Archive for the ‘Marketing’ Category

Marc Barros on the shift from Product to Marketing/Sales

Marc Barros, the founder of Contour cameras wrote a great follow-up to my post on your company’s shift from a product focus to building out a sales and marketing organization that’s definitely worth reading. A few excerpts here:

1. Make A Clear Definition of Success

Early on, often before you raise venture capital, you want to create a clear picture of what the future looks like. That picture can include a range of things such as how you define your culture, values, employee morale, size, revenue growth, market domination, etc. Equally how you define success could range from world domination (e.g., Square) to building a small company focused on great products (e.g., 37 Signals).

Whatever the definition for success is, the best companies know this early on. They are already thinking about how they transition from their initial customers to growing the business. So when they do raise venture money they are clear about what the money is for and how they are going to use it to complete their ultimate vision.

At Contour we weren’t clear early on about what we wanted to be. At the core we were always focused on building great product, but along the way we didn’t shift our priorities from the best products to reaching more customers. We weren’t sure if we wanted to lead the market, follow the market, just make the best products, be a niche brand, etc. Instead we invested a little bit everywhere, never recognizing when we should shift from satisfying our early customers to a focus on how to reach a lot more of them.

2. Every Company is Building a Brand

Just because you are a product-focused or technology-focused company doesn’t mean that you aren’t building a brand. You are.

No different than Apple, your brand matters. The name, what it stands for, what it feels like, even what it smells like. Some of the best technology companies have built the stickiest brands. Look no further than Google, who through Marissa, was obsessed with its brand. I’m sure there was a lot of tension within Google about what was considered on brand, regardless she was consistent in protecting its image. Another great example is Intel. Technology at its core, they spend serious dollars to brand “powered by Intel” at a consumer level to make no doubt consumers wanted their technology.

If you recognize early on you are building a brand, it helps to lift your head up above the product/technology and begin thinking about how you are going to scale your platform.

3. Don’t Divide Your Organization

A traditional way to see the world is to divide the company between the functions: sales, marketing, product, finance, operations, etc. This is consistent with how we are taught to run a company and with how people view their roles within the organization. This is even consistent with how Seth phrased it, shifting from product to sales/marketing. I have come to believe it’s the wrong way to lead a company, especially early on.

It’s true your company will have specialists that can handle customer relationships, design things, write code, etc. But it doesn’t mean all of these people have to be working on different objectives.

If we remove the functional titles for a minute and talk about what the company is trying to accomplish it becomes much clearer. Early on you are finding your customer and building a product to satisfy them. As Seth says you are constantly cycling between customer feedback, improving the product, and getting more feedback. This process can sometimes take years until you have built a great product that your customer can’t stop using with a business model you think is sustainable. To do this well you often hire designers, engineers, and product managers. Before you know it your team is great at understanding the customer need and building a product.

Skipping forward you decide you want to really “grow” the business. If we forget the traditional functions of “sales/marketing,” and rephrase the objective, we’d say the goal is to get more customers. The more customers, the more revenue, and hopefully the greater the profits. There are a variety of ways you can grow your customer base. Getting new customers could be through adding new features (product), hiring people, traditional marketing efforts (social, advertising, SEM, etc), or even traditional sales efforts (sales teams, distributors, affiliates, new channels, etc). The important shift here isn’t the shift in hiring more sales people or more marketing people, it’s the shift to recognizing the most important thing is to get more customers. If the whole organization is thinking about this, including engineers, I bet you would come up with a variety of ideas and priorities to meet this. And instead of just the sales guys thinking about sales, you involve the whole team.

I believe the best companies focus the whole organization on a few priorities and therefore get the mind share of every employee towards the same goal.

Lastly, don’t rule out the need to shift the mix of your team mix, especially if your business isn’t generating enough cash flow to support the people you hired and your new growth objectives. At least by making these changes it would be clear to the whole organization that you are focused on growing your customer base.

February 5th, 2013     Categories: Marketing, Startups    

Introducing Colorado Entrepreneurial By Nature

When it comes to the question of nature vs. nurture for entrepreneurs it’s clear that both are important. While great entrepreneurs are born with at least the seed of that entrepreneurial spirit, it takes some encouraging – as well as plenty of guidance, help and support – to see that seed blossom. I’ve had the great fortune to experience the evolution and transformation of Colorado into a community that I believe is one of the most supportive of entrepreneurs anywhere in the country. In fact, Colorado has always had an entrepreneurial spirit – from before its founding as a state as a frontier territory supporting prospectors and pioneers, through its history of ranching, the oil and gas boom, as a hub for telecommunications start-ups, to its leadership in LOHAS businesses and the burgeoning green-tech field, to Internet and related technologies. Surrounding these business trends has been a Rocky Mountain lifestyle that has attracted entrepreneurs to our state since the 1800’s. These factors, combined with a support structure and philosophy of paying it forward, has turned Colorado into one of the best places in the country to start a business.

