By Alyson Dutch
In a nutshell, marketing is any method used to get a product / service into the hands of someone who wants to buy it; and, preferably can’t live without it. Which methods you choose, depend solely upon who your customer is and how you can most readily engage their interest and get them to pull their credit card from their wallet. Ideally, choose from this list a series of methods that will become your “marketing mix.”
Advertising – One of the most expensive, yet influential marketing methods, advertising is the purchase of space or time in a magazine, newspaper, magazine, TV, radio or online that is filled with fixed content provided by the advertiser. Often compared to PR, advertising, is subjective, while PR is objective. There is high art and science that goes into advertising and it’s incredibly powerful when paired with other forms of marketing, but is very expensive to employ alone, especially for startups. Trade advertising can be very targeted and affordable, but national ads, like magazines can cost anywhere from $160K a month for one page. TV advertising can also be targeted and possibly affordable on cable, but national advertising can’t be done effectively for less than millions of dollars.
Advertorial – a hybrid of advertising and publicity in a paid-for space in print or electronic media. In a magazine, this is something that looks like an article or editorial in style, but the space has been paid for. Advertorial is usually cheaper than advertising.
Awards and recognition – soliciting awards for your product are a good way to gain credibility with your customer, whether it be getting a Good Housekeeping seal for a home product, USDA organic certification for a natural food or a green Energy Star stamp of approval for an eco appliance, awards are like having celebrities in your pocket; they create automatic reputation and move you further along the path of a customer having enough faith to try something new.
Direct mail – The use of the United State Postal Service to sell a product/service. This could be anything from postcards, to special packages of samples sent to scads of addresses which are purchased by SIC (standard industrial classification aka industry identifier) codes and/or zip codes. There is some high technology that has popped up over the past 20 years that makes targeting of address information a science. Direct mail tends to be a very expensive form of marketing, probably only second to advertising, however, it can be extremely effective. Recently, some of the smartest direct mail uses handwriting and what appears to be personally scribbled Post-It Notes to encourage recipients to open the envelope or read the contents.
Direct response TV (DRTV) – This includes all forms of infomercials, however long or short and also “DRTV” purveyors like Home Shopping Network and QVC. There are many companies who sell a full service DRTV experience specific to a genre of product and include magazine ad buys to support “tune in” to the TV spot the produce. DRTV uses buys of time on television to sell a product and now “DRTV” styled campaigns are appearing for free on YouTube.
Email marketing – An aspect of online marketing that uses email, in various forms, to reach a potential customer and links back to a website to sell a product/service. This is considered a form of direct marketing because its results are wholly measurable.
E-marketing – aka online marketing. There are certain schools of thought about selling product online, and it is indeed, an entire world unto itself. Think of e-marketing as another product distribution route, like you might think of choosing retail, wholesale, or creating a product soley for OEM (original equipment manufacturer) distribution. It is still the “wild west” in many regards which make the possibilities truly endless, but in short, all traditional methods of marketing are employed, along with new technologies which can only be made possible on the internet. The success of e-marketing is based on a relationship that falls within and in some cases, games the search process of Google.
Integrated Marketing – this means that different forms of marketing are used together or are inserted into an environment so they appear to be natural to content and not look so much like advertising. A form of integrated marketing are products/services that are “integrated” into a video game, or products that are integrated into a reality TV show. Another example might be simply the addition of a web link integrated into a banner ad. The fact that Tivo made the eradication of TV commercials possibly has made integrated advertising one of the most important trends today. The rise of reality TV is a good example of this, as stand alone advertising is increasingly becoming ineffective because viewers now have a choice about whether they look at it or not.
Gifting suites – Usually held during “awards season,” when the Sundance Film Festival (January), Grammy’s (February), Oscars (March) and Emmys (September) take place, gifting suites take advantage of the time of the year when a plethora of celebrities will be in one place and invite them to sample products in return for “schwag.” Product companies pay for the opportunity to place their product into the physical hands of celebrities, give them product, take photos of them and use the celebrity’s names and photos for their marketing. This is a very cheap and effective way of garnering celebrity credibility for a product without paying for a very expensive celebrity endorsement. There are a handful of companies who do gifting suites, some are much better and reputable than others.
Guerrilla tactics – Generally a very inexpensive, if not free, creative approach to reach a customer without a formalized approach. A flash mob might be an example of this, or an informal street team descending upon a crowd creating a spectacle to grab attention.
