Advertising – the aspirational mirror

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Disclaimer: I am not now, nor have ever been, nor ever will be, an advertising guy or even a marketing guy.

That being said, I’ve developed a simple working rule for judging the marcom efforts of my mentees and it seem to work well, so I thought I would share it.

The idea is simple: your ads should reflect back not the image of your target customer, but an enhanced image, the image that they aspire to project, not who they really are.

This came to me one day while I was watching pro football, which I do a lot. But unless it’s a New England Patriots game, I record the game my Tivo and watch it perhaps an hour or more into the game so I can skip over the ads.

But when I watch the Patriots I watch in real time with my football fan friends. It’s the only time I see TV ads, everything else is Tivo’d. The ad that struck me that day was of a young man with the stylish 3 or 4 day stubble driving a convertible down what looked like Route 101 in California, wherever it was the scenery was breathtakingly beautiful, as was the blond woman sitting in the passenger seat, and the weather. What were they selling? Well the car, of course. But I can’t even remember what make and model car was being advertised. Watching the ad it hit me: the car company was not trying to convince viewers that the car was faster, got better mileage, or was more reliable than its competitors. No, what they were trying to do was reflect the aspirations of the mainly male viewers who watch pro football: to be driving down 101 in a beautiful car, with a beautiful woman, on a beautiful day, whilst most of the viewers were actually sitting on a lumpy couch with their male football friends and if they lived in the midwest or east coast, on a cold, bitter and windy day. Who wouldn’t aspire to be that guy, 30 years younger, handsome and carefree, enjoying driving his convertible? The car the advertising was designed to sell, by association, not on either features or benefits. After watching that ad I started viewing every ad as an aspirational mirror. First you had to figure out the demographic – who the target audience was, then what activity was being shown that they would aspire to. That lens works almost unfailing well, whether it’s cars, beer, or washing machines. Of course, there are the odd humorous ads, designed to cut through the clutter, but for the most part holding up the aspirational mirror to the target audience held true.

So now when I review marcom materials, whether it’s for enterprise security or an app to help you lose weight, I advise the mentee to make sure his ad does two things: present an image of the target customer, solving the problem the product was designed to solve. If your customer doesn’t see him or herself in your marketing materials you’ve lost them right off. But that’s necessary, but not sufficient. You have to show them in a better state than they really are. Instead of being the harried CIO worried to death about data security you show them as the young with it hip technologist totally on top of the problem. The CIO as hero. Because as a vendor that’s your job: make the CIO the hero! One of the best, and simplest ways

Creating successful ads or other marketing collateral requires three things: a very clear definition of the customer, a very clear understanding of the problem they have, and a way to depict them as triumphing over that problem. I used to think that consumer ads for aspirin and other OTC drugs were designed to convince the viewer that they have a problem, then sell them the solution. That’s not totally wrong, and certainly it’s the proven technique for the various nostrums pushed by the pharma companies every since our government decided it was ok to allow drug companies market their drugs directly to the consumer instead of being forced to go through the intermediary, their doctor.

You can play the game by choosing a TV show targeted at your demographic and watching the ads carefully to see how they are designed to reflect not you, but the aspirational you. If you don’t recognize yourself in the ad the advertiser has made a mistake. Likewise if you don’t see yourself not as you are, but as you’d like to be: younger, better looking, wealthier, sexually successful are probably the top four qualities the aspirational mirror is designed to reflect back the advertiser has probably wasted their money.

One of the most effective ways to design aspirational advertising is to show the before (the target customer without your product) and the after (the happy customer using your product.)

You know the old saw, half of all advertising dollars are wasted, you just don’t know which half. As I’ve written in The business driver you can’t afford to ignore, personalization is the business megatrend of the 21st century. Of course, the holy grail of advertising is to get that personalization down to the individual consumer.

The irony of Facebook’s current problems are that it’s achieved that holy grail, and become one of the richest and most powerful companies in the world. It’s problem is that while it was doing so it ignored security in the process.

