Nesheim Online

DISECTION OF A NOT-SO SECRET START-UP: Stanford success or folly?

Stealth start-up Clinkle got good press recently.

The reporter focused on the unusually deep Stanford roots of the new enterprise. While that is interesting, I found a lot more.

In this blog, I have focused on what can be useful to people like you who are keen to learn what happens in real start-ups, especially those whose founding core team is heavily composed of students.

So let's take the story apart and see what it reveals:

• Leader's family's immigrant history typical. Lucas Duplan, "son of Croatian parents" fits the pattern seen often before in Silicon Valley start-ups: Immigrants and their children have unusually high drive and desire to excel. One VC's survey revealed 62 percent of their portfolio's founder CEOs were immigrants ("green cards"). Good news: This is one aspect of an unfair advantage that others cannot easily duplicate.
• Leader thinks big and bold. Lucas has the mindset sought after by VCs. He starts with a big idea. He is bold in forming his plan and raising seed financing. That's outstanding good news to the ears of winning venture capitalists. Bad news: Lucas could be dreaming about more than he can handle.
• Idea from personal frustration and emotions. Lucas was bothered that he could not use his smartphone like money. Personal needs often trigger the spark that grows into a hot start-up idea. Smartbook began as a college lark. Cisco grow out of frustrations of Stanford University people trying to cope with data storms on campus IT networks between a quagmire of different computers, operating systems and interspersed networks.
• Market category clear. It is the e-wallet market segment, already named, already emerging. Good news: It is clear. Bad news: It is already there, no opportunity for Clinkle to create and name it.
• Crowded market. Though new, the e-wallet market is already filled with different companies seeking the magic thing that gets millions of consumers going wild about using their smartphones to purchase things. Good news: A lot of people anticipate this could be a huge market. Bad news: Lots of competitors with a head start.
• Chance to be "First-to-get-it-right". So far, in the U.S. there is no Gorilla dominating the new market segment. Many are trying, small and large. Africa is the most advanced in the world at using phones to pay for things, but so far none of those competitors is headed for the U.S. That leaves the door open for Clinkle to be first to get it right. Good news: No danger of being "first mover" and thus getting pioneering arrows in Clinkle's back.
• Secret sauce. Clinkle has something hidden that is central to the specialness of their offering. While buried so far, we do know "Clinkle aims to let people pay at retailers using a smartphone without stores needing a major tech upgrade." So we'll have to wait to see what the secret is all about. I am willing to bet this will launch as a flanking strategy, into uncontested territory where Clinkle could quickly establish itself as the leader. Good news: Some very smart, IT savvy Stanford faculty liked the secret sauce enough to invest in the seed round. Bad news: Could be a dud, an idea that does not attract the millions needed for this kind of consumer enterprise to succeed. A great deal hinges in this secret whatever-it-is.
• Execution risk is high. "Execution of a start-up's business plan is everything" is a truism ingrained in the venture world. Doing well what you think you have to do is very demanding for start-ups. This new enterprise is run by students and recent graduates. It has nearly zero experienced managers and IT professionals. Good news: Youth that does not know better can do amazingly creative things, quickly. Bad news: Mistakes in execution, in a crowded market can lead to fatality.
• High early burn rate. With about 30 employees, Clinkle is burning a lot of cash already. The company has announced it will double the number shortly and move to new quarters in San Francisco. Veteran venture investors are reluctant about feeding fledgling start-ups with too much early cash, it is too often wasted. Good news: Bold thinking with confidence is evident. Bad news: Sounds like it could be either an amazing success or an amazing high profile dud.
• 2 years old. Sounds like progress has been made. Certainly in fund raising (read the article for who invested). And hopefully in building a working prototype and gaining a sharp focus on marketing the new product. Good news: Progress in several aspects builds momentum and grows reputations as successful. Bad news: No signals yet about first launch date.
• Rolling thunder launch. Plans are to start selling via college students ("like Facebook"). There are merits in that, one being that peer group is already hooked on using smartphones for as much as possible. The bad news: As an infrastructure play, starting tiny can simply open the door to giants eager to cover the U.S. with some sort of copy of Clinkle. Clinkle's business success depends on some sort of widespread network and related infrastructure coming together at the right places in the right time. That is daunting to any new enterprise. The secret sauce is probably about a solution to that issue. Good news: This issue is a big barrier to competitors. Bad news: There are a lot of un-controllables that have to happen, well, for Clikle's success.
• Enthusiastic culture. From photos and words, it is clear that Clinkle's company culture is full of energy and is very enthusiastic. This may be one of the central elements of the company's unfair advantage. Employees (with stock options) like that can do amazing, very creative things. Clinkle can just look out the window to see the giants who rode to success on their special company culture. That is only good news and is very valuable, too often overlooked by first-time entrepreneurs.
• Buzz has begun. Good news: The press is picking up "the story" about Clinkle. Bad news: The stealth start-up is no longer in a very stealth mode, perhaps talking publicly prematurely.