Media introduction salons – Media introduction events are business match-making services that put consumer packaged goods companies in direct contact with reporters from magazines, newspapers, blogs, TV and radio shows. Produced in a trade show format, media introduction events are designed to showcase products to reporters at the time of the year they specifically need content for their “annual issues” and “roundup stories.” This form of marketing methodology was created as a cost effective alternative to hiring a PR firm which traditionally charge a monthly retainer with a contractual obligation for a period of time. Media introduction events are beneficial to reporters who each year produce annual “roundup stories” themed to match their news cycle. For example:January, New Year’s resolutions; February, Valentine’s Day gift guides; April, Earth Day; May, Bikini prep season; June, Weddings; July, Summer; September, Back to school; October, Pink products that coincide with Breast Cancer Awareness Month; December, Holiday gift guides. There are a handful of companies who produce these events; some are better than others. Being that we created Consumer Product Events as the first to present these events all throughout the annual news cycle, we, of course, recommend this one!
Network marketing – This is really a form of a business structure, otherwise known as “multi level marketing.” An example of network marketing are companies like Mary Kay Cosmetics or Jafra. Network marketing is incredibly powerful because by its very nature it is exponential and percentages of profits are passed on as the network grows.
Networking – is the basis of relationship building, networking can be utilized as part of a marketing mix, but should be a constant in any entrepreneur’s life. People buy products from people they like. Often they’ll buy products they don’t even need just to support the business of someone they like. Reputation is everything in business. Networking can be done in person by attending professional events, parties, scheduling one on one meetings or online through social networks.
Online marketing – This includes any marketing method used online; a wide spectrum of methods, some of which are online versions of traditional marketing methods and some specific to the web. This may include search engine optimization, sales funnel marketing, pay per click, banner ads, keywords, video sales letters. Usually, these methods are being quickly created and the technology is being up leveled on a constant basis.
Pay Per Click – A very direct online marketing method that allows you to control of how much exposure you get and exactly who is clicking on your ads because you only pay when someone clicks. This is a very powerful way to gather intelligence about your customer and what they are looking for on the internet. Once you determine the exact words and phrases they are using on Google to look for a product like yours, you bid on those words, paying anywhere from $1-$5 for a word or phrase and your three line text ads show up when someone searches for those phrases. This is the most direct method of getting a customer to your website. Pay Per Click (PPC) is available on every major search engine, but it mainly dominated by Google. You can purchase PPC on Facebook and LinkedIn. Tip: use the Google “keyword tool,” it will show you what words you need to use.
PR – There are many synonymous names for PR, publicity, public relations, media relations, but the one thing that differentiates it from all other marketing modalities is that PR is the persuading of the press to report about a product/service. The beauty of PR is the “third party endorsement” that a reporter’s opinion about product/service which provides the #2 method of marketing power available. PR tends to be very inexpensive for the return of investment and next to trade show investment, the first marketing method startups use to launch a product. Known as an “island of objectivity in a sea of advertising prejudice.”
Professional associations – are important places to be seen and involved. The more involved you are with your industry’s professional associations, the more you are seen as a leader and expert in your field. Professional associations, which sometimes produce an industry’s most influential trade shows, are good places to make announcements and to rally your peers to talk about industry factors that affect your business.
Promotions – Usually a formally paid-for opportunity, a promotion is a marketing exercise that starts with an incentive and is engineered to engage a customer in a contest, sweepstakes or some kind of activity that generates awareness of a brand.
Referral programs –Using a referral program of any kind is one of the most effective and inexpensive ways to market because it uses the recommendation of an existing customer, whose already had a good experience with you to serve as a mouthpiece. The elements of a referral program are based on an incentive. The incentive must be formidable, as large a discount or as shiny of an award as you can possibly muster. Humans are driven by incentive. I know an e-marketer who actually gives away a Ferrari to his affiliate marketers to get them motivated. He makes so much money on the backend from this program, the car is a drop in the bucket to get them into action. On the internet, there are specific referral programs called “affiliate programs,” which are powerful, formally organized methods to refer business with an incentive attached.
Sales / distribution – Unlike all the other modalities under the marketing umbrella, sales is the only element on this list that is 100% necessary; the others are chosen based on your customer.
Sampling – A direct experience of getting product into the hands of potential customer. This can be as simple as providing a sample of a coffee in front of a cappuccino shop, food samples in Costco, getting product to magazine stylists who work with celebrities, a free download of a software, sending something in the mail or paying to put your products into a Hollywood celebrity gift bag. The gift bag samplings can be very effective, but don’t provide an opportunity to follow-up with the celebrities who get the product. If you do a sampling with your staff or street team liaising directly with customers, you have an opportunity to gather very valuable feedback from customers. Gifting suites fall under this category.
