E-mail Tactics for the Smartphone Age

DIRECT and CONCISE

If most of your official (i.e., work-related, important etc.) e-mails have these two qualities, then you do not need to read any further.

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I am beginning to realize the following regarding my own usage of e-mail:

- the e-mails that I send tend to be relatively long
- the e-mails that I receive tend to be relatively short (with words like “sounds good”, “agreed” etc.).

These days it seems that many read and reply to e-mails on their iPhones, Blackberries and other smartphones. In addition most readers do not have a lot of time to read or write e-mails. The challenge then is to craft an e-mail that is direct (to-the-point) as well as concise. Whether your e-mail contains a request or marketing communication, your goal is to convey the message quickly and with minimal usage of words.

It is not easy to be direct and concise in your written communication -  we need to develop the “direct and concise” writing style if we want our e-mail communication to be effective.

Do you agree?

NEW PRODUCT PRICING: Is the MARKET right?

A key challenge that an entrepreneur, especially in the case of new and innovative products, often faces is “how do I price my product or service?” I faced this situation at two early stage companies that I worked for and at one startup where I was the cofounder.

Conventional pricing theory, which Robert Phillips explains very well in his book Pricing and Revenue Optimization, says that there are three (3) methods for setting prices:

1. Cost-based: add a markup to the cost of production.
2. Market-based: charge the price where supply equals demand – the final price is arrived at after the customer compares competitors’ prices
3. Value-based: relate price to the benefit gained by the customer -  negotiate a price that is proportional to the value that the customer gains by using the product

While one can make a case for each method of pricing, my experience has proven the following related points regarding new product pricing:

- a customer will pay a price that is similar to what it pays for something that it (i.e., the customer) perceives as a substitute

- a customer will pay what it feels is the market price that in turn is constrained by a budget. For example, back in 1999  when I worked for one of the early software-as-a-service (SAAS) companies, one of our prospective customers had a $10K per month budget for application software – the price that we eventually negotiated did not exceed the $10K  per month budgetary limit.

In my 20+ years in the enterprise applications business I have noticed that, while vendors like to rave about “value-based” pricing, customers end up negotiating a market-based price. I do feel that the value-message is the right one – it’s just that customers often, and rightly, feel that it is impossible to link value to specific products. Therefore, the market-based pricing method is what actually works in the real world.

Pricing is a hot topic in several industries. Most of us are aware of yield-management in the airline industry where different classes of customers (e.g., leisure travellers that book early versus businesspeople that buy at the last minute) pay different prices. In the software industry several companies, especially those with SAAS offerings, offer “freemium” products – you can use a free version upto a certain number of users etc. In the world of web 2.0, social media and online gaming, there are challenges such as what to charge for virtual goods, how to monetize offerings (e.g., Twitter) etc.

There is a lot of debate about pricing in the world of enterprise software as well as consumer software. Recently Techcrunch published a great writeup on free pricing in enterprise software. Bill Gurley from Benchmark Capital has a nice writeup on pricing-related opinions of several notables including Malcolm Gladwell (author of Outliers, Blink (my favorite book) and Tipping Point). My perspective is that nothing of value is ever free. In the enterprise software industry, newer technologies such as cloud computing and web 2.0 collaboration are enabling vendors to provide freemium offerings – the vendor benefits by lowering the cost of pre-sales  (instead of viewing demonstrations, why not try the software for free!) as well as by getting faster product feedback (therefore lowering the cost of product management/development etc.). In my own experience as an entrepreneur I started using free versions of software until I had to upgrade because of increased users – I paid because I saw value.

Pricing is a complex topic with nuances such as price differentiation, dynamic pricing (i.e., the price changes with supply and demand) and monetization strategies (e.g, Twitter). Despite the complexities, I have seen that conventional economic principles of supply and demand still influence prices. My simple rule of pricing is to set a price that is close to that of similar products and then run it by your customer – the customer will most probably compare your price to those offered by the competition, and eventually pay what the customer feels is the right price – which is essentially the market-based price!