BOTTOM LINE: This exciting start-up has a lot going for it, the envy of many other new enterprises. It's success is not yet assured. But it is an excellent case study for you. Review the elements and issues noted above, then apply them to your own business plan. That can boost your chances of success as you craft your unfair advantage.

I wish you The Best on your Adventure!

 

 

HOW DO START-UPS MEASURE A MARKET THAT DOES NOT YET EXIST? Tips that work for serial entreprneurs

"How do I measure the size of the market my start-up will be competing in?

I received that question yesterday from a first-timer. It's an important question.

Here are responsive tips from serial entrepreneurs (who do it with little effort).

EXAMPLE

Let's assume you are going to sell an app to consumers. Specifically, it would help people monitor calories eaten daily by scanning the dish of food they eat, using their smartphone. The company business model (how it makes money) is 90 percent sales, plus 10 percent from advertising.

The numbers you will be generating will be Units and Price per Unit. The mulitiplicant is the economic size of your market.

• Top down: TAM = Total Available Market
  
  1. How many end users have an over-weight problem?
  2. How many have an under-weight problem?
  3. For (1.) and (2.) how many are
     1. In the U.S.
     2. Europe
     3. S. America
     4. China
     5. India
     6. Rest of World
  4. What portion of them own a smartphone?
  5. What portion are
     1. Obese
     2. Over weight by 30 pounds or more
     3. Think of themselves as "over-weight"
     4. Have serious (doctor treated) health problems related to excess weight
  6. What portion are
     1. Seriously under-weight
     2. Chronically under-weight
     3. Psychologically under-weight
  7. The total of the above equals TAM
     1. Units
     2. Price per Unit
     3. Dollars
• Focus: Ideal Customer = SAM = Served Available Market
  
  1. Which segments of TAM is your product most appealing to (pick 6)?
     1. Which segment is most eager to use your product?
     2. What 2 related segments are next as measured by product appeal?
  2. In what year will you offer products for each of those 3 market segments?
  3. Line up these 3 segments like Bowling Pins
  4. The total of the above equals SAM
  •  
    1. Units
    2. Price per Unit
    3. Dollars
    4. Calculate % of TAM
       
       
• Sales: Customer Adoption = SOM = Share of Market
  1. For each of the 3 Bowling Pins:
     1. At what rate (% of each of the 3 market segments in SAM) will customers purchase your product, each year, for five years.
        1. Units
        2. Price per Unit
        3. Dollars
     2. Add the 3 sets of numbers to get your Sales.
        1. Total Units
        2. Total Dollars
        3. Average Selling Price
        4. % of SAM

• Boundaries:
  • SAM in early years should be less than 25% of TAM, rarely over 50%.
  • SAM below 10% is too small, or TAM is too large, not focused enough, lacks meaning.
  • SOM over 30% of SAM is rare. Gorillas of new markets settle in around 30%
    • SOM below 10% is too small.
    • Your adoption rare may be too conservative.
    • Or your product is rather boring, not appealing.

