Can your Management Team pass the Financial Literacy Test?

February 4, 2011 By 1 Comment

The CMO once made a strong statement that one of the requirements to be an entrepreneur, at least a good one, is to have written a business plan. I am not talking about the back of the napkin strategy, but rather a true Business Plan. The purpose is this exercise is not to show the world that one can write a long document but rather it shows the readers whether the writer truly understands the entire business from vision to the model to research to marketing strategy to the management team to operations to sales and finances and funding.

Before an entrepreneur can write a great business plan, they first must be financially literate. Are Your People Financially Literate? According to the article, “Asked to take a basic financial-literacy exam—a test that any CEO or junior finance person should easily ace—a representative sample of U.S. managers from C-level executives to supervisors scored an average of only 38%. A majority were unable to distinguish profit from cash. Many didn’t know the difference between an income statement and a balance sheet. About 70% couldn’t pick the correct definition of “free cash flow,” now the measure of choice for many Wall Street investors.”

I hope that this scares the “#$%&” out of you. Do you know who is coming into your business to help you grow? Hey CEO/Founder, you are off the hook, you do not have to be the expert on finance, but I guarantee that you have a strong sense of financial literacy (especially if you funded the business out of your own pocket). If this is not a core competency of yours, your team better have an even stronger understanding of finance.

I discussed Why Entrepreneurs Fail before. They have No Skin in the Game. Based on this new research, maybe you should ask your management team to put skin in the game. Maybe they will understand how money flows through the business when it is their own money on the line.

Do you agree with me? We put our money where our mouth is with our clients. Do you? Financial literacy is not a nice to have, it is a must have, especially when growth is on the line.

“Accounting is the language of business, and you have to learn it like a language. You can’t be comfortable in the country if you aren’t comfortable with the language. To be successful at business, you have to understand the underlying financial values of the business.” Warren Buffett

CAN YOU PASS IT? I met the team at FINANCE DOG who created the financial literacy test to implement their services in my company. I now make it a requirement that my management team(s) must pass this.

The Chief Marketing Outsider and Financially Literate

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , ,

10 Critical Marketing Metrics Every Entrepreneur Should Measure NOW

February 4, 2011 By Leave a Comment

Carpenters, the good ones anyway, have a saying: “Measure once, cut twice. Measure twice, cut once.”

The notion being it’s far less expensive to pull the measuring tape out a second time than to perpetually cut wood to the wrong size and have it go to waste.

When it comes to metrics, marketers and entrepreneurs —especially in startup, growth and mid-market companies—it seems, don’t have a saying. And that’s a problem, because many of them either don’t measure their marketing efforts or worse, they measure the wrong things altogether.

The Metric System (for marketers, that is)

Not to be outdone, engineers, all kinds, have a saying too: “If you can measure it, you can improve it.” It’s no less true in marketing.

But before you take out your yardstick, be sure you know:

  • What your focus is, what drives your organizational libido
  • What your value proposition is—those unique qualities about your product or service people are willing to pay for over and over again at a profitable price that is unique in the market place
  • Who the right customer is and how to best satisfy their needs
  • What the right business drivers—the leading indicators for revenue growth—are

For each new product, create a dashboard indicating expected annual revenues and their timing; revenue assumptions such as success and failure rates; assumed pricing; length of time customers will stay; and number of repeat purchases.

Be sure to make a detailed review of the marketing skills your company needs, its inventory of talent, and the recruitment and development plans that will address any gaps in the personnel pipeline.

Chief Metrics Officer Too

Think you’ve got the right metrics? They’re different for every business model and every industry, but here are 10 we think are the most over looked, undervalued, or misunderstood metrics many entrepreneurs and management teams miss:

  1. How many of your most profitable clients and products can you identify?
  2. How much does it cost to acquire new clients?
  3. How consistently can you define your value proposition?
  4. What percentage of your management team is aligned toward the same goals, measurements, and key leading indicators (those indicators that predict and control future revenues/profits)?
  5. How quickly can your leadership team respond to change?
  6. How large can you scale your value proposition to earn profits at higher volumes?
  7. How good are your financial forecasts (Hint: You should be aiming for +/-10% of net income)
  8. How much of the capital you need to fund future growth do you have?
  9. How much of your capital is invested effectively to maximize profits?
  10. How complete is your plan to battle your greatest risk?

