The 11 Rules of Highly Profitable Companies

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How do you generate the most profit with the least effort? How do you maximize margins without sacrificing quality? 

 

I'm not talking more customers, nor more revenue, nor more offices and employees. Profit.

 

Based on my interviews with high-performing CEOs ("high-performing" determined using annual-profit-per-employee measurements) in more than a dozen countries, I've listed 11 common "rules" below. This is a return-to-basics call.

Here's your cheat sheet for consistent profitability -- or doubling of it -- in 3 months or less. 

1. Repetition is Usually Redundant — Good Advertising Works the First Time

Use direct response advertising (call-to-action to a phone number or website) that is uniquely trackable – fully accountable advertising — instead of "image" or "brand" advertising (e.g. billboards with no URL/phone/messaging), unless others are pre-purchasing product to offset the cost (e.g. “If you prepurchase 288 units, we’ll feature your store/URL/phone exclusively in a full-page ad in….”).

Don’t listen to advertising salespeople who tell you that 3, 7, or 27 exposures are needed before someone will act. Well-designed and well-targeted advertising works the first time. If something works partially well (e.g., high click-through with low percentage conversion to sales (CVR), or low click-through with high conversion, etc.), indicating that a strong ROI might be possible with small changes, tweak one variable and micro-test once more.

Cancel anything that cannot be justified with a trackable ROI. 

2. Pricing before Product – Plan Distribution First 

Is your pricing scalable?

Many companies will sell direct-to-consumer by necessity in early stages, often through a simple website. Only later do they realize that their margins can’t accommodate resellers and distributors when they come knocking. This is true whether your "distributor" is iTunes, a worldwide widget distributor, or Orbitz.

If you have a 40% profit margin and a national distributor needs a 70% discount off of retail (or "cut") to sell into wholesale accounts, you’re forever limited to direct-to-consumer… unless you increase your pricing and margins after-the-fact, or launch new "premium" products to fix the problem. For a bootlegged start-up, this distraction can equal sky-high customer churn or death altogether.

Plan out your first two years of distribution plan before setting pricing.

Think digital is different? Think again.

Test assumptions and find hidden costs by interviewing those who have done it: will you need to pay for co-op advertising, offer rebates for bulk purchases, or pay for shelfspace or featured placement? I know one former CEO of a national brand who had to sell his company to one of the world’s largest soft drink manufacturers before he could access front-of-store shelving in top retailers. 

3. Less is More – Limiting Distribution to Increase Profit

Is more distribution automatically better? Not necessarily.

Uncontrolled distribution leads to all manner of head-ache and profit-bleeding, most often related to rogue discounters. Reseller A lowers pricing to compete with online discounter B, and the price cutting continues until neither is making sufficient profit on the product and both stop reordering from you (or selling/referring your product). This race to the bottom requires you to launch new products, as price erosion is almost always irreversible.

Avoid this scenario and consider partnering with one or two key distributors instead, using that exclusivity to negotiate better terms: less discounting, prepayment instead of net payment terms, preferred placement and marketing support, etc.

Whether Apple or Estee Lauder, sustainable high-profit brands usually begin with controlled distribution. Remember that more customers isn’t the goal; more sustained profit is. 

4. Net-0 — Create Demand vs. Offering Terms:

This is related to Rule #3.

Focus on creating end-user demand so you can dictate terms. Often one large advertisement, bought at discount remnant rates, will be enough to provide this leverage.
Just because everyone in your industry offers payment terms doesn’t mean you have to, and offering terms is one of the most consistent ingredients in start-up failure.

To avoid getting strung out and cash-flow poor: Cite start-up economics and the ever-so-useful “company policy” as reasons for needing prepayment and apologize, but don’t make exceptions.

If you agree to receive payment on net-30 terms (they pay 30 days from invoice, or receipt of product), it will become net-60, which becomes net-120. Time is the most expensive asset a start-up has, and chasing delinquent accounts will prevent you from generating more sales.

On the hand, if tons of customers are asking for your product, resellers and distributors will need to buy. It’s that simple. Think a big order from Wal-Mart is a godsend? Be careful.

Since they're almost always net-180+, and they can return unsold product, it could actually be the death of your company. How are you going to pay for the needed inventory?

Typically, debt. What will you do if they return half of it because they didn't give it proper placement, so it didn't have sufficient sell-through? Be careful, lads and lasses.

Put funds and time into strategic marketing and PR to tip the scales in your favor. Consumer demand = your ability to negotiate better terms. 

5. Limit Downside to Ensure Upside — Sacrifice Margin for Safety

Don’t manufacture products in large quantities to increase your margin, unless your product and marketing are tested and ready for roll-out. In other words, only when you already have a proven demand and can forecast sell-through rate.

If a limited number of prototypes cost $10 per piece to manufacture and sell for $11 each, that’s fine for the initial testing period, and essential for limiting downside. Sacrifice margin temporarily for the testing phase, if need be, and avoid potentially fatal upfront overcommitments. 

6. Niche is the New Big — The Lavish Dwarf Entertainment Rule

Several years ago, an investment banker was jailed for SEC violations.

He was caught partly due to his lavish parties on yachts, often featuring hired dwarves. No joke. The owner of the dwarf rental company, Danny Black, was quoted in the Wall Street Journal as saying: “Some people are just into lavish dwarf entertainment.”