Today we’re launching Colorado Entreprenurial by Nature – a grass roots campaign created by a handful of entrepreneurs in our community to show support of that ecosystem. The goal is simple. We’re giving members of our community an easy way of showing their pride in the entrepreneurial community we’re building in our state. We hope that this will help us both encourage entrepreneurship in our community and attract new entrepreneurs to come to Colorado to start their businesses.

Joining is easy. Head to the Colorado Entrepreneurial by Nature website and download the badge (it comes in a number of different colors and sizes). Display it proudly on your company or personal website. We’ve made some stickers up as well which you can fly proudly on your laptop/car/bike/etc. They’ll be showing up around Denver and Boulder at a handful of coffee shops and other places where entrepreneurs congregate.

If you feel the way I do about Colorado – about living here and working here to support entrepreneurship – I hope you’ll join me in the movement.

October 22nd, 2012     Categories: Marketing, Startups     Tags: , , , ,

The Freemium Myth – more data

My last post with some thoughts on product pricing has received a ton of traffic, comments and email. Clearly this topic is one that a lot of entrepreneurs care about (and struggle with). A few people pointed me to a great post by Ruben Gamez of Bidsketch on the Software by Rob blog that talks about freemium plans and why, in Ruben’s view, they aren’t always drive the results companies are looking for. It maps well to my thinking (I directly called the freemium model into question in my pricing post). There’s some great data in the post – definitely read the full thing. Here’s a few that caught my eye:

Bidsketch started out with a freemium model. Ruben carefully documents their early success with this (by early, he’s referring to a weeks, not months) and their challenge only a few months after launch of a sub 1% upgrade rate and rapidly increasing support challenges (they had a huge user-base – just not one that was paying). And then he did something “radical” – and completely got rid of the free version. This change led to an 10x increase in paid conversions.

Jason Fried from 37signals had a similar experience. “…the majority of people who are on pay started on pay…” he says. And by correlation, most people who start on free stayed on free.

CrazyEgg doubled their revenue the month they dropped their free plan.

We’ve had similar experiences with companies in our universe that struggled with freemium pricing plans. And while there are clearly companies that have made a success out of offering a free service to a large percentage of their user base and charging the few that are willing to pay (including some very successful ones in our own portfolio) I’m hoping that more companies at least consider that their best pricing plan may not need to include “free”.

August 19th, 2010     Categories: Company Creation, Marketing, Product    

Pricing models, the freemium myth and why you may not be charging enough for your product

image I’ve been pulled into a number of product and pricing meetings recently (for reasons unknown I’ve become the Foundry pricing and productization guy). I thought it would be helpful to put some of my thoughts into a blog post and hopefully spur some conversation in the comments and over email. With any broad topic, there are always exceptions to the general rules. There are also few absolutes and much of this advice varies depending on your specific product and market. And keep in mind here that I’m dealing generally with web services of some kind in the advice below (not consumer apps and not enterprise software). With those caveats, here are some ideas on pricing models:

– Beware of too many pricing tiers. Relative simplicity is helpful in many things related to building companies and pricing models are no exception. As it relates to pricing tiers, I favor fewer pricing levels. More tiers = more complication = more confusion. It also makes you more likely to violate some of the other ideas below. I generally like 3 or 4 product tiers plus one “call us for enterprise pricing” tier.

– Have a clear delineation between product tiers. Many companies initially offer a base level that includes all of the features of their product and then offer a little more of each feature at various incremental pricing levels. For some relatively straightforward services this can make sense (think Basecamp where your sales pitch is about offering more of a relatively defined thing, that everyone pretty much understands and values, and generally will want more of as they use the product more). For most products, however, this is a bad idea. For starters, most companies vastly overestimate their prospective customers’ ability to understand the features of their product (thinking the value of each feature is self evident). It also complicates the buying process as prospective customers try to figure out how much of each of those great features you’ve developed they want, and doesn’t create clear delineations between pricing tiers. While there are some features in almost any product that need to be priced this way, I generally favor opening up some number of completely new features with each pricing increment (say an analytics layer or workflow module, etc.). This has the side benefit of giving you lots of nice ways in your product itself to promote higher tiered features (think grayed out features – “click here to upgrade!”). It also makes the upper tier value propositions relatively straightforward – want X feature? You’ll need to purchase the Silver package for that.

How about overlay features that you charge by the drink for? Many companies have parts of their product which some advanced users may want to access at every product level (API level access being a pretty obvious example). In these cases (and to be clear, these should be product features that a subset of your customer base is looking for – if not, they should likely fall into your regular pricing tiers) I think it’s fine to have an overlay where you charge incrementally to the base price of each tier ($X for every 1000 API calls or something similar).