Once you start to follow this example for your start-up, you'll get a feel for how it is done. Avoid looking for other people to measure the market for you. Serial entrepreneurs never do. Instead, they focus on exactly what they are offering to their Ideal Customer, find them in various related markets, and figure out a plan for selling to them, including modifying the first product to appeal to each market segment.

BOTTOM LINE: You can forecast something from nothing. New markets just forming in people's heads is where great start-ups begin. Facebook before Facebook. Google before Google. Even more modest new enterprises think the same way. First-timers can learn it. MBAs can learn it. Giant corporation people can learn it. So can you! Do it and add it to the elements you are using to build your unfair advantage.

I wish you The Best on your Adventure!

DISECTION OF A SUCCESSFUL START-UP: A 17 year old’s adventure from idea to success.

Headline: WSJ LINK “At 17, App Builder Rockets To Riches From Yahoo Deal”

Nick D’Aloisio sold Yahoo his technology and company Summly for “undisclosed millions” as reported by the Wall Street Journal on March 25, 2013. Some say $30 million.

It is a special story of a kid with an idea that turns into riches. In it are classical “How To” lessons for you and your start-up ambitions. Here we go:

• Serial entrepreneur. Nick “previously created several apps, including Facemood, . . . and a service that helps people discover new music.” Start-up experience is valuable, for founding a successful start-up it is priceless.
• No pedigree. Nick was not born into greatness. No famous or super-rich parents. No entrepreneurial family-trail. No fabulous university degree. No Silicon Valley location. Just an idea and determination to make it succeed.
• Talented founder. Clearly Nick is the center of attention, for good reasons, primarily for his invention and also his entrepreneurial savvy. The founding CEO of a start-up is what investors focus on. Venture investing is a people business.
• Tiny burn rate. Nick lives at home, works at home. It does not take huge financing to do a great start-up.
• Bold seed funding. SRI International, the revered Silicon Valley R&D firm got involved with Nick’s technology (related to artificial intelligence) and has some ownership. More high profile investors got involved. Zynga’s CEO Mark Pincus, Horizon Ventures (the investment firm owned by Li Ka-shing of Hong Kong). Then came actor Ashton Kutcher, Stephen Fry, and Wendi Murdoch “who collectively gave him a total of $1.5 million in funding.” Start with high quality investors to lead you to more of the same.
• Clear use of funds. The $1.5 million came after he his initial app began getting attention. The fresh funds were for getting code written and patents applied for. Very simple, very clear, very focused. Not overly ambitious plans.
• Focus. Nick put his further education on hold, without abandoning plans for a future university education (perhaps he could buy one as his next move?). Serial entrepreneurs realize doing a start-up is best without significant distractions.
• Fresh category. The new market Nick focused on is “news-reading technology.” That is a new name for a new space, a new market. It is a unique name. People are following it as it develops meaning and commercial endeavors. Selecting (or inventing) new category increases chances of big success.
• No Gorilla. The new market is not yet dominated by a strong market leader. It has no Gorilla yet. Summly had a clear playing field ahead of it. Serial entrepreneurs know it is not wise to attack a market leader. Instead it's best to flank into uncontested territory where there is a good chance to become the Gorilla of the new market category.
• User savvy. Nick’s app attracted users, quickly. Knowing what triggers positive responses from your Ideal End User is critical to success.  That is one reason youth often “gets it right” with youthful technorati (like kids hooked on mobile phones). Nick clearly got it right.
• Strategic partners. In addition to SRI, Nick connected with News Corp. “which signed a deal . . . so that its content could easily be integrated with the [Summly] app.” Wendi Murdoch, an investor, is wife of Rupert Murdoch, the CEO and Chairman of News Corp.. One move leverages another, adding power to the market positioning as leader of the new category.
• First-to-get-it-right. Not "first market mover."  First is death for start-ups. Pioneers get arrows in their backs. Nick had many predecessors trying to get news reading summary products. All were trying to figure out how to attract large numbers of end users. Nick followed them and became "First-to-get-it-right.” Serial entrepreneurs know first is to be avoided, and that first to figure out what sensationalizes end users becomes the big winner.
• Morphed and renamed. First name was Trimit, launched in 2011 as a service for summarizing news. In late 2012 it was re-launched as Summly, reflecting the morphed focus of the refined app. Start, modify, change, shift, alter, focus, launch. So don’t sweat the first name of your start-up, you will change it.
• Clever name. Choice of the new name for the app reflected elements of brand marketing with names, a move that boosts competitive power: (1) alliteration (sum-lee, as in goo-gill, face-book) and, (2) suggestive, bringing meaning and value to users of the product. Clever names add significant value to a new enterprise, especially its branding potential.
• Buzz boomed. Nick “became a minor tech celebrity, and his efforts garnered numerous print-media articles and TV appearances.” Nothing beats a start-up worth writing about, blogging about, Tweeting about. In fact, Nick says Horizon Ventures “contacted me out of the blue” after Trimit began to receive accolades. PR tsunamis are the dream of marketing-minded entrepreneurs, exactly what they spend creative juices to make happen.
• Buyer enthused. Yahoo sees a clear fit for the technology. They see a broader application to more of what the company offers to its end users. The focus is on applying news-reading technology. In fact, the Summly service will be shut down. A large vision for the acquisition made it go down easier, quicker and with a higher price tag for the selling start-up.
• Wise sale. Nick said “a number of companies approached us” about a possible acquisition. Big corporations have staffs looking for start-ups that might be suitable for purchase. Buyer Yahoo has made six since its latest CEO has come aboard. Nick chose with criteria important to the future success of the technology he had created. And he sold, rather than strive to build a large company from this idea. Serial entrepreneurs know when it is a great time to cash in their chips.
• Quick success. From 2011 to March 25, 2013 is very fast for any start-up to succeed. It is rare. Even more rare is the large financial value for such a new enterprise. The chances of repeating this time-to-wealth are historically very slim.

