The Social Media Net

I kind of like the phrase “the social media net.” I doubt that I actually coined it, but I can’t think of exactly where I may have first heard it. Regardless, a net is one of the things that comes to mind when I think of social media marketing – a “fishing” net, not an “Inter” net.

As I’ve said many times before (I do understand that I may not have said it to you, but I have said it a lot to somebody) bad marketing is bad. Unfortunately, I see a lot of bad marketing, especially where social media is concerned. That is understandable. Social media is relatively new, and it changes so rapidly that it’s not easy gain a solid understanding of it before it changes again.

The single biggest mistake I see regarding social media, is in thinking that social media is an end in itself; not really understanding its value and what it can and will do for your company.

First, it’s important to understand that every company has a storefront, either physically or metaphorically. These days, many companies have more than one storefront. If customers come in to your building, that building is a store front of yours. If you have a website and that website is how people buy things from you, that website is a storefront. If people call you to buy, the phone is your store front. Whatever method customers use to buy from you is a storefront.

If you’re a non-profit, and you solicit donations or volunteers, whatever method people use to donate or sign up to volunteer is a storefront for you. Whatever your organization is, think of what it does with the outside world, and how it makes those interactions. That will be your storefront(s).

As a marketing person, your job is to find the right people – those that need what you have to offer and can afford it – and bring them to your storefront. That’s when sales takes over and helps the customer decide if your product is the right one.

That last paragraph contains the critical piece of information that many people miss when using social media in their business. I see a lot of marketeers working really hard to get people to their social media site, which is okay if you follow through and get them to your storefront. They don’t follow through.

They don’t take all of those people on their social media sites and then move them to a storefront. It might be really fun to have a million people visiting your Facebook page or YouTube videos, but it doesn’t help your business if they don’t end up at some place where they can buy from you..

Getting people to Facebook as an end can work for Coca Cola and Taco Bell, because their storefronts are all over the place. You don’t have that luxury. You don’t have your product on the shelf of every grocery store, convenience store and fast food place. If you do, you probably aren’t the engineer entrepreneur that I’m writing this for, so you can stop reading, run to Taco Bell and have a taco and a soda.

Your primary objective needs to be to collect people that are out on social media, and get them to your storefront – most likely that is your website. Think of the social media sites as nets and your website is your fishing boat. (see, I did get back to the metaphor) You’re dragging those nets and pulling the fish into your boat.

A strategy to get people to your Facebook page or Twitter feed is an awesome thing to do. But you also need a strategy for getting them from Facebook and Twitter to your website. If you forget that second part, you’re wasting a lot of time and opportunity.

That doesn’t mean that you shouldn’t put your “follow me” social media links on your website. Doing that helps to bring them back you your storefront after they’ve come and gone. Just remember that’s secondary.

People spend a lot of time on social media. Your marketing objective is to find the people that need what you have and get them to your storefront. They are out there. Cast your net. Use social media to filter out the ones that don’t need what you have and filter in the people that do need what you have. Then get them to your storefront.

Signal to noise ratio

Signal to noise ratio is a pretty important factor in the world of electronics design, especially in Rf and analog design. Strangely enough, it’s also a critical part of marketing.

In many parts of the engineering community, the term “Marketing” essentially has a similar definition as the term “deception.” Point of fact, that is not the definition of the term. But a low signal to noise ratio can make it seem so. Fundamentally, marketing is about getting factual information to people who need it to make an informed decision. Deception is bad marketing.

Just as designing a noisy amp is a lot easier than designing a clean, low noise amp; noisy, unclear and even deceptive marketing is a lot easier than is good marketing. That’s why you see so much bad marketing. It’s easy. But we’re not here for “easy.” We’re here for accurate and important.

Creating high signal to noise ratio marketing doesn’t involve grounding and filters. Well, maybe it does. Just a different type of grounding and filtering. Keep yourself emotionally grounded and filter out what’s not important. It requires an understanding of what is important to your potential customers and the ability to differentiate between that and what’s important to you. If those are the same thing, you are luck, but they’re rarely exactly the same thing.

Hopefully, there is some overlap. If not, you’re likely trying to sell the wrong thing to the wrong people and that’s never a good thing. What you need to look for is overlap, and you need to understand your customers in order to find that overlap.

That may very well be one of the most difficult concepts for an entrepreneur to fully grasp: just because it’s important to you, doesn’t make it important to anyone else.