Shakespeare said, “To market without metrics is to market without…” Well, truthfully, Shakespeare didn’t say anything about marketing without metrics, but he did pen Measure for Measure and he had plenty to say about wise men and fools.

Have we overlooked any metrics you’ve used as part of your marketing strategy to successfully grow your business? Share, please.

ps – if you are going to say ROI, please be specific. This may be the most overused, misunderstood and miscalculated metric we have seen.

Filed Under: Marketing Strategy Tagged With: , ,

The CMO’s Role in Evaluating Mergers & Acquisitions

February 4, 2011 By Leave a Comment

Dear Board, CEO, Founder and Chief Marketing Officer,

What role does your CMO play in evaluating M&A decisions? I was not surprised to read that the M&A market for 2010 and expected for 2011 is being lead by “Strategic Buyers”. A strategic buyer is a company that is ultimately looking to grow its business and has come to the conclusion that it is cheaper to purchase/merge than it is to do it oneself or outsource. In your organization, is your CFO or CMO leading the charge on determining your growth strategy?

According to the article, “Although the M&A market has been subdued in 2010, the author has seen strategic buyers pay strong prices for carefully considered acquisitions. “In addition to the distressed deals, there have been acquisitions by strategics who are looking for niche, highly synergistic businesses…” he says. “These corporate buyers are looking to buy a technology to leapfrog their competitors or add a product line that will make them more competitive.”

A CMO has 3 roles in an M&A transaction that leads to growth:

  1. Front-End Needs Analysis
  2. Culture Fit and Strategy Alignment
  3. Operational Analysis

Front-End Needs Analysis: A CMO better be leading the charge on the front end to determine IF a company should build, buy or outsource BEFORE the CFO, Board and Management Team decides to merge or acquire. Those companies sitting on cash that want to take advantage of this market can choose to invest it to improve the operations and/or replace old assets (increase efficiency), invest it in internal growth (the marketing budget), or invest it in M&A activities. The CMO must be working closely with all parties to communicate to the management team, CFO and Board that the company needs to look outside the company for strategic growth BEFORE there is an opportunity.

Culture Fit and Strategy Alignment: A CMO also has the responsibility to protect the culture and company’s focus by making sure an M&A transaction is inline with the vision and future plans of the company (not a one off hail mary) and the cultures are a fit. Otherwise, the “good deal” becomes the pit of despair.

Operational Analysis: Finally, the CMO must understand and evaluate whether the operations can improve as a combined entity. Throwing an M&A transaction over the wall to the operations team is not fair play. In fact, in some organizations, the CMO’s team is responsible for evaluating and modeling the true costs of implementing an organization into the current company. Whether it is the marketing team, finance team or operations, the marketing executive must be willing to sign off that the transaction will drive the expected growth, drive the expected profitability and drive the expected cash.

What do you think? And why is M&A a CFO discussion and rarely finds itself into the marketing trade publications?

Are you in the Pit of Depair? Tell us your war stories.

Filed Under: Marketing Strategy Tagged With: , ,

The Big Bertha Myth

February 4, 2011 By Leave a Comment

Read this blog and I promise that your golf game will improve…

Welcome to 2011! As I sit in the freezing cold, I crave being on the golf course. It occurred to me that the Social Media craze reminds me of the golf technology revolution. When the new metal driver came out and then the revolutionary Big Bertha Driver by Callaway appeared, Golf changed forever. But, did it actually make golfers better? More specifically, did golfers’ scores go down?

I assume that the new technologies did increase people’s drives off of the tee, (it extended reach), but did it lower scores? 

I wanted to pass along an interesting article about the top 10 B2B (Business to Business) Marketing Trends. Six of the top Ten revolve around social media. I will let you make your own conclusions from this article. The author does a great job of trying to explain the myths and expectations from it.  Social Media reminds me of Golf. There is a lot of hype and talks of Social Media saving strokes (meaning… at the end of the day increasing companies revenue and profitability and most importantly free cash flow), but does it?

