Fist Fight at the Board Of Directors Meeting – part 1

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fist_fight_foxes_JillAllynStaffordI 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:

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[Before I go into this I need to preface this by saying all of these people are razor sharp. The CEO has taken two companies from startup to public, various people around the table are bona fide experts in their chosen fields, specialists in this company’s particular market. All movers and shakers, many well-connected in the financial community – this is no bunch of slackers.

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.

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“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.

Get the rest of the story via email – “Fist Fight at the Board of Directors Meeting, Parts 2, 3, 4” and more, here:

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Perry Marshall


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About the Author

Perry Marshall has launched two revolutions in sales and marketing. In Pay-Per-Click advertising, he pioneered best practices and wrote the world's best selling book on Google advertising. And he's driven the 80/20 Principle deeper than any other author, creating a new movement in business.

He is referenced across the Internet and by Harvard Business Review, The New York Times, INC and Forbes Magazine.

32 Comments on “Fist Fight at the Board Of Directors Meeting – part 1”

  1. I hate to admit it, but I have a Love, Hate relationship with reading anything Perry Marshall puts out. I LOVE how much I learn from everything he writes about – sometimes I learn a lot, some times I learn a little, but I ALWAYS learn something. But whenever I’m done reading it, I HATE thinking that I wasted four years of my life and a whole lot of money getting my college degree in business because they simply don’t teach you this kind of stuff, which is the kind of stuff you need to know in order to be successful in business.

    1. Thanks, Brent. I have similar feelings about the 6 years I spent in Amway but nonetheless I acquired some VERY VERY important skills there. Useful, just incomplete. Top of the list is storytelling and navigating the dynamics of a sales conversation. I hope you got some important stuff in college too.

  2. Perry, I’m about to begin a job as an IT reseller. I have to make loads of cold calls a day, arrange face to face meetings and sell IT stuff to them. What product of yours would you recommend that I can immediately implement to get quality leads off the get go as opposed to making 80-100 calls a day? I want to produce quality results from the very beginning.

    Hope you read this!

  3. You are absolutely right on testing. Funnily enough a marketing manager at a big company just offered to give me some advice on email marketing best practice.

    He said that I needed to email my ‘helpful ideas’ less often (twice a week) and design my emails differently (they look like the messages you’d send to a friend or colleague, rather than a leaflet).

    I have actually done lots of split testing and found my approach is what generates the most business for me. Of course, it is totally alien to most of the marketing profession.

    Which just goes to show that a lot of marketing is untested insanity.

  4. It says something doesn’t it – if I was having a conversation about web marketing for an important venture and Perry Marshall was sitting there I think sometime *very* early on (about 30 seconds into the conversation) I’d be asking him “hey Perry have we missed anything on this?” (or at least looking at his expression to see) – not yakking on and sticking my nose in the trough.

    Perry you need to charge these sort of guys more so they take you seriously! ;o)

  5. I’ll bet they were glad they had you on their side! We are too. Thanks for the great info.

    I’d know I have heard something like this before from various other places but you have a knack of busting through the “heard it before” wall and making me actually think about it.

    Looking forward to part 2.

  6. This is my favorite Perry Marshall story. It has so many good points. And makes so much sense.

    Unfortunately, it is so hard to convince people even when you are totally right. I don’t want to spoil the ending so I will stop now.

  7. Great post Perry! What’s up with that anyways?

    The majority of companies think that “Oh, well we just need some products and people will buy ’em” and they focus squarely on product development. They think that if they just “provide” people will buy.

    Nope. And then an entire line fails or worse yet, the business goes under. Doing your research ahead of time and getting those critical details are what separates the little knee-biting chihuahuas from the viciously rabid pitbulls.

    If you don’t do it, you’re better off getting out that dusty old shredder from ’99, withdrawing some cash (preferably benjamins) and running the suckers through THEN adding a touch of flame to the mix.

    What do you guys think?

  8. Perry,

    Thanks for this wonderful post. As an internet marketing coach, I have always breathe this to my student’s ears “Research, research and more research!!”

    I know it’s tough in the beginning, you literally spend a lot of time on research which is very boring. I have been through this as well.

    But the research will save you tons of money, and i can see why so many internet marketing newbies fail, they skipped the market research part.

