B-B Marketing for Advanced Tech Firms Vegas Enterprise...B-B Marketing for Advanced Tech Firms ... Marketing Sherpa, New B-to-B Research; ... Rank, Select Tech for NPD Evaluate,

B-B Marketing forAdvanced Tech Firms

Enterprise Chapter of Los AngelesAIAA Western Office

999 N. Sepulveda Blvd., Ste. 440El 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

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 differentOdds of success higher for advanced tech start-up selling B-B

90% of fastest growing private businesses sell B-BHigher pricesHigher growth areasNew, 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” BestPractices ≡ Myth

BigsHierarchies to handle processesEconomy of advertising scale = high fixed costs, lower marginal costsResources for distribution, sales, customer mgmt.Brand recognitionTesting capabilities

Smalls≠ Hierarchies; different structures, bus. modelsHigh advertising cost per unit itemLimited resources -processes inefficient, ineffective, or non-existentBuild Brand from zero –takes timeVery 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 mightexceed 30% M&S


Marketing in Company Context


Technology Selection

ProductLaunch

MARKET

COMMERCIALIZATIONOPEN MARKET

DISTRIBUTION

SALESSALES

FINISHEDPRODUCTFINISHEDPRODUCT

REVENUE

PROTOTYPEPROTOTYPE

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GOALS

Definition of Marketing Phases

STRATEGYIdeate, define,

develop, evaluate &

selectprojects for

Commercialization

TACTICSSupport design,development of

specific product,prepare for

Commercialization

OPERATIONSDistribution, Sales,

CustomerRelationship Mgmt.,

Servicing,Operations &Maintenance

Transform Technologies

via projects intoproducts & service

Transform Technologies

via projects intoproducts & service

Determine product features for

customer, refine plans, launch

product

Determine product features for

customer, refine plans, launch

product

SupportPost Product

Launch

SupportPost Product

Launch

© 2009 Dennis Wonica LaserLight Networks Inc. 7 of 43

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


FoundersCTO, CFO, CMO

SalesAdmin/CollectionCustomer Relationship Mgmt

Service, Maintenance, Repair, Support

Distribution & partner mgmt.Maintain brand

Manage product upgrades, performance, enhancements

Feedback on trendsAcquire field data

Ideation/ConceptsIdentify Segments, Targets

Position in ChainCompetition

Alliances, Mergers, Acquisitions, Partners

RisksModel Financials

ForecastsRank, Select Tech for NPD

Evaluate, select best portfolio

Company level communications

Start CommercializationTranslate Customer requirements into technical requirements [Market Req. Doc]

Analyze Customer preferences for product Functions/Features

Define BenefitsPosition productPrepare for LaunchDefine promotional methodsDefine distribution channelsRefine forecastsPricing

SalespeopleAdministrative

Accounting

Product DirectorMarketing Director

Phase Processes vs. Personnel

Strategy Tactics Operations


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."

N

?

Research suggests innovators have ≤10% chance of starting with right strategy

Source: C. Chistensen and S. Anthony, “How to be a Disrupter,” Forbes, Jan 2007


Segmentation

Market Driven RISK Technology Driven

Incremental Evolutionary Revolutionary


Market Driven

Geography Industry Dimension Behavior Benefits Economic Stage/Timing Organization

SELECT CRITERIACommon for B-B

State

National

Regional

World

Sector Number factories, employees,users

Direct, distributor VAR, OEM;Tech ornon-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


Revolutionary: Create A MarketHigh Risk Problem:

No Data ExistNo Comparable ProductsOld Customers Provide Bad InputNew Customers Unreliable

Iterate, Continue Risk Reduction

Solution Outline: Poke It with a StickObserve ReactionsLearn as You Go for Little ExpenseDevelop Strategy from Responses


Create A Market - MethodsExternal Focus - Triangulate


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 it5. Reachable through

distribution/sales6. Big enough to be profitable

+ ID purchasing authority7. Roughly static over time

period

SEGMENTS


Forecasting

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Forecasting

Financial EngineeringStrategy includes Forecasting

Feeds into pro forma statementsExternal investors demand but discount projections

Nail down Cost of Goods Sold becauseRevenue more difficult to estimate than CostForecasts are dynamic:

Diffusion of InnovationProduct SubstitutionTrendsComplementary DisruptionChanging Market Environment – Politics, Legal, Economic, etc


3 Sales Computation MethodsSales = [# Buyers x Quantity Purchased] x Market Share x Price

Top DownMarket Based

Bottom UpCustomer 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


Competitor Analysis

Rank Ordered Methods OtherCompetitors’ sales people SpeechesCustomers Reverse engineeringCompetitors’ reports Company InsidersBusiness publicationsProf. reports (white papers)10 K ReportsDistributors & dealersTrade showsGovernment publications


Check Point

Sufficient Target SizeRevenue > CostsNiche Low CompetitionTiming

STOPSTOP

If the numbers don’t add up +

timing is off, there is no point in proceeding


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 demandExecute 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, 2005 in Knowledge@Wharton


