Will Microsoft's BING Finally Bring Success in the Search Engine Market?

Microsoft's new search service is called BING, and takes a contrarian approach to the simple Google Interface. The BING interface is kind of a cross between Google and the Yahoo Directory, with a bit of Expedia, MapQuest, Shopping.com, UTube and Flicker thrown in for good measure. Never accuse Microsoft of being modest in their ambitions--this site takes on directly just about every major category in the online world.

I've given BING a quick look. It's polished and appears pretty comprehensive. The search results don't seem to be that much different from previous Microsoft efforts, although the interface's major categories may allow the finding of information more quickly than an elegantly simple one like Google's--if you know upfront the category of information that you're looking for.

HOW LIKELY IS SUCCESS?

Will they succeed? They have many times before in similar situations. They've been laughed at and written off in quite a number of markets over the years. MS has a bad corporate habit of releasing poor products in their first one, two, and even three incarnations. Any other company would give up after so many failures in a particular segment-but not Microsoft. Don't forget that as a software company, Microsoft has always seemed to believe that it is their god-given right to sell every line of software code written in the world.

There are many examples of Microsoft rising from the dead in software market segments. In spreadsheets, Excel was at one point in time a speck on the wall compared to Lotus 123. WordPerfect had a commanding lead over MS Word in word processing back in the DOS days. And a large number of MS Network Operating System Server software offerings (beginning with LAN Manager) were considered a joke relative to Novell Netware, for the longest time back in the 90s.

In all of these situations, Microsoft had the last laugh, soundly beating their seemingly entrenched and unbeatable rivals in large market segments. As a result of this corporate history, they believe that can beat anyone and rarely give up. Occasionally, I have seen them back off, notably after several tries competing with Intuit in personal financial software. But if it's considered a strategic, core segment by MS, they will throw a huge amount of resources at the segment, take large losses, and not give up until they've broken through.

I call them the Terminator of High Tech.

TERRIBLE TRACK RECORD IN ONLINE SERVICES

Of course, this isn't a pure software market, its online services. The problem for Microsoft with Bing and the search engine market in general is that they've been floundering almost completely, for a long period of time, in online services. In fact, they've not had much success in their history online at all. This is especially noteworthy in contrast to their domination of the desktop software business, and the competitive advantage their desktop monopoly should provide them in online services. Yet they've done poorly in almost everything online, and are a distant third in search engine marketing--not even all that close to a fading Yahoo.

So as most pundits will confirm, Microsoft has been terrible in the online world. This does not bode well for the possible success of Bing. But as I alluded to earlier, there is another side to this equation.

MICROSOFT CONSIDERS ONLINE SERVICES IN GENERAL AND SEARCH ENGINE MARKETING SPECIFICALLY, TO BE ABSOLUTELY AT THE CORE OF THEIR FUTURE SUCCESS--AND EVEN THEIR SURVIVAL.

Yes, this hugely successful company has always been a bit paranoid--which may be a bit on the humorous side given their overall success. But it has worked well for them over the years. It has given the company a sense of urgency which is very hard to generate in corporations of their size and stature. So anyone with a sense of history would be foolish to rule them out.

HOW CAN MS OUTFLANK GOOGLE?

But how are they going to defeat their competitors, mostly notably Google, this time in the online world? In my quick evaluation, I didn't see anything technically revolutionary, such as demonstrably more-relevant search results. Some people may prefer the Bing category-oriented interface better than Google's, but it will be a matter of taste--I can't see an overwhelming advantage here. In past cases MS may have overwhelmed a segment with marketing, or simply given away a product, to ensure defeat of a rival they feared could grow into a broad line Software competitor (Novell, Netscape, etc.). It's unclear to me what strategy they will be able to take to defeat Google, which is a dominant, embedded brand with wild profitability in Search Engine Advertising. But I believe they fear the Google franchise and know they need to crack to code to online success if they are going to retain their position in the long run. So don't expect any throwing in the towel any time soon.