Niche in the new big, I tell you. And here’s the secret: it’s possible to niche market and mass sell.

iPhone commercials don’t feature dancing 50-year olds, they feature hip and fit 20-30-somethings, but everyone and his grandmother wants to feel youthful and hip, so they strap on Apple gear and call themselves converts. Who you portray in your marketing isn’t necessarily the only demographic who buys your product — it’s often the demographic that most people aspire to. The target isn’t the market.

No one aspires to be the bland average, so don’t water down messaging to appeal to everyone–it will end up appealing to no one. 

7. Revisit Drucker — What Gets Measured Gets Managed:

Measure compulsively, for as Peter Drucker stated: what gets measured gets managed.

Useful metrics to track, besides the usual operational stats, include CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, chargebacks, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect breakeven), MER (media efficiency ratio), and projected lifetime value (LV) given return rates and reorder %. Consider applying direct response advertising metrics to your business.

Look at "lean start-up" metrics for more methods of measuring during the start-up phase. The work of Eric Ries is a good starting place. 

8. Hyperactivity vs. Productivity — 80/20 and Pareto’s Law

Being busy is not the same as being productive. In fact, being busy is a form of laziness -- lazy thinking and indiscriminate action.

Forget about the start-up overwork ethic that people wear as a badge of honor–get analytical. I'm not going to say "work smarter; don't work harder," as I'm fine with hard work...but only as long as it's applied to the right things.

The 80/20 principle, also known as Pareto’s Law, dictates that 80% of your desired outcomes are the result of 20% of your activities or inputs. Once per week, stop putting out fires for an afternoon and run the numbers to ensure you’re placing effort in high-yield areas:

What 20% of customers/products/regions are producing 80% or more of the profit? What are the factors that could account for this?

Invest in duplicating your few strong areas instead of fixing all of your weaknesses. 

9. The Customer is Not Always Right — “Fire” High-Maintenance Customers

Not all customers are created equal.

Apply the 80/20 principle to time consumption: What 20% of people are consuming 80% of your time? Put high-maintenance, low-profit customers on auto-pilot. Sure, process their orders, but don’t pursue them or check up on them. And “fire” high-maintenance, high-profit customers by sending a memo detailing how a change in business model requires new policies at your company: how often and how to communicate, standardized pricing and order process, etc.

Indicate that, for those clients whose needs are incompatible with these new policies, you are happy to introduce other providers.

“But what if my largest customer consumes all of my time?” you ask? Recognize that 1) without time, you cannot scale your company (and, oftentimes, life) beyond that customer, and 2) people, even good people, will unknowingly abuse your time to the extent that you let them.

Set good rules for all involved. Minimize back-and-forth and meaningless communication. 

10. Deadlines over Details – Test Reliability Before Capability

Skill is overrated.

Perfect products delivered past deadline kill companies. Better to have a good-enough product delivered on-time. Google "minimal viable product" for more on this philosophy. Even the great Reid Hoffman, co-founder of LinkedIn, has wisely said that, "If you are not embarrassed by the first version of your product, you've launched too late."

Test someone’s ability to deliver on a specific and tight deadline before hiring them based on a dazzling portfolio.

Products can be fixed as long as you have cash-flow, and bugs are forgiven, but missing deadlines is often fatal. Calvin Coolidge once said that nothing is more common than unsuccessful men with talent; I would add that the second most common is smart people who think their IQ or resume justifies delivering late. Don't tolerate it. 

11. Keep it simple. Complicated answers are rarely the right answers.
'Nuff said.

Tim Ferriss

The Smart Way For Start-Ups to Create a Marketing Strategy

Recently, I’ve been getting asked questions directly and indirectly related to the marketing strategy for start-ups.

Here are some questions I’ve received:

• Why can’t I attract business for my tech start-up?
• How can a start-up achieve its marketing strategy goals?
• What are the most effective ways for a small business to start marketing with little or no budget?
• Is the marketing strategy for a start-up different compared to a business that is no longer a start-up?
• What should a start-up do different with its marketing strategy?

These issues are really symptoms of the same painful problem, which boils down to not clearly understanding what a marketing strategy is and how do you get one. Don’t worry … it’s a fairly common ailment.

There’s a process you can work through that will help you achieve greater clarity of your start-up marketing strategy, which leads to great clarity in your business.

This process might also help you come to understand how to turn your start-up into a success with only the necessary elements, because you’ll know exactly what attributes to take stock in before you start thinking about creating or realigning your business. 

1) Narrowly Define “You”
Understanding the characteristics, desires and behaviors of a narrowly defined target market is very hard work, but indispensable to your start-up success. Every marketing book, class or expert will tell you this, but few can give you the magic tablet that allows you to go deeply in the psyche of your prospect.

You can acquire some measure of knowledge from various research techniques, but nothing beats living, breathing, and feeling the same things your prospects do. I once heard Zig Ziglar say, “owners are closers.” You must own the product before you can sell anyone on it.

 I truly believe that the owner is the customer. Some of the surest successes in history have come from founders who created a product or service to meet a personal need and discovered a business by virtue of doing so. 

2) Connect Your Offering to an Established Market
Some entrepreneurs dream of locking themselves in their lab for a year or so and emerging with the world’s greatest innovation. Sounds romantic I know, but if your innovation solves an incredible problem people don’t yet know they have, you may wind up burning through all the money before they get it.

Better to innovate around a proven market, borrow genius from an unrelated industry, or discover an unmet need in a mature market crying for a solution. New products or services are like riders, they need a horse to go somewhere and interact with the outside world. So, if you have a terrific offering, but you can’t find a way to connect it to a medium to travel, nothing happens, there’s no activity, you end up with a static marketplace.