BOTTOM LINE: Dissecting a successful start-up like Nick's Summly reveals a lot of the right things going on. When you can see them in new enterprises (or see them missing), you'll be well on your way to building your unfair advantage.

I wish you The Best on your Adventure!

IS YOUR START-UP FOCUSED TO WIN? Quick test shows where to improve.

"How do I know my start-up idea is focused enough?"

Great question, needs an answer, right now.

Here are tips from serial entrepreneurs I respect:

• Long, multi-word name for company or product/service. This is an immediate sign of lack of focus. Customers read and wonder instead of eagerly respond and make a purchase.
  
  • For example:
    
    • "Horizon Online Entertainment and Games Inc." tells customers you are very broad, wide and expansive in what you are suggesting. They wonder "Just exactly what are you selling?"
  • Better:
    • Company name = Horizon Inc.
    • Business = Causal games
• Vague, or no description of the Ideal Customer. When "customer" is used without more details, it is a tip that work is needed to focus more.
  • For example:
    • "Casual games for people" is pretty broad, lacks precision.
  • Better:
    • "Quick games to play when waiting in lines"
      
      
• Need to demonstrate your product/service. When you must show your product/service to people so they "get it" then you need more work. People must "get it" with just a few words. Write a 3 sentence explanation. Short, crisp, clear. Then you are focused.
  • Words instead of paragraphs: "Just click, launch and play, only seconds away."
  • After that, a demo simply validates your claim to fame. People already "get it."
• Have to educate people so they understand your offering. If your product description requires several paragraphs, each rather long, that's a signal that you have focus work to do. Try thinking of how your product/service does 1 thing extraordinarily well.
  • "Fastest way to kill time."
  • That is powerful, leaves an immediate impression, is compelling.
  • Just a few words.
• Afraid that focusing will miss the big market opportunity. "We want everybody to use it!" is a natural response. Yet that leads start-ups into a land of grey fog where they get lost. Far better to start with a crisp market segment, capture a lot of it, and then move on to the nearby, related markets.
  • Line up your bowling pins.
  • Divide your targeted market of Ideal Customers into separate segments.
  • Select 3 that are related.
  • Choose 1 of the 3 to be your first bowling pin.
  • Education
    • Secondary
      • High school
        1. Private
        2. Religious
        3. Large public
  • Games
    • Casual
      • Mobile
        1. Apple
        2. Samsung
        3. Nokia
  • You will build momentum, gain access to more and more market segments, and grow larger and larger, thanks to starting with crisp focus.
• Brand does not stand for something. What do you want end users to think of when they see the name of your product/offering? The great brands own a word or two. So should yours.
  • Search = Google
  • Cool = Apple
  • Social networking = Facebook
  • So for our example consider this:
    • Quickie games = Horizon