What do you think?

WIP Entrepreneur’s Tips For New Entrepreneurs

I call myself a WIP (work in process) Entrepreneur. I am using an analogy from the world of manufacturing, where products start as “raw material” (basic parts, nuts, bolts, components etc.) and end as “finished goods”. WIP  is the intermediate stage, similar to an unfinished automobile on the assembly line.  My entrepreneurial background includes  2 startups that I worked for and 2 that I founded. I am in the process of starting my next company and so writing this blog post is reminding me of some of the important lessons that I have learned from my prior experiences. I hope you find these valuable.

Here are some tips:

SELL WHAT MARKET WANTS: One mistake that new entrepreneurs make is trying to sell products/services that customers either do not want or do not understand. In the latter case, expensive marketing resources are needed to convince prospects about the value of your products/services. At my last company (Highlander Systems) I made the former mistake (i.e., trying to sell what the customer did not want!) until I opened my eyes/ears to what the market was looking for.
GOOD PEOPLE ARE IMPORTANT: An important tenet in the world of business is the ability to “find, acquire, develop and retain talent”. At one of my startups it was difficult to both find as well as develop talent. Once I realized that I could not develop (i.e., train, teach etc.) the available talent, either at that time or in the future, I decided to redirect my efforts.
KEEP OFFERING SIMPLE & FOCUSED: It is tempting to try to offer a little bit of everthing – some entrepreneurs use the term “end to end” solutions/products etc. The problem with this approach is that in smaller organizations customers look for specialized skills. You are more likely to acquire customers if you have a narrow focus on a few related products/services. Focus, focus, focus … it always works!
DO WHAT YOU ENJOY: I am one of those entrepreneurs that likes to “do the work.” If I have to do some or all of the work (depending on the stage of the company) I prefer to do what I enjoy – in such a situation I do not view myself as “working” … instead I am genuinely having fun. Remember that phrase: “if you do what you like you would not have to work a day in your life”.
EXPERIMENT: At my last company we started as a “sales & marketing consultancy” where we delivered sales training to companies, then we became an “advisory company” where we attempted to advise startups on business and fund-raising strategies, then we spent 8 months trying to sell enterprise software and finally reverted back to a “sales and marketing consultancy.” Why? Because we were trying to figure out what we could offer/sell to the market. We had to experiment with different offerings until we determined the right business to be in.
DO NOT DO IT JUST FOR THE MONEY: This is an important lesson for all entrepreneurs. It is natural to pursue entrepreneurship in the quest for wealth. One of my favorite billionaires, J.P. Getty, said that the best way to make money is by starting your own business. Once, when someone asked him the secret to making money, he said “…wake up early, work hard … and strike oil.” I think you can substitute “oil” with the current flavor-of-the-day.  What I enjoy most about starting and running my own business is the freedom, control and ability to fully apply my talents.  Experts say that if you do what you like you are more likely to make money. Personally, I believe that it is very difficult to make a lot of money in a short time span with minimal risk (I heard this on CNBC TV). I love what I do and whether or not I make money does not bother me .. as long as I can do the things I enjoy I will continue to be happy.
LEARN VALUE OF MONEY: My last venture (Highlander Systems) is a fully personally-bootstrapped business (i.e., I am funding it with my own money AND time.) In the last 22 months I have undergone extreme stress due to financial crunches, limited funds etc. I have learned first-hand about capital efficiency. It’s a unique feeling to see ones own hard-earned money (my own, NOT a gift from my parents or future wife or whoever … my very own ) work and not work for you. One of the most rewarding moments of my latest venture was the day I paid myself from funds that my company earned – it was just a little bit less than what Larry Ellison earns, but I was happy
KNOW WHEN TO SAY WHEN: One of my favorite beer commercials ends with this phrase – the message is to stop drinking when you know you have had too much. If you feel that you need to change direction have the courage to do so. Never worry about prestige, pride etc. You control your own destiny and nobody can take away from you what you have accomplished. You grade yourself! In my case I have always given myself an A+ (the best grade) for effort, passion, strength, composure and most importantly … personal happiness!