Maybe Microsoft will hit upon some innovative strategy that will enable them to win the day in this crucial market. But the one thing I can think of right now, that may work in their favor, is deep pockets, longevity and sheer persistence. Google has also been unable to achieve success outside of their domination in their core Search Engine Marketing segment. This is very analogous to Microsoft's struggles outside of desktop software. The Search Engine advertising segment will eventually mature, and there are already some early signs of slowing. Plus Google risks killing the goose that laid their golden egg by raising their "Auction" bid rates to levels that will make it hard for their customers to make money--don't get me started on that. Advertisers may eventually take their advertising budgets elsewhere. So for MS in this crucial platform it may be a matter of hanging around, making incremental improvement to their Search Engine offerings, until Google shoots itself in the foot.

Doesn't sound like much of a strategy, I know. But stranger things have happened. Let me know what you thing of Microsoft's launch of Bing. Post a message or drop me an email.

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

Organizational Structures in Software & High Tech Companies

So you've put together a hardware or software startup company. Chances are you didn't give a lot of thought to what the next step should be in organization development--you just wanted to bring in some revenue and find a way to keep the doors open. Or, maybe you gave it a great deal of thought, even before you bound your initial business plan--there are quite a few anal-retentive planning types out there--you know who you are!

I don't mean to make light of this issue; it's actually quite a serious one. Let's look at a few of the questions to consider when deciding how to organize your company, as well as a few options.

IMPORTANT QUESTIONS TO PONDER

What are the strengths, weaknesses, and operating styles of the principals? I believe that this is a critical question to ponder, if one wants to organize the company successfully. One of my great examples is HP. Bill Hewlett and Dave Packard instituted a decentralized structure almost from the very beginning of Hewlett-Packard. They were careful to keep the units small, by breaking them up as they grew. In my opinion, this was one of the great drivers of HP's success, and worked well because it suited their personalities, as well as the folks that they hired. They believed in "Management by Walking Around", but also believed in motivating high performance by allowing their employees to use all of their talents, without unnecessary constraints. It seems simple, butit is often hard for managers (especially hands-on, entrepreneurial types) to give their employees enough rope and space to excel. I believe that this hands-off, decentralized approach only worked well because this style fit with Bill and Dave's personalities.

What are the key personality traits of your employees and target hires? Similar to the question about the principal's above, the organizational style needs to fit with the "personality" of your company, the culture. If you have a lot of type "A", self-motivated people with strong leadership skills, a decentralized org chart may fit better than a hierarchical, centralized approach.

Are there disparate technologies within the company? This is a big driver in deciding how to organize. If you have several different technologies, how do they fit together technically--if at all? Do they fit together from a market perspective? If there is a lot of synergy or need to coordinate between technologies/products, a centralized, hierarchical approach may work best. The less "fit" that there is between your core technologies or products, the more inclination I would have to organize using a decentralized, business unit approach. This assumes that the resources are available for a decentralized organization. But if resources are so scarce that you can't decentralize properly, does it make sense to try to be successful with multiple disparate products/technologies anyway?

Now let's take a look at some common ways to organize.

ORGANIZATIONAL OPTIONS

Hierarchical/Functional/Centralized - the classic organizational style of traditional businesses. The strength of this type of organization is that it is easier to optimize each function, as there are more resources available within each function in a centralized approach. This can enable a more sophisticated approach to best practices. On the downside, my first job was with a Big 3 Automotive manufacturer, which was VERY hierarchical and centralized. The company was SO hierarchical that it paralyzed the organization to a huge degree; trying to get even the simplest, small thing done had to go many levels up. It was like trying to turn a battleship on a dime, and really painful. I'm not a big fan of this style for larger organizations, but for smaller, single-market or single product companies, it generally is optimal.

Decentralized/Business Units - This is the polar opposite of the traditional hierarchical organization. It's my preference for growing companies who are starting to "spreading their wings" beyond their initial market or technology focus, as well as for larger companies. It's strength lies in the ability to keep lines of communications short, keeping personnel close to the marketplace, and motivate self-starters by providing more positions of broad responsibility. For medium-sized companies, the danger lies in decentralizing before there is really critical mass to run separate business units, which comes with some added costs due to duplication of functions. One good way to mitigate this is to centralize and share as many of the non-product specific functions as possible, such as finance, HR, quality control, etc. The key functions that absolutely need to reside in the business units are usually marketing, product development, possibly manufacturing (for hardware companies) and occasionally sales.