The difference between the #1 PGA TOUR player in the world and the one who does not get invited back the next year is less than 2%. In 2007, the #1 PGA TOUR player in the world, Tiger Woods, stroke average per 18 holes was 67.79. The last player to make the cutoff, #120 Kent Jones, stroke average was 71.08. Less than 2% (3 Strokes) cost Kent Jones over $10.1M in earnings. The evidence suggests that we CANNOT leave any strokes out there.

BUT…does Social Media add or subtract strokes? Let’s look at the best golfers in the world and ask the same questions. Does new equipment and new tricks (LinkedIn, oversized clubs, blogs, tricky putters, facebook, better golf balls, SEO) lower golf scores?

Arguably, the greatest golf championship in the world is the Masters. Reviewing the scores that won the Masters over the past 40+ years tells an interesting story:

  • In 1964 – Arnold Palmer won by taking 276 strokes
  • In 1965 – Jack Nicklaus won by taking 271 strokes
  • Between 1965 – 2008 – the average winning score was 279
  • In 2008 – Trevor Immelman won by taking 280 strokes*
  • In 2009 – Angel Cabrera won by taking 276 strokes*

The reality is that to WIN, a golfer and a company must practice great marketing strategy. New clubs and new tactics just do not pay off by themselves.

DO YOU AGREE?

* Besides Ray Floyd that matched 271 in 1976, no one else even came close to matching 271 until Tiger Woods shot a 270 in 1997. In all fairness, in 2001, Augusta National increased the distance of the course from 6,925 yards to 7,290 in 2002 and then 7,445 in 2006. What happened after the change? The scores went up. One might actually make an argument that PGA TOUR players skill went down (PGA TOUR players today do not use the longer irons that were absolutely necessary just a few years ago to reach the greens).

I promised that I would improve your game. The numbers don’t lie…

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: ,

Culture as Important as Cash Flow, Revenue, Customers?

February 4, 2011 By Leave a Comment

Marcie Zlotnik, Co-Founder, Chairman and CEO of Startex Power, opened up her keynote speech this at a conference I attended with the words “Culture is as important as Cash Flow, Revenue and Customers.” She caught my attention.

Where is the evidence that Culture truly is as important as a business and marketing strategy as driving cash flow, revenues and more and happy customers?

In Marcie’s case, Startex Power has received the J.D. Powers award for Residential electricity in Texas, Houston Business Journal Top 10 Best Places to Work and distinction as one of the fastest growing private companies. She credits her success and the company’s success to the strategy of building a culture that is INTENTIONAL, MEASURED and CONSTANTLY EVOLVING. She ended her speech with a saying, “a satisfied employee pays dividends above and beyond customer service.”

Here are a few others Champions of Culture that have also found success in focusing on building, maintaining and growing their culture:

  • Patagonia – Founder Yvon Chouinard built a company that has built a culture of building the best products, causing no unnecessary harm, and using business to inspire and implement solutions to the environmental crisis. This not only happens to be their mission statement, it’s built into the fabric of everything they do including their people. What are the results? In this economy, Patagonia is having the best year they have ever had for the second year in a row.
  • Whole Foods – John Mackey states that there are those companies and underlying leaders that subscribe, live and continually walk in a conscious capital environment from the beginning. He uses the word “intrinsic”. Great word. These are the leaders that believe that the purpose of business is more important than the profits of business. Hiring employees to fuel a purpose (vs. lure of profits as the end-game) requires a powerful and consistent culture. When I walk into any Whole Foods across this country, I find a consistent and harmonious theme that the people of Whole Foods are cut from the same mold. When I spoke to John, he told me that culture makes good business sense, look at his profits.

What do you think? Do you believe this is true or just Culture Washing? Some marketers would like to say that all of them practice great “branding”, but what does this really mean? We will discuss this and more in future barks. Stay tuned.