  9. This is the kind of stuff I run in all the time. Most people don’t have the view that you have. A whole process where the outcomes are predictable. Most people just do and think things 1 step at the time and simply can’t see how things will develop beyond the next step. So they create these simple plans which are basically just 2 step plans: “1) Force the whole thing onto the market (in its various ways of course) and 2) wait for sales to come in.”

    Your way is a multiple step plan where many people simply can’t see the connection between step 3 and step 7. It’s sucks so much that when you explain stuff you always have to go 1 step at the time. Skipping a couple of steps (because the in between step are so obvious) is suicide.

    Lots of people tend to agree when they read a story like this but when they are in the same situation they make the exact same mistakes. Only afterwards they realize they were in the same situation that you just described.

    It’s happened to me that people tell me that we shouldn’t “waste” our time planning for the future because we have enough stuff to resolve today. I always say we should be focusing on both and not just on the daily stuff. But the daily stuff takes so much time that the future is kind of forgotten by most.

    What makes me go nuts is when these same people complain that we “missed the boat” on various things. I mean, if you don’t focus on the future, you’ll always mis the boat.

    But experience teaches to deal with this stuff too :) My way isn’t as direct as yours, Perry, but I already know that over time I will find out that it’s a very good way. Sometimes you just have to go through the experience before you get somewhere.

  10. Perry, Perry, Perry,

    And I was just about ready to start pumping my eBook, “Insiders’ Secrets to Buying a Franchise” through a “new, improved channel.”

    Now, I’ve got to slow down and do it right.

    Thanks for saving me from what “I already know” stupidity.

    Six weeks would be too long to wait;>)

  11. I really enjoy reading your posts because they usually contain at least one valuable take away. The take away from this post is to always test what is testable.

    Thanks for sharing.

  12. Perry,
    Thanks for such an engaging insightful post.

    I love the quote “So I don’t see what we’re going to learn that we don’t already know.” that so concisely captures the problem that so many of us entrepreneurs get hung up on.

    Reminds me of when Donald Rumsfeld said :

    “because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know.”

    It’s what we Dont even know what we dont know thats the most expensive.

    (this isnt unintelligible, you know what I mean right?)

    It could be Hubris, optimism, passion or even relying on what we know worked in the past, but when we assume we know something about our market without the current testing and proof, its a gamble.

    Gambling in partnership marketing is so much more expensive than simply asking the market with surveys.
    The surveys and product funnel test data also can have the most powerful effect on actually recruiting the affiliates and partners in the first place.

    anyway looking forward to “part 2”
    thanks and take care
    Bryan Bliss

  13. Perry, many thanks for that great practical marketing mini case study. (I can’t wait for Part 2!) You’ve given us a powerful example of how to use the WWW to do the market research — the detailed TESTING — which is oh so vital but never mentioned in academic marketing textbooks and all too rarely taught on BBA, let alone MBA, courses — no wonder you got everyone’s attention!

  14. Great blog article Perry, as usual. Your overall approach to business is just so well rounded, you eliminate a lot of the typical myopia associated with normal business models.
    I have a great deal of respect for you and your team- your integrity is what makes me come back and listen – thanks for great material.

  15. I was in hi-tech for 20+ years and the senario you lay out above I saw (and participated in) over and over.

    I will site two examples (there were many more):

    In 1994 I did an phone call survey into the client list. This was for an existing product that the president wanted to drop. His comment was that no one wanted it. With the information from the survey the product was repositioned and turned out to be very profitable. I also re-did a direct mail piece that had been done for this product with comments from the survey. The response from previous mailing was 1%, the new mailing did 3%. This was a B2B product.

    I become sales director for a new product that had been done in partnership with a major software company. The company I worked had $400M in annual revenue (no fly by night outfit) I got my hands on some marketing money, and I spent $20K on a survey and lead gen program. What I discovered was not pretty. There was limited real demand for a product the company had spent close to $500K on deveking. My recommendation was to fold the technology into another product as an add-on sale. Yes I met my sales goal, but the product was not going to generate the million plus in annual revenue the company was expecting.

    You are right on Perry.

    John Deck

  16. How excellent. And how true.

    For decades I’ve been telling people to use questionnairs, surveys, before they do anything.

    When I worked on Readers’ Digest they used to send out 21 before they launched anything, which is why they hardly ever failed.

    Meanwhile, the great corporate masturbation machine marches on.

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