So What? Who Cares? Why You?

Fun and Crazy and Frustrating and Hard and Rewarding

For those of you gearing up to hit the VC circuit this Fall, read David Hornik's post on VentureBlog. It's a good reminder that all VCs are not the same and why you need to spend time knowing who really cares about your size and stage of company.

The description of the startup as having "a million moving parts" is classic -- sound familiar !!

Are You Keeping Score?

If you’re not, then it’s time to start.

Keeping score means measuring your progress.  Are you executing on the things that matter? Set yourself up 90 and 180 day targets – and be specific on the metrics to measure them. And don’t get a laundry list – pick 4-5 important yardsticks.

I know lots of CEOs that say they do this, but they don’t do it with discipline – written down, shared with the team, and with a commitment to running the company against them.

Depending upon your growth priorities, you’ll have different things to score, but here are a few examples of what I mean:

- # of new customers acquired

- Leads/Close

- Key Account Wins

- RFP/Win Ratio

- Design wins

- # of new customers acquired

- # of new channel partners signed

- Revenue by customer type

- Customer support response times

- Uptime – MTBF – or some product performance metric

- there are lots more…

Commit to metrics that matter. Write these down and keep them in your back pocket (the entire team should be doing this).  Report quarterly on these and hold yourself and your team accountable. 

It WILL make a difference.

Sizzle without the Steak

I've been observing some entrepreneurs spending a lot of time lately on taglines, slogans, and catchy buzz words to describe their business.  In my view, I think the emphasis in some cases is on the wrong sylABLE.

I also hear from some of these folks that this is their positioning statement.  But a slogan or tagline is NOT the company or product positioning statement.  These are two VERY different things. 

A positioning statement is an internal company document (in my experience 3-4 pages) that spells out the value proposition and positioning for the target audience.  It's the steak -- the master blueprint for architecting things like taglines, sales presentations, etc.  It spells out the following: "for this set of customers with this type of problem, we offer XYZ that has ABC benefits for these customers.  Unlike 1,2 or 3 competitors, we offer these differentiators.  It's grounded in facts and insight about the market, your customers, and direct competitors.

The best business builders use corporate and product positioning as a strategic weapon -- strategic meaning they begin here and then build everything else out from this. It's a discipline they believe in.

the saying goes "you can't sell the steak without the sizzle"

..I prefer to say you gotta have steak to sell sizzle.

Get in to the discipline of developing a positioning document to guide the creation of all materials that tell your story.  And circulate this positioning document internally to everyone to get buy-in to delivering on this positioning statement/promise (I've seen it glue an organization together to deliver). 

Once you've accomplished this, you've got some pretty great steak to start crafting taglines and stories and materials that sizzzzzle!

Wendy Kennedy
author/advisor/lady with the flipcharts
www.wendykennedy.com

You say Tomayto and I say Tamahto!

Mental Floss for Today!

Are You Speaking Your Customer's Language?

Take a look at your customer facing materials - things like web sites, brochures, presentations, demonstration tools - really look closely - every word.

Are you speaking like your customer or talking all about yourself.

Take for example your web site - is it written touting your product and all it's features or is it written as if your customer is talking - you know what I mean - the vocabulary, lingo, and the mental imagery that the customer's world speaks most about.

This is where you want to be - speaking to your customers in the language they use.  They need to see themselves in your marketing materials.  Clearly. 

There's only a very small percentage of customers that will translate your materials into their own language - we call them early adopters - they like to do this - they find it fun.  But the problem is there's only a small % of these folks - the rest of your potential customers expect you to do the translation.