I think you get it by now. Focus is worth the time and brain work. Serial entrepreneurs do it constantly.

BOTTOM LINE: Focus brings power to your start-up idea. Concentration of force is the marketing principle. It gives your new enterprise the opportunity to excite a lot of very specific customers. They immediately "get it." That's what you want when you launch your first product/service. It is central to branding success. Focus also makes it easier for investors to "get it" so you get your money quicker. So work on more focus for your clever idea. It will help you build a powerful unfair advantage.

I wish you The Best on your Adventure!

FOCUS, SIMPLIFY YOUR START-UP IDEA FOR MORE POWER: One sentence per topic does the trick

How do you focus, narrow, and simplify your start-up idea (so it excites a lot of people)?

In my prior blog I discussed what to do when your initial idea for a new enterprise is not exciting many people: the remedy is to modify it, pivot it, change it so it is much more specific. The outcome of your work should be a refined idea that is much more focused, narrow and simple. That's what excites people to say "Aha! I get it! Terrific idea!"

This is very difficult to do, even for serial entrepreneurs.

However, there is hope.

I've learned a trick from the veterans of start-ups that you can try on your idea.

Fill out the following topical outline, USING ONE SENTENCE PER TOPIC.

• START BIG:
  • What is the big opportunity you intend to exploit?
  • What is the first product are you intending to offer?
  • How many users in the world are there for your product?
• SELECT A CATEGORY:
  • What is the name of the new market category your first product will compete in?
• SHARPEN IDEAL CUSTOMER:
  • Who is your Ideal Customer?
    • Describe the demographics of users especially attracted to your product.
  • What in your first product is compelling to your Ideal Customer that noone else has?
  • How many of those Ideal Customers are there?
• GIVE YOUR BRAND MEANING:
  • When your first product is branded, what do you want it to stand for?
  • What word or two do you want people to recall when they think of your brand name?

Your responses to this question should lead you to make significant changes to your initial idea. Test the outcome of your work on the people who first found your idea uninteresting and unclear. Listen to how they respond to your refined description and repeat the process until you find people eagerly responding.

BOTTOM LINE: When you find yourself disappointed by the lack of eager responses from people to whom you describe your initial start-up idea, begin a process of refining the idea so it is increasingly focused, narrow and simple. The power lies in finding a combination of very few words that excites a lot of people. That is a challenge for even serial entrepreneurs. But when you can achieve it, you will be well on your way to building an unfair advantage.

I wish you The Best on your Adventure!

STARTUP MARKETING: (13) Mulitple brands win (but it's tricky to do)

Management prefers a single brand.

Marketing prefers multiple brands.

Start-ups begin with a wonderful singular focus: launch one product, make it famous, brand it, make it the gorilla of a new market category.

What comes next?

To grow, more products must be added. Then the start-up is confronted with the same challenge as the large corporation: What name do we give the new product?

And the big error is made (most of the time): add the company brand name to the new product.

IBM personal computers. Kodak digital cameras. Both major failures.

At first it seems natural to stamp the famous name onto the not-yet-famous new product. Powerful helps the weak.

But the result is dilution of the famous brand plus confusion about what the new product is. Both are weakened. Sometimes fatally.

