Monetizing relationships...

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One of the paradoxes of marketing and sales is "monetizing relationships."

We typically hate to be sold. The harder the sell, the more we hate it. However, we typically like to buy. Any person who has had an experience of spending their own money knows this. Many of us have been blessed to be able to buy something from someone we found ourselves liking.

This is no accident.

On the other side of that transaction, the sales person has to build trust, rapport, peer-to-peer credibility, some level of personal connection. An emotional connection. A relationship, if you like. That goes triple for the B2B complex sale, where a company is buying big-ticket, high-risk items from another company. (I believe that it's also true in many other types of sales where the stakes are much lower.)

We who are selling stuff want people who are in the market to buy to be confiding their problems to us. Unless they trust us to let us in on those problems and help them solve those problems, nothing is going to get bought. At least not from us.

Why would a buyer trust me [a marketer, sales person, company PR representative, executive leader, etc]? Because he or she believes at some level I am willing and able to act in their interests as well as, and possibly even counter to my own (at least in the short term). There's some human vulnerability going on. They tell me what's really going on, and I tell them what I really can and can't do to address their situation. Because we have a relationship.

Now, in addition to all of this, the sales person is also on the hook to monetize that relationship.

How can I maintain your trust (which implies vulnerability) and still do things that move you toward buying something from my company (which implies control)?

If you've ever wondered why so many startups fail, it's because selling is a lot harder than it looks. Most startups are not run by people who can sell. And sales (including repeat business from happy customers) are what keep companies in business.

If you ever wondered why great sales people make a lot of money, it's because the ability to monetize a relationship is worth a lot of money.

Someone sent me a Seth Godin post, so I will blog about it now.

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The post:

http://sethgodin.typepad.com/seths_blog/2009/04/first-ten-.html

The B2B sale is a relationship sale. What Seth describes is selling into referrals. This is the way most businesses actually grow. Better than 70% of sales come from or through existing customers in many companies and industries.

To scale up in that sales environment, the key is applying a process mentality to figure out what activities further those relationships. What activities can we control that speed the buying decision? What are we doing that unintentionally lengthens the sales cycle? Identify problems. Try to discover root causes. Test ways to improve.

Relationships are relationships - can't standardize them. But human nature is human nature, too. This allows some activities (and not-doing certain activities) to be adopted as standard practices. See also: behavioral finance.


Dumping a lot of volume into a leaky process just creates a bunch of work and chasing after the wind. So, like Seth says, start with small investments. Look for things to try that you can afford to repeat if they work and won't kill you if they don't. Pull back fast from activities that don't give sustainable results - either tweak them and try again, or move on. Find a few small things that seem to help. Do more of those. As repeatable results become evident, begin to add volume to the process inputs.

Buying is irrational...like investing

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Tip: for marketing inspiration, read up on common traps in investment management psychology and behavioral finance. The same emotional wiring kicks in just about any time people buy stuff.

A quick example from both the Miller Heiman world of sales training and the Warren Buffett world of investment management:

Emotional capital.

Just like monetary capital, emotional capital is a finite resource. The more I expend, the more committed I am to my course of action. This can make an obviously bad deal difficult to unwind. It means that the further two (or more) parties go into a dealmaking process, the more either (or all) will be tempted to act against their own interests in order to reach a given outcome.

This is reportedly why Warren Buffett has played a lot of card games in the course of his career. He saves up emotional (and financial) capital for good deals by ignoring most deals as much as possible.

Savvy buyers and savvy sellers walk away as quickly as possible from deals, because they know that this conserves emotional capital. It helps hold down the error rate. We're only human, after all.

Related article

Self indulgent personal statements are not marketing.

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People ask me all the time why I think marketing should be invisible. Here's one of those examples.

Did you see the 2008 Microsoft/Seinfeld ads? (If not, time for a quick trip to youtube.)

This campaign illustrates why many innocent young creatives go into advertising: to get their personal creative statements funded.

Now, the agency sounds reasonably intelligent and businesslike when talking ABOUT the campaign.

But just look at the ads. Pick someone who you think represents their target audience for those ads (say, a colleague in your office or a friend's college-age kid). Ponder the actions the company probably wants the audience to take. Contemplate what Microsoft wants us to believe about their company and products.

After seeing the ads, what do you think Microsoft achieved?

If you answered, "Awareness," who discovered Microsoft's existence through this campaign?

Here's what I think. Either Microsoft has nothing interesting to reveal, which I doubt, or Bogusky (the agency's creative leader) failed to understand Microsoft and their mojo, which I suspect. Perhaps Microsoft could not get behind a clear message strategy. Perhaps Bogusky's people failed to execute.

But I think the agency's responsibility to make the value of a company more visible through the marketing it creates. Or to bow out.

If Microsoft had spent the $30 million on direct response ad testing with niche markets, niche messages, and niche media where they think they have growth potential, would they have come out ahead? Maybe.

To know us is to love us - right?

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Awareness is a common goal of marketing.

The assumption, of course, is to know me is to buy from me. Image advertising. Being funny, memorable, businesslike, serious, whatever we think will help the customer remember us.

You know the textbook example of great awareness/brand marketing? Movie marketing for Snakes on a Plane. It went viral months before opening day. It had incredible word of mouth. Heck, half the movie was designed by the target audience. Prelaunch estimates projected box office earnings in excess of $100M.

The problem, of course, is that awareness did not translate into sales. Actual U.S. box office? $34M. If you account for both production budget and marketing expenses, the franchise broke even at best. A spectacularly successful failure.

