Morettini on Management

General Management and Marketing Advice for Software and Tech Companies

Category: B2C

Retail Distribution of Software Products

Selling software at retail at one point in time was the “Holy Grail” for consumer, home office and small office software suppliers. That’s where the volume was. Everything that a company did starting up was intended to build enough volume to get into a distributor, so they could then pursue shelf space at the major retailers of software.

But oh, how times have changed. The advent of the Internet and wide availability of broadband has made nearly every consumer and small business application downloadable with the click of a mouse, and a major credit card. In the meantime, major sellers of software have dropped like flies (CompUSA, Computer City) or have de-emphasized software in their retail assortment.

PROFITABLE retail distribution of software, which has been a major challenge for software companies dating back more than 20 years, has gotten tougher every year, as the retail distribution pipe shrinks. And even twenty years ago, it was already very tough, for small software companies, in particular. I’ve even seen a credible authority recently predict that distribution of software through retail outlets will CEASE TO EXIST within five years.

IS RETAIL SOFTWARE DISTRIBUTION DEAD?

So should you forget about retail as a potential distribution channel for your consumer or SMB software application?

First of all, it’s my opinion that the near term extinction of retail software distribution is greatly exaggerated. While it has been in decline for a very long time, and will continue to decline, it still has some life left. There is still quite a bit of software sold at retail. There are still some reasons that people buy at retail. And last but not least, nearly every thing in high technology takes more time to “go away” than the pundits predict. People just don’t change their habits that quickly, no matter the technological reasons for that change to occur. Among several reasons people still buy at retail:

WHY PEOPLE STILL BUY SOFTWARE AT RETAIL

Impulse – They are in a store looking for something else, and happen upon a product that looks neat or useful. In this respect, software benefits from this “in-store effect”, much like any other retail product.
Credibility – Buying software, or any other item over the Internet from some unknown company, is scary for many people. Just the fact that it’s in a “touchable” package, and is “blessed” by the retailer stocking it, gives comfort to many, especially the mainstream and late adopter types.
Physical Media – Most folks want a backup copy of the application which they’ve put out good money for. Sure, you can burn a backup CD on your own. But to some folks that’s technologically challenging–and seems like a lot of work to others.
Internet Phobia – There still are folks, more than want to admit it, that just aren’t comfortable with the Internet, particularly the ecommerce aspects.

WHEN SHOULD A SOFTWARE VENDOR CONSIDER RETAIL DISTRIBUTION?

So in some cases, software vendors should still give consideration to packaging their products for retail distribution. What are the elements which may make retail still a viable distribution channel for a particular product line?

* A VERY hot product – In one of these rare instances where you’ve hit a product home run, it’s beneficial to get your product in as many channels as possible. When you have a product “selling like hotcakes”, retail can be ideal to help you maximize your return on the high demand. Make sure that you’ve proven that it’s a brisk seller via other marketing and distribution methods BEFORE you enter the retail channel, however.
* A well-known brand – Almost nothing helps product sell through retail as much as a well-established brand. There is almost never anyone to “sell” your product in a retail store. You are relying almost soles on the box copy to be your salesman. In this situation, the credibility of a strong brand is often the difference between a customer purchasing, and leaving the box on the shelf.
* A related portfolio of products that can be sold to the same customer. It is very hard to make money on a single product being sold through retail channels. The upfront marketing programs and thin margins make breakeven a huge challenge for a single product company. However, if you can profit indirectly even if you just break even on the actual retail sale, by building your customer list and selling related products to them–that’s a huge advantage.
* Add-on services to sell – Much like having a large portfolio of products, a single product vendor can also have a greater chance at profitability if the “retail product” is a front-end to other revenue generating services. Maybe the product leads to subscriptions to an add-on web-based service, or there are custom forms or other tangible supplies that can be sold to users of the software application.

These are a few of the circumstances where I would actually encourage an ISV to consider retail distribution. I want to caution that in the best of circumstances, this channel isn’t for the “faint of heart”. Startup costs are high, margins are generally lower than other forms of software distribution, and there are substantial inventory issues and risks. There’s an old saying in the software business about retail distribution–”the only people who make money at it are the freight companies who ship the inventory back and forth among vendors, distributors and retailers”. In short, it’s a great place to lose money–if you aren’t careful. I highly recommend that you retain an expert to help you through the process, if you are new to retail and decide that it may be appropriate for your products.

There are many more angles to cover on this topic. To name a few, the need for a relationship with a major distributor of software to retailers, what marketing programs to use, the importance of a retail package–and much more. As important as they are, we’ll have to leave the detailed mechanics of getting your software into retail distribution (and making a profit!) for a later article.

SUMMARY

So don’t dismiss retail distribution of your software applications completely, even in this age of Internet instant gratification. But make sure that you are doing it for the right reasons, with a solid plan for how it will benefit your company. If your company is entering retail for the first time, consider retaining an expert to reduce your risk of failure.

I’d enjoy hearing your own experiences with retail distribution, past and present, as well as your attitude about this channel today. Post a comment so we can all learn from your experience.

Phil Morettini
PJM Consulting
www.pjmconsult.com

No Comments by admin on April 11, 2008
filed in B2C, Corporate Strategy, Distribution Channels, Pricing, Promotion, Retail
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High Tech Market Research for New Products

One of the biggest problems in High Tech businesses is the “technology-driven” approach that tends to predominate, especially among startups. Much of this occurs due to the fact the many founders of software and technology companies tend to come from an engineering, programming or other technical background. While a strength in creating a flow of technical innovation, this can be a real problem when companies are planning new products which they hope to find a real market for.

Everyone has a tendency to focus on what they know best; that’s just human nature. Folks spend more time on the issues that they enjoy, are more comfortable with, and are more confident about their ability to make good decisions on. Things that don’t fit into this category tend to be put off, or given short shrift.

The result is often products are well thought out from a technical viewpoint–but much less well so from a “meeting market needs” perspective. While both are important, the market perspective is absolutely critical initially. So what’s the right approach to product planning-oriented market research?

When Should The Research Should Be Conducted?
The answer to this is early, often and forever. The earlier you start prior to design or coding, the more time you will have to obtain the most accurate picture of the market that’s possible. Sometimes there are practical limitations to how early you can start–Trade secrets and patent filings, for example, or the lack of a prototype which may be considered crucial to receiving realistic market feedback. Within these limitations, get out and begin interacting with the marketplace as soon as practical. And don’t ever stop. Markets, especially the software and technology variety, are like living organisms. They are constantly growing and changing. What may be true in the early phases of a market could change dramatically over even a short period of time. Companies tend to develop an internal “common sense” that is used in making decisions, which is based upon past inputs. When doing Product Planning this can very dangerous in a dynamic market.

Who Should Do The Research?
The best way to do this research is what I often refer to as the “two-headed monster” approach: one marketing person, and one technical person. Not a lone wolf if you can help it, and please–no committees. Most often, this would be a Product (Marketing) Manager along with the Engineering Project Manager who will lead the actual development of the project. In the smallest startups, it might be the technical founder and the “business” founder, for example the CEO and CTO, or CEO and VP Marketing. The Business/Marketing manager should be in the lead for this task, but it’s important to note that both camps have a role to play in this endeavor. There are two different perspectives on market feedback, and well as two different priorities in questions to ask. Having both parties involved (assuming there isn’t a dysfunctional relationship) usually leads to the most complete and risk-reducing result. In addition, it often eliminates arguments over priorities later in the process after coding starts (and schedules inevitably begin to slip) If only one can be available, it should be the Marketing side–working closely with the Product Development/Engineering lead to make sure their input is included in the process.