Steve Jobs famously said in 1996: “Picasso had a saying — ‘good artists copy; great artists steal’ — and we have always been shameless about stealing great ideas.” 

3) Use Your Competitors Marketing and Advertising
Sometimes entrepreneurs shy away from competition. If market research shows that there’s too much competition in a given area or industry, the thinking is that the market is saturated and there’s probably no room for your start-up there.

Wrong. While it may be true that your neighborhood couldn’t possibly stand another doughnut shop, I’ve found the success of several businesses in an industry, even in the same direct community, can spell opportunity.

If people are already spending money on a product or service then two-thirds of your work is done. Use your competitors marketing and advertising to your advantage. They have educated the market so they understand and value the offering enough to whip out their wallets. All that’s left for you to do now is show them how much better you can make the experience. Few businesses really provide great service. In fact, stealing market share in mature markets is one of the easiest paths for smart start-ups to run. 

4) Simplicity is Your Innovation
Much of this article has focused on entering proven markets. While that’s absolutely the advice I’m giving here, know that you must do so with a significant point of differentiation that market easily understands and appreciates. In most cases this can be done by looking at the way most folks in the chosen market operate and find a way to simplify your offerings around breaking the mold.

For example, if people in your service business operate by proposal and bid, come up with a fixed price. If the traditional operating method is custom work, come up with a series of pre-packaged offerings that meet most people’s needs without the custom hassle.

The popular pizza franchise Little Caesars has one unique pizza on the menu that they call “Hot-N-Ready”. They make it up in big batches and serve thousands a day at $5 per pie. Their message is “No need to call ahead! No need to wait! No limit!” 

5) Nothing is in Stone
Here’s the one that can snag small business founders. If you’re in love with your bright shiny baby start-up and all that it offers, you may become blind to the reality the market suggests.

Keeping an open mind and a willingness to discover what the market really wants and adapt accordingly is one of the core advantages of your smallness – remember to use it.

Talk to your customers, talk to your competitors, talk to your employees and remember nothing is precious but what the numbers prove to be so.

About the Author: Patrick McFadden is the owner and marketing consultant at Indispensable Marketing, a strategic marketing firm based in Chesterfield, VA. We help small to midsize businesses get the strategy right so marketing tactics get results.

Written by

Patrick McFadden

The 10 Trends Shaping the Global Ad Business

Sir Martin SorrellInfluencer

Founder and CEO of WPP

As we plan for the future of our business, looking across the 110 countries in which we operate, we try to identify the trends that we think are shaping the global marketing services industry. Here’s our top ten: 

1. Power is shifting South, East and South EastNew York is still very much the centre of the world, but power (economic, political and social) is becoming more widely distributed, marching South, East and South East: to Latin America, India, China, Russia, Africa and the Middle East, and Central and Eastern Europe.

Although growth rates in these markets have slowed, the underlying trends persist as economic development lifts countless millions into lives of greater prosperity, aspiration and consumption.

2. Supply exceeds demand – except in talentDespite the events that followed the collapse of Lehman Brothers in 2008, manufacturing production still generally outstrips consumer demand. This is good news for marketing companies, because manufacturers need to invest in branding in order to differentiate their products from the competition.

Meanwhile, the war for talent, particularly in traditional Western companies, has only just begun. The squeeze is coming from two directions: declining birth rates and smaller family sizes; and the relentless rise of the web and associated digital technologies.

Simply, there will be fewer entrants to the jobs market and, when they do enter it, young people expect to work for tech-focused, more networked, less bureaucratic companies. It is hard now; it will be harder in 20 years.

3. Disintermediation (and a post-digital world)An ugly word, with even uglier consequences for those who fail to manage it. It’s the name of the game for web giants like Apple, Google and Amazon, which have removed large chunks of the supply chain (think music retailers, business directories and bookshops) in order to deliver goods and services to consumers more simply and at lower cost.

Take our “frienemy” Google: our biggest trading partner (as the largest recipient of our clients’ media investment) and one of our main rivals, too. It’s a formidable competitor that has grown very big indeed by – some say – eating everyone else’s lunch, but marketing services businesses have a crucial advantage.

Google (like Facebook, Twitter, LinkedIn and others) is not a neutral intermediary, but a media owner. Google sells Google, Facebook sells Facebook and Twitter sells Twitter.

We, however, are independent, meaning we can give disinterested, platform-agnostic advice to clients. You wouldn’t hand your media plan to News Corporation or Viacom and let them tell you where to spend your advertising dollars and pounds, so why hand it to Google and co?

Taking a broader view of our increasingly tech-based world, words like “digital”, “programmatic” and “data” will soon feel out-dated and obsolete as, enmeshed with so many aspects of our daily lives, network-based technologies, automation and the large-scale analysis of information become the norm.

The internet has been a tremendous net positive for the advertising and communications services business, allowing us to reach consumers more efficiently, more usefully and often more creatively on behalf of clients. But it won’t be long before those clients stop asking our agencies for a “digital” marketing strategy (many already have). It will simply be an inherent part of what we’re expected to offer.

4. Changing power dynamics in retailFor the last 20 years or so the big retailers like Walmart, Tesco and Carrefour have had a lot more power than manufacturers because they deal directly with consumers who are accustomed to visiting their stores.

