Scott Porad

I come from the product development side of things, which means that generally speaking I’ve spent my professional career surrounded by people who don’t have a lot of respect for “the idiots in marketing”.  As you, my loyal readers know, I have outgrown that mindset.

If I were to describe the job of marketing it is to find efficient ways to get the product in front of people who will actually pay.  So, that implies three tasks, none of which are easy.  Let’s break them down.

People who will actually pay — maybe the hardest of the three for a startup, and this is the question I always ask entrepreneurs: Who is going to buy your product? I have a friend who has built a great product, but his startup doesn’t really know anybody who will pay for it.  (Actually, that’s only partially true…it would be an excellent acquisition for one of about 3-5 companies in the entire world.  If they can get one of those firms to bite, then they’re golden.)

In front of people — this is what most people thing of marketing as…getting stuff in front of people, i.e. buying advertising.  But, the thing is, just buying advertising basically doesn’t work unless you’re selling something to a mass/mainstream market which most startups are not.  Most startups are targeting a niche, and finding those people is really tricky.  See the previous point: finding just one of them is tricky…try finding many, many, many.

Efficient ways — now, here’s the real trick: in theory, you could just buy SuperBowl ads, but that would be inefficient.  In other words, you’d probably spend a lot more than you make.  So, not only does the marketer have to find customers, and figure out how to sell to them, they also have to do it for less money than they make on a sale.  Some companies can’t do that, so they trick themselves into “lifetime value”.  (I suppose that’s not a trick if can retain your customers and have enough money to hang around for a lifetime.)

So, there you have it, the three-bladed gauntlet of marketing.  Now, think about your job for a minute…would you want to trade it for that?  Sure, maybe at a well-established company that has many customers, that’s not so tricky.  But, what about at that brand new company with the brand new product that nobody has ever heard of before?

My friend Fred is a caterer.  An excellent caterer, as a matter of fact.  Once, after eating one of his profiteroles I didn’t eat another dessert for weeks because I knew that nothing would compare, that all others would disappoint.

I’m always encouraging Fred to raise his prices and tell customers who only want him to do small events that he’s booked on that day.  He thinks I’m nuts.

My point to Fred rests on the Power of the Velvet Rope Theory—that anytime you tell someone they can’t have something they want it even more.

I’ve developed this theory after years and years of going to clubs and live music shows.  Put up a velvet rope and it doesn’t matter what you put on the other side, people will want to get back there.  Seriously, a velvet rope and a bouncer saying, “sorry, VIPs only” and you’ve created insatiable demand.  Most of the time, the party on the other side isn’t even half as much fun, anyhow.

In our capitalistic, materialistic society, price is the ultimate velvet rope.  So, my point to Fred is raise your price and you’ll have customers knocking down your door.

All of this came to mind today after watching the latest Rocketboom installment on “Trashy Art” in New York City.  Some guy is selling packages of authentic New York City trash.  First, it was a low priced gag.  Then, a mid-priced souvenir.  And, finally, a high-price piece of art.

Again, it’s like the velvet rope…

Patrick McKenzie, creator of Bingo Card Creator, writes about how he was inspired by how Dropbox uses “two-sided incentives” to drive growth.

McKenzie’s inspiration comes from Drew Houston’s presentation at the Startup Lessons Learned Conference.  Houston explains how their customer referral program has been a huge success because it benefits for the referrer and referree.  Specifically, if you’re a Dropbox user and refer another customer then the person you refer will get a pay a lower price…and, as the referrer, you will get more services for the same price that you’re currently paying.

This is great…it makes “tell-a-friend” type features more palatable than because it everyone get value.  But, I’d argue that it’s lame for two reasons.

First, it’s still spamming your friends and social networks.  Sure, perhaps it’s not as bad as Viagra e-mail spam.  In theory, your friend has made the decision that you might be interested, and you trust your friend.  Still, it’s not Permission Marketing.

In addition, it doesn’t it doesn’t actually mirror real world behavior.  Here is my experience in the real world:

I want to sign up for a service like Dropbox—let’s call it Service X—and I want to get a discount.  So, I go around the office, or tweet, or post to Facebook, “Hey…does anybody have a discount code for Service X?”

