drive, what we eat and how we live.

Gordon Moore, a kind and razor-sharp engineer published a paper in 1965 describing that integrated circuits had doubled in density every year since 1958. “Density” in this context meant the number of components in the circuit, essentially its “capacity”.

The “Law” has stood up to the test of time, and 55 years later it has been generalized for processing speed in computers, the amount of memory in computers and consumer devices such as phones, and the number of pixels (“sharpness”) in digital cameras.

Even Moore does not believe that the exponential nature of capacity will continue to grow, and eventually it must slow. Although he has been quoted widely on this, including recently, it hasn’t yet stopped. This is why your iPhone from last year has already been superseded by a superior model, before your 2-year contract is up.

The salient point for us is that product development, providing services, and even the basics of transporting grass-fed beef cow to market, will be dramatically affected by the constant improvement and expanded capacity of computers. Our markets and cost assumptions are, by definition, a moving target.

For more on the Law, and its implications read the Wikipedia entry.

By the way, I had the great pride to work with Dr. Moore at Intel, although “work with” is a generous interpretation. He agreed to attend a few meetings with key customers that I hosted, and was gracious, self-deprecating, and very smart. A superior individual.

Crazy, or Just Inspired?

January 4, 2012 by David

I was recently schooled on the importance of the “First Follower” in entrepreneurial startups, and the class was fully resonant. In fact, I’m fairly embarrassed that I hadn’t realized the First Follower’s role before now. Because it is essential.

The key here is that there isn’t much difference between a crazed whackjob and a brave new leader, at least not at first glance, and sometimes not even with the benefit of another look. Is that guy crazy, or just inspired?

Let’s face it, we’ve all known for a long time that the #1 attribute of a entrepreneur is self-denial. After all, the entrepreneur is going to hear constantly that It cannot be done, can’t be funded, can’t be built (or built affordebly), can’t be brought to market, can’t be (easily) sold, etc. etc. Even the well-intended supporters can’t seem to stop themselves from pointing out the difficulties… and the entrepreneur has to ignore this input, has to practice self-denial and forge on ahead anyway.

But therein is the paradox. An entrepreneur that ignores hard facts, hard constraints, and good advice… does so at their peril. So how to balance the confidence to go on, no matter what, with the wisdom to listen and observe?

As we wonder about the individual on the whackjob-to-brilliance continuum, there is a test that almost everyone else is unconsciously waiting for: the First Follower.

This brief, 6 minute TED talk by Derek Sivers (founder of CD Baby, and quite a whackjob himself) you’ll see a vivid explanation of the concept: http://www.ted.com/talks/derek_sivers_how_to_start_a_movement.html

While we can lionize the courage of brave leaders, the most important test isn’t their idea (or themselves) but whether they can attract a First Follower. As Sivers explains, the First Follower models for everyone else, what they should do.

Because the esteemed leader isn’t actually modeling the desired behavior. He’s out in front, doing something crazy. The First Follower is literally and figuratively the model of what the rest of us need to do, the catalyst from crazy idea to brilliance.

Obviously, that isn’t sufficient for success, but it is absolutely necessary. And if you think about it, investors, journalists, candidate employees, and definitely customers are looking for it.

Think about it.