So take a close up look at your web site, collateral, and brochures.  How often do you talk like your customer and how often are you spelling out features and company capabilities?  My guess is, if you're like most, it's a 10-90 ratio.  We need to turn that around to 90-10.

~~~Wendy Kennedy
advisor/author/lady with the flipcharts
So What? Who Cares? Why You?

The Best Competitive Edge - A Great Attitude

When I was 21 (yah, before the dawn of time!) i worked in the most amazing place.  A company that made one of the first portable personal computers.  A little company called Hyperion, with 150 of the most invigorating, energetic, and inspiring people I've ever worked with.  We worked 15 hour days, nights, weekends, and LOVED it!  I was fresh out of school and green but i had one thing this company wanted -- the right attitude.

Quite simply, it was the people that made the place and while I have worked with many great folks since, I have not felt the chemistry that this little startup created.  It was positively awesome and when I see some of these people now, there's an instant connection.

I was at my vet's the other day and got to chatting with the hospital administrator -- this vet hospital is hugely successful, the market leader within a 300 mile radius.  With a staff of 120+, the #1 challenge they face is people - they've got top notch vets, surgeons, and the like,  but the real challenge is in bottling the energy and enthusiasm of a few front-line people and injecting it in to the others.  In other words...the right attitude.

hmmm...another place where the people factor makes the difference.

An old friend and colleague of mine, the CEO of a growing $15M software company, was trying to entice me into working with them to ramp their business - why me I ask?  he says, "because you're not jaded -- you have a child-like enthusiasm and energy that will be infectious".  Again, a people factor!

What's the point?  I think you know. 

If it's the people, why do we spend so little time worrying about this?  We obsess about product schedules, sales forecasts, and operating budgets, and every now and again we throw in a company event and expect everything to be cool. 

It doesn't work that way so let's stop kidding ourselves. Donuts on Friday ain't gonna cut it.

Take a close look at your people and how much they're lov'in what they're doing and the people they're with.  People do their best work when these two conditions are met.  If we really want a competitive edge, it's right here under our nose.

Best to wrestle with the people factor today, cause it only gets harder when you layer on more people. 

Ecosystems - The Good, Bad, and the Ugly.

In the last 2 startups I've been knee deep with, I learned a valuable lesson about ecosystems.  That being, spend time understanding the motivations of those who've been around a lot longer than you.  There are clues that can tell you the good, bad, and the ugly about your market if you look across the entire ecosystem.   

For example, some larger players may just be "testing" their product in your market waiting for their primary market to be ready for it.  Short and sweet - no real commitment to the market you're in.

Or the ugliest is, and we all know this one, a company who's just sniffing for ideas from you and teases you with the notion of licensing technology.

Physically mapping out the different suppliers in the ecosystem and the motives of the players can tell you a lot about where to place your bets.

There's a lot more here young companies can benefit from, so I'm going to read and think more about ecosystems - for now, there's an article in Fast Company's August issue "In Praise of Ecosystems", by John Sviokla, that talks about another ecosystem issue - building proprietary architectures.  He uses the IPOD as an example of a dangerous strategy.

Coleman keep getting better

When I think of Coleman, I think back to my days as a kid -- lazy summer days at our cottage.  Tire swings, poison ivy, a sunfish sailboat that doubled as a raft and camping out under the stars in our sleeping bags -- so Coleman has a special place in my heart.  Lanterns, sleeping bags, tents, you name it.  Coleman is camping - simple as that.

But nothing lasts forever - and for Coleman it seems there is a need for greener pastures - target markets that have better growth potential. 

So Coleman is now looking to target 3 new markets:  emergency preparedness, outdoor events, and backyard gatherings.  (CMO Magazine July 2005).  I like how these new markets are compatible with the company's overall outdoor brand.

I can't wait to watch Coleman (www.coleman.com) bring its new focus to life with new products, distribution strategies, and customer centric marketing.  An exciting time for sure!

I'm Choking - You Must Be Too!

Way too much info in these last few posts and definitely not my style. 

I'm going back to my "cut to the chase" roots.

Let's focus on who's doing it well and give up on the tutorial. 

If you want help with markets and segments, I'll put on a webinar or a podcast in the Fall where we can get up close and personal on this topic. 

Text just ain't cutting it for me.

Stay tuned.

Shaping Segments – Fishing for Customers

Segmenting a market is perhaps as much an art as it is a science.   There are obviously an enormous number of different ways you can “slice and dice” a market into segments -- the trick is to do this in a way that makes real business sense.

If you haven’t already, go to my web site and read my "how-to" on brainstorming segments. I use a fishbone as a tool to begin this process.  It’s a great way to get the juices flowing to include all the potential segments that might exist for your product or idea. You should really start here before jumping down below.

In shaping segments, consider these 3 questions:

1.      What types of problems does your product solve for the customer – if it solves several problems, this may indicate several different customer segments are emerging.

2.      What is a common problem/need customers have that you can solve with your product. For example, they are all from the banking industry and want to give the sight-impaired access to electronic banking.

3.      Who does the customer reference when making a decision?  These people should be grouped together.

At the highest level, segmenting the market by industry type is a good starting point.  We call these vertical markets.  The only problem is that segmenting by vertical is not specific enough.  All banks are not the same, nor are all hotels, or hospitals, educational institutions, etc.  So defining a vertical can be useful, but there’s much more to do beyond this to make segmentation work for you.

Also keep in mind, your product may have horizontal application and therefore segmenting by vertical may not be relevant. 

Here’s how I go about it.

I think of slicing on two levels:  Definers and Descriptors.