Product-Centric or Market-Centric- This is a variation that can be combined with either of the two major organizational structures above. For example, within your marketing department, there could be people assigned as product managers, or as market managers. Sometimes a hybrid approach is used, where there are product managers for unreleased products, and market managers for currently-marketed products.

Matrix - This organization style is "overlaid" on top of a more typical organizational structure, such as the types discussed above. The main idea is to set up "dotted line" teams, responsibilities and reporting structures that are desirable, but fall outside of the normal way a team is constituted within the main structure in use. For example, in a hierarchical organization, you might set up a matrixed, cross-functional team to put focus on the launch of an important new business initiative. This may give the new initiative more emphasis than it normally would get, given its modest contribution to the overall business at that point. If used properly, matrix management techniques can be a great way to dampen the negatives that are inevitable in any rigid organizational structure. It must be used with caution, however. If used too frequently, or without endowing the "head" of the matrix with real power to accomplish the desired goals, matrix organizations can quickly become ineffective and politically driven entities--and the butt of jokes around the water cooler.

This is just a quick take on a very complex topic. There are many different ways to organize a software or technology company for success--too many to discuss here. And we just touched on a few of the issues to consider. Hopefully this short article will stimulate some thinking on this topic, to avoid organizational structure which often form haphazardly as companies are started and grown. Post a comment if you have a take of your own.

Phil Morettini

PJM Consulting

www.pjmconsult.com

Strategic Acquisitions for Software and Technology Companies

Acquiring new products or whole companies is a popular activity for many growth and market-share oriented companies. Is it a good idea?

Well, as I often say--it depends. I get involved in company or product acquisitions quite often in my consulting practice. There is nothing inherently good or bad about acquisitions in the technology business. However, there is nothing inherently bad about opening a restaurant, either. Nonetheless, a very high percentage of restaurants (I've seen figures as high as 90%) fail within 5 years. The failure rate for acquisitions may not be quite as high as for restaurant startups, but technology acquisitions are also judged to be failures at shockingly high rates. Caution should rule when approaching either of these very popular activities. As I'm fond of saying about success or failure in any complex business activity--the devil's in the details.

Common Motivations for Acquisition Activity

Let's examine the common reasons that acquisitions are considered in the first place:

1) It's exhilarating and "sexy" to buy another company
2) Growth for growth's sake (often pushed by investors)
3) The belief that buying a competitor is the ultimate "victory"
4) A consolidating market (often commoditizing) where there is only room for a few large players
5) Diversification
6) A great strategic fit where 1+1 truly equals 3

As you might have guessed, reasons 1-3 above aren't great justifications for such a risky activity. Number 4 can be a good justification, but often this is given as the rationale, when the actual market case doesn't truly support it. Number 5 can be a good or bad rationale, depending upon whether the business case really calls for diversification--or if focus would make more sense. Number 6 is by far the best reason to acquire a company, particularly if you aren't an industry giant, pitted in a death match with another titan of your marketplace.

So let's say you've actually thought it through, and have used sound analysis and judgment in deciding to pursue an acquisition. Congratulations for passing the first test--but there are still myriad things that can trip you up, on the way to acquisition success:

Great Ways to Fail

First acquisition done "on your own"--I strongly urge all first time acquirers, whether of the product or company variety, to seek assistance. Acquiring a company and even a product is very complex, with a lot of places to trip up. Retaining an experienced hand that has seen and gone through the mistakes before, can prevent you from the most expensive education of your life.
Bad cultural fit--In the excitement of an acquisition or a merger, people have a tendency to not look past the surface. It's much like dating an attractive potential mate, and proposing based upon infatuation, without establishing whether there is common ground in the way you live your lives. This is the business equivalent of marriage, folks. Compatibility in business philosophies and practices is crucial--and often overlooked, until after the fact, when everything is unraveling.
Poor organizational integration-- Even with an excellent evaluation of potential partners, a great many mergers fail based on the execution of integrating the organizations. That's because it is HARD. You are generally merging two organizations with disparate operating styles, as well as overlapping functions and people. Fear, uncertainty and doubt of the individuals involved can by ITSELF scuttle a potentially great fit. This area is often quoted as the reason most acquisitions fail.
Poor product integration--This is the reason a lot of acquisitions in software and high tech should be called off early in the process. It is often very difficult to rationalize how you are going to support two different code bases or technologies, aimed at the same market. The plan usually call for integrating them over time, but that often proves to be very difficult from a technical perspective. This is a real red flag when buying a direct competitor. Yet the price of the merger in high tech often assumes that the products can be integrated acceptably, without losing customers from either of the existing products. Unfortunately this is usually a very tall order
Paying too much--Price plays a big role in software and technology acquisitions. Due to high growth rates and the perceived need to move quickly in fast-growing, competitive technology markets, acquisitions are often priced in multiples of revenue. This is in contrast to the more conservative multiples of EBITDA in other less dynamic industries. Often the target isn't even profitable yet, but still commands a high price-to-revenue multiple, due to the "hot" nature of the market space, and perceived value of the acquired technology. This high price puts a severe strain on downstream execution of the merger to be "perfect", as discussed above.

So with all of the landmines out there in the acquisition arena, along with the high failure rate, is it simply nuts to consider acquisitions? Doesn't it make sense to just stay away from them? NOT NECESSARILY.

Sound Approaches to Pursuing Mergers

Buying innovation--This often happens when companies reach a certain size; they simply lose their ability to innovate. Rather than innovate internally, they do so by acquiring small companies with market-changing technologies, which may not have the resources to fully exploit in the marketplace on their own. Even though multiples here tend to be high, risk is somewhat mitigated relative to internal Research and Development that might not "pan out", and the size of the acquisition is often very modest, relative to the resources of the acquirer. This is an example of a true 1+1=3 strategic fit. This strategy has been used with great success by Cisco, Microsoft, and many other large companies with successful acquisition programs.
Buying companies or products that truly fill a hole in your offering--While some companies tend to overuse this as justification, acquisition of a reasonably priced company or product at just the right time, can mean the difference between continued growth or inevitable stagnation.
Buying undervalued assets--This is harder to do in high tech than in other industries; high tech companies have a habit of overvaluing their businesses and technologies. But an executive team with a key eye for a bargain can often pick up a diamond in the rough, for example a division that has suffered because it isn't a good fit with the parent company's core business
Truly appropriate diversification--Sometime you run out of steam in your current market, and the amount of cash flow generated by your current business dictates that an investment in another growth area may be prudent. The key here is to pick a market segment adjacent to the existing business, or at least a business that the management team can easily adjust too. However, management teams often are over-confident and deceive themselves, and end up investing in an area where they really don't belong.


I could go on and talk more about acquisitions for a very long time. But instead of putting you all to sleep, let's begin a dialogue on this topic. Inform us of your own Merger and Acquisition stories, best practices, and cautionary tales.

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

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

Open Source Software Business Models

Open Source has been gaining ground for quite some time. Some would say, using the example of Linux, that Open Source has Microsoft and the rest of the traditional software giants on the run. No doubt that open source software has had a major impact on the economics of the software business, across many different market segments.

But is it a good model to use in your software business--if you are actually interested in making money?

Not Generally My Cup of Tea--But Let's Take Another Look

I will admit that my feelings toward open source business models have always been lukewarm, at best. Maybe there's a bit of dinosaur in me. But the idea of putting into the public domain the code that you've sweated to produce, at great emotional and financial expense rubs me the wrong way. It trikes me as fundamentally opposed to the basic nature of capitalism and the entrepreneur.

Like just about everything else in business, however--the devil's in the details. Using Open Source methods has been shown a number of times that it can be a competitive weapon in the software business--when used thoughtfully and strategically.

Poor Use of Open Source

Let's first examine a typical example of what I consider a misuse of the Open Source model. It often goes like this: Technical founder with a crack programming team, and little marketing money or expertise, decides that they are going to use Open Source to inexpensively roll out their new product in the market. Being programmers, they love the idea of Open Source from a user perspective, and so have a strong belief that the market they are aiming at will love it as well. Unfortunately, they aren't trained as marketers, and don't think the situation completely through.