A brand stands for something. Google is search.

But what happens when three dozen new products have Google attached to them? Simple: brand dilution. People get confused about what a Google is becoming. What the famous established brand stands for diminishes. And worse than that, people get confused about what the new products stand for.

Amazon is struggling with the same issue: Amazon Web Services (cloud) is now dubbed AWS (not very exciting). Then there is Amazon Cloud Drive (is it for photos or competing against Box?). How about Amazon Elastic Cloud? And there is a lot more Amazon [add what you want here].

This can be lethal. Just look at what happened to Yahoo. And Hewlett-Packard.

Microsoft is not a search giant so perhaps entering the search market is not the wisest move. But they did something right when they named their search product Bing and not Microsoft Bing. Bing is search, Microsoft is Windows. No confusion.

Even when staying focused as Yelp has, the competition can become intense. There are over 50 direct competing companies attacking the same market as Yelp. So the temptation to stick to one name is also intense. Competitors target slices of the larger market and attack with focused brands, often with lethal success.

Most start-ups are right to focus everything on making their first product the giant in the new market. That strengthens the brand and fends off competitors, it leads to domination of the new category and gorilla power.

Yet along the trail to IPO the start-ups will unavoidably encounter the issue of how to position, name and brand new products. It is tricky to decide how to do that without diminishing the growing power of the first product as its intial brand increases in stature. When done well, the first brand remains strong and the second is free of confusion, free to compete on its own.

BOTTOM LINE: Start-up managers from large corporations struggle in new enterprise marketing. The focus necessary to win the first branding race to the top of the new marketing mountain is what is needed and they get that. But what is hard is to decide on the name (and positioning and branding) for follow-on products. Mostly they make the error of attaching the company name to each of the follow-on products. This is a quandary for most management people from large corporations who are now trying their first new enterprise, especially MBA trained marketing professionals. If you study and think about this issue, you can overcome and triumph in a new start-up. Serial entrepreneurs have done it and won big time. So can you. It will become part of your own personal unfair advantage.

I wish you The Best on your Adventure!

================================

"Marketing is too complicated to be left to management people who have little experience in marketing and who don't understand its principles." wrote Al Ries.

Rated by Advertising Age as one of the Top Ten living legends of marketing, Ries's findings and related implications in the book "War in the Boardroom" are spot on with the marketing challenges that confront first-time entrepreneurs.

This series on startup marketing follows the principles laid down in that book. I highly recommend the book to startup leaders.

STARTUP MARKETING: (14) Marketing research is subversive

Management follows research.

Marketing follows intuition.

Would you use a search site called Google, or would you prefer to use a search site with the Microsoft name?

Before the launch of Google, there would have been no question which site consumers would have preferred. 

Research will always favor the existing brand. But the companies that begin and become gorillas of new markets are not-yet-brands, they are unknown start-ups.

Try explaining that to a board member from a large corporation when you are about to make a bold marketing maneuver. And while trying it, sit close to the exit. That's where you'll likely be told to make a swift departure.

Serial entrepreneurs live by intuition, that instinct learned from real world experience. They can see through the fog. Yet they are risk-takers without being reckless. From their marketing minds emerge the great start-ups.

That's hard for the big corporation trained manager to accept. Much too dangerous. And he is right, it is far too risky for him because he would be following intuition trained in established enterprises, educated with MBA lessons, and that is far too likely to lead him to make big errors in start-up marketing judgment decisions about new products, branding and strategy.

BOTTOM LINE: Your job is to have confidence following your intuition and learn how to sell your decisions to a reluctant board of directors of your start-up. It is easier with a board composed of start-up winning people. They know the power of intuition over research when making marketing decisions for new enterprises. They learned how, so can you. Make it part of your unfair advantage.

I wish you The Best on your Adventure!

STARTUP MARKETING: (12) Visual hammers win minds

Mangement deals in verbal abstractions.

Marketing deals in verbal hammers.