This won’t change overnight, but manufacturers can now have direct relationships with consumers via the web and e-commerce platforms in particular. Amazon is the example we all think of in the West, but watch out for Alibaba, the Chinese behemoth due to list on the New York Stock Exchange later this summer in what could be the largest IPO in corporate history (and heading a capitalisation of around $200 billion).

5. The growing reputation of internal communications

Once an unloved adjunct to the HR department, internal comms has moved up the food chain and enlightened leaders now see it as critical to business success.

One of the biggest challenges facing any chairman or CEO is how to communicate strategic and structural change within their own organisations. The prestige has traditionally been attached to external communications, but getting internal constituencies on board is at least as important, and arguably more than half of our business.

6. Global and local on the up, regional downThe way our clients structure and organise their businesses is changing. Globalisation continues apace, making the need for a strong corporate centre even more important.
Increasingly, though, what CEOs want is a nimble, much more networked centre, with direct connections to local markets. This hands greater responsibility and accountability to local managers, and puts pressure on regional management layers that act as a buffer, preventing information from flowing and things from happening.

7. Finance and procurement have too much clout, but this will changeSome companies seem to think they can cost-cut their way to growth. This misconception is a post-Lehman phenomenon: corporates still bear the mental scars of the crash, and conservatism rules.

But there’s hope: the accountants will only hold sway over the chief marketing officers in the short-term. There’s a limit to how much you can cut, but top-line growth (driven by investment in marketing) is infinite, at least until you reach 100% market share.

8. Bigger government
Governments are becoming ever more important – as regulators, investors and clients. Following the global financial crisis and ensuing recession, governments have had to step in and assert themselves – just as they did during and after the Great Depression in the 1930s and 1940s. And they’re not going to retreat any time soon.

Administrations need to communicate public policy to citizens, drive health initiatives, recruit people, promote their countries abroad, encourage tourism and foreign investment, and build their digital government capabilities. All of which require the services of our industry.

9. Sustainability is no longer “soft”The days when companies regarded sustainability as a bit of window-dressing (or, worse, a profit-sapping distraction) are, happily, long gone. Today’s business leaders understand that social responsibility goes hand-in-hand with sustained growth and profitability.

Business needs permission from society to operate, and virtually every CEO recognises that you ignore stakeholders at your peril – if you’re trying to build brands for the long term.

10. Merger flops won’t put others offDespite the failure of one or two recent high-profile mega-mergers, we expect consolidation to continue – among clients, media owners and marketing services agencies. Bigger companies will have the advantages of scale, technology and investment, while those that remain small will have flexibility and a more entrepreneurial spirit on their side.

FMCG and pharmaceuticals (driven by companies like 3G and Valeant) are where we anticipate the greatest consolidation, while our own industry is likely to see some activity – with IPG and Havas the subject of constant takeover rumours. At WPP we’ll continue to play our part by focusing on small- and medium-sized strategic acquisitions (31 so far this year, and counting). 

Posted by:Sir Martin Sorrell

What Disney and Playboy Can Teach You About Branding

Image credit: Playboy

In his book No B.S. Guide to Brand-Building by Direct Response, business coach and consultant Dan S. Kennedy offers a no-holds-barred plan to creating and profiting from a powerful brand. In this edited excerpt, the author discusses two well-known marketing geniuses, who turned their companies into worldwide brands.

Walt Disney frequently reminded everybody that "It all started with a mouse." Hugh Hefner's empire began with a stag as a symbol of maleness, abandoned because it was already taken, and replaced by the symbol of eternal horniness, the rabbit. These are two of the greatest brand-builders around.

You might not think the two should share the same sentence, but they have a lot in common. They both began with virtually no money and built valuable, powerful, iconic brands with little investment in actual brand-building and virtually no brand/image advertising. Both Disney and Hefner grew their brands on the back of direct marketing and sales activity, on free advertising via media partnerships and publicity, and through leverage of the media.

Other shared strategies include:

Creating a world of their own. Disney's line "The Happiest Place On Earth" might have been used by Hefner for the world of Playboy, symbolized by the Playboy Mansion, if Walt hadn't already snagged it. The existential importance of The Playboy Mansion was shown off in a Playboy magazine cartoon, circa 1960, in which a truth-seeker has climbed to a mountain peak to beg wisdom from the wise guru. The guru tells him: "There is a man who lives in a mansion full of beautiful women and wears pajamas all the time. Sit at his feet and learn from him, for he has found the secret of true happiness." Disney also featured a symbolic structure at Disneyland and Disney World: Sleeping Beauty's Castle, where dreams come true and romance flourishes. Both Disney and Playboy feature a profound sense of place--where no one ever need grow up.

Standing for and promoting a philosophy. Hefner even called it "The Playboy Philosophy" and explained it in detail, beginning with a series of essays in his magazine. Hefner argued against censorship, for sexual freedom, for civil rights, even for modern feminism. He also created a series of internal ads titled "What Sort of a Man Reads Playboy?" which presented a profile worthy of aspiration. Walt also stood for certain enunciated principles and values, built into the films and entertainment product, and integrated into projects like Epcot and Celebration. Here's a revealing Disney quote:
"Disneyland would encompass the essence of the things that are good and true in American life ... a place for people to find happiness and new knowledge. The older generation can capture the nostalgia of days gone by, the younger generation can savor the challenge of the future, and it will be a source of hope and inspiration to all the world."