Filed Under: Marketing Strategy Tagged With: , ,

Strategic Pricing Exercise with Wild Turkey

February 3, 2011 By Leave a Comment

My father was an entrepreneur and executive that built an IT services enterprise. He drove a van. Then he converted to one of the original mini-vans. I was embarrassed. My friend’s parents drove cool vehicles: Suburbans, station wagons with 3rd seats facing backwards, anything but a mini-van (& it was puke brown). In my friend’s station wagon, we used to make faces and “kept up relations” with the cars behind us back then. I wonder if our generation started the road rage epidemic? 

I remember my father driving to his offices throughout Texas (Yes, in the Mini). Then one day, Southwest Airlines changed his travel habits. My father began to fly. He also began to ONLY travel using Southwest Airlines to all of his offices located throughout the South. As someone who dreamed of being “first class”, I couldn’t understand why my CEO Dad was traveling common style. This could have been due to his loyalty to SWA’s free Scotch promotion, but more likely, it was his loyalty to the low prices and convenience of getting to his destination is less time.

When is the last time that you considered your pricing strategy? Most of us take a cost plus approach to almost everything. If SWA tried this, we would not be talking about them. I want to challenge you to work on an exercise that starts with arriving at the ideal pricing to dominate a market, and then work backwards to arrive at the costing that will get you to that plan. It may just save your company.

Try this approach and let me know what it reveals.

  • First, determine your “Usual Suspects”: all of those products and services that most closely resemble your offering (this is your traditional Competition).
  • Second, determine your “Non-Customers”: all of those products and services that do not take on the same form as your offering BUT perform the same function.

Take Southwest Airlines. “We’ve always seen our competition as the car. We’ve got to offer better, more convenient service at a price that makes it worthwhile to leave your car at home and fly with us instead.” (Colleen Barrett, executive vice president). This is not the time to be proud of your offering. What are all of the ways a customer can solve the same problem that you fix but in different forms?

  • Third, determine what price range you will need to attract this larger market (in SWA’s case, those people that drive cars) in order to compete.

Your price range needs to attract the mass of target buyers that fall into both the Usual Suspect and Non-Customers so that they will have a compelling reason to buy.

In SWA’s case, they priced their fares  based upon the cost for someone to drive instead (not for someone to fly using another airline).

In the case of Ford and the Model T, the Usual Suspects were over 500 automakers in the United States that built custom-made luxury autos. Henry decided to focus on the horse-drawn carriage as his competition instead of the luxury custom made shops. The carriage offered the same utility as the automobile but it was very different in form. The Model T was designed and priced to compete against the horse carriages.

  • Finally, determine the cost structure that you will need to deliver in order to make a profit on your new determined pricing.

In Ford’s case, the Model T had to offer the same utility as a horse drawn carriage that could travel anywhere (smooth and uneven roads, during rain or shine) and was easy to maintain. As a result, Ford achieved a breakthrough in innovation by limiting options that did not enhance utility and by creating an assembly line that could use interchangeable parts. Ford was able to achieve a competitive cost position that allowed him to price his product against the mass market, automobile owners and horse carriage owners (Where is Ford’s cost position today?). Back then, the 500 other auto manufacturers focused on customization (high prices, low utility).

What operations breakthroughs can you uncover by turning your analysis around and focusing on your pricing first to arrive at your achieved cost targets?

One last thought on promotional pricing. When Braniff Airlines moved into Texas to take SWA head on, it offered flights from Houston to Dallas at 50% of SWA’s prices. In response, SWA did something absolutely brilliant. SWA cut it fares to the same price BUT for those passengers that paid the full fare, SWA would give the customer a bottle of liquor (or an Ice Bucket for “the Mormons who claimed they don’t drink” according to Herb Kelleher). Herb told a group of us a few years ago that in 1973 during the promotion, Southwest Airlines was the #1 distributor of Whiskey in Texas.

Cheers and Bottoms up to that!