Right-brained marketing people know they need to use the narrowest possible term to describe a brand or category so they can develop an effective visual hammer. They know the spoken word will be instantly linked to a visual image. Simple and clear, it leads to power that wins.

EXAMPLE: Starbucks' Marketing Returns

A number of years ago, Starbucks hired a management guru to help it define its "big, hary, audacious goal." What came out was "To be one of the most well-known and respected organizations in the world known for nutruring and inspiring the human spirit." Fine for the United States of American, but to emplyees, this is just "management talk."

When entrepreneur Howard Schultz (first Starbucks' marketing hire) returned to take the reigns of a company that had gone astray, he immediately focused on "coffee." In an interview with USA Today he said "We'll spill out more coffee than most coffee shops sell. You won't be able to find a fresher cup of coffee on the planet."

VISUAL HAMMER

Right-brained marketing people decide on a verbal while also considering what the visual might be.

That's the opportunity for a start-up. To own the new category. The start-up's name instantly associated with the new market category. The verbal (Google) triggers the visual (search).

• Nike + Swoosh logo = athletic shoe leader
• McDonalds + Arches = fast food leader
• Louis Vuitton + multiple-logo design = luxury handbag leader
• Rolex + unique watchband = luxury watch leader

It does not matter that Starbucks sells more than coffee. Or that Nike sells more than athletic shoes. Because their visuals are easy to visualize. Far easier than "human spirit" or "respected organization."

BOTTOM LINE: Serial entrepreneurs intuitively search for the visual the moment they start thinking about the name of the company or product or service. They understand the power of the visual hammer to drive into the mind a compelling visual. When you can do that for your start-up, you'll add winning power to your unfair advantage.

I wish you The Best on your Adventure!

================================

"Marketing is too complicated to be left to management people who have little experience in marketing and who don't understand its principles." wrote Al Ries.

Rated by Advertising Age as one of the Top Ten living legends of marketing, Ries's findings and related implications in the book "War in the Boardroom" are spot on with the marketing challenges that confront first-time entrepreneurs.

This series on startup marketing follows the principles laid down in that book. I highly recommend the book to startup leaders.

STARTUP MARKETING: (11) Owning a word is winning, owning all the rest is losing.

Management would like to own everything.

Marketing would like to own a word.

“What is a Sony?” I have no idea. I know what it used to be. Today the name has lost meaning.

“What is Apple?” I know immediately. So do you.

So what is your start-up? What does it stand for? When customers say its name, what pops into their head? When your answer is boiled down to a single word or concept, you have won. If you have to explain using sentences and paragraphs, you lose.

What does not work is standing for “great customer service,” or “top quality products,” or “lowest price.” Left-brainers use those phrases and end up explaining what they mean with a lot of words.

Right-brained marketers want to supply a single word that sums up the customer experience such as what is meant by “great customer service.” Otherwise, there is no way for a consumer to file the brand into the mind.

The objective of a marketing program used to be to make the brand famous. Today it is to answer in a single word the question “What is a [your company’s name]?”

Here are some examples:

• What is Campbells? Soup.
• What is Domino’s Pizza? Home delivery.
• What is Red Bull? Energy drink.

Check out automobiles:

• BMW = Driving
• Lexus = Luxury
• Mercedes = Prestige
• Scion = Youth
• Volvo = Safety

Are you struggling with your start-up standing for something? Try applying these right-brained marketing tools:

1. Focus the product line. Giant corporations sometimes get away with broad lines of products and services if they have a strong name like General Electric. Google is heading that way (from “search”). But focus requires dropping everything other than the one thing that can make the name stand out. For start-up CEOs, focus takes guts and often a fight with the board of left-brained investors. Nokia dropped rubber tires, trees and telecommunications gear to do only mobile phones. You know the rest of the story.
   
   
2. Focus the company name.  Start-ups can change their names to reflect more of what the company wants to stand for. Broadcom is better than Integrated Circuits Inc. and rides the expansion of mobile phones to smart phones requiring ever-larger (broader) communications channels.
   