Rather a grandiose way to describe an amusement park, don't you think? But that's the point. Disney and Hefner both saw and spoke of significance and importance in what they were doing that went far beyond the basic products and deliverables of their businesses. Whether you agree with them or not, these men who built great brands believed they were doing something important.ersonality-driven brand. Disney was as much the public face of his enterprises as was Mickey. He began promoting Disneyland by hosting a show on ABC and remained a familiar TV host for many years. He was the company's chief storyteller and salesman. Hefner used his own TV show early on, purportedly a party in his own penthouse, with his celebrity buddies all there having a good time. Very recently, he was again seen starring with his girlfriends in a reality TV series. The two individuals and these two brands, inseparable.

Place. The Disney Parks with Cinderella's Castle as centerpoint. The Playboy Mansion, with its infamous Grotto as its centerpoint. Both sites have a "Fantasyland."

Product as promotion. For Disney, it began with a licensed Mickey Mouse watch and a Disney train and has become a licensing juggernaut, with its characters and iconic images on hundreds of thousands of products. The Playboy bunny logo is one of the most licensed trademarks of all time for apparel, cologne, artwork, etc. All these products not only generate revenue but work at promoting, creating and sustaining interest in the brand.

Media. Walt Disney launched Disneyland with an alliance with ABC--now Disney owns them, along with ESPN and several Disney-branded cable TV channels and Disney radio stations. It still airs Disney specials on ABC, each an infomercial for the parks, current Disney personalities and new movies. Hugh Hefner began with Playboy magazinebut promoted Playboy early with TV. To this day, Hefner still uses such media plays--in recent years, there were reality shows on the E Network, all about the Mansion and his girlfriends.

 There was also a feature film, in 2008, The House Bunny. All these serve as powerful infomercials for the brand, yet Playboy has been paid for them rather than buying advertising. Its own cable TV channel is also both a business itself and continuous, 365-day brand promotion.

Consider how these two men launched and built their brands. They never spent or had to spend on dopey image advertising. Their brands were built by their own media products and businesses, by profitable advertising selling their products, by stealth advertising imbedded in TV programming they were paid to produce and provide or paid licensing fees for, and by an untold variety of merchandise proliferating in the marketplace, for which they were also paid licensing fees.

If you have a small, local business you may too quickly disqualify yourself and think that this is above and beyond you. There are two things to consider about that. One is that everybody started and starts somewhere, often small and local. Disneyland was, after all, a local business, and central Florida was picked as the second location based on the population within one day's driving distance. Hefner began in Chicago, his office in his apartment, his magazine assembled atop his bed, and then with one local Playboy Club.

These days, geographic boundaries have been blurred and expanded by ecommerce and overnight shipping. A local gourmet cupcake store in Hudson, Ohio, has customers in 40 states and 9 countries. A clothier's shop in London mails catalogs throughout the U.S. and ships products worldwide. Why must you think small?

Second, even if you choose to be local and stay small, all the same strategies can and should apply, particularly if you want to be a locally dominant brand. Why shouldn't you dominate your market?

Dan S. Kennedy

Dan S. Kennedy is a strategic advisor, consultant, business coach, and author of the popular No B.S. book series. He directly influences more than one million business owners annually. 

How I Founded a Top Marketing Technology Startup in Less Than 6 Months

Tiffany Pham, 

Alex Gold is the co-founder of Buzzstarter, a marketing technology company in San Francisco working with the world’s largest brands like Dove, Axe, Degree, Clear, Danone Activa, and Aeropostale to drive higher return on investment for their ad campaigns.

Buzzstarter is a distribution marketplace and exchange that, on one side, connects any type of brand content (such as videos or articles) with hundreds of thousands of users who, on the other side, share the content. He uses data science to optimize the marketplace connections.

Originally from Toronto, Canada, and a lawyer by trade, Mr. Gold’s background is in the entertainment and advertising industries working with Discovery Communications , Vuguru, LLC, and DDB Canada. I sat down with him to discuss his rapidly growing company and the future of communications technology.

After 5.5 months, you’ve had significant traction with some of the world’s most prominent brands? How did you get from 0 to 60 in such a short time, when most entrepreneurs need much longer to build momentum?

Great question. Two reasons: 1) addressing real pain and acute need and 2) maniacal research and planning. Brands are feeling real pain with online marketing right now. There are so many options, and target audiences are not migrating to one or two online destinations. They are splintering to hundreds of thousands. This gives brands, who are used to buying single destination advertising like television a massive headache but also a lot of fear of missing out or FOMO. So Buzzstarter comes in with a value proposition of: 1) a single destination site that will give your brand access to hundreds of thousands of channels; 2) a laser sharp and very open focus on metrics; and 3) increased ROI. People start paying attention. We back that up with an acute understanding of what specific needs are on our platform. We designed it with that in mind.

What were some of the tactics you used to launch Buzzstarter and get it off the ground fast?

We analyzed each step of the process: research, development, operations in a very methodical way. I suggest this to any entrepreneur. This may be in contrast to what you think about most startups, where one prominent entrepreneur described it as “putting on a parachute while falling down.” My Co-Founder Kenzi Wang and I spent months in customer development obtaining information on what our target users (brands and advertisers) wanted. We did not want to build a product on intuition and we shifted the focus numerous times in research. With development, we started two parallels: product engineering, which is typical, but also sales and advisory. Since we knew sales would take some time to get off the ground, we set about creating relationships on an advisory level with potential partners months ahead of time. We are lucky in a way that one of our first customers, Lou Paik, from Danone, has an incredible amount of vision and foresight in the digital space. This gave us a running start. And for operations, we carefully engaged in a trial period with many of our colleagues where they were asked to generate real value before permanent onboarding.  We have a great team as a result like our designer Zach Zorbas and our account manager, Melissa Aiello.

