Robbie Kellman Baxter on Market Strategy

Welcome!

Welcome to my weblog!   Baxter's Blog is a place where I comment on trends in business strategy.  Many of my clients have recurring revenue models, so I spend a lot of time thinking and writing about best practices in online subscriptions.  My personal belief is that successful subscription businesses share a lot of the same core fundamental strengths, and span consumer/SMB/enterprise as well as a number of industries and services--from entertainment to dating to accounting services to cloud-based businesses--this blog is about what can be shared across these groups. You can expect topics like tiered subscriptions, pricing strategy and the role for freemium, customer acquisition, partnerships,  I welcome your questions, suggestions and ideas.

Marketing and the Sales Funnel--Part 2--Retention and Recurring Revenue

In my last post, I lamented the fact that too many companies focus on the top of the funnel, awareness, before they have figured out how to optimize leads and convert them into happy customers.

I said the most important area of the funnel is the bottom. 

But actually,there is something even more profitable than converting leads into happy customers.  And that is retaining those customers over time. Companies with recurring revenue models understand this truth.  That's why it's so hard to cancel your mobile contract, magazine subscription and gym membership.

It's also true of companies who have multiple products or frequent (paid) upgrades.  It is much cheaper and easier to get someone to buy more than it is to get them to buy once.  

The best businesses use retention metrics to ensure that they are maximizing  lifetime customer value, and getting the most out of their marketing spend.

Repeat business is the low hanging fruit.  Maximize repeat business before investing in new business, especially if profitability is more important than (unprofitable) growth.

Marketing the Olympics

 
Anyone else notice how little of the Olympics is covered by the main NBC channel in prime time?  How Shaun White dominated 3 days of coverage--before, during and after his victory?  How glamour shots of the women's snowboarders got more airtime than the actual event?

If you watch the Olympics--you see what broadcasters think Americans value:

1.  heroes
2.  beauty
3.  youth
4.  underdogs
5.  Americans

What isn't covered as much is what formed the basis of the first Olympics--a competition, with strong religious overtones, to see which nation states had the strongest, fastest, most agile citizen athletes.

Today's athletes are often professionals, who manage their images as carefully as their practice regimen--in hopes of longer careers in sports and entertainment. 

As a marketer, I am impressed with the sophisticated machine that is the Olympics.  As a spectator, I wish there was more grit and less glitz.

Marketing and the Sales Funnel

Nearly every company uses the metaphor of a "funnel" when thinking about their sales prospects.

• Top of funnel: everyone in our market who is aware of our product
• Middle of funnel: prospects--people who are actively interested in our product
• Bottom of funnel: customers--people who have bought our product

Each part of the funnel can be widened through marketing activities.    You can build awareness through advertising and PR, generate prospects through lead generation, and close business with a well-designed purchasing process, strong sales support resources and, of course, a product that your target audience actually wants to buy. By measuring and analyzing the different parts of the sales funnel, you gain control over the rate of customer acquisition.

Most companies spend their marketing budget in the wrong place.

Before spending a nickel on awareness or lead generation, before you even launch the product, you need to be sure

1.  that your product is what people want and

2.  that you have a lead management process

It's hard to believe, but a lot of companies are so focused on being well known, that they don't apply resources to generating leads and systematically converting them into customers. 

The money is at the bottom of the funnel.  Start there, with a great customer experience.  If you aren't confident that your customers will be happy, fix the problems before you try to get more customers.  Only then, should you focus on how to care for your prospects, and convert them into customers. 

Awareness and generating new leads is a waste of money if you don't know how to convert and retain.

Politics and Online Community Building

Advocates of social causes can fear jumping into the social media fray.  While there is certainly risk in moving from one-way to two-way communication with the public, there is great potential reward.

Last March, 3.5 million inquiries pushed the question of legalizing marijuana to the top of Barack Obama's Virtual Town Hall.  This kind of derailing of an online conversation to suit the interests of a special interest group is what makes many companies and causes alike steer clear of real social media initiatives. 

Obama handled the situation poorly, shrugging off the activity and opinions of 3.5 million people.  He missed a powerful opportunity. Instead, he could have pointed to the response as a sign of the importance of this topic, and clearly and respectfully shared his point of view on the subject, even if it was not aligned with that of the activists.  He could have held up this organized online act as an example of the power of the internet community, and invited other groups to follow suit.