Good luck with your journey … if you have already started on the path of entrepreneurship then you are already successful!

What do you think? I’d love to hear from you ….

Startup Sales Advice: Choose the Right Customers

Ask any enterprise software entrepreneur what his/her biggest challenge is and you will hear some variant of the following:

… sales … revenue … customers ….

My experience at 4 early stage (less than 40 employees) startups has taught me the value of choosing the right customers, especially the right initial customers.

While a startup usually does not have the luxury of “choosing” a customer (heck – any customer will do, right??), the following guidelines will help:

1. AVOID “OUTSOURCED DEVELOPMENT ORG”:  Avoid an overly demanding customer that essentially uses your organization as it’s outsourced development arm! One of my startups licensed our software to a major telecommunications carrier. Thereafter, 65% of my company’s effort went into supporting the customer, instead of using that valuable time/effort to develop additional capabilities that would have attracted more and less-resource-intensive customers. Keep in mind that “cost of sales” and “cost of support” are as important as “sales revenue.”

2. SEGMENT THE MARKET: In seeking your intial customers it may be tempting to cast a wide net and try to win any customer regardless of industry, company revenue etc. My experience has taught me that it is better to focus on a few industries and company sizes (e.g., financial services companies with revenue = $ 50MM – $250 MM etc.). Choose segments that are early adopters and need relatively less support. One benefit is that your sales team can leverage the experience gained from selling within the same segment.

3. SUCCESSFUL CUSTOMERS ARE YOUR BEST SALESPEOPLE: One of my companies learned this the hard way. We acquired quite a few customers but were unable to help the customers get tangible value from our software. As a result we did not have an adequate number of referenceable customers. In retrospect, had we limited the number of our initial customer wins and instead focused on helping our few customers become successful with our product, we would have acquired more customers later at a lower cost of sales.

Here is a 3-step mantra: choose wisely, choose few and make everyone successful!

What do you think?

Selling Enterprise Software To SMB: 5 Lessons

In my 19+ years in enterprise software I learned a lot about the differences and similarities between selling to larger businesses and selling to the SMB (small & medium-sized businesses). For the purpose of clarity, in the US a business with upto 100 employees is considered “small” and one with 100-500 employees is in the “medium” category.  Here is what I learned about selling to the SMBs:

1. Scarce IT resources: SMBs typically do not have employees with deep expertise in technologies such as relational databases, middleware, enterprise application integration etc.

LESSON: Show how easy it is to use your software and de-emphasize technical complexity and robustness.

2. Hosted solutions: Lack of IT resources and elimination of relatively large upfront license fees are some of the reasons why SMBs prefer the software as a service (SAAS) model.

LESSON: While emphasizing SAAS ensure that you address issues of data security, such as “how will you ensure that my data is safe?”

3. Process expertise: SMBs usually do not have well-defined processes for operations such as purchasing, expense reports, order management etc.

LESSON: Show how your software can help implement processes and describe how processes will save money.

4. Support: SMBs, because of their lack of IT and process resources, need support in all major areas such as networks, e-mail, security, applications functionality and business processes.

LESSON: Ensure that you understand the customer’s definition and interpretation of support.

5. Quick start: SMBs want solutions that can be used right away – 18+month implementations will not work.

LESSON: Demonstrate quick “time to value.”

Social Media Marketing: It’s the PROCESS dude!

One of the most important lessons that the enterprise applications software business taught me is that business processes are more important than specific enterprise applications software vendors. For example, Dell’s success was mainly due to its build to order (BTO) model, and not necessarily the ERP or supply chain software vendor that Dell used. Similarly, Southwest Airlines’ business practices led to its unparalleled performance.