How Should The Research Be Conducted?
This is a really broad question which of course depends heavily on the situation. How much do you have available to you in terms of money and other resources? If you’re in a big company, you may be able to commission some objective research. If you are a startup with modest resources, it usually is an ad hoc exercise of visiting and interviewing potential customers.

What’s most important to keep and open mind, and eliminate your own biases and pre-conceived notions. This exercise needs to be a search for the truth, not an attempt to validate your own theories. Also, make sure that you are talking to the right people. If you are planning a market-creating breakthrough product, you really need to be talking to Early Adopter types, not the guy or gal that only buys after everyone else they know. If you are introducing a product that is very similar to other products in an already large market–but maybe at a lower cost–by all means, talk to those mainstream buyers and even the late adopters. Use the current market phase to guide who to get input from.

It’s great if you have the money to do some formal secondary research, but be careful about confusing formality with accuracy. For example, I know of large companies that spend huge amounts of money on Focus groups, while their Product Managers only reluctantly talk to actual potential customers directly. I find this very dangerous (you might say stupid!). Particularly with breakthrough technology, you tend to find a “garbage in, garbage out” phenomena with professionally managed focus groups. But there is that formal, professional looking report that appears very convincing in the aftermath. They can be great if constructed properly, but I have seen a lot of money spent for a very bad result. If the focus group wasn’t run properly, or the technology is very revolutionary, the results can be total garbage covered in a beautiful wrapper. I always advise that there is a good amount of old-fashion ad hoc research–talking directly to customers–to be used as a sanity check, if not the main research technique. There are exceptions, of course. If you are doing incremental product research, where the product is well-understood and the changes are evolutionary, objective research methods such as surveys may be a great way to get a quick and definitive read on the market’s reaction.

How Do You Know When You’re “Done”?
This really depends on what you are doing, but my general answer is that “you will know when you are done when you get there”. It’s important to not put an absolute time limit on the research, if it is at all practical. In some cases in the real world, this isn’t possible, of course. Sometimes you just have to go with the information that you have gathered up to a set point in time, along with your market common sense, intuition, and gut feel. With incremental product releases, waiting may not be possible or necessary. But if you can avoid it, especially if starting a new company, division, or business area, resist the temptation to “go with what you have”, if it just doesn’t’ feel right. In my experience, when you’ve “done enough” research to begin serious product planning–it’s obvious. You will feel very comfortable with regards to the clarity of the current market snapshoot, and feel you’ve really nailed the wants and needs of the market as it relates to the new product opportunity. Try not to get “antsy” and move forward because you’ve reached the original market research end date on your theoretical timetable. Resist that temptation and keep working until you are CONFIDENT that you are there, unless other factors just won’t allow it.

Summary And Conclusions
Make sure that you do sufficient market research before you begin building products; product development on a developer’s gut feel is most often a prescription for failure. There are a few high profile companies which have entered our folklore that were lucky enough to start that way, but usually this approach will quickly empty your pockets, rather than make you rich.
Include both Marketers and Technologists in the Research if at all possible. In summary:

*Marketing should take the lead on market research for new products
*Always make sure you talk to at least some customers directly and informally
*By wary of formal market research results, if not supported by an informal research “sanity check”
*Make market research a continuous company function
*Don’t stop an individual product-oriented market research project until y
ou are comfortable that you’ve got the correct answer.

There you have my thoughts on market research for product planning purposes. I’d love to hear yours as well.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

1 Comment by admin on March 10, 2008
filed in B2C, Pricing, Product Marketing/Management, Social media, Software/Product Development, market research
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Which Online Advertising Platforms Should You Include in Your Marketing Mix?

I often write about online marketing, as many of my regular readers know. A frequent topic of mine is Pay-Per-Click (PPC) advertising, also known as Cost-Per-Click (CPC). Occasionally, people will refer to this marketing vehicle as Search Engine Advertising. What you’re hearing this called more and more is “Google Adwords”.

HAS GOOGLE ADWORDS “BECOME” ONLINE ADVERTISING?

Of course, its kind of like asking for a “Coke” when you want a soft drink, or “Scotch Tape” when you are seeking sticky-backed tape. It’s the age old story of a brand DEFINING the category itself, and usually happens when a product becomes dominant in a market segment.

The conventional wisdom these days is that Google has basically won the Online Search Engine-based advertising wars, so don’t even bother with any of the other advertising platforms out there. This topic is the very reason for Microsoft’s recent offer to buy Yahoo for a gazillion dollars; they are motivated to do this because Google is so far ahead that they don’t appear able to catch up on their own. This raises the issue of two also-rans in a market, combining to take on the market leader–which usually ends in disaster–but we’ll leave that for another discussion…

Back to the main question, should you focus your online advertising energy and budget strictly on Google Adwords, or broaden your campaign to other platforms? I have an opinion, of course, and I’d like to illustrate that opinion with my own pragmatic advertising experience, as well as some more theoretical marketing theory which has served me well across a variety of markets. Let’s start with the theory, using an experience from my past to illustrate my viewpoint.

MARKET NICHES: HIT’EM WHERE THEY AIN’T

As markets develop, conventional wisdom usually instructs you to “get on the bandwagon” of the market leader, and don’t waste your time “where the action isn’t”. Back in the 90s when I was running a systems & network management software business, Novell Netware had the overwhelming share of the Network Operating Systems business–roughly a 70% share. As a result, most of the companies in our general space focused on making their add-on products compatible with the Novell platform. They ignored two other competitors: Microsoft LAN Manager and Banyan VINES. There were almost no add-on systems management products available for these two platforms. We ported our applications to these two platforms, with excellent payback. Not only were we able to make easy sales to the customers of these two NOS vendors due to lack of competition, these secondary platform vendors supported our efforts to a much greater degree than Novell, where we were one of many. In addition, it turned out that while Banyan (and too a lesser extent LAN Manager) had much higher market shares in the coveted Fortune 1000 market than they did the market as a whole. Many large companies also had mixed networks containing two or more of these NOS platforms–we had a major strategic advantage in these large accounts, due to our cross platform support. The first lesson here is that sometimes it really pays to segment a market a bit differently. In some cases, in segments important to you, the market leader isn’t nearly as dominant as overall market share data would lead you to believe. The second take-away is that smaller market segments are often DRAMATICALLY less competitive, allowing you to efficiently grow revenue without huge marketing outlays to “get above the noise”.

MY OWN EXPERIENCE WITH THE MAJOR ONLINE ADVERTISING PLATFORMS

I run PPC advertising campaigns for several of my clients. Let me make something clear right away–there is no comparison between these three advertising platforms. Google Adwords is the clear winner, hands down. It’s not close. Adwords is both by far the most robust and easiest to use, which is quite a statement. Adwords is a great piece of software, which Google is constantly evolving and improving. You can do almost everything you want and there is excellent online help if you do have a question. If you ever really do need a live person, help is available, even if you are spending a modest amount on advertising with Google. It is a pleasure to work in Adwords. Plus the fact is that by far the most volume of searches is available on this platform.