Pricing Impacts Profit morethan Cost or Volume

Price factorsCompany StrategySales executionPeople Mgmt.Metrics, RecordsGov’t Regulations

Source:Profiting from Tough Times Ways Transactional Price Management can be used to create a competitive advantage during a recessionDeloitte Consulting LLP September 2008


Pricing Methods


Pricing

Most new products + ALL revolutionary products use Market Based pricingSubstitute product - know price range of competitor products + compare to your costsPlan to lower costs in future as commoditization sets inUnless you sell in sector with increasing returns (e.g., software) pricing depends on perceived differences in value

Differences = benefits which come from featuresAim for differentiation, price premium

You sell benefits not features


OPERATIONS

Direct Sales vs. DistributorsMajority of high-tech + almost all firms selling B-B use own direct sales force

Limited customers + technical nature of productComplex product dictates multiple customer contacts

Use Distributors depending on:

Market size + locationsCost efficiency - fixed lower cost, higher variable costsStandard productCRM or O&M Needs

Quality of distributor staff, capabilities in complementary areas


Customer Relationship Mgmt.New CRM = Customer Accountability

Treat best customers wellFire worst customers

Focus on Market Drivers – do not let:First big customer define your market direction and force you to over extend capacityCustomers force you to a one off productCompetitors force you to me too products

Voice of CustomerTrack Survey customers regularlyInteract Survey after critical interactionMonitor Examine e-mails, calls, BlogsUpdate Obtain future needs Immerse Interact, visit


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 possibleFind select customers target Focus on customer needs niche

Statistic Source: Marketing Sherpa, New B-to-B Research: Business Technology Marketing Trends, July 2007

Lead Conversion Rate ≈ 1%!!!


Top Problems

TOP PROBLEMSRANK 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 7501-1000 14

> 1000 21

“Decider” involved@ $25K Threshold!


Buyer Finds Seller 80% of Time

And only when Buyer is ready to actSELLER NEEDS TO BE CONSTANTLY VISIBLE

Smaller constant activity better than burst activityTraditional Direct Methods still importantBrand helps visibility – but only a start

Nurture prospective Buyers – keep educated & awareOperations (Sales) closes on Buyers ready to act, converts to Revenue

Message

SUPPLIER BUYERPUSH

Now I’m ready to

purchase


Sales RealityMatch Message to Buyer Cycle

BUYER TIME∼ 3-18 Months

THRESHOLDTHRESHOLD

7-21 People

Celebrate

Evaluate & Decide

Buy

Consider

SearchAware!

Problem

RetainAdvocate

Company Data

Website

White Papers

E-Mails

WebcastDemo

Bid/Quote

Follow Up


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%


Most decide to read message depending on Subject Line; skim contents of 4”x4” reading pane

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Monitor E-Mail DeliveryYahoo blocked both spam + legitimate e-mails from bulk senders on March 11 when it changed its inbound mail serviceSeparate Transactional messages from Marketing messages

Use dedicated IP address for Transactional messagesFed CAN SPAM Act: commercial E-mail must have opt out clause

Does not apply to Transactional & Relationship E-MailAuthentication helps but don’t send too many messagesMail servers use rules looking for excessive bounced e-mails –clean your list


Specific Modern Tactics

2009 Dennis Wonica LaserLight Networks Inc. 38 of 43

Source: Marketing SherpaNew B-to-B Research: Business Technology Marketing Trends, July 2007 and Business Content Study, March 2008

Engin

eers

RANK

OR

DERED

Web 1.0 vs. 2.0 Tactics

For 2.0 Tactics:Sales process shared by buyer & seller, more

personal + more collaborationConnect through narratives, not benefit statements &

feature lists© 2009 Dennis Wonica LaserLight Networks Inc. 39 of 43

Media Shift

On-Line Formats Increase As Print Decreases


Social MediaFavorites for B-B sales:

#1 = LinkedIn; managed data#2 = Hoover’s

Twitter – mixed signals60% do not use after sign up

Facebook - personalZoomInfo

open sources data mining; unmanaged dataIEEE uses it

Social Media may be good for:

SamplingSurveysData miningSpecific real time data


Quick TakesTACTIC PRO CON

E-Mail Widespread; easy to use Steadily decreasing opening rates: <25%

Your Web SiteAlways 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


SummaryPhased Strategy-Tactics-Operations approachNumbers important

ForecastingPricing

Determine your Seller—Buyer response curveDirect Sales is top priority—not advertising, promotions, or distribution

Find first few customers who actually buyHandle all Buyer questions, objections, doubts

Transactional Sales: Buyer trusts product

Consultative Sales: Buyer trusts seller

OLD

NEW


Documents

B-B Marketing for Advanced Tech Firms Vegas Enterprise...B-B Marketing for Advanced Tech Firms ... Marketing Sherpa, New B-to-B Research; ... Rank, Select Tech for NPD Evaluate,