I spent a year and a half on the board of directors of a startup company.
This is no run-of-the-mill spare-bedroom online company, but a full blown corporate launch complete with bylaws, founding and first-round investors, a schedule for going public, the whole ball of wax.
After funds were raised and product development was well underway, we had an official Board Of Directors meeting. After we got done talking about corporate and financial issues, the topic turned to the marketing strategy.
Get the rest of the story via email – “Fist Fight at the Board of Directors Meeting, Parts 2, 3, 4” and more, here:
All of them are light years ahead of me on one topic or another, so before I tell you this story I must be clear, no disrespect intended.]
They know what they know… but they don’t know Internet marketing. Not like I do, being privy as I am to the inside details of literally hundreds of online operations.
So they’re talking and talking and talking. They’re talking about the website and the layout and the branding and the message and the features and the benefits… and I’m not saying a thing. And I’m a little miffed because a project I gave them to do got sidelined.
After about 20 minutes the other marketing guy at the table says, “Perry, you sure are quiet over there. What do you think?”
Uh-oh. He asked, and I just couldn’t stop myself. Our happy little dinner meeting (complete with scalloped potatoes, chicken cacciatore and blueberry pie a la mode) suddenly experienced an abrupt change of direction.
“I think there’s some marketing intelligence we haven’t gathered yet, that’s gonna be a whole lot more expensive when we find out that what we thought was true about our customers, wasn’t true.”
“Uh, what do you mean, Perry?”
“Remember that survey I put together last month and gave to you to post on the site? For whatever reason that project got canned and at this point we’re throwing darts in a blizzard, as far as getting new customers is concerned.”
“Oh, well Perry I just wasn’t comfortable with one of the questions on that survey, and besides, I would never take a survey like that online anyway. That survey didn’t even have any information about our software.”
“Doesn’t matter whether you would take a survey like that or not. Five to fifteen percent of the visitors will, regardless of what any particular person likes or doesn’t like.
“Not only that, if we can’t get at least 5% of the visitors to take that survey, then it’s an indicator that this market has big problems. Better to find that out right now than to wait until we’ve spent another quarter million on product development and burnt another half million of our limited cash.”
Tension begins to rise in the room. Nobody was expecting our cordial board of directors dinner to turn into a confrontation.
“Perry, I guess I don’t understand how this survey process is going to help us sell this product better. We’ve already got beta testers using the software, we’ve already got partner relationships with vendors who will give us access to tens of thousands of customers, we’re going to six conferences next spring, and the product is going to be really, really top notch when it’s done. So I don’t see what we’re going to learn that we don’t already know.”
“What you don’t know is, how much it costs you to acquire a customer. None of us have the slightest idea. Until you know that, we don’t have a business. We have a money-pit for venture capital.”
The questions and puzzled looks indicated that they didn’t have a framework. I elaborated: “The typical customer who buys my Google book is a guy who’s running a business out of his spare bedroom. He’s swatting away the toddler who’s pushing the reset button on the computer, and his wife is standing over him with her arms crossed.
She’s saying, OK honey, if you really MUST buy that stupid ebook, then buy it. But don’t forget how we were going to get rich in Melaleuca, and surely you haven’t forgotten about that stupid college scholarship thing you were selling. We lost a bunch of money in both of those deals, and if you blow all our money on this deal too, bubba, you ain’t getting’ laid for six weeks.
Three seconds of silence, followed by an eruption of nervous laughter. (The men thought this was a lot funnier than the women did.)
They’re paying attention now.
“That guy in the spare bedroom doesn’t have the luxury of angel investors. He can’t afford a year of product development. He’s gotta make this deal work right now.
“When you’re in that situation you cannot afford to guess. You have to know that every time you spend $1.00 on traffic you’ve got $1.50 coming back. And I can guarantee you, if you’re just guessing what John Q. Public wants instead of asking him, you’re going to launch the cool new product into a marketplace that you think you understand but don’t. One way or another, you’re going to pay for that knowledge. Better to pay for it up front.