Here’s a great example of aspirational advertising from the back cover of Rolling Stone:

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Here’s an aspirational ad from The Sunday New York Times. Are you cool enough to even know what the ad is selling? Hint: O.J. Simpson was a customer.

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The one business parameter that will determine your customer acquisition strategy

valley-of-death

As a mentor for the past 8+ years at the MIT Venture Mentoring Service (VMS) I have seen a very wide variety of early stage startups – and with a few exceptions all my mentees are at zero stage – idea conception or stage one – idea validation.

There’s one question I ask these very early stage startups to answer for me, but more importantly for themselves: Are they a high volume, low price business or a low volume, high price business? For example, creating apps for iOS and/or Android is a very high volume business – you will need thousands if not hundreds of thousands of users to succeed, because Apple and Google have set the pricing for apps incredibly low – a few dollars per app at the most. Conversely developing drugs for very rare diseases for a very small number of patients results in very high prices – as much as thousands of dollars per month.

Typically high volume, low price businesses are in the B2C market. There the cost of customer acquisition has to be very low. You can not afford a sales force if you are selling an app that cost $3. So it’s absolutely critical that you have a very well thought out customer acquisition strategy or another way to make money, such as in-app purchases. Typically consumer apps need to go viral – customers sell their friends and zero cost to you (search for viral on Mentorphile to see several posts on this subject). Conversely, if you are selling a very high end product you will probably need either your own sales force to call on the relatively few prospects you have, or a partner who does. The valley of death is littered with those companies try to do both: “We’re all floor wax! No, we’re a dessert topping!” Only on Saturday Night Live can you be both!

The reason Apple is a money machine and the most valuable company on earth is that they have succeeded in being a high volume, high price business! But that has only taken the genius of Steve Jobs and Steve Wozniak and thousands of brilliant designers, engineers, marketers, and executives and over thirty years to achieve.

So please, early stage founders, stay out of the valley of death! Determine if your business will be selling to millions of consumers who won’t pay more than $X or $XX, or a business that will sell to hundreds or perhaps thousands, but where customers will pay $XXX or even $XXXX+ for your product.

The foundation of all marketing is product positioning

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I’m not a marketing guy, never even played one on TV or in a high school play. However, I’ve been quite involved in marketing since my days at Software Arts decades ago. I’ve concluded that all marketing has to start with positioning: what product category your product fits in and how it compares to other products in that category. Most important is how your product is differentiated from other products in the category, in the eyes of the customer, not the eyes of the developer.

I was reminded of this reading Jean-Louis Gassee’s (JLG) weekly newsletter, Monday note, one of many sources about tech news I consume regularly. Jean-Louis is a former Apple exec and often writes about Apple products. This week’s newsletter article is entitled More HomePod Trouble: Positioning. Like JLG I’m a long time Apple user, starting with the Apple II in 1980 and up to today with my iMac, MacBook, two iPads and iPhone X. I’m also an audiophile and former sound reinforcement engineer, so I’ve followed all the reviews and news about Apple’s HomePod with interest.

HomePod positioning is dead simple: Apple’s latest audio product belongs to the smart speaker category, a space dominated by Amazon and Google. Amazon fields a range of Echo devices starting at $49 and sporting the Alexa voice assistant. Google Home speakers, with the powerful Google Assistant voice interface, also start at $49. Apple’s one and only HomePod costs $349 and features the Siri conversationalist, generally perceived as substantially inferior to Alexa and Google’s Assistant.

Positioning case closed: HomePod costs more, but does less. Late start. Once again, Apple’s offering is dead in the water.

Jean-Louis goes on to write about how Steve Jobs – with a great deal of help from Adobe and Aldus – positioned the Mac in its early days as the leader, in fact the category creator, in desktop publishing. You may want to read that historical background, Apple’s relationship with Adobe was truly win-win.

JLG uses Clayton Christensen‘s Job To Be Done (JTBD) in an attempt to determine the HomePod’s positioning. I heartily endorse the JTBD framework. What job does your product do? And for whom? In Jean-Louis’ example, a car gets you from Point A to Point B. But more subtly it also provides benefits such as self-presentation, entertainment, moments of privacy.