Similarly, success in social media marketing will result from proper business processes and not necessarily solely from the use of any specific software platform. For example, one company may rely on Twitter whereas another may depend on a suite of different tools. What is absolutely important is to determine the set of business processes that are appropriate for each firm. As I survey the social media landscape I am amused at how there is a different flavor of the day – MySpace yesterday, Facebook today, Twitter tomorrow etc. Regardless of the specific platform, social media is here to stay. We live in an internet democracy and the users have voted – social media beats mass media, social media marketing beats traditional marketing.

For a great writeup on how social media marketing helps brands, read this post from Bob Warfield.

Personal Branding Using Social Media: How To

For the last few weeks I have been trying to understand how to use social media for personal branding. It is interesting to note that when we graduated from college 20 years ago there was very little we could do to brand ourselves. The most sophisticated practice was to print a resume on a laser printer (wasn’t that cool??) and snail-mail it to companies (yes, we mailed the resume to many companies hoping that a few would give us the opportunity to interview with them).

Fast forward to now and look at the plethora of ways in which we can market ourselves  – Facebook, Myspace, LinkedIn, Twitter, Blogs, Scribd etc. Marketing has been democratized – it’s marketing for the people and by the people! Social media is just that – we control the distribution of information as opposed to traditional media (e.g., newspapers, TV, radio etc.) where corporations control the distribution.

So, I asked myself: what is the most efficient way in which I can market myself:
- what tools should I use
- what should be my strategy

Here is what I came up with:

(1) CONSISTENT MESSAGING: have a consistent message across all the tools (i.e., whether you are on Twitter &/or Facebook &/or LinkedIn, you should have the same message that briefly summarizes who you are, what you can do etc.)

(2) FEW KEY TOOLS: use a few different platforms. For example, I use the following

- LinkedIn
- Twitter
- Blog
- My company website

(3) STREAMLINE NAVIGATION: ensure that regardless of which platform your viewer accesses, he/she can easily access all sources of information on you. In my case, here is the navigation for each tool:

(i) LinkedIn (has links to my Twitter, Blog and Company)
(ii) Twitter (has links to my LinkedIn)
(iii) Blog (has links to my LinkedIn, Blog and Company)

Since each site has a different type of information, a reader (e.g., recruiter, hiring manager, decision maker) can access any of my sites and easily go to the other sites to get a complete view of who I am and what I have done (LinkedIn) as well as what I am thinking of and writing about now (Twitter and blog respectively).

So, to summarize:

(1) use a few different tools
(2) have a consistent message across the tools
(3) provide links to all the tools/sites

I hope this gives you some tips on how you can use social media to brand yourself.

Twitter – What & Why

Whenever I ask my friends whether they are on Twitter I get answers like:

“I don’t get Twitter”

“It’s too complicated”

I made the following 30-second video to try to demystify Twitter – take a look:

Twitter: 30-second Overview

more about “Twitter – What & Why“, posted with vodpod

Product Knowledge!

Regardless of how well-known your company’s brand is, or how great your company’s product is, you (i.e., the salesperson) need to know your company’s product to the extent that your customer expects you to. If you are in inside sales or lead generation then you need to know

- product capabilities (i.e., what it does for the customer’s business)

- the sales pitch (i.e., why the product is good for the customer’s business)

- the elevator pitch (i.e., 30 second sales pitch)

Software: No customer wants software!

Most customers prefer not to buy software. Enterprise software is way too complicated, difficult to maintain and generally disappointing for users. EVERYONE needs to solve problems. Some know what problems they have and some do not. Those that do know their problems are looking for solutions. What is a solution? It’s the answer to the problem. That’s it…. So, here is a quiz… A company needs to sell more of its products. How do you solve that problem? DON’T tell me that the company needs customer relationship management (CRM) software – it really does not need software.

So, there is your answer… no one really needs software. Everyone has problems and if you figure out a way to solve their problems, you may be able to sell them the “way” to solve their problems.