Right now, I am involved in a political campaign in our community--and there is much debate about how to engage with the public.  I put together some tips for handling unexpected (and sometimes unwanted) social media activity:

1.  Set expectations up front. Let your audience know you will listen, but  may not respond, and that you may respond but not agree. And be clear up front in establishing a "no tolerance" policy for rudeness.

2.  Discourage anonymity.  People are more thoughtful when their names are attached.

3.  Before responding, wait to see if it's a trend or a lone extremist.  If it's part of a much larger trend, thoughtfully respond with your rationale. Otherwise, just let it go.

4.  If someone is rude or insists on posting inaccurate information, shut them down.  But be cautious about censorship.

5.  If a big, unanticipated issue arises in your online community, respond to it.  Acknowledge that you hear it.  Let the public know how you plan to respond to the information and under what timeline.  Responding doesn't mean acquiescing, it just means that you let them know they've been heard.

As social networking evolves, groups need to focus on how to use tools like Twitter, Facebook and Youtube, where content is user-generated,  policing is minimal, and control does not exist.  The advantages are obvious--light
ning-fast awareness of new messages, honest feedback from customers and constituents, and, most importantly, showing up where the voters are ready to engage.

Be prepared for the unexpected--it could be that something extra that helps you win the support you need!

Nestle Crunch Hot Line

I bet a lot of you have called the Nestle Crunch Hotline (800-295-0051) more likely for a laugh than because of a milk-chocolate-with-krispy rice-related question. What a great way to engage customers, and refresh their brand image as an engaging, lively company. It's also completely viral.  I have received emails, tweets and FB postings with this phone number--and not just from chocolate lovers.

Other companies have used similar strategies to win loyalty and respect by adding a little humor to their brand. Google, Zappo's and Southwest come to mind. Nearly every company, whether consumer, SMB or enterprise focused, has room for a little creativity in their brand voice--it's an inexpensive way to get a little attention and have a little fun, something even marketers need now and then!

TRY IT:

Oh and for those of you who have never called, dial 800-295-0051. When asked to continue in English or Spanish, just wait about 10 seconds. Then, keep listening and choose option 4. Then listen to the options and press 7. Save this number for those times when you need a smile and nothing is working! Have fun!

Thanks to Alvin Begun for this arresting use of graphics to convey a (frightening) trend.

I love words and articulate verbal communication, but sometimes a picture is just way more effective. For those of you interested in great tips and tricks on communicating with pictures--check out Dan Roam's book Back of the Napkin http://www.thebackofthenapkin.com/

10 Things to Consider on Virtual Goods and Virtual Economies (from Conversation with IMVU CEO Cary Rosenzweig)

After the GSB event on virtual goods and virtual currencies,I took some time to think about what my takeaways were.  By writing them down, I seem to absorb them better, and be better able to apply those ideas going forward.  I hope you find them helpful too.

Below is a list of points made during the talk, by Cary and others, about how these models work--together, they can serve as a primer to give quick insights into virtual worlds.  These are the points that I thought were most relevent.

1.  It may have been the kids who were first to play, but it's the grownups who really pay..the majority of folks on IMVU are over 18.

2.  Make it easy for people to pay...and go beyond credit cards and paypal to offer several payment methods

3.  There are two types of virtual goods people buy--

• functional virtual goods, that allow you to DO something (like a weapon in MafiaWars), and
• decorative virtual goods that allow you to express yourself (like a virtual dress or garden).  People are willing to pay for both, but for different reasons

4.  Consider multiple payment models--most virtual worlds use a Freemium model, in which the game is free to play, but becomes more interesting with payment.  You can offer different options for free, via subscription, or via microtransaction "pay as you go" models.  The important thing is to have options, and to see what works.

5.  People generally participate in virtual worlds for one (or more) of the following 4 reasons:

• To enhance game play
• To express identity, either sharing one's real self or one's alter ego
• To build relationships and to make new friends
• To have fun shopping in an affordable way. For example, IMVU adds over 4,000 new items for sale each day--a huge catalog of items to buy.