So what job does the HomePod do, and for whom? Is it just a music player, or is it a more ecumenical home control device, an companion for all kinds of everyday tasks? Is it a bi-directional communication port to the rest of the world?

My answer is that in typical Apple fashion, the HomePod does the job of providing very high quality sound to those customers who value high quality sound, regardless of where you place the HomePod in a room. The HomePod plays on Apple’s strengths: ease of use, simplicity, and quality laid over very complex technology that the customer never sees.

I’m going to end the discussion on the HomePod with JLG’s conclusion: the HomePod is an incomplete product.

The HomePod that ships today lacks important features such as stereo, multi-room audio, and a better version of Apple’s wireless Airplay protocol. Over time, the A8 processor and iOS derivative inside the HomePod are likely to provide substantial improvements and make it very competitive compared to speakers that have less hardware and software muscle. But for today, the HomePod is incomplete and its place in the world unclear.

So what’s to be learned from this dive into the HomePod’s positioning? First of all only a world class company with incredible financial and talent resources could get away with launching a product that is more than twice the cost of competitors from Amazon and Google and has by far the weakest smart assistant, Siri. As founder of a startup you need to either launch a complete solution for the customer or launch a partial solution that dovetails nicely with the market leaders. For example, you could launch a mini-monitor speaker without providing stands – which any mini-monitor must have to sound its best. Why? Because there are many 3rd party stand suppliers out there. In fact you might want to develop a business alliance with one of them.

Lesson two is to figure out what category your product fits in. In Apple’s case it is the smart speaker – a category brilliantly created by Amazon with its Echo hardware and Alexa assistant.  Then, unless you are Apple, you must determine your USP –  Unique Selling Proposition. What differentiates your product in the eyes (or in the case of smart speakers, ears) of the customer? Customers decide product differentiation. What does that mean? They don’t care about specs and features – they care about benefits! Benefits are in the eye of the beholder – the customer. But it is your job to make that job as easy as possible for the customer. Getting market leading sound quality, irregardless of where you locate the HomePod is a wonderful benefit to that segment of customers who care about sound quality. Sadly for me as an audiophile most people do not: witness the popularity of MP3s, which contain only about 10% of the original music – the rest is thrown away in order to shrink the file for ease of sending and storing. And earbuds – their quality is terrible, but millions of people seem happy with them!

So when you position your product against the leading competitors in the product category make sure your USP resonates with virtually everyone in the category, otherwise you are a niche product. And that can be ok, so long as you have a roadmap to expanding that niche to a sizable portion of the total market. For example, Apple is initially addressing the niche of audiophiles: those of us who are willing to pay a lot more money for better sound.

But as JLG points out, over time the HomePod will become more complete and I wager Apple has some eye-opening feature/benefits up its sleeve.

Everyone in the tech startup world is fixated on the MVP – Minimum Viable Product. And with good reason – you need to engage the market ASAP. But without proper positioning your product won’t be viable, it will die on the vine as so many have. Read my post MVP vs. MRP for why I don’t buy into the MVP thesis. Being viable in today’s crowded market is not enough. Every founder is in a fierce battle for the customer’s attention. Your product needs to be remarkable!

Finally there is one other high risk, high reward approach to positioning: create your own category! Netscape did this with the Web browser. Jeff Bezos and Amazon did it with the Echo smart speaker. It can take a lot of patient capital, hard work, and some luck to create your own category. But it can be done. But either way positioning will drive all marketing activities from PR to trade shows to social media: what category you are in and why the customers in that market category should chose your product over all the competitors are the keys to product positioning.

P.S. Just in case you are wondering, I won’t be buying HomePods any time soon. I’ve been using Sonos for whole house audio since the day they shipped. But if Apple can offer me something really useful who knows, I must might try a pair, if and when.