Now that I think about it, I think my Dad flew SWA for the Wild Turkey

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , ,

The Art of the Business Plan, Part I

February 2, 2011 By 5 Comments

People ask the me how to write a business plan. I feel compelled to share this knowledge in hopes that more of YOU can be successful launching a new business or reviving your current going concern. I also believe that a good entrepreneur and CMO must be able to write one of these. You must be able to blend the art of the vision and the science of the business case. If your CMO cannot write a business plan (or has never written one), you may have to look for someone that can… (All of you McGyver’s that never write a business plan and can create value with a napkin, you are amazing).

WAIT: Why do we pray? We pray not to change God’s heart, but to change OUR heart. Why write a business plan? It organizes your thoughts and makes you ready to speak like an expert. DO IT!

The best business plan tells a story that is backed up by great research and believable financials. The writer must be able to tell a story, research, find the data and put all of it into a plan that both the financiers and the visionaries can get behind.

Today’s post is not about the art of managing change but tactically how to actually write a business plan (what are the guts of the plan). If you want to read high-level guidelines on what business plan should look like, read Tim Berry’s post entitled: 8 Factors that Make a Good Business Plan. If you are interested in understanding the art of managing change, read Tim Berry’s book The Plan-as-You-Go Business Plan. In my opinion, if you spend too much time trying to figure out the change, you will miss it. Yes, I am a Ready-FIRE-Aim Entrepreneur, but I will never move forward without a good business plan. It is like running a marathon, if you do not train, if you do not set goals, you will not be successful. If all you do is set goals, you never have time to actually run. Point dead.

Question: Dear Emily Post, how do I start a business plan? Well, mr. or ms. confused imagineer, you need to start with a great template. There are many out there, but I recommend Palo Alto’s software called BusinessPlanPro. This has been by far the most user friendly, packed with resources tool that I have every used. Signed, your friend, Emily Post (friend of the Chief Outsider). Thank you Emily. I would add that you must put this tool in the hands of an expert. Without it, you may run it into a wall. A template is only a tool. Palo Alto, my template or others on the market will help guide you; however, if you have never written one, consult with a friend or send an email to the Chief Outsider for resources.

Here are the key categories of any good business plan (for a template of a completed business plan that was funded, launched, and acquired, please email me for your copy):

  1. I. Executive Summary
  2. II. Company Summary
  3. III. Market Analysis
  4. IV. Management Summary
  5. V. Operating Strategies
  6. VI. Milestones
  7. VII. Financial Plan
  8. VIII. Key Investment Considerations and Risks
  9. IX. Appendices

The Executive Summary is a 1-3 page summary of the entire business plan. You should not write the summary until you have completed every other section. Otherwise, it is not a summary.

The Company Summary is your chance to explain the vision of the company and why it should exist. This section includes the following key items: Defining and Refining your mission and key objectives, Describing the market place needs and benefits, Understanding market entry strategies and barriers, Branding and positioning key services and products, and Defining future product and services roadmaps.

The Market Analysis section is your chance to tell the readers (and yourself) why NOW is the best time to launch into this brave new world. You will include all of your data from your research including: Researching and understanding key target customers, Researching and reporting key industry and market trends, Researching the competition and creating necessary go to market strategies, Defining best strategies to gain valuable research for new company and/or product launches.

The Management Summary is the section that discusses why YOU and YOUR TEAM is the right team to move this idea forward. Many of the bankers behind your idea will be most interested in this section, so make it GOOD. Venture Capitalists continue to tell the Chief Marketing Outsider that they would rather invest in an A level management team with a B idea than a B level management team with an A level idea. One of the top reasons a company and/or product fails is due to the management team not agreeing on the same strategy (SIDENOTE: we have been working on insightful research showing this exact trend from management teams running companies between $5M – $100M. More on this soon). Discuss who the players are and why the bring value to the team. Discuss your past as a team. Have you worked well together before? Discuss where you have shortcomings and how you are going to fix your gaps.

The Operating Strategies section is your deep-dive into how you are going to run the company. This is the section that most people assume is the CMO’s job. This is only part of it. This section should include Distribution Strategies. This is where you will review and define the Marketing Mix including (known as the 4 P’s): Product (Customer Solution), Place (Convenience including Channels, Coverage, Assortments, Locations, Inventory, Transport), Price (Customer Cost), and Promotion (Sales Promotion, Advertising, Sales Force, PR, Online, Other). This section will also cover the best sales strategies to Fill the Pipeline, Follow Up with Prospects, Getting Presentations and Closing Sales. Finally, this section should cover strategic alliances that are necessary to move forward.