You work very closely with large brands. What do large brands gain from working with startups like Buzzstarter as opposed to their traditional established agencies?

Very timely and funny. Well, first, they usually get to have their dollar go further because startups offer better ROI and more efficiency in their offerings. Large brands get the benefit of the startups’ deep knowledge of up-to-the-minute innovation. Startups act as brands’ eyes and ears on the ground and in some instances form external innovation teams. Large brands can employ startups to source new trends and even partners. My brands ask me all the time what new emerging social media sites are out there as I get calls asking what Medium and Secret are (side note: sign up for Secret – it’s awesome). Dave McClure, the Founder of 500 Startups has always said, “Brands have access to customers and distribution, but like many large companies they don’t move fast and aren’t experts in tech innovation. Startups are tech-savvy and can impart and even transfer rapid innovation forward.”

Does BuzzStarter apply to just advertising? Can it apply to content creators like filmmakers or musicians who have a need to distribute their message cost-efficiently and can’t afford to do so through traditional means?

Yes, of course. We’ve never seen Buzzstarter as applied only to advertising.  We anticipate a very near future in which our plug-and-play platform assists in optimizing communications for nearly every creator of content: from an advertiser to a filmmaker to a musician to nearly any writer.  We are banking on the fact that as the number of means for communicating online increase, the amount of noise is also going to increase. What’s going to matter most is relevance and optimization.  Relevant audience targeting and optimization of message.

This is a great time to switch gears. What inspired your career move from producing creative content to leading a team of engineers and data scientists to drive efficiency in creative content  distribution through technology?

One word: the market.  Coming from the traditional entertainment side at Discovery and Vuguru, I saw that entertainment distribution windows were starting to narrow with the arrival of Netflix and Amazon.  But consumers were (and still are) moving faster than any one platform.   They are consuming content not just in one destination but in a multiplicity of applications, sites, and channels that are not limited to the social web or where you can buy exposure.  The only way to harness this — to truly harness these new market dynamics — was through data and technology.  I saw what Andreas Wigand was doing at Amazon  in regards to targeting audiences across different channels and was shocked that no plug-and-play solution existed.  If you wanted to target audiences on one blog versus another you needed to make separate deals.  On each social network, another separate deal.  That’s enough to give anyone a headache.  I knew there was a need to create a plug and play solution that allowed any content creator or advertiser the opportunity to distribute across all of these apps and social media outlets that no one else can get into.  And now we have the engineering and data science to make it work.  So, I partnered with Kenzi Wang, a growth engineer, moved to San Francisco, and started Buzzstarter.

Was the transition from being a creative to being a technologist challenging?

Yes, it was, although I find my creative side to be an immense asset.  Initially, it was hard getting my head wrapped around the concept of scalability at inception.  Building a technology platform requires that every function and action be scalable to a target market with minimal labor. By contrast, developing a television series or a film is iterative, customized, and often personal.  Coming into the tech world, this was a jarring difference for me but as soon as I learned the ropes, I started to jump. In fact, I use my more creative skills every day in iterative product focused problem solving and roadmapping.  I have picked that up directly from the story-editing and development process.  It allowed us to craft a user focused story faster and launch the company sooner.

Do you have any advice for aspiring entrepreneurs coming from the corporate world?

Yes. This may sound trite, but you have to be an optimist. You also have to be open to a flexible schedule. You may have heard it before, but working in a startup is backbreaking and awful. There are many times you may want to give up. This means you constantly need to be an optimist.  You always have to keep your eye on the positive aspects. Sometimes, admittedly, even blind optimism helps. The other thing you need to be open to is a flexible schedule. Coming from the corporate world, you may be used to 9-5 meetings and some weekend work but startup life is everywhere, all the time, including time you may think is off.  This may sound obvious, but I have met many a new entrepreneur who came from the corporate world only to attempt to run their startup the same way. Not my advice. Be flexible in your schedule and time. It’s the mental barrier that makes such a difference.

14 Stats to Inform Your 2014 Social Marketing Strategy

As 2013 draws to a close, brand marketers and social media strategists have the opportunity to reflect on learnings from the past year.  While no single industry statistic should stand alone in informing future plans and strategies, a broader snapshot of social network trends, social consumer behaviors and brand social media results can help inform the big picture of social going into 2014.

 

Here are 14 statistics and trends from 2013 to inform your 2014 social marketing strategy. 

Growth, Usage and Trends of Social Networks

1.) Facebook users spend 6.35 hours each month on the social network via their desktop
When it comes to sheer usage, Facebookstill reigns supreme, accounting for almost twice as much time spent monthly by users on the social network over Google. And while mobile usage is on the rise, the majority of this time is still via a desktop experience. (Facebook)

 

2.) Instagram has more than 150 million active users
Now a part of the Facebook family, Instagram has surged in growth and has more than 150 million active users. One third of that numbergrew in the last 6 month time period, underscoring the growing interest in visual content creation and consumption. (Instagram)

3.) 15% of Internet users are on Pinterest 
Nearly one in every 6 people who use the Internet are on Pinterest. What’s more? These users are well educated and 18% have an annual income of $75,000 or more. (Pew)