 

Market research – what is it and why you need it

 

market research

In my MIT mentoring at both the Venture Mentoring Service and the Sandbox Fund I see mainly very early stage entrepreneurs, often pre-product, even pre-prototype – just at the idea stage.

But they all realize that they need to present some type of evidence that validates their idea; every founder has a pitch deck. But not every founder realizes the differences between primary and secondary market research and the key attributes of each.

When it comes to markets investors, partners, and job candidates usually have the following questions:

  1. How big is the market?
  2. How fast is it growing? (If it is growing at all).
  3. Who are the major competitors?
  4. What segment of the market will you target initially, e.g. who will be your early adopters?
  5. What differentiates your product or service from competitors? What’s your value proposition? What is your competitive advantage?
  6. What will be your barriers to entry? In other words if you are successful what’s to prevent two people in a garage from cloning your product?

Any presentation needs to answer these questions. And answers need to be backed up with evidence, either first hand or second hand, with the emphasis on the former. As Daniel Patrick Moynihan said, “Everyone is entitled to his own opinion, but not to his own facts.” And as someone once said of a meeting between investors and founders, “Inside this room what we have is opinions. Outside this rooms are the facts.” That’s where market research comes in.

Primary market research generally is synonymous with customer discovery, going out and talking to the people you think will be good prospects for your product or service and getting their feedback. It’s very tempting to start with friends and family, I’ve made this mistake myself, but by the nature of their relationship with you they are going to be biased – in your favor. So you really need to plunge into the deep end of the customer pool, talking with prospects who have no relationship with you, though they might have a connection. But the further away they are on your social graph the more likely you will get unbiased feedback. False positives can lead you down the wrong path, wasting time and money. Lately I’ve seen a few founders who got lists of prospects and actually cold called everyone on the list. While this seems inefficient, it was surprising the number of people who were willing to talk with them. So spend less time on that pitch deck and a lot more time on your 30 second pitch and figuring out why a stranger would want to talk with you – what’s in it for them? Lots of people are intrigued by startups and entrepreneurs, so if you have a good story, like your origin story of how you got the idea, lead with that. And having some good credentials can really help, like being an MIT or Harvard grad, or having worked at a name company like Amazon or Google. You have about 10 to 15 seconds to capture someone’s attention, then you need to be able to hold it for several minutes.

Interviewing is a skill, and like any skill it will improve with practice. Start out with three questions you would like to get answers to, such as: what are you (the prospect) using now to solve this problem? How satisfied are you with that solution? What features or benefits would cause you to switch to a new product that better solves your problem? And forget about pricing! The key is to identify a market niche you can dominate, not to refine the price for a product you haven’t even created yet.

One good strategy is to go an organization that many of your prospects belong to or are served by. For example, if you have a new product idea to help the blind, in Boston you could go to the Perkins School for the Blind or the Carroll Center for the Blind. If you can capture the attention and the imagination of an administrator at an institution that serves your prospects they might help you set up interviews with their clientele. Much more efficient that cold calling! But again, the key is what’s in it for them? For example, you could promise to deliver a written report on your market research with their clients and/or a presentation.

There really is no substitute for primary market research. But there is value in secondary market research: scientific papers, research studies, analyst reports, journal articles, etc. But make sure it meets the following criteria:

  1. It comes from an authoritative source. There are a lot of fly by night market researchers out there, as well as stock analysts who tend to be biased by their bank’s or private equity fund’s strategy.
  2. The market research is recent. Given the time it takes to perform research, write it up and get it published, any published research is by definition somewhat out of date.
  3. You have more than one source. Ideally having three or more reports or published articles that help to validate your business concept will be convincing.
  4. It’s highly relevant to your idea. It may be hard to find research that’s completely congruent with your idea, but the more relevant it is the more convincing it will be.

Keep in mind that in an early stage company your business idea and value-added are both working hypotheses. It’s ok if you find prospects or even researchers that don’t fully support it – in fact mentioning one of these may help to increase your credibility.

Make sure you give credit where credit it due. Not only will the owners of the research appreciate this it will also enable your audience to track down the original report or publication – which an interested investor would be prone to do.