Yahoo Search Marketing (formerly Overture) comes in second place. This is the original search advertising platform. It’s not nearly as robust as Adwords, but the recent major upgrade at least brought the software into the modern ages–it was pretty stagnant for a very long time, allowing Google to surge into a commanding lead. The basics are covered, and it’s pretty intuitive–although if you are used to working in Adwords, the subtle differences can drive you a bit crazy. And there are a few things that are simple to do online in Adwords, that you have to call and request over the phone to make happen in Yahoo’s platform–but at least they are very nice about it.

And then there is Microsoft AdCenter. What can I say about Microsoft; it is the typically excruciating experience dealing with them. They dominate most markets they are in, and have that arrogant way of dealing with you that only a monopolist has. When you have 90% of the OS or word processing market, you can get away with lousy support, vendor-centric policies and non-intuitive software. But they are a distant third in this market, and they aren’t gaining on anyone. So these weaknesses stick out like a sore thumb. This is the newest platform. The software isn’t all that hard to use, but in Microsoft fashion they have created some of their own conventions in opposition to market terminology, and the application doesn’t always behave in a way you would expect. Add in the unbelievable support mentality, not to mention the fact that they are a distant 3rd in traffic, and you realize why they are last among the major platforms. As an example of their attitude, when I decided to look at Microsoft’s offering, I wanted to import my Adwords campaigns into Adcenter to save a BUNCH of time, which the Help function stated that I could do. Makes a lot of sense for a new user, right? Well, I couldn’t figure out how to do it in the software, so I called Adcenter support to ask how. I was told that I needed to be spending at least $11,000/month to have access to that feature! There’s a classic catch 20–not allowed to import all your campaigns into a platform (which will enable you to spend money in that platform), until you’re spending over $100,000/year. Brilliant market penetration strategy! Whoever is making decisions at Microsoft has no idea how to compete–which I guess isn’t surprising for a monopolist. No wonder they are trying to buy Yahoo….

SUMMARY AND RECOMMENDATIONS

Adwords is clearly the best platform, so why bother with the other two? Remember the discussion about niche markets above. Although Adwords is by far the best, as a result, it’s also the most fiercely competitive of the three–meaning costs are high and margins are sometimes lower. It really varies by market segment, but in some segments, Yahoo Search Marketing and Microsoft Adcenter are neglected, leaving excellent bargains on important keywords. I am currently running a campaign on Adcenter for a client in a very niche, technical market, which isn’t supposed to be well suited for MSN search traffic. This campaign is doing VERY well. So the moral of this story is don’t pick one–use all three, as long as you’re making money on each of them. This is the beauty of PPC marketing, after all. It is quite easy to test to see if it will work for you, and objectively track your results.

That’s my take on the three major search marketing platforms–I’d love to hear yours. Post a comment so everyone can benefit from your own experience.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

No Comments by admin on February 12, 2008
filed in B2C, Marcom, Online Marketing, Product Marketing/Management, Promotion, enterprise software, sales
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Channel Pricing Strategy for Software and Hardware Products

Pricing software products is always a difficult exercise. With high product development costs, but near zero costs of goods sold, there are many different strategies that people have followed successfully (and not so successfully!) over time. Pricing hardware products is a bit simpler because there is generally a significant cost of goods sold that acts as a governor on pricing behavior. But even with hardware, technology markets are dynamic and fast moving. And it’s a complex enough topic when all sales are going direct–once you bring channels into the picture, it only gets worse.

CHANNEL CONFLICT
The biggest concern most companies have when pricing for multiple channels is channel conflict. I have seen many companies who actually AVOID selling through channels for fear of the pricing implications it brings. They are afraid of a channel undercutting their direct sales force in price, and channel conflict in general, which arises as a result of different prices being presented to customers from representatives of different channels. But this doesn’t have to be so; with a savvy understanding of the implications of pricing actions. This comes from both experience, and “paying attention to what actually HAPPENS in the marketplace. If you price properly and run your channel programs well, you can sell successfully via multiple channels–with these channels living in relative harmony.

VALUE-BASE CHANNEL PRICING
I’ve written about value-based pricing before, in the context of the perceived value of a product, as seen by the end-user, being the guidepost for pricing actions. A similar concept exists for channel discounts. Rather than taking a simplistic approach and give the greatest discount to the channel players that move the most product ( a destructive strategy–more on that later), it’s important to measure how much “value” a particular channel provides both you and your end-user customers. Look at things like 24/7 support, inventory & product availability, technical expertise, credit services, and the like. In this case, it is helpful to let the cost of delivery of each of these attributes be your guide to the value they provide.

VALUE-BASED CHANNEL DISCOUNT STRUCTURE
For example, you may figure that the cost of a VAR providing 24/7 support to end users (meaning YOUR company doesn’t have to) is equal to 5% of the list price of the product. And the inventory held by a retailer (again, meaning YOUR company doesn’t have to hold it, at a cost) is equal to 2% of the list price. And so on and so forth. Using this value-based method, you can calculate the actual costs borne by your partners in delivering marketplace value, and use this as a guidepost in building your channel discount schedules for various types of channel partners. This value-based channel pricing approach is not well-known, and seldom considered; most people seem to figure the only value worth extra discount is sales volume. If you use a value pricing approach, you actually have a chance to build a multi-channel strategy that “clicks on all cylinders” by providing discount structures that are equitable based upon cost and value associated with each channel.

LIMIT VOLUME DISCOUNTS
If you choose the “more volume=greater discount approach, your multi-channel strategy is a house of cards which will soon collapse around you. One channel will quickly grow to dominate, and the other channel types will soon quit selling on your behalf, and wither away.

THE GOAL IS TO MAXIMIZE SALES THROUGH ALL CHANNELS
Again, the key is to not let one channel dominate. Ideally, you would like all channels to be presenting prices to the end customer that are equal. In reality, that pretty much can’t happen without price fixing (which some folks may be able to get away with, but that’s another story….). But you should strive as much as possible to have end user pricing equity for all channels. But this is where the counter-intuitive part of this discussion comes in to play. Most people pricing high tech products have a tendency to price based upon the volume of product a particular channel player can move. It seems logical–why wouldn’t you want to incent and reward a partner with better margins if they are selling more products?

While this appears logical, it is actually penny-wise and pound-foolish. In fact, it is usually catastrophic to your plans to maximize sales through multiple channels. Let’s look at a simple case of how this often “breaks” a multi-channel strategy for a common case: a vendor selling through both retailers and VARs.

A SIMPLE EXAMPLE
Retailers provide a vendor with a point of purchase holding inventory, where their customers can go to immediately purchase a product. VARs often don’t hold inventory, but provide other services important to the vendor and some customers, such as tech support, training and integration with other software and hardware products. Each may have an important role to play in the overall strategy to maximize vendor sales.