6.  Members of virtual communities can feel tremendous loyalty to their worlds, in much the same way as sports fans associate themselves with their favorite teams.

7.  Virtual gifts make up a significant share of revenue, both in the form of virtual gifts presented online or gift cards purchased at retail--and are purchased and given for many of the same reasons as physical gifts.

8.  Movie studios and other major media players risk missing the virtual boat with their insistence on total control of their images in virtual worlds.  User-generated content both enables the kind of longtail choice that makes communities appealing, and engages individuals in a tangible way with the content.

9. Many "new frontier" businesses--social media included--risk focusing too much on the technology, and not enough on the customer experience and willingness to pay. 

10.  It's important to remember that virtual goods are real because they are imbued by their owners with real emotion and meaning. Ultimately this is the key point for marketers to remember when selling almost any kind of product, real or otherwise.

So now, go play a little. Check out a list of virtual worlds and avatar chat sites to get started in.  In today's environment, it's definitely not wasting time.  More like market research...

Interviews--College and Otherwise

The other night, as part of San Mateo County's "Schools Committee" for my alma mater, I co-orchestrated (with 3 fellow alums) a 2 hour interviewing frenzy in which 55 alumni ranging in class year from '09 back to '61 (and maybe further?) interviewed 67 high school seniors, interested in attending Harvard next fall.

A few observations about interviewing for college, which can also apply to interviewing for a job, establishing a business partnership and even going on a date with a romantic interest or possible future BFF:

1.  "Being yourself" isn't enough.  The chatty mom of one of the students was sharing how she told her daughter "just be yourself," adding that you can't study for an interview--and while that statement seems like an obvious fact, it didn't quite resonate.  I would alter that statement to say "Just be your BEST self".  What I mean is, don't try to be someone else, but try to put your best foot forward. Dress appropriate ly.  Show that you thought about the interview before you arrived.  Arrive on time, if not early.  Bring a pencil.  For goodness sake, bring a pencil.   

2.  Put yourself in the other guy's shoes.  It is human nature to be optimistic when meeting someone new.  Interviews are the extreme of this fact.  We want to be wowed by the person across the table.  We are not trying to trick you.  If we ask you what you are interested in, expect that we will follow up on that subject--and be prepared.  And make us feel good about being there too--at least make us feel like we are helping someone who appreciates our effort.

3.  A little nervous energy is good--more is not, and is not needed.  Remember--interviewers and interviewees alike are people.  Most of us have many opportunities to be on both sides of the table over our lives.  Try to connect with the human being across the table--learn about them, find common ground, and try to find a little joy in the moment.  It will help you relax, and make the meeting more inspiring for both sides.

Thanks Francine Hardaway for Getting Me Blogging Again

A blog is like a baby--it needs regular attention and cannot be ignored.  But after over 6 months of regular postings, I let the ball drop in December.  Too much work, too much travel, too much family (well, can you ever get too much family?) led me to back-burner my blogbaby.

It took a comment from super-blogger and social media whiz Francine Hardaway (who has been teaching communications since before I was born) to get me back on track. She and I are working together to help launch a company--and I love her creativity, energy and straight talk.

Francine blogs for FastCompany and The Huffington Post on a range of topics.  Sometimes controversial. Always timely. Always engaging. Check her out. Maybe she'll motivate you!

Exploring the New Frontier--Virtual Worlds and Beyond...Notes from Conversation with IMVU's Cary Rosenzweig

This morning, I moderated a conversation with Cary Rosenzweig, CEO of virtual world leader, IMVU, for the Stanford GSB alumni association. The event was literally standing room only, full of people pushing the envelope on the new frontier of virtual worlds, goods and currency.

As the moderator, I got the last question.  I wanted to know what advice Cary had for experienced MBA-types thinking about how to play in this new frontier. 

Cary talked about how disappointed he has been by classmates and former colleagues who have been afraid to jump in and apply their strong fundamentals to a new and evolving business model. 

The world is evolving so fast.  There are no rules about who gets to make the rules.  The new frontier is available for any of us to explore and to claim.

In this new year--each of us should be stretching our knowledge, reading new books, attending events on topics we don't know, getting to know new kinds of people. 

Otherwise, we will be left behind.