Student interns can be very helpful in conducting secondary market research. Find an MBA student who needs a project to help out while you concentrate on primary market research – never delegate customer discovery!

Finally, as you talk with individuals or institutions keep in mind you are going to need advisors, mentors, partners and staff – you might well find these people during your customer discovery and market research phase of your business.

 

Lessons from inventor James Dyson

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PHOTO: JUDE EDGINTON FOR THE WALL STREET JOURNAL

James Dyson is a highly successful inventor who has built an empire of high-tech, design-centric consumer products, including  vacuum cleaners, supersonic hairdryers and air-purifying fans. His background is somewhat different than the typical U.S.-based engineer/founder:

Mr. Dyson, 70, was born in Norfolk, England. He had no formal engineering training. Instead, he went to art school and then studied design at the Royal College of Art.

There are some important lessons in the Wall Street Journal article James Dyson’s Big Ideas that are far from unique, but seem to be key elements of successful founders.

The first his his attitude towards market research, which is virtually identical to Steve Jobs:

Market research at the time said that customers weren’t especially interested in cordless vacuums, but Mr. Dyson decided to ignore it. “You can’t ask your customers to tell you what to do next,” he says. “They don’t know. That’s our job.”

The second is his attitude towards failure and the need for perseverance.

He credits his success to “perseverance, taking risks and having a willingness to fail.” “Inventors rarely have ‘eureka’ moments,” he says. “Developing an idea and making it work takes time and patience.” He adds, “We fail every day. Failure is the best medicine—as long as you learn something.

N.B. that failure is ok – as long as you learn something! There’s too much lip service paid to the value of failure in the startup world and not enough attention paid to the need for continuous learning.

In my 30+ years of working with entrepreneurs I’ve found that persistence/perseverance and continuous learning/improvement are the key determinants of success. For example, Tim Westergren the founder of Pandora was turned down by 150 VCs before finally landing an investment.

So here’s a little self-test for founders: if you aren’t willing, able, and passionate about working extremely hard to realize your vision, usually for years and usually taking well below market compensation,  don’t even start. Go to work for someone else.

I used to wonder why successful song writers kept writing songs even well after they became multi-millionaires and could easily have retired. The answer is simple, the can not NOT write songs! It’s something they are driven to do. And founders have to have the same motivation, it is not about money, fame, power or other stuff more easily found on Wall Street or elsewhere – it’s about the unquenchable drive to build out their vision. James Dyson at age 70 is still going strong, and why not! Money, fame, power, etc. are the byproducts of a successful startup, not the reasons for starting a company. There are lots of easier ways to get rich, if not famous.

*In a 1998 interview with Businessweek, he famously stated:

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

Baking the network effect into your product

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I’ve written three posts on this subject, though the term I used was “virality” vs. “network effect”. The latter term is perhaps better.

How Snapchat succeeded without built-in virality

Everyone talks about virality but no one knows how to create it

B2C – build in virality or bust

What’s really interesting in the article  by Alexei Oreskovic The founder of real estate website Trulia has a new twist on startup investing – and it involves building his own products is not so much the fact that they are hiring their own engineers, it’s what those engineers will be doing.

Flint, and the other cofounders of venture capital firm NFX, are on the hunt for “network effects” – products that increase in value as more people use it. That’s what propelled Microsoft’s Windows operating system to become the dominant computing platform , years before the internet was a factor. And more recently, it’s the secret to the success of giants like Facebook, Airbnb and Uber among others.

NFX recently closed a $150 million fund to invest in early-stage startups that fit the bill. The firm says it has identified 13 types of network effects, in industries ranging from synthetic biology to machine learning and blockchain .
I’ve found that customer acquisition is both the most difficult and most expensive part of building a startup. So by building in virality or the network effect into your product from the get-go you can let the product create its customers. What used to be called word of mouth.
It will be interesting to see how well NFX companies fare, and if indeed baking in the network effect into their products does eliminate or significantly cut down the cost and time to acquire customers.