What you need to look for is overlap between what you do and what your customer needs to know to make an informed decision. That overlap is the key. It’s not about what you want to say. It’s not about telling someone what they want to hear. It’s about the overlap of what’s accurate from you and helpful to them. If it doesn’t help a potential customer understand how it will help them or isn’t accurate, it’s not good marketing.

Why winning in sports might be a lousy template for business success

Sports metaphors are incredibly common in the world of business motivation. Probably even more common than military metaphors. We raise the bar, huddle, put on a full court press, try for the home run, and we use the winning sports team as a template for the winning management team.

At first glance, that makes sense. Team sports require, well, teamwork, as does business. A sports team that plays well together is much stronger than a simple sum of the individuals. That principle holds true in a corporate environment too. A team working well together is more multiplicative than additive. With that being the case, how can I say that sports metaphors are bad news? It comes down to the origin of purpose. It’s about why every one is there; what their foundational motivation is.

Success in team sports require much of the same recipe as does success in business. You need a common purpose. You need an understanding of what each teammate needs. You don’t necessarily need deep knowledge of everyone’s positions and jobs, but you need to know enough to help and understand all of them. Everyone has a place and must fill that place, and none of those places stand alone.

Everyone on a winning sports team is there for one purpose: to end the game with a higher score than the other team. Every member of the great team lives that purpose, and has for most of their life. Many of them have been handling the ball or bat since before they started school. Some as soon as they could sit up as a baby and reach out for the brightly colored round thing coming at them. By the time they reached high school, college, or the pros, they have all been living the same dream for a substantial portion of their life.

By the time a soccer player reaches high school, the serious ones are all thinking about playing college ball, perhaps even with a scholarship. In college, it’s the Olympics, the world cup, and a coveted spot on a pro team. They are all after that exact same goal, and have been since their formative years.

Those new freshman team members have all of the ingredients needed to form a winning team. A great coach can work with those ingredients because all of the individuals come into the team with the same goal. They all live, breath, eat, and sleep that goal. All they need is to have it tied together.

And right there, my friend, is where the metaphor falls flat in the business world. First, if you pick the wrong sport to anchor your story, someone’s going to think: “that’s not a real sport. My sport is the real sport.” Someone else, the clumsy nerd, is going to think: “great more glorification of the hot shot popular kids that made my life miserable back then.”

Your company doesn’t have a homogenous-thinking group of people that have held the same dream since potty training. Great sports teams do. You don’t have the same raw material. What you have is just about the opposite of what a sports coach has to work with. Different ingredients require a different formula. Look at what you’ve got:

  • At the age of six, Aaaa was dreaming of walking on the moon. But then, we stopped going to to moon, so they found a different career.
  • Bbbb mostly played in the mud a lot and drove their parents nuts with all of the laundry and ruined church clothes. Yet, in their head, they were creating giant hydroelectric dams and other massive public works.
  • Cccc wanted to be a great leader of soldiers, protecting the weak and saving the world for democracy.
  • Dddd wanted to be the next Joe Montana and win the Superbowl.
  • Eeee was lost and already starting to dabble in what would become a decade centered around creative ways to abuse drugs and alcohol.
  • Ffff couldn’t think about much more than a future family with happy spouse and kids, cars, a house, and relaxing vacations.
  • At five, Gggg was trading little used toys for slightly better ones with neighbor kids. Then came lemonade stands, paper routes and odd jobs up and down the street. Never any doubt that this one would grow up to be an entrepreneur.
  • Hhhh ran track, played basketball and baseball throughout most of K-12, settling on track in college. After not quite making the Olympic team, they became a fighter pilot and finally ended up in sales because the airlines weren’t hiring at the right time.
  • Iiii just followed the formula – grade school, middle school, high school, college, an MBA, and some lifeless job.

It’s quite unlikely that any of your management team was dreaming about middleware software as a service when they were five.

Unless you’re in one of the few overtly world-changing companies, it’s quite unlikely that even half of your management team is really passionate about the products or services that the company produces and delivers.

They may be passionate about creating a great user experience, but that can be done just about anywhere, as long as there’s enough money in the budget. They may be driven by quality, but that drive can be fulfilled in a lot of different companies.

No. You don’t have that common fundamental purpose so important to the sports team as a starting point. You don’t have a group of people that are driven by the same thing, and you can’t treat them as if they do. You’ve got to find and or build a different purpose, and you’ve got to understand that you may always have a few team members that aren’t motivated by what you really need them to be motivated by.