That leap of faith between awareness and sales doesn't play well for marketing teams in tough times, either. How does marketing show me the money?

First, here are my assumptions:
- Your company doesn't already have a century-old storied brand.
- You don't have money or time to build one.
- You are under the gun to drive sales this fiscal year.
- You understand your customers well enough to talk to them in a manner they will consider directly and actionably relevant, or if you don't you're willing to roll up your sleeves and figure it you.

If those are your parameters, then the marketing answer, in my view, is two things.

Thing One: Strategic coordination between operations, marketing, and sales.
Someone is driving the conversation internally and externally so that your company is able to make promises it can keep and live up to the promises it does make. This isn't about perfection or even operational excellence. It's about understanding the reality of your operations, having some clue of your customers' mindset and needs, and being able to put your company in a relevant position between the two. If your marketing message makes either your operational delivery team or your customer facing sales people cringe (let alone complain openly), do some more work before you take it to market.

Thing Two: Direct marketing.
Direct marketing teaches us to question anything that (1) can't be measured, and (2) doesn't lead to revenue.

Run campaigns which intend to get a carefully identified set of persons to take specific actions to move through their buying processes. Measure what actually happens. Then tweak your approach based on prospects' behavior and feedback from sales people.

Awareness building tactics that help you gain credibility with your target buyers and influencers can help. But you should be able to draw a line from those awareness tactics to a step in your demand generation process or in your sales cycle, and identify some evidence of lift. Even if it's anecdotal.

The meat of your marketing budget should go into getting buyers and influencers to take concrete, measurable steps toward you, which lead to other measurable steps, which lead eventually to a sale.

Marketing voodoo...the fluff formerly known as collateral...and why we made the logo blue.

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A friend and colleague was recently describing common failings noticed at marketing departments, especially in startups, with a number of companies where he has consulted (not as a marketer).

His first observation:
What marketing VPs do often looks like voodoo to him. And a lot of it looks like a me-too game. "If I pull up our website, and a competitor's website, they sound like the same company. And I can't tell what either company actually does."

His second observation:
When he asks honest questions about the how and why of marketing tactics that are going out the door, he often gets a huffy response.

Now, even a patient professional (in any discipline) can tire of being second guessed within their zone of expertise. But I think my friend is correct in viewing these 2 observations as signs of trouble in a marketing effort. Here's why.

- Even if your strategy has all the validity in the world, if the rest of the company doesn't understand the marketing message, you're in trouble.

The rest of the company doesn't necessarily have to understand why the CIO picked Microsoft or why the COO closed the plant in Guangdong province. (Though it's better if I understand how these visible decisions serve the same larger strategy that my daily chores do.) However, the marketing message is closely tied to the entire company's strategic purpose. We shouldn't all parrot the same canned phrases to describe why customers buy from us. But if we really have no shared ideas about what our customers expect to get from us in exchange for their money and trust...that's going to breed problems in delivery. Marketing messages are greatly handicapped if they are concocted in a vaccuum. They are much more powerful when rooted in past operational results, and in companywide shared beliefs (okay, how about overlapping beliefs?) about customer needs.

- Differentiation isn't what I say it is in my meticulously crafted positioning statements. It is what my customers say it is.

Quite frankly, good line managers and strong sales people know more about the customer than their marketing executives do. They also know more about what the company does and how the sausage gets made. Carefully observe the reaction of your delivery organization and sales people to a big redesign of your website (or other marketing materials). I would argue that any silence, hesitation, question, or concern they express is a red flag.

If they want to know why the logo is blue, well, you may not need the most sophisticated of answers to that. If they think the logo is ugly, it's worth hearing why. If they don't understand your tactics, you can be gracious about others' lack of expertise in your profession. And not everyone has to love your tactics.

But if good people in other parts of the company don't see a connection between what you're telling your customers and what those people think the company is about, then drill down and understand that one.

Even if your campaign tactics and strategic approach are "right", getting questioned about them creates a chance to lead. You're never going to be through building that shared (OK, overlapping) vision of what the customer needs and what we're all supposed to be doing about it.

Respectfully disagreeing with Seth Godin on equity

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Seth Godin just gave some really out of the box advice on how to structure equity in a new company.

It's actually great advice, but I disagree with his claim that his method offers a better way to value the company.

Here's why: just as Seth points out that we don't know what the company's going to be worth in 18 months, we probably don't know what it's going to do, how it's going to make money, what market forces we're going to have to address, nor how we'll address them during the next 18 months.

We have a plan. If we're really smart and sophisticated, we have a Plan B and a Plan C and so on.

But it's even harder to say "here's what this task list will be worth in 18 months" than it is to say "here's what this company is going to be worth in 18 months." Both are equally dependent on the same unknown variables in an uncertain future.

What's really valuable about Seth's advice is the brass-tacks conversations you have to have about expectations and the implementation roadmap if you take his advice. It's a lot easier to dream together than to figure out how to work together. Better to figure that out now, not months from now.

Spending lots of upfront time hashing out the roadmap should make the equity conversation a lot simpler. We should come away from that conversation with a clearer sense of shared vision, what everyone's got to do toward it, and to what extent we trust each other to do what we say.

But I don't think that actually structuring the equity in the manner Seth suggests has any more value than 50/50, 49/51, the % of startup capital each put in, the % of decision responsibility you expect to share, whatever motivates and satisfies your partners and stakeholders.