Here are some of the negative things that can happen:

1) Since the company is releasing the initial product as Open Source, they are not quite as diligent as possible with QA of the code, as well as other "commercial product" polishing activities. Basically the product is rushed to market. The product isn't well-received, costing them the one opportunity that you have, to make a good first impression

2) Open Source tactics are used prior to developing a proven business model: "We'll release a free, Open Source product, and have so many users, we can figure out how to make money later". This is reminiscent of the old "eyeballs" business plans prevalent just before the Internet bubble burst in 2001. It's very important to have a solid idea of what the Open Source release is going to gain you, and what the steps are that will to allow you to capitalize on the wide attention. Ultimately, you need to monetize SOMETHING. There are ways to make money with an Open Source model: customization, training, training, premium versions--but in many instances, these won't really support a serious, mainstream core software development effort--if you are also interested in profits.

3) The company has done some thinking about the business model issue, and has decided that there will be a free, Open Source version released initially to seed the market. The follow on product will be commercial/paid with added features, with the hope that the large user base from the free version will upgrade to the more attractive premium version. But without expert marketing analysis, balancing how much to "give away" in the free version, and how much to "hold back" for the premium version, can be quite tricky. If you don't get the balance right, the potential revenue stream can be greatly reduced.

4) The company is in a market segment that highly values order and traditional business practices--in this circumstance, using an Open Source model could seriously devalue your product, in the eyes of your target prospects.


Good Use of Open Source

The other side of this story is that when implemented thoughtfully, Open Source can be a major strategic weapon in certain markets. Let's look at some scenarios of how an Open Source strategy might be implemented more shrewdly:

A) When entering a new market against a huge, strongly entrenched (but slow and stodgy) competitor, where it will be difficult to get traction with traditional marketing methods. This is Open Source used as a Guerilla tactic.

B) In markets where the availability of Source Code REALLY IS IMPORTANT. This may be for reasons of integration, or for reasons of business continuity (for example, a bank application) where they would require source escrow anyway.

C) Having a free Open Source version for one type of small volume customer (internal developments), but to redistribute the code for commercial purposes, there is a royalty/fee. This is using the Open Source model only partially. MySQL has used this model very successfully for quite a while.

D) Formulating a well thought out, hybrid business model ahead of time. For example, a free Open Source version is made available to seed the market. Backed by extensive research and marketing planning, a paid premium version is made available, with just the right features at just the right price, creating huge upgrade numbers with minimal marketing expense.

E) An Open Source product is created for a particular market segment, with data backed by research that this segment will require and pay for substantial levels of integration, customization and/or support.

Summary

That's my view of the good and bad in Open Source as part of a commercial business model. Used well, it can be a major weapon--when the situation calls for it. But if used blindly by companies just following a trend toward the newest thing--it can be the "Business Model of No Return".

Drop me a note or post a comment with what you think.

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

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/

Search Engine Optimization (SEO) Through Online Bookmarking

I've spent a fair amount of time talking about Search Engine Optimization in the past. The reason is that in the new century, this is as fundamental to marketing success as print advertising in the last fifty years, and maybe billboard advertising in the fifty years previous to the last fifty. The details and tactics of marketing change, but goals don't really--getting your products and business in front of prospective customers. It would be really hard to find a business of any size these days that doesn't have a website. If they don't, they are probably on the same path as the carriage builders of the early 1900's--becoming extinct.

That's why I spend so much time exploring SEO: it is nearly universally critical to the market presence of every company, especially high tech and software companies. So here is one more new technique that you can use to build your company's Internet presence, including the always present goal of improving your ranking in Search Engine Results for the keywords important to your business.

ONLINE SOCIAL BOOKMARKING

Online bookmarking, also known as "tagging" is a way of making available to others online, your recommendations on interesting content to visit on the Internet. Think of it as making your browser "bookmarks" or "Favorites" available publicly. In fact, most social bookmarking services allow you to upload your bookmarks/favorites into their system to streamline the process. You often have the choice of making your bookmarks available to just people you are acquainted with, or broadly to the public.