The Milestones section is your chance to outline the key next steps and milestones that you need to complete with dates. YOur milestones should be SMART (Specific, Measurable, Achievable, Realistic, Timed).

The Financial Plan is where the meat and potatoes reside. This is where most of your financiers will look first. What do the financials look like. You will need to have a 5 year (some recommend 3 but I like 5) financials for your Profit & Loss Statement, Balance Sheet, and Cash Flow Statement. I use a hybrid Cash Flow Statement that I like to call a POMS (Peace of Mind Schedule). This is a cash flow model that I have used to manage cash flow on a weekly basis. I first read about the concept while reading Inc. Magazine. Here is a great article on the subject written by Philip Campbell entitled The Secret to Formatting Cash Flow Projections. To download your free copy of the POMS, send me an EMAIL. If you want my version of the POMS on a WEEKLY basis and formatted to be pretty (I am a Maximizer), send me a note WEEKLY POMS Schedule Download PLEASE. Now that you have created the 5 year financials, you also need to include your startup costs worksheet. After you have all of this, you will need to include a funding plan and capitalization table. If you need a template of a Capitalization Table, please send me an email. A capitalization table is the document that shows who owns the company and what they paid to attain that ownership. In other words this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed — e.g. common and preferred shares, options, warrants, etc. — and respective capitalization ratios. The table will also show how as you raise more money at different times, how the ownership structure will change. (While many turn to the CFO to do this work, I will still argue that the CMO must have the financial acumen to produce and own this process).

The final section of your plan is your Key Investment Considerations and Risks. As Seth Godin clearly outlined in his book Permission Marketing, I believe you must make it very clear to all potential investors, partners, (stakeholders) that any new idea has risks. This section should outline and forewarn your audience of what you are trying to do. You want people that know what they are getting into PRIOR to the head nod. Do not miss this!

For all of the great documents that you have collected during this process, keep them. Put the most important documents in an Appendix so that your audience can reference them. At a minimum, you must include all of the financials, the startup costs, the cap table, key research and the management team bios (resume and/or CV will do).

This Chief Marketing Outsider Blog on this topic is only PART 1. I will follow it up someday soon with more insight and barks.

Please send me a note with questions. I love this stuff!!!

CHEERS

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , , ,

Garage Sale MBA

February 1, 2011 By Leave a Comment

In my final post on my Garage Sale MBA experience, I wanted to give my a few key takeaways…

The Chief Marketing Outsider is not going to let this current economic mad max beyond thunderdome economy crush the pack. He is going to sell everything he owns if he has to. Last weekend, we tried to sell everything that we didn’t want. It was a huge success, but why?

Here are a few amazing lessons that the CMO learned from that one day startup experience.

#1 – Craig’s List is Today’s Newspaper. New Media is Today’s Media. It is not that Craig’s List is “New Media”, but rather it is “FREE” Media. We advertised using Craig’s List to a demographic that has one of the lowest percentage of computer ownership in the US (According to the Pew Research Center study fielded in 2007, Latinos comprise 14% of the U.S. adult population and about half of this growing group (56%) goes online). How did this demographic figure it out? It is cheaper to look online than it is to buy a newspaper. When you add the number of cell phones out there, our target demographic can advertise amongst themselves through non-traceable means. When you think about it, Craig’s List has created an efficient marketplace that keeps prices down. This advertising channel fits the demographic and the marketplace: Cheap Goods. (For all of you techno-forwards out there, this point is many years old but still very important. The local newspapers are not out of this game yet. They still have the most local sales reps and they are starting to wake up).

