B-B Marketing for
Advanced Tech Firms
Enterprise Chapter of Los Angeles
AIAA Western Office
999 N. Sepulveda Blvd., Ste. 440
El Segundo, CA 90245
5 May 09
Dennis Wonica, Ph. D.LaserLight Networks Inc.
213-928-3822 [email protected]
Outline
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Overview + Definition of Marketing Phases
Strategy
Segmentation
Forecasting
Tactics
Pricing
Operations
Distribution & Sales
Buyer-Seller Response
WEB 1.0 vs. 2.0
Social Media
LATEST PROBLEMS
& TRENDS
Motivation for Briefing
Most ―Marketing‖ = Business to Consumer (B-C)
Most high tech start-ups market and sell Business to Business (B-B) and/or Business to Government (B-G) methods different
Odds of success higher for advanced tech start-up selling B-B 90% of fastest growing private businesses sell B-B Higher prices Higher growth areas New, Unique, and Different products
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STAT Source: Scott Shane, The Illusions of Entrepreneurship, Yale Univ., 2008
© 2009 Dennis Wonica LaserLight Networks Inc.
Adopting “Bigs” Best
Practices MythBigs
Hierarchies to handle processes
Economy of advertising scale = high fixed costs, lower marginal costs
Resources for distribution, sales, customer mgmt.
Brand recognition
Testing capabilities
Smalls
Hierarchies; different structures, bus. models
High advertising cost per unit item
Limited resources -processes inefficient, ineffective, or non-existent
Build Brand from zero –takes time
Very limited testing capability
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Determine strategy first, then adopt/adapt
© 2009 Dennis Wonica LaserLight Networks Inc.
Typical M&S Numbers
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Typical Costs for Industrial Products via Direct Sales
Established
Firms
Lead
Generation
Percent of
Revenue
Marketing 60% 3.8%
Sales 40% 11%
M&S Total 15%
As high as 30%
STAT Source:
Marketing Sherpa, New B-to-B Research; Business
Technology Marketing Trends, July 2007
New firms might
exceed 30% M&S
© 2009 Dennis Wonica LaserLight Networks Inc.
Marketing in Company Context
© 2009 Dennis Wonica LaserLight Networks Inc.
Technology Selection
Product
Launch
$
$
$Strategic Marketing
Tactical Marketing
Operational Marketing
Technology
PortfolioNPD
SUSTAINING
ENG.
ResourcesDebt & Equity
Debt & Equity STOP
MARKET
COMMERCIALIZATION
OPEN MARKET
DISTRIBUTION
SALES
FINISHED
PRODUCT
REVENUE
PROTOTYPE
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GOALS
Definition of Marketing Phases
STRATEGYIdeate, define,
develop,
evaluate &
select
projects for
Commercialization
TACTICSSupport design,
development of
specific product,
prepare for
Commercialization
OPERATIONSDistribution, Sales,
Customer
Relationship Mgmt.,
Servicing,
Operations &
Maintenance
Transform
Technologies
via projects into
products & service
Determine product features for
customer, refine plans, launch
product
Support
Post Product
Launch
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Which Matters Most?
Marketing vs. Sales
Strategy Tactics Operations
Answer: A Continuum
No Strategy
No Tactics
No Operations
No Customer
No Sellable Product
No Revenue
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Founders
CTO, CFO, CMO
Sales
Admin/Collection
Customer Relationship Mgmt
Service, Maintenance, Repair, Support
Distribution & partner mgmt.
Maintain brand
Manage product upgrades, performance, enhancements
Feedback on trends
Acquire field data
Ideation/Concepts
Identify Segments, Targets
Position in Chain
Competition
Alliances, Mergers, Acquisitions, Partners
Risks
Model Financials
Forecasts
Rank, Select Tech for NPD
Evaluate, select best portfolio
Company level communications
Start Commercialization
Translate Customer requirements into technical requirements [Market Req. Doc]
Analyze Customer preferences for product Functions/Features
Define Benefits
Position product
Prepare for Launch
Define promotional methods
Define distribution channels
Refine forecasts
Pricing
Salespeople
Administrative
Accounting
Product Director
Marketing Director
Phase Processes vs. Personnel
Strategy Tactics Operations
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STRATEGY
“You‟ve got to be careful if you don‟t know where you‟re going „cause you might not get there!”