4.) Tumblr and Pinterest outperform Twitter and LinkedIn when it comes to share of time spent, in minutes
They may not have as large a user base as giants Twitter and LinkedIn, but visually-focused social networks Tumblr and Pinterest win out for time spent on their sites in comparison. (ComScore)

Social Consumer behavior

5.) 33% of consumers cite social networks as a way they discover new brands, products or services 
One in three consumers are discovering new brands and products via social networks. That may not lead to direct attribution on the brand side, yet, but it’s as indicator that brand awareness and reputation are powerful in the social consumer lifecycle. (eMarketer)

6.) 60% of LinkedIn users have clicked on an ad on the site 
2013 has raised much discussion on the effectiveness of social advertising. If LinkedIn’s advertising performance is any type of indicator, relevant social advertising is going beyond awareness building through impressions and driving action. (lab42)

7.) 100% of business decision-makers use social media for work purposes
Social networks are huge, but does that mean they are being used for business purposes? Forrester Research confirmed this year that, yes, statistically every business decision maker is both using social media and doing so in part for some type work purpose.(Forrester Research Inc)

8.) 47% of Internet users share photos or video they found online
Active usage is great in understanding where people spend time, but understanding consumer actions is an even more meaningful way to get insight. Pew reported in 2013 that nearly half of all Internet users share multimedia they discovered somewhere online. The learning here? Resonate with your consumers’ interests, and they will share and propagate your content.(Pew)

9.) 25% of consumers who complain about products on Facebook or Twitter expect a response within 1 hour
Listening without action is no longer an option for social brands. The expectations of consumers have shifted to make brand responses a mandate. A non-response now risks a disappointed customer, at the least, and a negative brand perception. (American Express Open Forum)

Brand Intentions and Results

10.) 91% of executives are planning a more programmatic approach to audience segmentation in the next two years
Two trends are highlighted here: the rise of audience segmentation and the intent to scale social media through a programmatic approach. 2014 will likely bring with it more, personalized content and a strong concentration of building internal infrastructure to make this strategy repeatable and successful. (eMarketer)

11.) 70% of marketers say that content marketing has increased their brand awareness
Content marketing is on the rise for a very important reason: social is an always-on medium and it requires compelling content to consistently reach and resonate with audience members. The good news? iMedia reports that brands are seeing positive results as it pertains to content raising brand awareness. (iMedia)

12.) 65% of marketers cited an increased social media ad budget in their 2013 plans
To advertise on social, or not advertise on social is no longer the question. Two out of three marketers planned to increase their social advertising budget in 2013. And with greater stringency placed on Newsfeed placement, this number will likely rise in 2014 for marketers to reach their intended audiences. (Nielsen)

13.) 79% of Marketers have integrated social media into their traditional marketing activities
2013 solidified the year of social media earning a seat in the integrated marketing mix. Going beyond Paid, Owned and Earned social, brands are now actively integrating social with traditional marketing and creating a full view of social’s integration within CRM systems.  (Social Media Examiner Industry Report)

14.) Pinterest drives twice the website referral traffic of Twitter, LinkedIn and Google – combined
Conversions are a marketer’s best friend. As it pertains to social media, Pinterest proved its power in driving users from the social network directly to corporate websites, second only to Facebook. (Shareaholic)

 

* A bonus stat and parting thought – social media is the top driver for relationship building
52 percent of enterprise brands say social media is the top driver for relationship building/ brand engagement, more than twice as much as email, and quadruple that of corporate websites. Why is this significant? Marketers are realizing and embracing the inherent value of social media – building relationships – and working to create programs that deliver great experiences. The impact: happier, more loyal customers and increased awareness and demand. (Spredfast)

Happy Holidays and best of luck in your 2014 social media planning.  We can’t wait to see how your social brand strategies evolve in the next 12 months.

Authored by:

Jordan Slabaugh

Jordan Viator Slabaugh is the Director of Social Media at Spredfast where she leads the company's social strategy, execution and interactive marketing, as well as consults with clients on using social media to help achieve social business goals.

Being Digital Demands You Be More Human

by John Winsor 

The halls of every marketing organization are filled with rumors about the new crop of hires — computer scientists, math majors and big data experts. For them, consumers are a mass of 0s and 1s that represent online behavior that can be collected, analyzed and targeted.

But the one thing companies seem to keep forgetting is that customers are actually human beings.

The chocolatier Ferrero Rocher learned that lesson recently from Sara Russo, a big fan of its Nutella brand. Such a big fan, in fact, that she started an annual World Nutella Day in 2007. The event, conceived by Russo to celebrate the hazelnut spread, was held in mid-February this year; more than 40,000 fans like the event's page on Facebook. But Ferrero hardly had a positive reaction to the publicity blitz — the company had its lawyers send Ms. Russo a cease-and-desist letter.

Of course, Ms. Russo blogged about the letter and drew a great deal of media coverage. An outcry spread through social media as Nutella fans wondered why Ferrero would want to stop the celebration. Ms. Russo reported on her blog, "They were very gracious and supportive and we were able to have a productive discussion about World Nutella Day living on for the fans, which is the whole point."

I was on the other side of the same kind of interaction a couple of years ago. My son Harry, then 8, sent an airplane drawing to Boeing to see if they'd build his design. We got a very similar letter to the one Ms. Russo received from Boeing asking Harry to stop using the Boeing trademark in his drawings.