While this is a neat thing to do for a consumer from a Web 2.0 perspective, this activity also can have application to online marketers, if used correctly. You simply bookmark or tag the articles that you've written and posted online, press releases, news stories, etc.--any important and interesting content related to your company. In doing this, you get the opportunity to include your name, company name and a link to your company's website in the tag detail. This will create some organic traffic to your site, but will also be of assistance in improving the SEO rankings of your site.

Some people consider this to be spamming, but it really isn't. You are simply tagging interesting things for people in your industry to find easily. I recommend that you also include your other interesting bookmarks along with your company-specific content, to minimize any concerns.

Now this is a bit of work, even for one social networking service. For maximum effect, you want to cover as many social networking services as possible.

I've come across another great, free website that's assists you in doing just that, greatly limiting the labor involved. It's called ONLYWIRE. You can use this site to place a tag across multiple social bookmark sites(currently 16 different sites). Using OnlyWire you only have to place the tag once, instead of 16 different times if you tried to do this manually. It requires you to visit the 16 sites and open an account first (which you'd have to do anyway), which is a bit of work--but OnlyWire then increases your productivity tremendously from there on. I've been using it for a couple of months and found it to work great. Give it a shot and let me know what you think!

Phil Morettini
PJM Consulting
www.pjmconsult.com

Marketing and Selling Technology Products through the Value-Added Reseller (VAR) Channel

Selling through multiple channels is one of my preferred strategies in technology marketing. If done properly, it allows a company to fully exploit its expensive, hard-earned intellectual property to the maximum extent. One of the most popular channels (and one of my favorites) used to sell B2B software and hardware is the Value-added Reseller, or VAR channel.

VARS ARE THE DISTRIBUTION HOLY GRAIL FOR MANY STARTUP COMPANIES

In fact, with a great many startup software and technology companies, building a VAR channel network to sell their companies products is the first thing they want to do, upon releasing their first product. This is especially true when the founding management team primarily comes from a technical background. The thinking goes; they are technologists who have created a great product. They don't have a lot of experience selling or marketing--and most of the startup money has gone to, and will continue to go to developing products. Why not just recruit a bunch of resellers to market and sell their product for them? Sounds like a great idea on the surface, doesn't it?

Unfortunately, there are few strategies that are more flawed, and which have continuously led to failure than this one.

Let's contrast the realities of the VAR channel, against this simplistic notion that has been tried again and again, without success:

WHAT VARS DON'T DO

1) First of all, VARs DON'T market. At least not YOUR products, anyway (they may market their services). So the very first flaw in this strategy is that it is based on a gross misconception of what a VAR typically does.

2) VARs don't create new markets. VARs are great at selling into established markets and further expanding already growing ones. Missionary sales: brand new markets, categories and products? Not so much.

3) They don't sell a wide variety, or a large assortment of products. In fact, VARs are focused on actively selling VERY FEW products--if they are even focused on selling products at all.

4) VARs aren't motivated by high product margins.

5) The individual VAR does not exist to help YOUR company make money.

Now if you're not a sales or marketing professional with experience working with the VAR channel, you're probably very confused by the list just above. So what is it that VARs actually do? And why is it worth dealing with them at all!

What happens time and time again is that a technologist startup CEO will pursue the VAR channel as their exclusive distribution channel, without knowing any of the points in the list above. Their effort will fail miserably, and they will then scramble to begin selling their product directly, or through some other means. They will swear off the VAR channel forever, and I do mean swear:

"Those !!@#$%^^* resellers are good for nothing. They take a big cut of your margins, while adding no value in return. I'll never deal with them again."

I can't tell you how many times I've heard some version of the quote above.


But the VAR channel is a major force in the technology business, and if you know what you're doing, it can be used to great leverage by your company. So let's now take a more realistic look at what VARs CAN DO:

WHAT VARS ACTUALLY DO

1) First and foremost, VARs are in business to sell their own HIGH MARGIN SERVICES. That is why they exist, and how they put bread on the table. This revelation may be discouraging to some product vendors, but you must understand and respect this above all, if you hope to leverage this channel. The only exception to this is the "core" product, which will be discussed later in this article.

2) VARs are very interested in things that apply to their own vertical focus. Although it wasn't so true many years ago, most successful VARs these days have a very tight vertical focus.