But the retailer will usually be a high volume partner, with the VAR less likely to be a volume outlet (although the VAR CHANNEL, in total, may hold great promise to move volume). If you structure your pricing by volume, the retailer will get better discounts. Because individual VARs generally have higher costs spread over lower product volumes, they actually need HIGHER discounts to stay even in pricing potential to the Retailer. This situation is exacerbated by the fact that retailers tend to be volume-oriented, usually accepting a relatively small, fixed margin on everything they sell. If you provide discounts based upon the volume that a partner moves, what will happen is inevitable: The retailer will take over your channel business, because the VARs will be “squeezed out” by the relatively low prices charged by the retailer. They won’t be able to make a profit on your products, so they will ignore the business, and you will lose the opportunity to realize significant sales through the large (in aggregate) VAR channel, especially those customers that desire the service and support they supply. I am oversimplifying this situation, of course, because VARs are more interested in the service revenue that a product can pull, than they are in product margins. But I have seen this scenario play out many times and kill product sales through VARs channel that might otherwise generate health sales through that channel. This can be a heavy penalty for naïve technology product managers who are charged with pricing their products and moving them through multiple channels, but who don’t fully realize the consequences of their actions.

SUMMARY
Pricing seems pretty simple on the surface–when channels are involved, it’s anything but. It’s important to fully think through the downstream effects of your pricing policies when multiple distribution channel are involved. Let me know if you have questions, or you own channel pricing stories that you’d like to share.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

No Comments by admin on November 23, 2007
filed in B2C, Corporate Strategy, Distribution Channels, Pricing, Product Marketing/Management, enterprise software, hardware
tagged , , , , , , , , , , ,

More SEO Tools

From time to time, I let you know about some of the more useful (out of the abundant crop available on the Internet!) online tools for Search Engine Optimization (SEO) that I have come across. So here’s the latest batch of valuable, and free, widgets that I’ve found:

The first is a site that checks on all of your back links, with a twist: it actually details not only the back link itself, but the anchor text associated with the link. For those of you sophisticated about SEO for your website, you’ll know that this is very important information. There are a couple of reasons why this is important. First of all, the search engines use anchor text to associate your site with keywords that might be searched on in that engine, and uses this information in it’s search rankings. So it’s very important to have your most important keywords show up as anchor text on as many back links as you can manage. Secondly, if the search engines find that the anchor text on your back links is too repetitive, the engines will penalize you from a ranking perspective. The reason is that if the anchor text on all of your back links reads the same, Google and the other engines assume that the links are “manufactured” by the owner of the site–rather than generated naturally as a result of your site being interesting to others. So I highly recommend that you check out and use this tool:

Backlink Anchor Text Checker

A similar tool is the “C Class Back Link Analyzer”. Once again, this is a tool for those sophisticated about SEO. The “C” Class Back Link Analyzer investigates the links pointing to a website, and then groups them according to the IP addresses they result from. If one back link comes from 54.37.14.5 and another comes from 54.37.14.6, the tool would group together. Links which come from the same C-Class IP are likely to be hosted by the same company, often lowering the site’s search engine ranking.

“C” Class Back Link Analyzer

One last esoteric tool for the true SEO fanatics out there. It’s called Deep Link Ratio Calculator. This tool measure the number of links to pages on your site other than the Index/Home Page, divided by the total number linked to your site. This is important because the Search Engines consider these “Deep Links” to be more “natural”, more likely the result of someone creating a link to some great content in your site (as opposed to you listing your own site in a directory, for example). So this neat tool can give you another view of how “natural” the Search Engines are viewing the links to your site.

Deep Link Ratio Calculator

Finally, I present “yet another” Keyword Suggestion tool. I know, there are lots of them out there, but I find that when you’re looking to generate keywords for SEO on a site, or when starting a PPC campaign, there are never enough good tools. This Suggestion tool claims to accumulate and report Keyword variations from the six most major search engines. Give it a shot and report back how it goes.

Keyword Suggestion Tool

I hope that you find these online SEO tools useful–post a comment and let me know!

Phil Morettini
PJM Consulting
www.pjmconsult.com

No Comments by admin on September 28, 2007
filed in B2C, Marcom, Online Marketing, Promotion, Social media
tagged , , , , , , , , ,

The Future of Wireless Communications

Land Lines are going away, right? Everyone says so. We hire young women, generally in their twenties, to help take care of my son. I can’t remember the last time one of their phones had an Area Code associated with the place they are currently living.

That’s because they don’t use landlines–many people in their twenties and thirties move around a lot, and rely strictly on a cell phone as their sole or primary telephone. If they have a couple of roommates, occasionally they will also have a landline. But the number usually isn’t given out, and doesn’t appear to be used much.

So does this mean that we are rapidly heading toward the wireless society that pundits have been predicting for a number of years? Or is wireless growth slowing and about to settle into mature market mode, with modest incremental growth in the future? There are a number of factors on both sides of this discussion–let’s explore a few.

Factors Pointing Towards Acceleration Of Wireless

Mobility
Society is becoming more and more mobile as time goes on, and everyone is getting used to being able to do things on the go, that used to be done only at home or the office. This trend appears to be one that will only continue–and is a positive thing to most people’s thinking. I do think there may be a bit of a backlash in this area–”too much of a good thing”–I’ll address this later on.

New Services
The addition of many new services should drive users to utilize wireless as an increasingly greater percentage of their total computing/communications device usage. Trends such as the merging of consumer cameras and music into smartphones create the types of new services that are driving increased wireless usage in the near term. Location-based services could provide another nice pop in growth, if they ever do reach their potential (and they’ve been “coming” for quite a while). I would note that I don’t consider these trends the type of major innovations that will cause a fundamental, “step-function” like shift and a major positive effect on wireless usage. I view these new applications as incremental, something to continue the modest growth we are currently seeing in the wireless market–in the western world, at least. Outside of the developed world, of course, there is some phenomenal growth occurring. In terms of market development, I view rapid wireless growth in developing countries as a “catch up” phenomena.

Cost
This is a bit of a two edged sword. Like any other technology-driven market, the cost of electronics and services are being continually driven down, especially as wireless has scaled into a mass market, with corresponding economies of scale. Up to this point, at least, there has been sufficient competition to drive down the price of services from the wireless carriers. There seems to be some flattening of this price deflation in the US recently, however. On the other hand, as new services have been introduced, the “total bill” that consumers end up paying for ALL of their technology services (wireless, TV, Internet Access, etc.) has been going up. There will be a point where consumers say “enough is enough”; the total tech entertainment and communications bill simply can’t rise forever.

Technology Innovation and Competition
I do believe that technological innovations, market scale, and competition will all play a factor in continuing to bring down overall costs in the long run. New technologies such as WIMAX, networked WiFi and in-home pico cell towers will provide technological alternatives for consumers, and therefore increased indirect competition. And there are certainly many exciting developments in research labs which we haven’t even heard of yet, that will lead to increased innovation and continuing industry growth. I really believe that the technological aspect of wireless is still in its infancy, and will be the major factor that leads to long growth in wireless markets.