--- Yogi Berra
Why You Need a Strategy
Alice’s Adventures in Wonderland "Would you tell me, please,
which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where‖ – said Alice.
"Then it doesn't matter which way you go," said the Cat.
"– so long as I get somewhere," Alice added as an explanation.
"Oh, you're sure to do that," said the Cat, "if you only walk long enough." ?
Research suggestsinnovators have
10% chance ofstarting with rightstrategy
Source: C. Chistensen and S.Anthony, “How to be aDisrupter,” Forbes, Jan 2007
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Segmentation
Market Driven RISK Technology Driven
Incremental Evolutionary Revolutionary
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Market Driven
Geography Industry Dimension Behavior Benefits EconomicStage/
TimingOrganization
SELECT CRITERIACommon for B-B
State
National
Regional
World
Sector Number factories, employees,
users
Direct, distributor VAR, OEM;
Tech or
non-tech, brand loyalty
Cost
Performance
“ilities”
Turnover, production process, Type/size of customers, Buying cycle, Patterns
Product Life Cycle
Procedures;
Centralized decentralized;
Profiles of decision makers
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Revolutionary: Create A MarketHigh Risk Problem: No Data Exist
No Comparable Products
Old Customers Provide Bad Input
New Customers Unreliable
Identify and Prioritize Risks + Assumptions
• Define Good Enough Solution to Problem, Need
• Reverse Engineer Financials
• Identify 50 Assumptions/Barriers
Validate Assumptions, Reduce Risks thru
Experiments
• Use Prototypes
• Simulate Market Locally
• Examine External Data
• Research Market at Grassroots Level
• Test, Test, Test
Assess, Shape Strategy for Best
Chance of Success
• Change as Necessary
• Enhance Understanding
• Constantly Reduce Risks
• Verify or Refute Assumptions
Iterate, Continue Risk Reduction
Solution Outline:
Poke It with a Stick
Observe Reactions
Learn as You Go for Little Expense
Develop Strategy from Responses
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Perform Customer Ethnography
Personal Interviews With
Potential Customers
Talk to VCs, Consultants,
Sector Experts
Delphi Method
Examine Non-mainstream
Fringes
Study Lead Users
Talk to Sales People &
Distributors
Create A Market - MethodsExternal Focus - Triangulate
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Evaluate Segments—Filters
1. Responds differently to different tactics
2. Recognizable using common variables
3. Can you make a useful product for it
4. How large is it
5. Reachable through distribution/sales
6. Big enough to be profitable + ID purchasing authority
7. Roughly static over time period
SEGMENTS
1. IDENTIFIABLE
2. DIFFERENT
3. ACTIONABLE
4. MEASURABLE
5. ACCESSIBLE
6. SIZEABLE
7. STABLE
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Forecasting
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Forecasting
Financial Engineering
Strategy includes Forecasting Feeds into pro forma statements External investors demand but discount projections
Nail down Cost of Goods Sold because
Revenue more difficult to estimate than Cost
Forecasts are dynamic: Diffusion of Innovation Product Substitution Trends Complementary Disruption Changing Market Environment – Politics, Legal,
Economic, etc
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3 Sales Computation Methods
Sales = [# Buyers x Quantity Purchased] x Market Share x Price
Top Down
Market Based
Bottom Up
Customer Based
Bound & Converge
Scenario Based
Most Likely
Optimistic
Pessimistic
Chain Ratio (akaChinese Market
Method);
Judgments
Direct Sales
Must estimate Separately for New
Market
Could Estimate Separately for
Existing Market
You Vs.
Competitors
Your Goal: 100%
Your Price per Unit
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Competitor Analysis
Rank Ordered Methods Other
Competitors’ sales people Speeches
Customers Reverse engineering
Competitors’ reports Company Insiders
Business publications
Prof. reports (white papers)
10 K Reports
Distributors & dealers
Trade shows
Government publications
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Check Point
Sufficient Target Size
Revenue > Costs
Niche Low Competition
Timing
STOP
If the numbers don‟t add up +
timing is off, there is no point in proceeding
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TACTICS
Concept Testing
Expose customer to single concept, get direct response (monadic testing)
Accurate 80% of time within 20% range Data from: personal interviews, Web surveys, E-
mail, panels, telephone, et al
Useful as Bulk filter: Establish features before starting costly product dev. Level of interest, rough price vs. volume demand Execute at low cost, change rapidly, repeat
Use Prototypes - evaluate fit vs. needs
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Source: L. Lodish, Pricing and Positioning for Entrepreneurial Marketers, March 30, 2005in Knowledge@Wharton
© 2009 Dennis Wonica LaserLight Networks Inc.