3) Many VARs act as "thought leaders" for their corporate customers. So they are very interested in "what's new" in the market, so they can stay on top of trends and remain market experts for their clients. This means that they will sometimes spend a lot of time talking to you about your new product, but never find the time to actually "sell" it (even if they have the best of intentions). In the busy world of the small VAR, client demands and selling the core product and services usually soak up all excess time.

4) VARs are often used as "aggregators" of purchases by corporate clients. This way, the corporation can use a single vendor point of contact for their technology purchases, greatly simplifying their purchasing process. They can also leverage the VAR as an evaluator/validator of new products and technologies. This makes them a very important part of the purchasing chain for many corporations.

5) If they put any real effort into selling products at all, it is usually into one or two "core" products that they have built their service offerings around. If you aren't a product that pulls services, forget about getting high mindshare with the VAR.

6) When it comes to selling "non-core" products, VARs are almost completely driven by the demand they see in their installed customer base. They won't often add in new products that they don't see a demand for, unless they are really techie, early adopter types. And these techies will often add a product, but never find time to actually offer it (let alone sell it) to their customers.

7) The VAR channel is EXCELLENT at fulfilling demand for great new products into their existing, installed customer base.

8) VARs can be an excellent proxy for a vendor in installing, configuring and offering first level support. This can enable a vendor extend its reach and to leverage the VAR channels existing infrastructure rather than building out a large field organization (which depending on the product category, may not even be feasible).

So given the points outlined above, what are the "best practices" to follow when you are seeking to build and leverage a VAR channel?

VAR CHANNEL BEST PRACTICES

*Always sell your new product directly in the beginning. Even if you don't plan to build a direct sales force and sell directly in the long run, it is critical to establish that the product works, and can be sold successfully. If you can't sell your own product, no VAR will be able to either (and few smart ones will be willing to try). De-bug and systemize the sales process, make sure that your end user price points are right, and build a small reference account list--at a minimum. Only at this point should you begin to approach VARs to distribute your product.

*Marketing the product is the vendor's responsibility. Do not naively think that the VAR will market the product for you, or that since you have VARs to sell, you don't need to market at all. Remember, VARs are great at fulfilling demand among their existing customers--and very poor at creating it among new customers. The vendor must position its products in the market and create demand for them--otherwise your channel efforts will certainly fail

*Treat VARs like the valued business partners they should be. If you do sell direct, don't "steal a deal" and take it direct just to make a few more points on one sale. Nothing is more short-sighted. Not only will this VAR not do business with you again, in any given vertical it's a small community--and word gets around fast. You risk becoming a pariah in the VAR channel, and losing all the hard work that you put into building your network. My philosophy is: when in doubt, cut the VAR in on the deal. If you don't feel he's adding any value to your business, eliminate him from your network after the deal. But don't use your low opinion of a particular VAR to convince yourself to cut him out of the deal. You risk cutting off your own nose in spite.

*Be realistic in what the VAR channel can do for you. If you have a non-core offering, be happy that they "make it available" to their customer base, rather than expecting them to sell it actively. Remember, VARs are key influencers of their clients; just being available to endorse your product as something they offer, to a customer that hears about the product elsewhere, can be very valuable.

*Provide a reasonable margin, but don't "throw margin away" thinking that it will motivate a VAR to actively push your product--if they otherwise would not. It won't work, and you'll just be giving away money for no reason--that you could use creating demand instead.

*For most products, make sure that you don't over-distribute by signing up more VARs than your market will support. Even though greater margins might not make a VAR push your products, the erosion of margins to near zero will cause a VAR to eliminate your product from their portfolio. It's better to leave a few deals on the table, than to risk demotivating your entire reseller network, because they are 6 competitors are bidding on every deal in an particular area. The exception to this is if you represent a "core" product that pulls significant service revenue, you can get away with a lot more stuff, because the product margins are trivial to the VAR compared to the lucrative service revenue. But in this case, be careful when using your market strength to abuse partners. People have long memories, and "what goes around, comes around."

SUMMARY

That's my primer on how to approach, and even more importantly, how NOT to approach doing business with Value-Added Resellers. Post a comment or send me an email to delve into this important topic further.

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