Factors Pointing Towards Slowing Of Wireless

QOS
The biggest issue, in my opinion, that will limit the future growth of wireless, is the lack of sufficient Quality-of-Service. Current cell phone service in the US sucks. There’s no other way of putting it. Depending upon your carrier in a given metro area, service can still be spotty, with persistent dropped calls–even after all of these years, and the fact that cell phones are a ubiquitous mass market item. I still have 3 landlines in my house, two for business usage. I sure don’t want to talk to a new client on a cell phone connection–if I can help it. I know many business people that don’t feel this way, and use their cell phone exclusively–my opinion is hardly universal. But I don’t really understand it. Especially inside, in homes and offices, you just can’t trust that the call quality to be anywhere near what is demanded by an important business call. Some of this is based upon real issues–mountains in the way of radio waves, etc. But much of the problem is simply the wireless carriers jamming too many calls into too little spectrum, for cost reasons. I’m quite surprised that no one has yet come up with a “business quality” wireless service, which guarantees a higher level of call quality–much like a business or first class airline seat.

Complexity
As new features and services get added, even if they are welcomed, user interfaces and experiences almost always get more complex–at least initially. Complexity is the enemy of mass acceptance. So vendors need to be careful about adding new bells, whistles and new revenue-generating services faster than the market can become comfortable with them

Size
The size of devices, dictated by the need for mobility, works directly against a premium user experience for many functions. The new iPhone is a major step forward, for example, and sets a new standard for browsing the Internet on a truly portable device. Yet anyone that would rather surf the net on an iPhone, rather than any real computer, would have to be classified as insane. As more compelling online services are developed specifically for mobile devices, this may become less of an issue. But the size constraints required to make a good mobile device work against wireless devices for many current applications. Here is where I believe that truly breakthrough technologies–things like speech recognition, holographic displays and virtual keyboards–are needed to make a real dent in this issue.

User experience controlled by Telcos
The wireless carriers have held a stranglehold on the user experience thus far in the life of cell service. Because of this, you have large, conservative telephone companies basically deciding on what users want and should have, in an otherwise technology-driven space. Most of their decisions are driven by their own short term revenue concerns, with little vision on what can grow the market exponentially in the long run. At the most basic level, you can’t even take your cell phone and use it on a new carrier network. A few major technology vendors are pushing to open things up, such as Apple and the open browsing experience with the iPhone, and Google’s recent attempts to make new wireless spectrum open. But the wireless telcos still have a stranglehold on the market and will keep things as proprietary as possible for as long as possible. They’re terrified a being left as just commodity bandwidth providers, like their wired counterparts were in the dialup Internet market. No one on the carrier side wants to see THAT happen again. Because of this, innovation in user experience will continue to be stunted.

It’s Just “Too Much”
As I mentioned earlier in this article, we’re all becoming instantly accessible no matter where we are. I am an early adopter of many types of gadgets
–a real tech guy. I am also an email junkie. I always expected that I’d be one of the first users of a smartphone that provided the proper balance between a cell phone and a computer/data communications device. Certainly these devices have been refined, and exist today. But by the time it happened, I decided that I really didn’t need to be quite that accessible. I’m not an emergency room doctor, nor a high level commodities trader that needs instant access to everything. It’s rare that I’m not in front of a computer to get email access within a couple of hours. And I can always be reached with a regular call on my cell phone, office phone, or home phone. Do I really need a device that provides instant email, instant messaging and cell phone access? With the convenience of that device comes the penalty of never having a moment’s peace that is totally within your control. It’s my opinion that as modern life has accelerated to warp speed on a normal basis, more and more folks are going to be rejecting the notion that 24/7, instant access is a necessity–let alone a convenience.

Summary
It is always difficult to forecast how such a huge, important market will develop over time. In many ways wireless communications has already commoditized, and in other ways one can hypothesize that these technologies are in their infancy. If they are truly n their infancy–then forecasting the future is a dangerous game. My own feeling is that we are at a very early stage–a plateau of sorts, which appears much like the steady-state commoditization of mature markets. But I expect that there will be a number of disruptive technological changes coming, separated by a period of years where the negative factors slow growth, over the next couple of decades. Wireless communications will hit plateaus where it appears the market has matured and growth has slowed. Then a breakthrough new technology will appear, changing the game and re-igniting robust growth. What will those technological innovations be–holograms, speech recognition, or large increases in data throughput capacity in the wireless spectrum? That’s where the guessing game begins. How do you see this market? What breakthroughs do you see in the coming years? Post a comment and enrich our discussion on this interesting topic.

Phil Morettini
PJM Consulting
www.pjmconsult.com

No Comments by admin on September 4, 2007
filed in B2C, Business Models, Corporate Strategy
tagged , , , , , , , , , , ,

Steve Jobs, the iPhone and Apple Strategy – have we seen this story before?

Apple computer and its red-hot iPhone have dominated the business news recently. By all accounts, with good reason. I haven’t had the opportunity to play around with an iPhone yet, but the early reviews have been very positive. Initial interest demand has been high, especially given the usual amount of mystery and intrigue woven by Mr. Jobs and the folks at Apple.

For a first-time entry in to a large, competitive business such as cell phones–you’ve got to be impressed. Yet I’ve got this vague feeling of familiarity when it comes to this story–I somehow feel that I’ve seen it and heard it all before….

THE RETURN OF JOBS

Apple Computer since the return of Steve Jobs from the hinterlands has felt a lot like the Apple from Jobs initial run at Apple. He’s restored the company’s attitude, and dominates publicity, product direction and what feels like nearly every little detail about the company. Not bad for what is roughly a $20B company. It speaks to how strong and impressive Mr. Jobs’ personality and skill set really is. He has done a tremendous job bringing Apple back from the brink, and it appears that they may be headed to heights that weren’t even approach in his first tenure at the company.

There are many reasons that Apple and Steve Jobs, over a long period of time, have proved to be an interesting story. There are the breakthrough products, invention of new categories, tremendous highs and lows in financial results, strong, eccentric personalities, and boardroom intrigue–all multiplied when Jobs is factored in.

But the thing that I’ve always found most interesting about Apple has been its corporate strategy.

APPLE CORPORATE STRATEGY

Lets first give Steve Jobs and his strategies their due; he’s done a whole bunch of things right. It’s hard to imagine where this company would be if they hadn’t brought him back for his second tour. But like most strong personalities, along with his myriad strengths–he’s got a few quirks as well. Some might argue these quirks are actually weaknesses. I’ve always thought that his biggest weakness was being a “control freak”. Some might argue that this is actually reflective of strength, indicative of a strong leader who is forcing a change in the status quo to his vision. At times it appears so.

For example, the original Mac was a great triumph at first. It set a new standard for PC usability and industrial design, and was a huge seller in the beginning. But in creating the Mac, Apple also:

1) Didn’t use standard (Intel) chips, but more expensive ones from weaker competitors
2) Was a relatively “closed” system
3) Couldn’t be upgraded much at all
4) Kept Prices and margins high, unsustainably so with hindsight

A SUSPECT BUSINESS MODEL?