#2 - Jim Collins was only partially right. Not only do you need to get the wrong people off of the bus, but you also need to get the head trash, mental garbage, and bad culture off of the bus. I believe that this takes time, but is critical to success. Take the garage sale. We did not throw ourselves off of the bus; we threw away old things that we did not need anymore. The exercise of identifying the bad from the good and then consciously placing the bad in the “to be thrown off the bus pile” is critical to the success. The CMO has a saying in his household. Remember Fully & Forgive! Can you identify those failed ideas and bad strategies that you have tried in your past? Can you now recognize the failures and not make them again?

Roy Spence’s book, It’s Not What You Sell, It’s What You Stand For discusses this concept that he calls DUMP THE GARBAGE. “Leaders of purpose have garbage to dump: grudges, guilt, greed, mistakes, losses, remorse. Holding onto those feelings will only create more of it. Whatever is on your mind will show up in your organization and in your life. Dump the Garbage. Do it early and often.”

#3 – Many executives are afraid to have a garage sale. It is beneath them. Are you one of these leaders? While preparing for the garage sale, The Chief Marketing Outsider was talking to a few potential collaborators (see note on Marketing Strategy) to help us build the product that we were going to position as the “largest children’s clothing sale”. One of these potential collaborators declined because they “do not do garage sales”. Are you afraid? Is taking out the garbage beneath you? A garage sale is the recognition that you need to remove the old to prepare for something better. Someone else values your past mistakes, failures, worn out goods and is willing to pay for them. If having a garage sale is beneath you, maybe you are holding onto bad strategies and unable to admit your weaknesses. If you do not make room for the new, your house will continue to be plagued by the old. (NOTE: please do not send the CMO any angry messages about how you take your @#$% STUFF to the Goodwill instead of having a garage sale. Well, that’s nice. All you are doing is giving your stuff to a middle man to have the garage sale for you!!!).

#4 – Cleaning is therapeutic, you make room for Spring, New Growth. The Chief Marketing Outsider’s close friend pointed out to the CMO that you need to cut back the plants in order for them to be able to grow. The exercise of preparing for a garage sale is painful but very therapeutic. Remember fully and forgive! We need to make room for the new. To do this, we need to get rid of the old. How many of you own or work for product based companies? Have you asked your operations team about how much old inventory is sitting on the shelves that needs to be written off? I am amazed about how much this practice is rampant amongst the small and very large clients. Most of these companies do not want to write down the assets which impacts their balance sheet.

#5 – Collaborators are Critical. The CMO and family wanted a successful garage sale. We believed that in order to maximize our positioning in the marketplace and our offering to the customers, we needed to align with others to help LIFT our offering and reputation. We ended up partnering with a clothing company that had old children’s clothing inventory that needed to be moved. This partnership helped us have the “largest selection of children’s clothing” in the entire city of Austin for garage sales that weekend. The CMO has observed that those companies that want to “preserve” their revenues and territory by not bringing in collaborators usually stay small. Their growth stagnates. I may write a book on this very topic (I DARE YOU TO PROVE ME WRONG!)

If you are greedy, too good to have a garage sale, do not like cutting back the old, and not aware of how to connect to your customers, you will fail.

CHEERS

The Chief Marketing Outsider

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , , , ,

Garage Sale Marketing: Marketing Activities

February 1, 2011 By Leave a Comment

Finally, we get to the part that many marketers and non-marketers alike consider the cornerstone of marketing. See my post regarding the role of the CMO to understand that you can not win on PART III if you fail on PART I & II. This is where we discuss the MARKETING MIX, the 4P’s, some now call the 4 E’s, etc…

“The advantage of solving the positioning problem is that it enables the company to solve the marketing mix problem. The marketing mix – product, price, place and promotion – is essentially the working out of the tactical details of the positioning strategy.” Market Management by Phil Kotler

Product / Experience: Value Delivered to the Customer. In our case, we delivered clothing to many many babies and children. The true value that we delivered was one place for parents to come and provide clothing for their children through multiple growth cycles. If we just thought we were selling crap, our sale and communications about our sale might have failed. See baseline.