A VC’s contrarian view on TAM

 

fishmoney

Starting way back in the early 1990’s the many VCs I met with drilled the concept of TAM into my head: Totally Addressable Market. In fact “too small a TAM” was one of the several excuses given for turning down a number of startup ideas I presented. But Matt Helman‘s article Why ‘TAM’ doesn’t matter to me on TechCrunch presents a contrarian view which I feel I really need to share, as I’ve hammered TAM into my many mentees whose pitch decks I’ve reviewed. Helman is a VC with Greylock, so he knows whereof he speaks.

Here’s how VCS define TAM: “the existing revenue opportunity available for a product or service,” and it’s often calculated by taking the existing top-down market size and whittling down segments of the market that are not addressable.

As we’ve all heard, VCs need to make 10X on their investments, as most of their portfolio companies crash and burn, or worse yet, turn into “zombie companies” that never grow, but stay alive sucking up the VC’s energy and putting a large blot on their portfolio. Because what VCs won’t tell you, but what is obvious, is that venture capital like Hollywood movies, is a hits business. The big hits have to pay for the many losers. And since no one can reliably predict what will be a big hit and what will be a big bust, VCs have to swing for the fences every time. Unlike baseball they don’t care about singles, doubles or even triples. It’s not about batting average, or even RBIs, it’s all about hitting homers and grand slam home runs. Because they also strike out a lot.

So it stands to reason that if every company they invest in has to at least have the potential to be at a grand slam home run that means they must be serving a huge market. And preferably a growing one. However, as Matt Helman points out:

The only problem is that if you had applied the TAM framework over the past 25 years, you would have passed on most of the best venture investments of all time. A cursory examination of these companies in their early years highlights the danger of too heavily weighting TAM. In fact, at the time of their Series A rounds, many of the very best venture investments would have had relatively small — or even undefined — TAMs.

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As screenwriter William Goldman so famously said about Hollywood, Nobody knows anything…… Not one person in the entire motion picture field knows for a certainty what’s going to work. Every time out it’s a guess and, if you’re lucky, an educated one. He might as well have been talking about the venture capital industry.

So what’s wrong with the TAM model? Helman points out the key flaw in the logic:  Yes, eventually the market size has to be very large to support the blockbuster companies they need to stay in business. But “it can be directionally misleading in the early years.” He outlines four reasons why there are other factors to consider besides traditional TAM when assessing the size of your startup’s market opportunity. I’ll list and define them below, but read Matt’s entire article for the important details:

  1. TAM expansion: hit companies like Uber fundamentally change the markets in which they operate.
  2. Credible adjacencies: Amazon’s a great example of a company starting with a small niche (books), which acted as the camel’s nose under the tent (online sales). Books were just an entry point into a much larger ecommerce market.
  3. Nascent market potential: this is a fancy way of saying catching a giant tech wave. That rising tide can lift a lot of boats, witness the mobile app phenomenon. Facebook rode it; Microsoft missed it.
  4. Frequency of use: this is mainly a B2C measure. I would add that not only is frequency of use critically important, so is depth of engagement. Facebook is such a giga hit because not only is it used daily by millions, but they spend more time in that app than almost anything else they do on their phones – where they are increasingly spending most of their waking hours. TV was an early example of a consumer product that was used both frequently and deeply, for hours a day.

Helman concludes on a cautious but optimistic note:

… founder should continue think about the size of the market they serve. Doing so helps prioritize development, understand customer segmentation and uncover non-obvious insights. But take it with a grain of salt; and if you see an opportunity, don’t let a TAM number stop you from building something great.founders.

As a result of reading his eye-opening article I’ll be changing the feedback I give entrepreneur’s when I review their pitch decks and how they have defined the size of their market opportunity.

 

 

 

How a reviewer at the New York Times tests your product

Brian Chen

Way back before the advent of social media, one of the prime marketing techniques in the personal software business was getting your product reviewed in national media, such as The New York Times or The Wall Street Journal. A powerful reviewer, like Walt Mossberg, formerly with The Wall Street Journal, could literally make or break a product.