Maybe most interesting of all from a strategic perspective, is Apple’s choice of a business model. Apple has always been an innovator in software, with most of its differentiation coming in this area. (At least this is true since the Mac was introduced–the original Apple hit product, the Apple II, was pure hardward innovation.) Yet the company has always tried to make its margin selling hardware devices, bundling in its software with its hardware, mostly for free. I believe that this closed, single vendor, hardware/software bundled system approach can be the right strategy in creating a new market. It allows a pioneer to control the user experience, while realizing larger margins and profits in the short run to support innovation. But as markets grow big, that approach which works so well in the beginning often becomes an albatross as other players enter a larger market, and figure out how to take cost out of the system. These strategic choices (flaws?) were some of reasons that ultimately led the Mac platform to be a distant also-ran in the PC races (although one with a rabid core following), even though it had a large advantage in technology and a healthy market share initially.

iTUNES AND THE iPOD

Interestingly, Jobs followed a similar basic strategy with iTunes and the iPod. He innovated with cool, hip industrial design, a classically simple but elegant user interface, and (maybe most importantly) broke the logjam with the Record labels on downloadable songs–for the first time creating a site with a truly wide selection of mainstream songs, downloadable without hassle. He once again has kept this a pretty closed system, not allowing other devices to download to iTunes, or other music sites to feed the iPod–although he has shown signs of opening this up recently. Once again, pricing is pretty high, relative to competitive “systems”. Apple has so far been able to keep a comfortable lead in the online music space–but using a timeline which is required to measure markets of this scope–one must remember, it is still very early in the game.

My feeling about this “closed system approach” that Jobs favors, is that in consumer electronics and computing, it often works very well for a while–but then backfires as the market grows and matures. Technology commoditizes, and markets eventually lean toward openness–which provides greater choice and lower costs to users. Jobs waited way too long with the Mac, and retreated on the strategy when Apple belately tried to open up the platform, just as he returned for his second run with the company. Apple may be headed toward open PC computing again with the new MacTel platform, but in my opinion, that ship has likely sailed long ago. It would be a long hard pull for the Mac to once again compete as a mainstream PC platform. Of course Steve Jobs is nothing if not audacious, so I wouldn’t put it past him to try.

iPHONE STRATEGY – GOOD & BAD

This brings us to the iPhone. Apple has been up and down during it’s corporate life, more often than a cat with nine lives. Right now, Apple is definitely riding on a high. When you take a look at this iPhone recent introduction, there is a whole bunch of familiar Apple/Jobs strategy going on. You see the innovation pointed at a major market that is populated by major players, but a relatively poor user experience. In this case it’s the poor user experience of the cell phone industry, just like PCs and downloadable music, which were frustrating to consumers when Apple innovated in those markets. The innovation is out of the old Apple playbook: led by cool industrial design, and a breakthrough, simple but elegant user interface. All of this, along with typically brilliant Apple PR, has led to the iPhone “mania” that is reminiscent of past Apple introductions. The iPhone sure looks like a big hit at this point, and no doubt will be in the short run.

But will Apple and Jobs be able to sustain the iPhone momentum, like they have with the iPod/iTunes to date, or will the initial success fade like it did with the Mac? While Jobs is now a more seasoned, and even more successful electronics industry icon, I would argue that there still may be a few of the old flaws in his game. The price point Apple introduced the iPhone at is very high, relative to most cell phones with a similar level of capabilities. The phone was introduced with a battery that can’t be upgraded by the user, something that has been standard in the cell phone market (and most portable consumer electronics) for many years. iPhone owners will have to send the product away to get the battery changed–who can go days without their phone? This is an incomprehensible mistake in strategy, in my opinion.

And finally, and most importantly, Apple chose the most “closed system” approach of all–the iPhone with only be available on one Cell Phone network, AT&T;, for at least 5 years. I find this part of the strategy astounding. First of all, it seems to me to be completely unnecessary and yielding few benefits to the company. It appears that Apple did this to have leverage in their cell phone partner negotiations, all
owing them to retain control on some items, and keeping their prices high. I think Apple is being penny-wise and pound foolish here. The have a hot product; now is the time to establish the Apple brand as the preferred high end supplier of smart phones. But they can now accomplish this in only a segment of the huge cellular audience, for completely artificial reasons. Shutting out the bulk of the market in this fleeting time of major advantage, for bit higher margins and control on a few areas that most cell phone manufacturers do without? It’s hardly worth in my opinion.

Also, the Cellular Network Operator partner they have chosen is very suspect. While AT&T; is the biggest wireless operator in the US market and a fine company, they are behind in the game technologically in the wireless Internet part of the cellular market–the very aspect in which the iPhone shines as a mobile device. So the wonderful new features brought to wireless web access by the iPhone will slow to a crawl on the inferior AT&T; data network. It may be like running a great graphical user interface over a dial up modem–frustrating. If all you do is sit and wait for the network, it won’t matter much how slick or intuitive the device UI is.

FLAWS IN APPLE’S iPHONE GAMEPLAN?

My feeling is that there may again be some major flaws in this most recent Apple strategy. This may again cause the company to give up an early lead, in a market in which they’ve contributed true innovation. I’m not privy to all of the information that Apple management is, of course. And it’s always easy to second-guess from a distance, after the fact. So it’s quite possible that I’m just missing something, and dead wrong in my take. Plus, the whole picture of Apple’s market entry hasn’t been revealed yet. For example, I haven’t seen or heard anything about Apple’s partnering strategy with Cellular operators outside the US, but I am very interested to see how this compares to the US strategy. Will the strategy be similar or very different internationally?

Steve Jobs has contributed greatly to the development of the worldwide computer and electronics business. He has had many great successes, and also fallen a few times. He is an iconic figure who isn’t afraid to take a stand. Apple has ridden Job’s strategies to great heights several times; and also to great depths a time or two as well. Along the way Steve Jobs has provided a wealth of controversial material for columnists, writers, commentators and anyone else with an opinion. I am fascinated to watch as his strategy for this latest chapter, the iPhone, plays out in the marketplace.

So there you have it–that’s my take. Post a comment and let me know what your own thoughts are on Mr. Jobs, Apple and the iPhone.

Phil Morettini
PJM Consulting
www.pjmconsult.com

2 Comments by admin on July 23, 2007
filed in B2C, Business Models, Corporate Strategy, General Management, Software/Product Development, hardware
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The Mechanics of Email Marketing

There are many different possibilities for technology and software companies, when it comes to formulating a marketing mix. I’ve written before about some of my favorites. One method that can be a big winner, if done well, can also be a big loser if done poorly. I’m referring to email marketing. If you want to be successful, you need to do it very well, as a result of SPAM and the general bursting of everyone’s email inbox these days.

Why Email Marketing?
Email marketing can be so productive for a company, because unlike more passive forms of online marketing (ex: PPC advertising, Banner Ads), you can usually target you audience very effectively. This is especially true if you are using an in house list; by definition, these are prospects that have some reason to have an interest in your products. In B2B marketing, there is an abundance of excellent niche lists available for rental, to use in a targeted campaign. In B2C they aren’t quite as good overall, but there may be very good lists available for a particular category.

Like all other forms of online marketing, another primary benefit to this method is the ability to measure results with great accuracy, granularity and speed. Lastly, you can make a very big impact quite quickly, unlike other online methods which may fit more into the “steady as you go” category.

The Elements of a Successful Email Campaign
So if “doing it right” is so important, just what are the important things to concentrate on, to achieve success in email marketing? Let’s take a look at some of the most important elements:

Relevancy
First and foremost, your email must be relevant to the people who are receiving it. This is the great problem with the email marketing universe today, especially when considering the Spammers. Scattershot emails to every name that you can get your hands on not only won’t raise your sales; it will ruin your online reputation, and prevent you from effectively marketing online in the future. It’s been said by others that the difference between SPAM and legitimate commercial email is RELEVANCY. I firmly believe this. If your offer resonates with the list that you send it to, you will receive very few complaints.