So, how could someone like McKenzie harness the power of this behavior?  I’m not sure…perhaps when a user goes to sign up for a service there would be a way to “ask” your social network if anybody has a discount code.

For example, using social network APIs, it should be easy to determine if there are currently any existing Service X users who are in my social network.  From there, the system could send messages into my network asking my friends they would recommend the service.  If they do, then we both get a benefit.  In this model, I am giving permission to my friends to market to me.

Do you have any ideas for how we could improve dual-incentive tell-a-friend marketing?

At Gnomedex this weekend, and I had a chance to connect with Chris Brogan again.  I met Chris for the first time earlier this spring–we had dinner together in New York.  I asked him to summarize his world for me and he broke it down like this:

1. Typically, he works with enterprise clients because it’s easier to sell one large contract than it is to sell ten small ones.  This reminded me of an old Calvin and Hobbes strip where Calvin is selling lemonade at $300 per glass.  Hobbes suggests that’s a bit expensive, to which Calvin replies: I only need to sell one.
2. Unlike other marketing consultants, he doesn’t suggest that marketing organizations throw away the “old way” for the “new way”.  Rather, he understands that a company has a sales pipeline and that social media tools have an appropriate place to supplement and improve that pipeline.  This makes sense to me because it’s less threatening and more effective for them.
3. As dinner and our conversation wandered, I realized that I never got the third point: “What’s the third point, Chris?” “I’m glad you asked…that’s my book,” he said, and you’ll have to wait.

Well, the book–Trust Agents–is finally out and available at Amazon.com.  I picked up a copy of it this weekend, and read the first few chapters.  While I can’t offer a full review yet, it’s certainly a must read for anybody who is “[u]sing the Web to Build Influence, Improve Reputation, and Earn Trust”

Today I had to call my insurance company to change my billing information.  No big deal.  Here’s how the conversation with customer service went:

• Ring, Ring…”Welcome to Big Insurance Co…existing customers press 2 to speak to an customer service representative.”  [Everything good so far.]
• Wait on hold for 3-4 minutes.  [Not great, but I'm at work, it's on speaker and I work while I wait...basically good so far.]
• “Hi, thanks for calling Big Insurance Co.  My name is Kathy.” [Still doing just fine.] “May I have your account number?”

Ouch!  I get that I’m just one of a zillion policy holders, but would it really have been so hard to ask my name?   To treat me like a human?  Would it have cost Big Insurance Co. anything to have the conversation go like this:

• “Hi, thanks for calling Big Insurance Co.  My name is Kathy.  What’s your name?”
• “Scott”
• “Hi, Scott.  May I have your account number?”

It’s really minor, I know, but being friendly, treating customers like real people, like human beings…like customers…doesn’t take all that much effort, but makes a subtle difference.

P.S.  Beyond that, Kathy was fine…my billing info got changed quickly, and I have no complaints with Big Insurance Co.

Gradon Tripp wrote a post last week about his great experience with the band Quiet Company.  Here’s the story in a nutshell:

Gradon posted on Twitter that he had heard the band and liked their music; the band was listening on Twitter and sent him a message back with a link to a sampler pack of their songs.  In addition, they told Gradon to share the sampler pack with anybody who he wanted.  That led directly a CD sale because Gradon like the music, and to word-of-mouth becasue Gradon told everyone about his wonderful experience.

Brilliant!

To a musician, the name of the game is audience.  Unless you already have a big audience who is buying your music, then you’re better off giving it away in order to build the audience.

With digital music, there’s no incremental cost to providing a copy for free.  Some might say, “well, the musician isn’t getting paid for that copy of the song, so there is a cost.”  But, the people you are giving the music to weren’t going to buy it anyhow.  Effectively, you’re giving away something that cost you nothing, and that nobody was going to pay you money for, in exchange for getting a new potential audience member.  That seems like a pretty good bargain to me.

By giving away the music, the bands are going to create an audience that will buy the music (and other things like concert tickets, merchandise, etc.) in the future.  The famous investor Warren Buffett has an expression for this: long-term greedy.   That is, that is making less money today, so as a result of building an audience, you will make more in the future.