Pricing Impacts Profit more
than Cost or Volume
Price factors Company Strategy Sales execution People Mgmt. Metrics, Records Gov’t Regulations
Source:
Profiting from Tough Times
Ways Transactional Price Management can be used to create a competitive advantage during a recession
Deloitte Consulting LLP September 2008
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Pricing Methods
Market Based
Value in Use
Price by Feature
Price as Whole
Product
CompetitionTarget Price = Target Cost + Target Profit
Cost & Technology
Based
Technology, SOA, or Complex Product
Cost + Acceptable
Markup
Total Product Cost
Lifetime Cost
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Pricing
Most new products + ALL revolutionary products use Market Based pricing
Substitute product - know price range of competitor products + compare to your costs
Plan to lower costs in future as commoditization sets in
Unless you sell in sector with increasing returns (e.g., software) pricing depends on perceived differences in value Differences = benefits which come from features Aim for differentiation, price premium
You sell benefits not features
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OPERATIONS
Direct Sales vs. Distributors
Majority of high-tech + almost all firms selling B-B use own direct sales force Limited customers + technical
nature of product Complex product dictates
multiple customer contacts
Use Distributors depending on: Market size + locations Cost efficiency - fixed lower
cost, higher variable costs Standard product CRM or O&M Needs
Quality of distributor staff, capabilities in complementary areas
Direct Sales
Founders at Start;
Your own employees
Reseller –Distributor
Sells your product as is
Value Added Reseller or Distributor
Sells your product and bundles other products together to solve customer problems
Value Added = Relationships +
Integrated Solutions or Systems
May become a customer
Sales Reps
Commission/Contracts
Bear own sales expenses
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Customer Relationship Mgmt.
New CRM = Customer Accountability Treat best customers well Fire worst customers
Focus on Market Drivers – do not let: First big customer define your market direction and
force you to over extend capacity Customers force you to a one off product Competitors force you to me too products
Voice of Customer Track Survey customers regularly Interact Survey after critical interaction Monitor Examine e-mails, calls, Blogs Update Obtain future needs Immerse Interact, visit
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LATEST PROBLEMS& TRENDS
Begin at the End—Sales
Even for established, Best Practice firms selling B-B:
Increase your odds: Create unique product revolutionary if possible Find select customers target Focus on customer needs niche
Statistic Source: Marketing Sherpa, New B-to-B Research: Business Technology Marketing Trends, July 2007
12% Inquiries
to Qualified Leads
40% Qualified
Leads to Prospects
20% Prospects
to Sales
Lead Conversion Rate 1%!!!
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Top Problems
TOP PROBLEMS
RANK ORDERED
M&S to Committees, Groups
Competing for leads in rich media environment
Generating PR
Creating perceived value
Long sales cycles
Budget
New marketing methods
Source: Marketing Sherpa, New B-to-B Research: Business Technology Marketing Trends, July 2007
Company Size
Avg. # Participants
100-500 7
501-1000 14
> 1000 21
“Decider” involved
@ $25K Threshold!
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Buyer Finds Seller 80% of Time
And only when Buyer is ready to act
SELLER NEEDS TO BE CONSTANTLY VISIBLE
Smaller constant activity better than burst activity Traditional Direct Methods still important Brand helps visibility – but only a start
Nurture prospective Buyers – keep educated & aware
Operations (Sales) closes on Buyers ready to act, converts to Revenue
Message
SUPPLIER BUYERPUSH
Now I’m
ready to
purchase
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Sales Reality
Match Message to Buyer Cycle
BUYER TIME
3-18 Months
THRESHOLD
7-21 People
Celebrate
Evaluate & Decide
Buy
Consider
SearchAware
!Problem
Retain
Advocate
Company Data
Website
White Papers
E-Mails
Webcast
Demo
Bid/Quote
Follow Up
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MOSTLY TACTICS…..