It’s easy to say that such people should just leave and go elsewhere. Ideally they will, and you’ll replace them with better fits. But, you can’t depend on it. It’s not practical to expect everyone that isn’t spot on with your purpose to quit or be fired. The real world doesn’t work that way.

You need to create a team building strategy that accommodates some crosses of purpose and some unproductive behavior. If your team building strategy requires that everyone come around and see and live by the common vision, it will very likely not live up to your goals.

You’ve got to find commonality in what drives every member of your team. And the purpose you derive from that needs to be robust enough to deal with some level of indifference. It can’t be dependent upon 100% buy-in. Don’t fool yourself into thinking you’ve got it that easy.

What Is A Brand? Really?

According to Webster’s Dictionary, a brand is: “a category of products that are all made by a particular company and all have a particular name.”

That’s true, but that definition’s simplicity harkens back to the days of identifying cattle on the open range. Use in the business world of today has evolved to encompass a far more complex set of meanings. Today “brand” covers so much more than just a pattern burned into thick skin.

Brand, as commonly used in the business world, is the internal imagery and emotion evoked in someone’s mind when they hear a name or see a logo. It’s more than just an identifying mark, it is the identity, the personality, and the definition.

Going back to the Old West metaphor, think about a couple of range hands spotting someone else’s cattle. They see the mark branded into the animals. If they’ve met or heard about the owner, they will have an emotional reaction.

If the cattle belong to Hank, across yonder dry creek, and Hank’s a mean son of a gun that won’t take nothin’ from nobody, the reaction upon seeing the mark might be one of fear. On the other hand, if they belong to the kind and open Miller family, down by the big oak tree – the one with the crooked trunk – the reaction might be warmth and memories of fresh Apple pie and good conversation. That’s the brand: “Hank” = fear at the point of a gun. “Miller” = good times and good food. The mark isn’t the brand. It just represents the brand.

Most companies aspire to have a positive brand, but regardless of aspiration, it is behavior that determines what the outside world thinks of a company. And that’s the given brand: what people outside the company think.

The “given” brand is more important than the aspirational brand. It’s what counts. In other words, it doesn’t really matter what you think; if you don’t act to inspire the brand you want, you won’t have it.

What this means is brand is not just something used in the marketing department. Even if the company doesn’t consider or put effort into the brand, it will still have a brand. Everything you do; everything that anyone sees; it all goes into the brand that outsiders assign to you.

How do you get the brand you want?

Building and nurturing a brand comes from your behavior. That’s why most small companies have a brand that is very much a reflection of the personality of the proprietor. A person usually acts in a small business as they are in person.

It gets more complex when employees are involved. Unless all of the employees share the same personality traits, the company brand will devolve from that of the owner. It will become a conglomerate of the most prominent personality traits of all employees.

A sales rep that’s perpetually grumpy, and vocal about their grumpiness, can cause the company to be given “grumpy” as a brand attribute. A half dozen polite, but quiet sales reps may not be able to cancel out one loud and grumpy rep.

A strong, positive, marketing campaign can start to create the image of a helpful company, but it can only start the process. The company, through its behavior, will outweigh anything that’s in print. That weight can be either positive or negative, based on behavior.

What to Write

Marketing should be easy. It should be just about the easiest thing you can do. Marketing is just getting the word out. Right? That can’t be too difficult.

Yes, marketing is just getting the word out. The big challenge, though, comes in deciding which words to get out. In the marketing world, we call this “messaging”, and like so many things in Marketing, it’s really more dependent on who will be reading it than who is writing it.

In marketing, what you want to say is less important than what a customer cares about. That doesn’t mean say what the customer wants to hear, regardless of truth. That’s bad marketing.

No, it means pull out the parts of the real story that a customer will care about, and toss the rest aside for now. No matter how important a fact is to you, if it’s not important to your audience, it’s simply not relevant. If it won’t help them make an intelligent purchasing decision, it’s not important right now. It will just get in the way.

It is possible to find examples that contradict this advice, but they generally involve significant amounts of money. One of the best goes back to the “Intel inside” advertising campaign. Before Intel started that campaign, few people outside of the tech world knew what a CPU is, what the difference is between CPUs, nor did they really care. Intel spent enough money to make people care. You don’t have that kind of money.

Picking words for marketing is actually quite closely related to product design. Product design is about learning what’s important to the person using your product. Messaging is about learning what elements of what your product does are important to the people buying your product; what aspects of you or your product will make a customer comfortable and confident enough to buy it.