So today I read with interest the Q & A with Brian X. Chen, The New York Times’s personal technology writer, about how he reviews products: Going Low-Tech to Solve Everyday High-Tech Problems.

There are good lessons here for any consumer product developer, whether or not you plan to try to get your product reviewed in the mainstream media.

What kind of testing setup do you use to tell us if a whiz-bang gadget or app or service is for real?

Oftentimes before I start testing a product, I jot down an objective set of tests for tasks that I can reasonably expect a product to do.

So the lesson here is, “What useful tasks does your product perform for the user?” Can you list them?

In addition to objective tests, my reviews are subjective. I keep in mind what I know average people care about when it comes to tech, other than a checklist of features. The setup needs to be simple and intuitive, the product needs to be durable and work well, the company’s customer service needs to be delightful and a gadget’s design needs to be aesthetically pleasing enough that you would feel proud about carrying it around or leaving it on your coffee table.

The two-word phrase for this paragraph is “user experience.” Apple is renowned for the quality of its user experience.  How does your product stack up against Brian Chen’s list of user experience criteria?

And here’s a warning if you have a what he calls a “blank slate product” like the Amazon Echo.

Blank-slate products like Echo Show create a dilemma for reviewers. Should we evaluate the product based on what it can do currently (which is very little), or what we think it has the potential to do in the future? Should we evaluate the product based on what it can do currently (which is very little), or what we think it has the potential to do in the future? I’m not a fortune teller, so I lean toward the former and render a “wait and see” verdict that seems repetitive. But even when people take the latter approach and predict a gadget’s potential, it’s unhelpful for informing people whether they should buy something today.

There is a major lesson for product developers here. Don’t ship a blank slate product! If you are a huge, successful company like Amazon you can get away with it. But it’s dangerous for a startup. Take the extra time to load up your product with the equivalent of “skills”, “apps” or “content” or make it very quick and easy for the user to do so. Because users most likely won’t buy your product based on what it has the potential to do in the future if it doesn’t do much for them right now.

Despite the power of social media, I still believe there is value for a startup in traditional media “earned exposure” otherwise known as PR or public relations. Startups need to create credibility and getting a good review from a well known reviewer can generate credibility in a hurry. But make sure your product is ready for prime time, because as the saying goes, “There’s no faster way to kill a bad product than to promote it.”

 

 

Start with a niche but be careful…

niche

I almost always advise my mentees to start with a niche, even if they think everyone who can walk and chew gum at the same time is in the total addressable market. But what is a niche anyway?

The dictionary define it as:

a specialized segment of the market for a particular kind of product or service:

But let’s take that further: a niche is determined by a significant commonality amongst prospects – those people you hope will become your customers.

There are several characteristics that may define your target niche:

  • Geographic – for many startups, especially service ventures, starting locally, e.g. in the same locale as the company, is one way to start with a niche. Once you dominate the local scene for say hairdressers, you can then expand to other locales.
  • Purchasing power – Uber started with a black car – limousine service. A very easily defined niche for high end customers. Once they worked out their operations they were able to expand to take over the taxi industry. How do you find high end customers? The same way Uber did – by other high end products or services they consume that are related to your product or service.
  • Vocation – workers in specific jobs may be a good target for you. For example, say you had a great speech to text app for mobile phones that could be customized by the user with industry specific terms. Construction workers or architects, who often have to work on a site, take notes quickly without having hands-free, and use a lot of industry-specific terms may be a good niche for you.
  • College students – startups often target college students, and for good reason. They tend to be early adopters as they are driven by FOMO – feat of missing out. They also tend to be willing to experiment with new offerings as they haven’t developed fixed buying habits as older adults may have. And they can be easily located – on their college campuses.
  • Associations and Affiliations – If you have an application or service for those interested in environmental sustainability your might try to reach them through the Sierra Club. There are thousands of associations and there are even directories of associations. 