The List
After relevancy, the next most important thing is the list. Absolutely do send your message to a list of folks that you have good reason to believe will be interested in what you have to offer. This is called target marketing; it is good practice across ALL marketing media. In email marketing–IT’S ESSENTIAL.

The Offer
Next comes the offer; often this is the most critical thing that you have a lot of control over. You need to remember that in email marketing, you are “going to the people”. They aren’t coming to you–actively looking for your product or service. As a result, your offer needs to be very aggressive to get their interest, and to compel them to act in the manner you desire. I always say that in direct marketing you want to make your very best offer. In email direct marketing, make them an offer that is so aggressive, it actually makes you wince a bit!

Creative
The above categories are the most critical to success. If you don’t get them right, nothing else will matter. However, it’s still very important to properly execute your relevant offer to the proper list. Even if you’ve got these elements formulate properly, poor creative execution can still lead to failure. My advice here is to make the email look like an email–not a web page. People’s expectations in an email message are very different from visiting a website (and attention spans are short enough in web-viewing!). I recommend that you keep your message simple, direct and relatively short. Feel free to include some attractive, eye-catching graphics. But remember, this is direct marketing–not an art project. The most recent research suggests that email graphics has no effect whatsoever on response rates. It’s all about the copywriting. Make your copy compelling, and get to the point very quickly–there isn’t much time before the “delete key” get punched.

Legal
The legal aspects of marketing via email are important, and quite a bit more restrictive, relative to any other form of direct marketing. So make sure you are aware of the laws which apply to your message–they vary from country to country. In the US, for example, the CAN-SPAM act requires an honest subject line, “remove requests” instruction, and a listing of the sender’s physical address–among other things. In some cases there are also state laws that apply. In Europe and other countries, the requirements can be far more restrictive, sometimes going so far as to require “opt-in” permission before any message can be sent. So be sure to research the local laws and comply with them at all times. To do otherwise risks ruining your online reputation–or worse.

Deliverability
This is one of the most difficult aspects to this particular direct marketing method. The advent of SPAM has created many barriers to delivering even the most welcomed messages to email inboxes. This was necessary, of course, for the preservation of the ability to use email at all. But deliverability is a very challenging, every changing scenario that has morphed into a marketing specialty of its own. There are many good places on the Web to assist you in getting your email delivered to your prospects. Return Path and Habeas are two of the more well known new companies that specialize in this area. I have used a free tool called SpamCheck to great effect over the last year, in screening my messages for deliverability problems. Contactology also has a great free Spam checking tool, as well as a turnkey service which enables you to easily create highly-deliverable email messages. EmailReach is another company that has some deliverability great tools. They aren’t free, but they do offer a 24 hour free trial for their service.

Continuous Measurement & Testing
The last thing I want to mention, which should be part and parcel to any successful email program, is measurement and testing. Since email is an online medium, it’s easy and cheap (or free) to measure your results. Frankly, doing any form of direct marketing without measurement is dumb. Online direct marketing with measurement is criminally dumb. There is just no excuse for it, other than laziness. Direct email marketing works best when it isn’t considered a “single-shot” campaign. Each drop should be part of an overall campaign aimed at continuous improvement. Multiple elements of your message should be tested and measured with each drop. If you do this, you WILL improve your results as you go–and likely will end up with a highly successful, and repeatable, marketing method to help drive your company’s growth.

Wrap Up
That’s my review of the nuts and bolts of good email marketing. Let’s hear from some of the other experts out there, on your best email practices. Post a comment so we can discuss this important marketing method in depth.

Phil Morettini
PJM Consulting
www.pjmconsult.com

No Comments by admin on April 7, 2007
filed in B2C, Marcom, Online Marketing, Pricing, Promotion, sales
tagged , , , , , , , , , ,

Selling Through OEMS

I’ve recently discussed selling through VARs as a distribution channel strongly favored (maybe a bit too much!) by many early stage technology and software companies. In this article I’m going to look at another channel that is often misunderstood and misused: The OEM channel.

No Leverage
If you approach potential partners with a brand and existing sales, there is no leverage in negotiating with the larger, more established OEM prospective partner. In addition, it’s a much harder sale, because your company and product don’t have a track record.

Important–but secondary–revenue source
Treat OEM business as an important, but secondary revenue source relative to your own brand. This will keep things in perspective and prevent you from putting your company’s future in someone else’s control.

Bundle rather than integrate
Once way to take advantage of large OEMs without the downside of losing your own identity is to seek bundling deals, rather than private label deals. By doing this you are essentially co-branding, building the power of the partner brand through affinity with the bigger company. This leaves you with greater marketing, selling and support requirements, but may lead to a larger, more profitable company in the long run.

Address a vertical out of your reach
A good way to utilize OEMs is to fill a key vertical where your technology has a market. This occurs when you decide that you can’t address this vertical well with your own brand, because you don’t have a presence, and have decided that it doesn’t make sense strategically to expend resources to develop one.

Leverage your IP into a new market
There are also cases where you main technology base can be easily used to create an entirely different type of product, which is intended to serve an entirely different market, relative to what you are selling under your own brand. In these cases it may make sense to team with an OEM in this disparate segment, to market this spin-off product from your main technology.

When a company goes about it the right way, OEM business can be an excellent additional revenue source for startups–and any high tech company, for that matter. Where I want to throw out a caution flag, is when a company decides they are going to rely on OEMs as its primary–or only–channel.

Now this can work, you might say. And you would be right. But in most cases, I believe, it isn’t the best way to proceed. It can work, if you have the right type of product, and you’ve thought your strategy through very thoroughly. The problem is with most companies, this the usual scenario. What I find more prevalent is the old “let’s make it, and we’ll get someone else to sell it for us” approach. As I’ve discussed before, ‘let someone else sell it’ almost never works. This sentiment often occurs with a technology-driven senior team, without a good feel for marketing or sales. The natural tendency in these situations is to avoid the current weaknesses in this organization, and “let somebody else do it”.

The problem here is that sales and marketing needs to be a core competency, in most situations, if a technology company to become as successful as possible.

So what are the “bad effects”, when an early stage technology company pursues OEM relationships as their sole distribution strategy–or at least “too early” in their company development?

EFFECTS OF “BAD” OEM STRATEGY

No development of internal sales & Marketing
Companies with OEM-only business models tend to have weak (or nonexistent!) sales and marketing departments. My belief is that sales and marketing is a core competency–making this a bad idea. While you can run a company this way, in most cases, the ultimate size and profitability will likely be a fraction of what your technology could have otherwise supported.

All push, no pull
Every sales and marketing activity works better if there are “pull” elements, in addition to “push”. If selling to the OEM is almost solely a “push” activity, with no brand or your own market share to help pull–the process is much harder.

All the eggs in one basket
Even if you do well and gain OEM deals with premier partners–success is far from guaranteed. It isn’t unusual for OEM deals, especially early ones, to yield actual revenues in the 10-15% range of forecasts. If this happens to you and you’ve built your company around these projections–you’re basically screwed. You risk “crib death” or at least a difficult restart with your own brand, due to the disappointing sales from the OEM relationship(s).