As an engineer, you know that a muffler belt won’t work without a good solid polysided freem modulator. You know that your freem modulator is more polysided than any other on the market. It seems quite logical that a customer would need to know that. Right?

Some will. Some won’t. Understanding which camp your customers fall into can be the difference between growing your business, and looking for a job working for someone else.

If the minimum acceptable working polisidedness is 10, and yours is 20, should you focus on the fact that yours is 20, while your competitors is 17? If that’s what the majority of your customers care about, then, yes.

However, it’s entirely possible that your customers just care that polisideness is greater than 10, and beyond that, they care about something else. Given that, you may find that you over built, and would have been better off with 15 polished polisides instead of 17 or 20 unpolished polisides.

That’s what messaging is about; the cross over of what your product does and what’s important to your customers. Find that and you will know what to write when trying to sell your product.

What’s Next for Content Marketing?

I’ve been engaging in content marketing for more than a decade. I’ve used content marketing to take an obscure, niche, commodity business, that no one wanted to write about, and turn it into a branded service that’s known as a leader in its industry.

Back in 2006, no one in the electronics industry cared about manufacturing. It was something that stood between design and selling. It was a wall, a black hole, that sucked up time and money, and eventually, hopefully, ended up spitting out products.

Trying to get press releases, case studies, and other material published, was a non-starter. I was told, many times, that: “our readers aren’t interested in manufacturing”, or: “we don’t publish anything about manufacturing.” Granted, I was talking to electronics engineering publications, not manufacturing or purchasing publications, but I had my reasons.

Prior to that time, manufacturing had simply been one small part of the supply chain. It was a purchasing and manufacturing issue and it was bought and sold through that supply chain. It seemed to make sense to promote my company, Screaming Circuits, through the supply chain media channel.

It would have made sense, except we were breaking the supply chain mold. We were selling direct to electronics engineers. We were selling a service, that would, years later, be called personal, or on-demand manufacturing. We were turning the small volume manufacturing world on its head, and the people buying from us were not readers of supply chain media.

Just turning to a different set of media, as I quickly learned, wasn’t enough to sell manufacturing to engineers. I had to change what I presented to the media. I also had to create my own publishing channel, until the engineering media world caught up.

We published easy to digest, short subject, technical content in our blog. We pushed it through our customer newsletter. We linked to it from message boards and social media. Eventually, we started turning it into publishable articles, and made our way into the mainstream engineering media world.

Over the years, we created a library of credible, valuable content, that’s been used and published by dozens of organizations – partners, and media – and has been sought out by other industry players. Media and industry leading companies come to us for content, advice, solutions, and marketing help. We’ve been referred to, by media industry experts, as “journalism.”

And, most important for a for-profit corporation, we’ve outgrown the manufacturing industry in the country. We’ve grown in absolute terms, every year – except the one really bad recession year, and we’d caught up and surpassed our pre-recession record in the following year. I’d have to say that content marketing at Screaming Circuits has been an unqualified success.

So, what’s next? More content marketing? Something different?

I wouldn’t use the phrase: “out with the old, and in with the new”, but there will be an element of that in the marketing universe. Content marketing hasn’t run its course, though it is quite long in the teeth for some of us early adopters. It won’t go away, but it does have to change and adapt.

For Screaming Circuits, the company blog has always been the anchor. That blog will stay, but I don’t know that I’d call it an anchor anymore. Content is used differently than it was a decade ago, and it needs ways to stay fresh and accessible. A blog is still a great thing, but its structure falls down when it holds 700 plus articles that don’t go out of date. It’s a vehicle for presenting content, but not a good one for reusing content.

Public relations, the granddaddy of content marketing was largely a one way street: information went out. Content marketing turned that into a multi-path, two way boulevard. The next derivative turns it into an interconnected world, with content being as much a product as is the core of what the company sells.

The content becomes a core competence of the company, and becomes a major part of the value proposition. That’s what follows content marketing. Content merges with the core of who and what the company is.

Content marketing doesn’t go away. It just becomes something greater, and more valuable to company and customer alike. If those of us who developed and matured content marketing are up to the task, the time is now.

What The Millennials Think They Understand

I recently read an article on Inc. online, titled “5 Traits Older Generations Don’t Understand About Millennials (According to a Millennial)”, by Nicolas Cole. You can find it here.

It’s a good read, although, it may raise your blood pressure a bit. Read it. What I have to say may not make a lot of sense without his article as a prerequisite. Read it and cut him some slack. We were all there once.