The key aspect of your niche is that the members are easily definable and reachable. It doesn’t help  to define a niche if it’s going to be very costly and time-consuming to pursue it. And keep in mind, you either have to solve a problem for your niche market or offer them a compelling new opportunity, otherwise why would they be interested in your offering?

There is one danger of the “dominate a niche then expand from there” strategy. I just ran across this with one of the ventures I’m mentoring. They found a great niche for their product. The prospects were very enthusiastic about their  offering.  The company started getting so involved with this niche that they began adding features requested by these customers. Then when they started looking for funding investors pigeon holed them as just targeting a narrow vertical –  too small a market to interest an investor. So make sure you don’t fall into the trap of customizing your product or service for your niche in ways that won’t be of interest of use to other users.

Entrepreneurs hear a lot about listening to their customers and evolving their products based on customer feedback. But if a new feature is only going to be useful for a very specific market segment, unless you plan to build your entire business on that segment, resist the urge to add that feature.

Finally, your niche should be early adopters. Check out my post Who are your early adopters? for details

 

 

People don’t read – so why are you reading this?

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Way back in the last century we entrepreneurs had to product called business plans in oder to raise money. Long, text-heavy documents accompanied by pages of spreadsheets of financial projections. There were entire books devoted to how to write a business plan, web sites of business plan templates, seminars on how to write a business plan. I wrote about a dozen business plans myself. Like an unpublished author, most of them languish in a desk drawer.

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But now in the 21st century business plans have disappeared and been replaced by the pitch deck. Why? Founders and investors have begun to realize that people these days don’t read. Too time consuming!

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So as a founder how do you communicate with investors if they don’t read? Make it easy for them. Linear, word-by-word reading has been replaced by three new ways to consume information:

  1. Scanning
  2. Skimming
  3. Summarizing

Scanning means to look at all parts of something carefully in order to detect some particular element. So make it easy for your reader to scan by formatting your document to highlight what’s most important:  minimizing the amount of text, putting important words or phrases in bold, using larger fonts for important information, using indented lists, and plenty of white space. For example, many investors are most interested in the team and who is the CEO, so they are going to be scanning for that information. Make it easy for them to find.

 

Skimming – Time is the resource in shortest supply and in highest demand. So rather than read, reviewers will skim: pass their eyes lightly and quickly over your pitch deck, executive summary or even email, looking for something that might catch their attention. So that’s your job as a communicator. Stop the skimmers in their tracks! Do it with a stunning graphic, a mind-blowing statistic, a totally novel idea, or a little known but amazing fact. If everything in your document has equal weight reviewers will just skip over the surface and never sink their teeth in. Give them something to chew on!

Summarizing – many, if not most decisions have multiple parties involved. This is especially true with VC firms, where an associate may get entranced with your pitch deck but the actual investment decision will be made by a unanimous vote of the partners. So make it very easy for a reviewer to summarize your document. There is an old saying accredited, probably apocryphally, to Aristotle, Tell them what you will tell them. Tell them. Tell them what you just told themAgain, you are making it very easy for the reviewer by providing a summary that can easily be passed on verbally or excerpted for an email.

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A related tip is the power of three in marketing communications, something I have arrived at by experience, but doing some Googling for this post I find it’s pretty common knowledge. Here’s a great article from Business Insider entitled  Marketers Must Understand The Power Of Three. I believe we are hardwired to be attracted to 3’s – stories have a beginning, a middle, and an end. Read the Business Insider article for a deep dive into the power of three and how it applies to marketing communications. It’s a powerful technique to capture attention in the age of the non-reader.

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And finally, and most obviously, the image has overtaken the word in social media and thanks to SnapChat and Facebook, video will soon replace the image. So for the time being you can get away with using lots of images, but you better learn how to produce, shoot and edit video (and audio), because video is rapidly becoming the replacement for text and graphics. In fact I’m now seeing video replace demos in meetings with founders, as videos rarely, if ever crash – though getting a laptop to work with a video projector still seems to be a black art.