Your OEMs swallow you whole
A very common scenario is a much larger OEM that starts treating its small, entrepreneurial partner like another department in its bureaucracy. The OEM stunts your overall company development by “tying up” the scarce resources of your smaller company in meetings, special projects, ever-changing product development requirements–and yes–more meetings.

Given the potential pitfalls, how do I recommend using OEMs?

THE “RIGHT WAY” TO INCORPORATE AN OEM STRATEGY

Develop your own brand/channel first
Pursue OEM business only AFTER you’ve established products under your own brand. It not only will provide you with a product that will be more attractive and stable to potential OEM partners, but you’ve got your own branded business to sustain you

Final harvest
Another smart way to use OEMs is to “harvest” a volume product which is now in decline, and is a product which you don’t intend to continue major investments. If you can get such a deal, it can be great way to maximize end-of-life revenue with minimum incremental investment.

Offer another price point
A strategy that can be used successfully in some cases (but is a bit dangerous) is to use an OEM to offer another price point in the market, one that you choose not to address with your own brand. More often you would do this with your own alternative brand or sub-brand. But there are instances where this investment might not make sense. Special care should be taken if the OEM is to fill a lower price point–care needs to be taken so that your own brands share isn’t eroded significantly.

Integration with complementary products
There are some instances in the marketplace where 1+1 does indeed equal 3. In these cases it may make sense to team with an OEM, to gain the advantages of product integration with a key product in your market, offering them as a single, integrated solution.

Summary
The bottom line is that OEM marketing is very important in the software and technology business. I strongly recommend that most everyone pursue this type of business; however, do it as part of a balanced, overall revenue strategy. Tread carefully and wisely and this may be the distribution channel that makes a break-even, or modestly-profitable business, into a profitable winner. It’s easy to say you want OEM revenue, but like most things in business, doing it right is hard–the devil’s in the details.http://www.pjmconsult.com/

That’s my thoughts about how OEM strategy best fits into a typical high tech business. Post a comment and let us know how YOU approach OEM relationships–I look forward to your opinions.

Phil Morettini
PJM Consulting

No Comments by admin on March 13, 2007
filed in B2C, Business Development, Business Models, Corporate Strategy, Distribution Channels, Startup/Early Stage, VARs
tagged , , , , , , ,

Pay Per Click (PPC) Online Advertising

It’s known by several names: PPC or Pay Per Click advertising, CPC or Cost Per Click advertising, or sometimes by the best known PPC advertising engine, Google Adwords.

Pay Per Click advertising is no longer new; as a result, much of the “easy” money has already been made. But I’m struck by how many companies I run across that are NOT using this method, to attract prospects or make sales on the web. While it is a competitive channel, unlike the early days of this medium, it is still one of the most effective, and cost-effective, method to promote most any product or service online.

PPC should not only be a staple of the promotion budget of nearly every company, it should be one of the first promotion methods utilized on behalf of a new product, service or company. Here’s why:

Complex to Optimize–But Simple to Start
PPC advertising campaigns can be very complex and extensive, and will be once you get them optimized. Many companies are spending tens of thousands of dollars/month on PPC. At that point they will be making a lot of money for you–so it’s worth the investment and the trouble!

But getting started is quite easy–anyone can do it. You simply open an account with one of the major advertising engines, which will take you all of five minutes or so. You can put together a basic test campaign in less than an hour’s time. I always recommend starting with Google Adwords first. Once you are successful and understand what you are doing on Adwords, it is pretty easy to move your functioning campaigns to the other major systems (Yahoo Search Marketing, and Microsoft Adcenter). There are differences, but they are fundamentally the same.

Adwords is the most powerful and has by far the greatest reach, yet it is still very easy to set up your initial trial campaigns. There is an excellent set of online Help and tutorials to walk you through the basics. When you set up your initial campaigns, you WILL make mistakes. But don’t worry. Just set your budget limits to a low number that you can easily afford, and you will quickly climb the learning curve. Once you’ve learned the basics of what you are doing, you can then seek assistance to do the final optimizations to your campaigns, which will lead to the greatest success. You may decide to “do it yourself”; if so, there are a lot of different experts out there with modestly priced guides and services, to bring you to the top of your PPC game. Or at this point, you may wish to outsource your PPC advertising activity. I always recommend opening an account on your own first, even if you plan to outsource. The knowledge that you gain will help you in hiring a third party who will best optimize your PPC activity.

Easy on the Budget
If you are a thinly capitalized startup company, or otherwise on a tight budget, you can start a PPC campaign that brings you results that you can continually improve, for just a few dollars/month. As usually is the case, the more money available the better. The more money you have to spend, the faster you can receive statistically significant results–which can then be used to tweak your campaigns for improvement, over and over again. But if you can only spare $50, $100 or $500 per month at first–don’t let that deter you. In most cases you can get started and move your campaign forward, at even these low budget levels. The beauty of PPC is that you really don’t need to commit to a large budget, until you’re sure that you’ve got a profitable campaign. At that point, you’ll want to pour as much money into your campaign that you can muster! Once a campaign is proven profitable, pouring more money into it is like turning up a profit meter!

Precise Measurements
One of the major advantages of PPC advertising, compared to traditional adverting and other promotional methods, is the ability to precisely measure nearly every important aspect of your campaign. The ability to track your results is much greater than any other form of promotion I’ve utilized in my career. This measurement precision turns PPC advertising into the most scientific form of marketing available. After some initial hypotheses with respect to Ad copy, keyword selection and landing page design, it is possible to systematically improve your results by tweaking these elements of your campaign, almost forever–increasing your profitability as you go.

Fast Results
The other important aspect of PPC advertising, in conjunction with measurement precision, which makes this medium so systematic and scientific, is the ability to get this precise feedback in near real time. As an example, in traditional, offline advertising campaign, you need to invest tens of thousands of dollars upfront. After this large investment, you won’t even know if your campaign was successful for months. With PPC advertising, you quickly get feedback in the form of precise, quantifiable results, sometimes only minutes after you started it. As a result, you can have a fully optimized, profitable PPC campaign working, before you would even get your initial measurements with other methods.

The Ideal Platform to Test Messaging, Campaigns and Offers
The expediency and precision of PPC advertising make it a great platform to kick off any new product, campaign or company. It is very efficient way of testing messages, offers and websites. Once you’ve discovered and proven the things that work best, you can transfer this knowledge to your rollout of other promotional vehicles. This greatly reduces the risk inherent in starting up new marketing campaigns of any type, and should increase your profitability across platforms, and promotional vehicles, from day one.

Summary
As you can tell, I am a big proponent of PPC advertising as a staple of every marketing budget. Unless your market is so small that it consists of only a few hundred prospects, I recommend it to nearly every software and high tech company on the planet. Consumer, Enterprise or SMB–it’s very effective across many markets. In fact, the more of a niche your market is, the more cost-effective PPC becomes, due to reduced competition and lower resulting bid prices. There are a few highly competitive markets these days which are so competitive, that it’s hard to run a profitable PPC campaign. But these are few and far between, and by far the exception to the rule. So if you aren’t active in PPC advertising today–get started! Give it a try, and let me know your questions or comments.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

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