What cracks me up the most is that this could have been written 10 years ago, 20, or 30… When I was young, we were thought to be the narcissistic self centered arrogant punks full of ourselves. The old folks thought us to be useless and lazy and wanted us to calm down and wait and see – we’d understand in a few years.

We didn’t. We rolled over that generation and changed the world. They didn’t know what hit them.

And this millennial generation didn’t invent the vision quest, the “finding myself” by traveling the world. We wanted to travel and see it all. We didn’t want to accept the status quo and settle into a single career, falling asleep until retirement. And we didn’t. The millennials have access to everything – the world at their fingertips because my generation said about life and the world: “It’s not good enough – we can make it better.” And we did.

Foregoing the American dream? The so called “American Dream” was not a white picket fence to us. The American dream for us equaled possibility. It meant that we didn’t have to settle into what we thought the old world expected. We could make the dream what we wanted it to be. And we did.

Our American dreams are the reality of the Internet, your smart phone, global connectivity, supercomputers, space probes, robots on mars – those were our American dream, and, as you can see, we didn’t forgo it, we made it happen.

Our American dream was equality and fairness. Not a dream limited to a few or to just those like us. This has been the hardest fight, yet the most important. It’s far from done, but we were not about to accept any dream that ruled people out. The house at 927 W. Drury Lane only existed for the privileged class, so we burned it down.

Oh, did we ever want – and find or make – something of our own! The on-fire startup was born in my generation. The rejection of the establishment for creations of our own was a solid theme for us. We rejected, We built our own, and we never looked back. We recreated business, media, entertainment. We wanted our own, and we made our own.

that little phone in your pocket that allows you to do so much; we made that

Tackling brand new industries… You don’t know the half of it. We destroyed old industries. Not just industries, we smashed the whole economy into bits and built our own out of the shreds.

Again, that little phone in your pocket that allows you to do so much; we made that. We ripped the cord out of the wall and remade communications. We thought it up. We made the infrastructure that enables it and we built it. Then we kept rebuilding it and making it better.

The gaming company that hired you – they’re only here for you because my generation rejected the old and created your world for you. We liked board games, but they weren’t enough for us. We liked sports and activities, but they weren’t enough for us. Not only did we create digital versions of it all, we reinvented it in the physical world too.

And, don’t think you’re special because you’ve done all of your great work in the shadow of economic demise, terrorism, and global competition. Even we didn’t invent that one. But we certainly lived it. When I was young, the American Century was over. We were getting our clock cleaned by Asia and Europe. Malaise was the watchword of the day.

The Soviet Union was putting weaponized smallpox into ICBMs to finish off anything their nukes missed. Western Europe was expecting the tanks to roll in at any moment. We grew up always 30 minutes from a fiery obliteration. Hang that over your head. It nearly happened, by accident or by design, more times than I’d like to count. I’ll take the world of now over what we had, any day.

So, you also think you’re special and different because you’re the modern-day disrupters? You d*** well better be. That self-confidence you speak of – you’d better have it and you’d better have it in quantity. If you don’t have a wanderlust, a disquiet, and need for more, that will make my generation’s version of the same look small, than you are letting us and yourselves down.

You see things different than my generation does? I hope so. You are obligated to. You owe it to us, yourself, and the generations that follow to see things differently. My generation didn’t create all of this stuff for you to rest on our laurels. We built this new world so that our children and their children can take it to places we can’t even imagine. Don’t waste what we built. There’s too much that still needs to be done.

And one final thing I ask of you; when your kids say something similar about themselves vs. your generation, as you have in this article (and they will), don’t get defensive. Tell them that it’s their job to think different and to never be satisfied with the way things are. It was my generation’s job, it’s yours now, and it will be theirs soon. Tell them to never back down.

Communicating Up and Sideways

A good leader should communicate in the language of his or her subordinates. A good leader should be the one to adjust dialect and language. This is well accepted wisdom. The problem is that “should” is a rather meaningless word. “Should” doesn’t require, nor does it instruct. “Should” implies obligation, but doesn’t imply action or consequence of not taking action.

Expecting a superior or colleague to speak in your language only ensures that you “should” be able to communicate, not that you will. Relying on “should” is a lot like relying on luck. You give up control when you rely on luck or “should.” It’s fine if you don’t care, but not if you do.

It shouldn’t be a surprise that effective communication is a vital part of surviving and advancing in the business world. Without it, no one knows what you do or what your worth is to them.