   
3. Focus on an attribute of the brand. To build a brand, you need to stand for something in the prospect’s mind. Burbn Inc. shifted its name to Instagram when founders decided to change from a multi- featured HTML5 check-in project to a business focused on mobile photography. That’s a classic example of how real start-ups cleverly change their direction and then focus and win (pivoting, morphing, shifting, flanking, whatever the word, you get it) by becoming a name that stands for something in the prospect’s mind. It the moment Instagram says it stands for “Fast, beautiful photo sharing.” “Instant photo sharing” is better. Beautiful lacks crisp meaning. More attributes requires more thinking and more clicks.

That’s how to move from a meaningless name to a branded start-up. It takes right-brained marketing.

BOTTOM LINE: Serial entrepreneurs are eagerly pursued by investors because they know how to create a marketing program that differentiates their business from the competition. Prospective customers recognize instantly what the company is about, in a word or two. That’s what you must do for your new enterprise. It is not easy. But when you can do that, you’ll be well on your way to building an unfair competitive advantage that leaves your competition complaining.

I wish you The Best on your Adventure!

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"Marketing is too complicated to be left to management people who have little experience in marketing and who don't understand its principles." wrote Al Ries.

Rated by Advertising Age as one of the Top Ten living legends of marketing, Ries's findings and related implications in the book "War in the Boardroom" are spot on with the marketing challenges that confront first-time entrepreneurs.

This series on start-up marketing follows the principles laid down in that book. I highly recommend the book to start-up leaders.

STARTUP MARKETING: (10) End Targets Win = Center of market loses, either end is where the winners are

Management targets the center of the market.

Marketing targets one of the ends.

Where is the "sweet spot" for a startup? What portion of the market is best to aim at?

Most responses are "Aim for where the most customers are, that's the fat middle."

However, serial marketing minds know that is death. Instead they aim for either end of the market.

Do you remember the famous "bell curve?" The fat middle is what management thinks is where the startup should aim. But there is where most of the fights occur between startups who have copied each other and stand for nothing different.

Instead, think of that curve upside down with fat high ends and a sagging middle. That's how marketing minds see each new market. Here are some examples from a huge industry:

• Airlines: Singapore Airlines and Emirates battle for the high-end customers of the premium market segment, while the value market is lead by Southwest Airlines and AirAsia in Asia, and Ryanair in Europe, and Gol Airline in South America. All the rest (hundreds?) are in and out of bankruptcy each slugging it out for seats in the undifferentiated middle with profits determined by the price of jet fuel.

The temptation for first-time entrepreneurs is to think the middle is where the riches are. But there is only where commodities are, where startups fight among their undifferentiated selves.

It makes common sense that you cannot be both a premium airline ("luxury") and a value airline ("cheap") at the same time. Nor is it wise to try to be an "affordable luxury airline", or an "bit more expensive low cost airline". Those fight it out for the profit thin middle market.

All startups, including industrial grade new enterprises face this marketing dilemma: "Should we pick one of the ends, or fight it out in the middle with the mob?

That decision separates management from marketing. It is crucial to make the marketing choice, go for one of the ends?"

BOTTOM LINE: Marketing minds of serial entrepreneurs pick one end of their new market to dominate, leaving the rest to fight in a bloodbath of red ink in the middle. That calls for both a wise choice and focus. It makes sense to serial entrepreneurs who know that to win they must focus on executing well their plan to dominate a target market segment. That's how the company's product gets branded and stands for something compelling for the ideal customer. When you can figure that out for your startup, you'll be well on your way to building an unfair competitive advantage.

I wish you The Best on your Adventure!

================================

"Marketing is too complicated to be left to management people who have little experience in marketing and who don't understand its principles." wrote Al Ries.

Rated by Advertising Age as one of the Top Ten living legends of marketing, Ries's findings and related implications in the book "War in the Boardroom" are spot on with the marketing challenges that confront first-time entrepreneurs.

This series on startup marketing follows the principles laid down in that book. I highly recommend the book to startup leaders.