Definers are those things that actual carve out customers into groups with similar needs – you can actual measure the number of customers when you shape your segment using definers.  Definers would be things like: size of organization:  for example, dividing the hospital market by # of hospital beds – 200, 400, etc. (you could divide hotels using something like this too) or metropolitan police forces vs. rural.   

Other examples of definers:

·         Geographic location,

·         # of locations,

·         Decision making unit,

·         Hardware and/or software requirements (ie.  must have XP, Sun Solaris, etc.)  you could even define the market based upon platforms and/or legacy systems, 

·         Company sales,

·         Number of employees

One definer I find particularly useful to divide up the market is application – ie.  How the customer uses the product.  A simple example here is airlines – segmenting by business travellers, vacation travellers, families etc.  Application or how the customer uses the product is a very effective way to divide up a market into groups of similar customers.

My rule of thumb is to use at least 2 definers for each segment.  I want to shape the segment into meaningful groups that can be measured quantitatively when it comes to forecasting market size.  So I look closely for at least two definers for each.

Descriptors

Descriptors are just that – details that paint a picture of your segment but you can’t quantitatively measure using them.  An example would be if you describe the segment as being innovative, risk-takers with new products.  It’s an important descriptor to profile the segment, but you can’t measure against it.   .

Other descriptors include things like: 

·         Buying process – and familiarity with the product category

·         Brand loyalty level,

·         Motivation of the customer,

·         Benefit sought,

·         Usage

Descriptors are equally important in the shaping of segments.  My rule of thumb is 2:1 – two definers to one descriptor.

Try to think about shaping your segments using definers and descriptors.  It takes some effort, but the results can be a more meaningful view of the differences between buyers in your market and a better understanding of how to appeal to them. 

In my next post, I’ll show you a tool I use to make this task a bit more visual and concrete.

First things First – What is a Market Segment?

When discussing markets and segments, I often hear people say things like “we target the medical segment”, or “we’re going after SME’s (small and medium sized enterprises).  Statements like this are indicators that market segmentation is NOT at work in these organizations.  First of all, these are large, broad markets with many different needs and wants, purchase behaviours, product requirements, and motivations. You cannot possible paint them all with the same brush – it's just not that simple.

So markets vs. segments – what’s the difference?

A market is …

the total set of potential buyers for a given product/service,

A segment is …

an identifiable sub-group within the market, with similar needs/wants, and who naturally tend to reference each other when considering what to buy – for example, all teachers don’t reference all teachers, or doctors to doctors, or even hotels to hotels.  So you need to look closely here at who your target buyer would see as credible when seeking advice on your product. 

A lead customer is …

a representative member of the target segment (who is ready to work with you now).  I quite often see people select lead customers based upon whoever comes through the door – what’s important is to identify and pursue lead customers who are representative of the market segment you plan to target.

In all cases, these potential customers must have a burning need or want, money to spend, and be willing to spend it.  Otherwise, there’s no viable market or segment that exists for what you offer.  If you apply these 3 conditions to every market or segment you’re considering, you’ll save yourself a lot of agony.

Kodak - A 116 Year Old Segment Strategy

It’s a Kodak moment. Kodak’s has built a supremely successful business by targeting women.  While other camera makers have been busy targeting techies with the latest gadgets, Kodak built a strong relationship with women by focusing on simple, easy to use features.  This strategy has worked.  And even as cameras have shifted from film-based to digital, Kodak has reinvented itself for its segment, delivering digital cameras that have simple controls with compact stand-alone photo printers that allow you to make prints without the need of a computer. 

It’s not that women can’t handle technical cameras downloaded to a PC, it’s just that they don’t want to.  So Kodak revamped its cameras to fit the needs/wants of this segment. The Post-Gazette reports that Kodak is now the #1 seller of digital cameras in the

USA

(according to an IDC Corp), and remains tops in stand-alone photo printers. And we all know the cash cow printer inks and photo paper can be for these companies.

3M Red Dot Electrodes

My favourite example of segmentation in the medical market is 3M defining segments for its Red Dot Electrodes.  You know those things they stick on the ends of medical devices and then place on your body to monitor your vital signs.  3M recognized that in hospitals alone there were many different sub-segments that would have different needs/wants, product requirements, and purchase behaviours for a product like a red-dot electrode.

When 3M looked at how hospital staff used red dot electrodes, they found very different applications, urgency, and product requirements.  For example, operating rooms, emergency departments, and Neo-Natal ICU, each were very different in their needs/wants, product criteria, and purchase motivations.  It’s easy to see how the red dot electrode for an infant in NICU would be unique.  But also, emergency departments had different purchase motivations than their operating room counterparts.

Segmenting is simply good business

Attacking your market segment by segment gives your entire organization a focus and the ability for everyone to put their shoulder to the same wheel. Product teams debating features and releases, sales teams chasing opportunities, marketing program investments – all of this becomes clearer with a segment focus. It’s easy to get distracted and flounder about if you’re chasing markets – everything appears on the surface to be attractive.

So today, take a close look at your target segment – is it really a segment or is it a market? And is the target segment specific enough (ie. 3M’s) to include only buyers with similar needs/wants. Do you need to do more shaping of your segment to help your team get their shoulders to the same wheel? 

Tomorrow I’ll offer some tips to help you shape the best possible segments.

Until then,

Wendy

author/advisor/lady with the flipcharts

www.wendykennedy.com