In this context, “shouldn’t” is an appropriate word. The usage here is that the argument is common enough knowledge that it’s reasonable to assume that a reasonable person would agree. It doesn’t imply, nor need to imply any action or consequence.

This isn’t an article about “managing your boss. I’ve seen enough of those, and have always thought them rather presumptuous. “Managing your boss” is really more manipulation and exploitation than it is about managing, and I’m not at all a fan of manipulation. What you can do, and will benefit from, though, is to manage the communications with your boss and co-workers.

It’s great if you have a boss that knows how to communicate well. Not everyone does, and even for those that do, it can be pretty helpful to share the job of effectively communicating.

One of the easiest illustrations is in the contrast between a visual person and a numbers person. The numbers person needs to see metrics in spreadsheet or table form. The visual person needs the same information in chart and graph format. Trying to get one to accept the other often results in little or no actual communication and lots of frustration.

If your boss is a visual person, and you hand in a table with all of the data, plus rows and columns of only distantly related numbers, they will have a hard time with it. Their brain wants to be able see structures at a glance. Instead, you’ve given them a jumbled mess of indistinguishable black and white hieroglyphs.

On the other side, if you give your numbers-person boss a nice bar chart, they will see a bunch of fluffy colors that do little more than obscure the details. They need to see not only the numbers they’re interested, but also the data behind the numbers.

But shouldn’t a good leader be the one adjusting language, you ask? Again, I’ll compare the word “shouldn’t” in this context to luck.

Good leaders do adjust their language, and listen carefully. They are putting in the effort, and what you are trying to say is (presumably) important. Why would you not do as much as you can to complement their effort. Good leaders have also hired you, in part, for your communications skills. Assuming the leader will do the majority of the work is doing them a disservice and is a failure to live up to your commitment as an employee.

The same holds when dealing with colleagues you don’t report to. It may seem like you’re partly doing their job if you adjust your communication to fit their style, but if your message is important enough to give, it’s important enough to justify the extra work toward clarity for your recipient. Ideally both parties are doing it so that misses by one will be more likely to be covered by the other.

A good example would be in the use of acronyms and jargon with (or as) a new coworker. Communications problems happen quite often when one person has a background from a large, tightly structured company, and the other is from a smaller, more cowboy like, company.

Jane joins a small start-up company from a large multi-national corporation. Her former company spent a lot of time studying lean manufacturing, the Toyota Production System, and other process improvement systems. Bob at the small company doesn’t have the same language.

Jane is aghast when she suggests “Poka-yoking” a process and Bob doesn’t understand her. She drops her jaw and wonders what kind of a mess she got herself into when she took the job. She’s surrounded by bozos that don’t know the most basic of business processes.

Poka-yoke is a term used in the Toyota Production System. (Wikipedia entry here) It sounds like a rather exotic process, but it just means to make a product or system mistake proof. If a plug would damage a piece of equipment when plugged in backwards, key the plug so it can’t be plugged in backwards. Just design in some mistake proofing. It’s as simple as that.

In this scenario, it turns out that Bob is a brilliant user experience designer and considers mistake proofing to be just about the most important aspect of a design. Jane and Bob are on the same page; they both strongly believe in mistake proofing products. However, since Jane didn’t take into consideration the possibility that Bob might not have been exposed to that one specific set of business terms, she feels he must be incompetent. Both Jane and Bob would be well served to accommodate the language of the other.

I’ve found, over my career, that there are an astounding number of terminology differences between different corporate cultures. There are terms that have different meaning altogether, and there are different terms used to describe the same thing. Even the basics like “margin” can be used differently in different organizations.

Jargon and acronyms are okay, as long as you never assume that the person you’re communicating with has the same jargon dictionary in their head as you do.

The Crowdfunding Pricing Paradox

Marketing for non-marketeers, lesson 6

I’ve haunted the working world for quite a while and have found that more often than not, common business workings are over complicated. I doubt that it’s intentional in most cases; some of the tasks and concepts we business folks deal with just don’t make a lot of sense from the surface viewpoint, even if they do under the hood.

Crowdfunding hasn’t helped much to relieve the lack of clarity. It’s made the inside of the process more accessible, but hasn’t made it any more clear. From what I see, that’s why a fairly large number of seemingly good crowdfunded projects either fail to get funded, or “succeed”, but don’t turn into a viable business.