Be careful what you put a tariff on. You should understand very clearly what drives your own costs as you start to matrix out your pricing so you know what user behaviors cost you money. You should also understand (by talking to early users) what drives customer adoption, usage and lock-in of your product. And with all that in mind, be careful what you chose to put a tax on. There’s no hard and fast rule here and this is a nuanced conversation that’s hard to generalize and put into writing. But remember that your pricing will effect your customer’s behavior around your product. And I’ve found that many companies make the mistake of charging for features that are the key lock-in points for customers in their early use of a product and in so doing actually limit their likelihood of getting enough value out of the product that results in their becoming a long term user. To be clear, you should try to align (but not necessarily match exactly) customer value to customer cost. But not at the expense of lock-in. To keep on the Basecamp example, note that they allow for unlimited users at even the base pricing level. They (correctly) realized that while they could have easily charged for this they’re better off getting as many people in an organization using the product as possible.

The freemium myth. I’ve been a great beneficiary of freemium models (as both a consumer and an investor) but I think for many companies the freemium model doesn’t make sense. If your product offers value out of the gate, if your service is such that it doesn’t necessarily benefit by having a large volume of users (and back-end data aggregation is probably not that benefit, which I point out since I often hear it used to justify fremium models for companies that in my mind shouldn’t have them), if you are selling largely to enterprises (companies) – you may not be the right candidate for a freemium model. I know it’s in vogue and I know that your product is so cool if only you could get a million people using it you’d blow past the typical freemium upgrade rates of 1-3%. But in all likelihood if you’re offering a product of value that’s well thought through, well designed and well architected, you’ll make more money by simply charging for your service out of the gate. (Note that I’m really not talking about consumer oriented applications here, where freemium models tend to make more sense)

Don’t be afraid to charge for your product. The other benefit of not going down the freemium path is that avoids another common mistake companies often make which is not charging enough for their product. When you’re jumping from “free” to “something” that something often needs to be relatively modest – after all you don’t want to scare customers off and you do need enough of them to pay something in order to stay in business. But the reality is that if you have a good product, many users who will pay “something” will pay more than you think for your product. Put another way, those that get value out of what you do get enough value to be willing to pay a meaningful amount of money for it. You may lose a few people at the low end, but many products have a lower price elasticity than their creators realize. I’ve watched many companies spend untold cycles trying to raise the price of their product after initially setting prices so low that they essentially commoditized what they do. It’s also worth noting that if you get it wrong it’s a lot easier to lower prices than to raise them. And to be perfectly clear, I’m generally not a fan of the $19.99 entry price point for a product/service sold to business users. You can charge more. And you should.

Beware the long “trial” period. I’ve written about this before. I think most companies offer too long a trial period for their product. Just like most customers who will pay for a product will pay more for that product, most trial users who will eventually become customers at 30 days will do so at 14 days. The idea here is to give people enough time to see how awesome you are but not too much time to change their minds or to forget about you. There was a great debate about this question when I wrote about it last time and I still haven’t found any academic research to back up my hypothesis, but that’s my opinion.

Hopefully some of these ideas will be helpful to you. Maybe a few will be provocative (as always, let me know!). I do recommend that companies working on their product pricing matrix spend plenty of time with customers to understand how they are using their product. It’s also helpful to bounce pricing ideas off of not just your early customers but also some trusted advisors who are not as close to what you’re doing. Getting a fresh set of eyes on your feature set is a good way to avoid drinking too much of your own cool-aid when it comes to your view of the ease with which potential customers will understand your value and pricing matrix.

August 12th, 2010     Categories: Marketing, NexGen Web, Product    

The kind people at AdSense are easing our fears

I find it strange that Google felt the need to send the following note out to their publishers (are we going to stop writing/publishing because we fear the bottom has fallen out of the CPC market?!?).

Dear Publisher,

We understand that the recent economic turmoil has created a lot of uncertainty in the lives of AdSense publishers. During these difficult times, we’re continuing to invest in innovations that improve publisher monetization and advertiser value in the content network.

We’re focusing on further developing our product offerings and boosting ad performance for publishers. We recently announced advancements in AdSense for search and experiments to make ads more effective. We’re bringing DoubleClick technologies to AdSense publishers, and we’ll continue to launch new products and features. We’re also continuing to improve our offerings for AdWords advertisers, making it easier for them to target the Google content network. Features for advertisers, such as the new display ad builder, are designed to improve ad performance on AdSense publisher sites.

We’ll keep driving technological progress, but our best asset will always be our publisher partners. The strength of AdSense lies in the value of the content you bring to users and the quality of the sites you bring to advertisers. Our success is tied to yours. We look forward to partnering with you for the long term, and remain dedicated to helping you succeed.

October 31st, 2008     Categories: Marketing    

Your chance to play designer

If you’re like me, you spend most of your days pining away for the life that would have been had you followed your true passion into product management and design.  Ok – I’m being flip, but we all have opinions on the way the sites we visit look, feel and work.  So here’s your chance to weigh in on an important design decision and help out a Foundry investment in the process.

Lijit is coming out with a new thumbnail feature in their search results (very cool) and can’t decide how to best lay out those results with the picture.  So they’ve tossed it out to their user base (and other interested – or at least opinionated – parties).  So if you have a second stop by their blog and vote on your favorite design.

May 10th, 2008     Categories: General Business, Marketing, Product