“So here’s the deal. There are two kinds of places we can get traffic to sell this product. The first is “warm markets” where we can do Joint Ventures and promotions with 3rd parties, we can go to big conventions and pitch this thing, we can have our friends recommend it to their customers.
“The other kind of place we go to is the search engines. The traffic we get from the search engines is not NEARLY as good as what we get from those friends and associations. BUT…
“There’s a big, big ‘but.’ The big ‘but’ is, you only get to go to those friends and associations one time. You only get to rub that genie once. If it doesn’t work – if it doesn’t make money – or if it rubs their customers the wrong way – you never get a 2nd chance. Your one chance is spent. Woe be unto you if you have not validated your sales process first.
“So the thing about search engine traffic is, even though the visitors are not warmed up to us and don’t know who we are, we can buy that traffic all day long. If we make a mistake we can fix it tomorrow and that traffic will still be there. So what we have to do is buy that traffic, run it through the sales funnel, and find out exactly how much it costs to acquire a customer.
“We need to iron out all the wrinkles and make it flow. THEN we go to our friends and JV partners and one-time opportunities. Then it’ll work the first time out and there’ll be a 2nd and 3rd chance from those people because they make money by promoting it too.”
People were starting to sit forward in their seats.
“The reason I’m using this survey system is because this gives us a chance to validate our sales funnel before the software is done. We cannot afford to wait until after the product is ready to start getting the sales funnel right.”
A few months earlier I had been puzzling over what to do, given that this company’s product was not ready for show time. The answer came at a perfect time. I went to a private session at the home of Dr. Glenn Livingston in New Hampshire, where he explained his entire survey system.
He affectionately calls it “Do your friggin’ research” but what he really has is a nearly bulletproof system for validating any online project, before you even start to sell it. So far as I know it’s the least expensive way to validate a market before or while you go into it. As soon as I got home from New Hampshire, I started assembling a survey process for this startup company, based on Glenn’s instructions.
“So here’s the thing: We go to Google and Yahoo and we buy clicks. We divide the keywords into various groups and send people to survey pages. We ask very specific kinds of questions in a format that Dr. Livingston designed, based on his years of Psychology and corporate marketing research.
“You find out very interesting things you’d never otherwise know. For example you might find out that people who type in “guinea pigs” are just starting their search, not ready to buy one yet. And you might find that people who type in “guinea pig” are several steps past that, and ready to buy one. So you send those two different kinds of customers through different sales funnels.
“If you don’t have this information, you’re just going to waste money. Glenn’s method is 12 for 12 in successfully launching new online businesses. Nearly 100% accurate, not only in telling you that a market is viable, but what part of the market is going to spend money and what part is not. The time for us to get this information is now, not after the software is released.
“You know what? We don’t even know the right domain name to use for our product. We’ll never know without testing. And we won’t find out until we start this survey process.
“We have an obligation to ourselves and to our investors to get this thing right before it sees the light of day, not after. If you get this right first then you can have affiliates all over the Internet recommending your product, and they’ll find nooks and crannies that none of us even know exist.”
At this point it was necessary to invoke my credentials. Mark had a laptop computer on the table, so I said, “Mark, go to Google and type in perry marshall google adwords and tell me how many results come back.”
“One hundred forty-three thousand pages. Wow, that’s a lot.” I said, “I didn’t make all those pages. My affiliates did. There’s 143,000 pages out there that reference my stuff and it’s mostly because affiliates make more money promoting my product than other Google related products. That didn’t happen by accident. It was engineered to happen.
And when we get the message-to- market-match right before we launch our software, when we validate the sales funnel from the start, then when this product launches it’s gonna go all over the place. Then the investors get paid. And we get paid. And then we sell this thing for millions of dollars.”
Room was quiet.
From that point we were not discussing whether or not we were going to use Glenn’s process, but how we were going to get it done and who was going to do it.
Sometimes you’ve gotta make people squirm to get them to think. I hope you’re squirming too, ‘cuz whether you’re a $100 million company or a guy who just wants to get laid every now and then, slinging mud against the wall isn’t the shortcut. This is the shortcut.
Another startup company, spared from the tunnel of chaos?
Ummmm…. not exactly.
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