Not long ago, I decided to take a closer look, and paired up with a friend to run a Kickstarter campaign. We did it twice for the same product. The first time failed, only reaching about 30% of the funding goal. The second succeeded, bringing in nearly twice the funding goal. What I discovered is that a crowdfunded business is not terribly different from any other business. The funding rules, and the order of things, or course differ, but the “business” is still just a business.

Profitability models work different at different volumes

Our first attempt with the Kickstarter garnered more dollars: $4,224, from 78 backers vs. $3,867 from 98 backers in the second attempt. But, the first one was overpriced and over ambitious. We had set a funding goal of $14,000. The second time, we lowered prices and lowered the goal to $2,000.

I’ll use a rounded example to illustrate why the $3,867 wasn’t as much a payout as it might seem. The numbers are from a hypothetical example, but are more than accurate enough for the illustration. We’ll be looking at a small electronic device.

At a targeted sales number of 100 units, the total cost of parts and packaging is $15.00 each. You can hand build the 100 over a few weekends, so you call that a zero manufacturing cost. Shipping costs you $3.00, and you include it in the selling price. Similar products sell for $25.00, so that’s what you set the price at. The crowdfunding goal is $2,500. A successful campaign brings in $2500, less $1500 in parts, less $300 postage, giving you $700.00 profit after all is said and done. Except, the funding website will take 10% of your $2,500, leaving you with $450.00.

If you over fund with 200 backers, receiving $5,000, you’ll still be in decent shape. Jumping from quantity 100 to 200 probably isn’t enough of of an increase in volume to get more than a tiny reduction in parts cost, and shipping will still be $3.00. It may be a stretch, but you can still hand build the 200 units, maybe with the help of a friend or two. $5,000 funding, less 10% fees, less $3,000 in parts, less $600 in shipping equals $900. You took your helper friend out for pizza and beer after, for $50.00. The $850.00 left starts to feel like real money.

In another scenario, your device ends up really popular and sells 1,000, for a funding amount of $25,000; less 10% fees, or $22,500. Parts costs drop in half. Shipping does not. You see that nice “profit” number, $12,000, and get excited. But… You don’t have enough friends (or tolerance among friends) to hand build 1,000 units. It’s simply not practical.

Scaling up doesn’t always make it less expensive

In the US, you can find a manufacturer that will assemble the boards for $10.00 each. To avoid handling $7,500 worth of parts, you have the manufacturer purchase them, for an added 10% markup. Your $12,000 drops by $750 for the parts markup, and $10,000 for the manufacturing cost, leaving $1,250. Your buddy helps to tape boxes, place address labels, and carry boxes to the post office, so you still pay $50.00 for pizza and beer. 1,000 boxes is a lot, so it’s going to cost you $100 for two dinners of pizza and beer.

The $1,150 is nothing to shake a stick at, but really? You sold ten times what you expected, and didn’t quite make two and a half times the cash profit?

Still, it was a successful Kickstarter. It was wildly popular, so you’ve got a viable business. Right? Well, with $1,150, you can’t even buy enough parts to build your original 100 target, let alone enough to get good volume discounts. And without the Kickstarter hype, you’ll have to pay to market the product. If you build 25 at a time, the parts cost goes up to $20.00, shipping still costs $3.00. You don’t have to pay to have it built, or any of those fees off the top, so you earn $2.00 for each one of those 25 that you sell.

That’s not enough money to build a website or do any advertizing. Fortunately, there’s Tindie, a web market place designed for post-crowdfunding products like yours. They have a very reasonable fee structure, only charging 5%. That’s $1.25, leaving you with $0.75 profit per board.

If you look for an offshore manufacturer, you might be able to drop the build cost to $5.00. That immediately adds $5,000 to your bottom line. You will, however need to have the manufacturers build a small pilot run to makes sure it will be built correctly, for around $500.00. You can add nearly a month to the fulfillment time for this.

Provided it all works out, you’ll want to up the quantity by 20 – 30% to make sure you get enough working boards. 80% would not be an unheard of yield at the cheap offshore manufacturers. An extra 25% would run you $3,125. You’ll also need to 100% test the boards, or develop a test program at the manufacturer, taking more time and money. Build, test, and shipping will add another month. Now you’re up to about $2,500, with two extra months to the delivery time. Don’t forget the 30% that will go to taxes. You’re left with $1,700.00. Nice money, but probably not so much when you add up the time involved.

These numbers are not close enough to copy, but are close enough to use as a case study illustrating that it can be pretty easy to build a product with crowdfunding. Turning the product into a business is a different story. It is possible to build a business out of a crowdfunding campaign. It’s just not much easier than it is to build a business without it.