I gave my take on the situation in a 2010 blog post titled, "Is Your Customer Service Ready for the New World of Openness?". The dilemma for me was whether to tell Harry about the letter and the cold, hard truth about corporate communications — or lie to him and tell him we didn't receive the letter with the hope of continuing to inspire his childhood creativity for as long as possible.

As you can imagine, the media world blew the story up with articles on thousands of blogs, in hundreds of magazines and even on ABC. While Boeing wanted the story to go away, Todd Belcher, the company's Director of Communications, reached out to Harry personally. After a few chats, Boeing invited the whole family to Seattle to watch planes being built. It was the trip of the lifetime for Harry and it has continued to inspire his creativity.

But Todd's actions weren't only beneficial to my son. By realizing that Harry was just a child with a passion for planes, Todd turned a potentially bad situation into a positive one and Boeing changed the way it responds to the public's ideas.

Nutella and Boeing aren't unique in trying to figure out how to balance their need to control their intellectual property with their desire to connect with fans that demand — and have — more access than ever to corporations and a passion for broadcasting their love of a brand in the age of democratized communications driven by digital technology.

In 2000, Metallica sued 30,000 fans for illegally downloading their music on Napster. Likewise, Mattel has battled fans over making their own versions of Barbies. Fedex even used the DCMA (Digital Millennium Copyright Act) to force Jose Avila to take down a web site that displayed furniture that he'd made out of FedEx boxes.

Like it or not, every brand that has a following will have to deal with this unique digital-age problem.

As companies become more digital and equipped with advanced marketing analytic tools that allow them to know and predict consumers' behavior even better than consumers themselves, they need to be more human as well. It's time to shift the paradigm. Brands need to not only connect directly with their fans but also rethink the concept of brand ownership. Brands can be owned by both the company and the community of customers, fans, and followers that rallies around them.

As new digital marketing tools and systems are implemented they must be balanced by even more analogue systems than before. The ability to reach out, in a human way, to a Sara or Harry can quickly create either positive or negative momentum for your brand. That makes human interaction more important than ever.

John Winsor

John Winsor is the CEO of Victors and Spoils.

Three Steps to Identify Your Wasted Marketing

 

Since the 1950's, executives have been saying the equivalent of, "Half our marketing budget is wasted. The problem is, we don't know which half."

Whether you are in senior management or on the front lines, you should want to finally end this sea of red ink that masquerades as "valuable promotion." It should be intolerable not only if you work in marketing itself, but also if you work in finance, operations, engineering, design, or customer service. 

Wasted marketing dollars prevent true innovation from taking place. Marketing waste makes it impossible to fund a wide range of actually useful initiatives.

The best reason to identify waste is not to cut costs, but instead to free up much-needed funds to improve customer experience, develop innovative products, and actually attract high potential customers.

I'd like to suggest that in three steps, you can find much of the waste in your marketing budget.

Here's how:

1. Identify the marketing programs that you have no metrics to measure.
One of the downsides of social media is that it has led some marketers back to the sort of fuzzy results that used to be associated with image advertising. Many vendors resist any attempt to attach specific metrics to their efforts.

For example, they imply you are a hopeless Neanderthal when you ask, "In a success scenario, how much will your social media program increase our revenues?" Beware such vendors.

It is quite possible to attach metrics to a well-thought-out social media effort, or any other marketing effort that actually results in your business winning, keeping or growing customers. This doesn't mean that every marketing dollar needs to correlate to, say, three dollars of additional revenue; it does mean that you should set specific goals and track the results.

Bottom line: don't ever spend money on a marketing program unless you can measure the results.

2. Identify the marketing programs that have no benefit for customers.
Some of you just blinked, shook your head, or re-read the last sentence. You might think that I'm confused. Marketing, after all, is about growing sales for our company. Its purpose is to help our company, not our customers.

Nope.

In today's hyper-connected world, marketing must benefit your customers. It should teach them valuable information they can use immediately. It should enable them to enjoy benefits and services about which they were previously unaware. It should broaden their perspective and deepen their understanding.

Years ago, I was part of a team that CFO Magazine engaged to reach out to hundreds of financial executives to determine which CRM programs were most successful. There was one clear factor that determined whether a project proved profitable: whether or not it had a tangible benefit for customers. In contrast, projects that simply automated internal marketing functions almost never paid for themselves.

Marketing that has no benefit for customers is nothing more than spin selling, and spin selling nearly always ends up with a race to cut your prices to almost zero.

Bottom line: don't ever spend money on a marketing program unless it has clear benefits to your customers.

3. Identify the marketing programs that have attracted unprofitable or marginal customers.
I was one of the first Groupon-haters. Why? They encouraged small businesses to sell services at a loss to customers who would nearly always be unprofitable to serve.

If the only means you have to attract a customer is to cut your prices in half, you don't want to attract that customer.

Too many companies focus their marketing budgets on customers who will never be profitable to serve. Such companies are living a fantasy: they delude themselves into believing their firm has a bigger market than it actually has. They also suck the energy right out of their business.

Look at it this way. If you work like a dog 70 hours a week to make no profit, you are not running a business, you are running a charity. (Caveat: ignore the last sentence if you plan on selling your company for $5 billion; more on this if I ever am foolish enough to write an article on How to Build the Next Facebook.)

The truth is, your company could be better off diverting money from advertising into customer service or product development. Get a bigger share of the business from your most profitable customers; the way to do that is to expand the scope - and quality - of the services they find useful.

Bottom line: don't ever spend money to attract customers on whom you will lose money.

 
Posted by: 

Bruce Kasanoff