E-Mail Opening Rates Decreasing
Use consistent address - most recipients report spam based on From field
Get to the point—summarize or use short sentence—link to Web Site
Include contact info as appropriate
Design for common E-Mail Programs
• Most B-B recipients use either Microsoft Outlook or Lotus Notes
• For marketing messages, some use Yahoo = 25%; Hotmail = 20%; AOL = 18%
© 2009 Dennis Wonica LaserLight Networks Inc.
Most decide to read message depending on Subject Line; skim contents of 4”x4” reading pane
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Monitor E-Mail Delivery
Yahoo blocked both spam + legitimate e-mails from bulk senders on March 11 when it changed its inbound mail service
Separate Transactional messages from Marketing messages Use dedicated IP address for Transactional messages
Fed CAN SPAM Act: commercial E-mail must have opt out clause Does not apply to Transactional & Relationship E-Mail
Authentication helps but don’t send too many messages
Mail servers use rules looking for excessive bounced e-mails –clean your list
RegularESPs provide reporting capabilities; request subscribers place your e-mail
address onto their ―safe list‖
Certified(Goodmail Systems, et al)
Provides services/tools to help your message get to inbox intact; software
embedded into commercial spam filters used by large corporations; only
accepts 10%-20% of applicants; $2.50 per thousand messages + $399
accreditation fee; need static IP address
Certified Email Paper
Suppression(Goodmail Systems)
Provides electronic proof that e-mails were delivered and received; takes
digital signature; $0.03 per message; available only to senders with good e-
mail reputations
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Specific Modern Tactics
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Modern Tactics Decision Makers
White Papers Vendor Sales Reps
Webinars/Webcasts Online User Community
Telemarketing (includes cold call)
Vendor Trade Shows, Conferences
Web Sites–Search Engines
Webcasts from Vendor
Podcasts Webcasts from B2B Source
Blogs & RSS feeds B2B Trade Shows, ConferencesE-Mails (includes mobile)
Source: Marketing Sherpa
New B-to-B Research: Business Technology Marketing Trends, July 2007 and Business Content Study, March 2008
Eng
inee
rs
RANK
ORDERED
Web 1.0 vs. 2.0 Tactics1.0 2.0
1-way Communications 2-way Communications
Standard E-Mail campaign Social networking
Web page Wikis
Basic info material, downloads
Collaborative sites
Search engine optimizationBlogs, videos
Webinar
For 2.0 Tactics:
Sales process shared by buyer & seller, more personal + more collaboration
Connect through narratives, not benefit statements & feature lists
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Media Shift
On-Line Formats Increase As Print Decreases
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Social Media
Favorites for B-B sales: #1 = LinkedIn; managed data
#2 = Hoover’s
Twitter – mixed signals 60% do not use after sign up
Facebook - personal
ZoomInfo open sources data mining;
unmanaged data IEEE uses it
Social Media may be good for: Sampling Surveys Data mining Specific real time data
MediumPaid (P)
or
Free (F)
Targeted
for
Business?
Jigsaw Both
LinkedIn Both
Twitter F Mixed
Yammer F
MySpaceF X
Plaxo F
Hoover’s or
OneSourceP
ZoomInfo F/Other
Sim
ilar
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Quick TakesTACTIC PRO CON
E-Mail Widespread; easy to use Steadily decreasing opening rates: <25%
Your Web Site
Always available; basic info &
data replaces salesperson to
first order
Work to keep relevant, current; work to
gather lead & customer statistical data
Vertical Search Engines
(Ex: GlobalSpec)
Focused on one sector; faster
searches, more relevant to
Buyer
Google/Yahoo search algorithms better at
present
On Line Publications
(Ex: Aviation Week)
Quality pub highly useful for
getting good leads; webinars,
white papers, articles
Publication for Audience or for
Advertisers?
On-Line Video
(Ex: You-Tube)
Product demos; useful for
complex items or how to use;
easily accessed by Buyer and
Seller
Customer may not view; how to track
impact
Virtual Events
(Ex: Unisfair)
Greatly reduced marketing &
sales costs
Need high speed connectivity or pay to
get into Virtual Tradespace
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Summary
Phased Strategy-Tactics-Operations approach
Numbers important Forecasting Pricing
Determine your Seller—Buyer response curve
Direct Sales is top priority—not advertising, promotions, or distribution Find first few customers who actually buy
Handle all Buyer questions, objections, doubts
Transactional Sales: Buyer trusts product
Consultative Sales: Buyer trusts seller
OLD
NEW
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