I’ll follow this up another day with some thoughts on getting closer to a viable business after the campaign.

Stage 3 Marketing

Marketing for non-marketeers, lesson 5

As an engineer entering the land of entrepreneurship, you know (over simplification warning) design can be split into two philosophies: hack & patch, or engineer it. I suspect that all but lazy people would prefer the “engineer it” method over “hack & patch.” Unfortunately, we aren’t’ always given enough time or resources to do it right, which leads to the common expression: “Never time to do it right, but always time to do it over.”

A similar concept applies in marketing; except that if you do a rush job on a brochure, no one gets electrocuted. Much less is at stake, and sometimes the “hack & patch”, or “rush job” is more appropriate. With marketing, you can still get by with a rush job if that’s all the time you have. You just have to do it properly. In fact, early on in your entrepreneurship journey, you’re usually better off putting the majority of effort into getting your product right, and only the minimum effective into marketing. Shoot for the minimum effective point in your marketing and put the rest of your resources into the product.

Minimum effective marketing does not equal “ugly” (although, it might very well be). It means, even though you’d love great graphic design, what you need, is simply a clear, accurate message. The message is always the most important part of marketing, and it can stand on its own. A design without the message, however, can not.

Keep in mind that if you’re a well-funded company, you’ll have people to do the marketing for you. That’s not what I’m talking about. This is for the shoestring engineer trying to get a business going. As the entrepreneur, you have three stages of marketing to concern yourself with.

Stage zero marketing

A count typically starts at zero in the digital world, but stage zero marketing is no marketing at all. Don’t go here. You have to do some or no one will know about your product.

Stage one marketing

This is the most common starting place for a new small venture. It can be done wrong, or it can be done right. Please do it right. Done right, it’s clear and concise. It’s easy to read and understand.

In the print world, stage one materials are simple typed information on a page. In the digital world, stage one is a template-based website, simple posts on Twitter, Facebook, and/or LinkedIn, and a few photos or illustrations. The photos aren’t overly cluttered. It’s all simple, inexpensive, easy to produce, and gets the message across. Form isn’t or primary importance. Your only criteria on the form is that it can’t be so poor that it gets in the way of function. If stage one is all you’ve got the time for, go for it. No need to be clever. Just be clear, and don’t try to push too much.

What you want to say isn’t important. What is important is what your potential customers need to know in order to make an informed decision. This is not the time to be in love with yourself. Think about what would be important to a customer and focus on communicating that.

Stage two marketing

You’re a little further along and want to present a better image, so you invest in some layout, either in house, or contracted. Stage two materials are still fairly simple and very clear. Efforts toward making it nice just enhance the message. Form does help, to the extent that it makes the message more readable and more approachable. Polish is there to enhance, not clutter.

On the web, you’ve got a decent layout, with information divided up into bite size pieces, and well organized. The imagery fits what you are trying to do, and can be related to by your customers. You’ll be more active in the appropriate social media and will be building a following.

Stage three marketing

This is where you decide to say: “We’ve arrived!” You’ve got funding, or have hit a revenue threshold, and want to show the world that you’re somebody. You’ve created a world beater and it needs to be dressed like one. It’s time for the BMW and the Armani suit. You’ve earned the splash and flash and anyone who says otherwise just doesn’t get it.

Right? Anyone? Anyone?

I speak from experience; almost every startup gets to this point, and it’s easy to spot. In the print world, it comes in 8 x 10” brochures, extra thick paper, high gloss or metallic ink. On the web, it’s elaborate FLASH animation, high production value videos, and a lot of “look at me” messaging. The problem with stage three, is that the urge to stand out and be clever overrides the instinct to actually communicate.

I’ve seen numerous examples of stage three material over the years. They are all beautiful, and they all communicate virtually nothing about what is being sold and why anyone should care. Stage three is also far more expensive than it needs to be. It’s usually so expensive, that it has to be rationed out. This is the type of material that give marketing a bad name.

Stage four marketing

If you’re wise and care about sales and profit, you’ll skip over stage three and jump here, to stage four. Stage four is only a bit more elaborate than stage two. Again, form is only important to the extent that it helps the message. Stage four materials are attractive. They’re clear, and convey a message of value. Prospects and customers feel connected to what you’re selling and can easily find the information they need.

Appearance is important. That’s why cars come in more than one color, but appearance is always secondary to communication. If anything you do in marketing does not help potential customers understand you and your product, toss it.


One two three four, who are we marketing for?