Place / Everyplace: This is the network on which we sell our goods. It is also how a company keeps connected with customers for a variety of tasks including demand generation, delivery of goods, product customization, etc… Since we were selling simple goods, we moved all goods to one place, our house, and opened the garage doors. We did act as the “middle man” for the clothing company and our next door neighbor who needed to get rid of his lawn mower. (You would be proud of the CMO. When the eyes of the men, the ones that had to be there because their wives dragged them to my house, looked at the lawn mower, the CMO jumped into play and sold that bad boy).

Promotion / Evangelism: How are we going to drive awareness of our sale to our target customer? In our case, we needed to attract people within driving distance to our sale. The old way to do this was advertise in the paper, but that cost money and overhead for the sale of inexpensive goods. As Chris Anderson discusses in his notes and now book about the Long Tail, the internet, new media (Craig’s List) has developed an easier, more efficient aggregation tool to allow people to find and buy niche products. New Media is Free Media. We advertised on Craig’s List and it drove 5x more people than the paper advertisement did for our neighbors just 4 weeks prior. We also put up signs in our neighborhood directing the drivers to our house and alerting the locals.

IMPORTANT NOTE: The baseline neighbors did not “position” their value to the market. Remember, your marketing vehicles may just suck because your positioning and strategy sucks.

Pricing / Exchange: The product, place and promotion drive the perceived value of the goods that we were selling. In our case, we found that by NOT putting price tags on our merchandise, we were able to increase our profits. This is not always the case. The CMO has spent many years in pricing. I found that during this exercise, the buyers would pay more for our CRAP than we thought our crap was worth.

Did our marketing strategy exercise really work? Did our positioning and focus on our target bring buyers that would pay more? HELL YES!!! In conclusion, following marketing strategy does work. Our understanding of the customer, our positioning of our offering, our strategy to create the best value and our execution of the marketing mix turned our garage sale into a sell out.

And I just thought that business school blah blah blah was for the birds.

DAMN, it works. I should have paid attention the first time.

The Chief Marketing Outsider

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , , , , ,

Garage Sale Marketing: Target Market

February 1, 2011 By 1 Comment

Part Deaux: Garage Sale MBA

Now that we spent NO time considering the 5 C’s (Customer needs, Company skills, Competitors, Collaborators, Context), we need to take step 2, determining who our target market is going to be, how to segment the market and how to position our goods/services to meet the needs. Well, let me be honest here, we gave this NO thought, but the CMO did do onsite research during the sale and determined the target based on three very common levels.

Demographic: Most users were 35-55 female, some male (85%/15%) that seemed to have lower incomes (no, I did not ask, “what is your annual household income” but I did get to keep a few mufflers and oil streaks).

Geographic: These people came from around here. Over 85% of the people drove to the sale, but there were a surprising 15% that walked. Interesting. See my note on Garage Sale MBA.

Lifestyle: These people were value oriented looking for basics. The GAP learned this lesson when they tried to stray into fashion.

Other: Finally, 100% of the participants were parents, parents, parents with small children.

Here is my favorite part of the entire marketing strategy process: the Positioning Statement. This is how we want potential buyers to see us. The Note on Marketing Strategy gives us a simple template (that I use all of the time):

(INSERT: Our Product/Brand) is (INSERT: Single Most Compelling Idea/Claim) among all (INSERT: Competitive Frame) because  (INSERT: single most important support).

In Our case here it goes:

The Chief Marketing Outsider’s Garage Sale is the largest children’s clothing sale among all current weekend’s garage sales because we have aggregated two former children’s clothing partners to bring in two cars full of inventory along with our truckloads of saved clothing.

Here was our gamble: We were targeting parents who needed to clothe their children during a recession. The baseline garage sale was just selling “garage sale”. People did not know the benefit of showing up. Dolan tells us that “value is created by meeting customer needs. A firm needs to define itself not by the products it sells, but by the customer benefit provided.”

Now that we have determined the target market and positioned our service to meet the market needs, we get to the fun CMO activities: Specifying the plan for the marketing activities to achieve the desired positioning.

Posting tomorrow with Part III: Garage Sale Marketing: Marketing Activities

Filed Under: Marketing Strategy, Seed Accelerators Tagged With: , , ,
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