Search Engine Optimization – The basic and most important part of online marketing, search engine optimization or “SEO,” are all the tactics used to ensure that your website is found on the internet. Having a website up and not doing SEO is like having a party and forgetting to send invitations; it’s that pivotal. There are many ways of doing SEO and practitioners who will offer certain tactics, which get around firewalls and rules that Google imposes very often. Think of your website as you would a retail store you might have bought on 5th Avenue. It’s your flagship and your customers need to know it exists and how to get there. As the head of a company, don’t pawn this off on junior staff or dubious vendors; it’s your responsibility to be involved with this and stay up on the changes that are made by Google on a regular basis. These rules change so frequently and can be so massive that businesses that been put out of business altogether when Google imposes a change; stay up on it.
Social networking – the primary social networks today are Facebook, Twitter, GooglePlus, Instagram, Pintrest and LinkedIn, though, the web is home to millions of social networks specific to certain populations. Social networking is powerful, specifically, for its very unique ability to grow virally.
Special events – the creation of a physical event that is produced to create a material experience of a product/service. Typically, special events are used as launch pads for film or retail store openings or brand announcements. Special events are extremely expensive and usually used by a more mature brand to future concentrate loyalty for existing customers. Non profits use special event, often, for central fundraising techniques, though it is expensive as well, usually producing only 10 cents on the spending of every dollar. Publicists often produce special events and they are engineered specifically to draw press coverage.
Trade shows – A close kin to the first listing here of “sales/distribution,” trade shows are one of the primary methods to find distribution by showcasing your product/service in a concentrated environment of specific buyers who are looking for products/services/content for their retail or virtual shelves. Trade shows are often one of the very first marketing methods a start up uses to establish sales and distribution.
Viral marketing – The optimal desired result of online marketing. If an online marketing technique is well constructed, the infrastructure of the internet and social networks, will automatically move a message virally. “Viral videos” are one of the tools used to entertain and be spread virally, but must be produced in a way that is truly interesting without being a commercial. Anything, however, can be spread virally, whether it be a message, photo, video. Through typically considered to be a digital message of some kind, word of mouth messages could be considered a traditional marketing technique of viral marketing.
Word of mouth – The #1 marketing methodology since the dawn of time. Because no consumer ever buys anything without hearing of it first, word of mouth marketing is getting information about something new from a trusted and credible source, whether it be a friend, family members, colleague, celebrity or trusted reporter, is priceless and the pinnacle of the kind of marketing any company can ever hope to achieve – or create.
It’s true.
As an entrepreneur, however, I bet you are wondering EXACTLY what that difference is and how to get from here to there.
Have you created a small business for yourself and are wondering what will be the tipping point when it will finally take off?
Are you fantasizing about an overnight success?
Have you suddenly been noticing all the wild news stories about unlikely candidates who struck it rich with a crazy idea that became the newest “Pet Rock”?
It makes you wonder…
Maybe you’re watching The Secret over and over again. You might be furiously creating “vision boards,” and filling boxes with cut-out photos of the things you want to manifest.
I’ve done that.
You’ve even taken your sorry bank statement and replaced the numbers with cushy bunches of zeros? Aaaah. Makes you feel good, huh?
Will there be a moment in time when luck smiles on you and something just “happens” to get every potential customer knocking down your door to buy your product?
When will it be “your time?”
Is there really such a thing as a lucky break?
Come on, admit it: I know you have thought about all of this at least once… Maybe a lot!
It took me years to build my own business, and the lessons I learned along the way range from hysterically funny to tragically expensive.
I survived the embarrassment of learning what a DBA was when the bank teller told me I couldn’t cash my first customer’s check without my partner’s signature. That lesson came after I fibbed to her saying my partner (who was my dog) “was in Europe.” I just didn’t know how to say, “Would you accept a paw print?”
That was the funny one.
I also survived the $5,000 penalty the EDD charged me and the angst of being audited to learn the difference between an “independent contractor” and an “employee.” That still hurts to think about.
The point is, I had the customers and cash flow to handle it. Where would I be had I not had customers?
So seriously, what is the deal? How – and when – is your business going to take off?
Malcolm Gladwell wrote a book called The Tipping Point, in which he describes a certain time where a want becomes a need on a mass scale and then it takes on a life of its own.
How the heck do you make that happen?
…especially with a limited budget?
Scratching your head?
I hear ya.
The truth is, some of us are indeed “lucky” types. Some of us have to work much harder to create what we want. Why this happens, is a longer and more involved conversation, but there is ONE NECESSARY thing – which, by the way is always the same for anyone – to gain success. It works, every time, no matter how lucky, cursed, wealthy, or wise you are.
Over the years, I’ve worked with many entrepreneurs, each of whom have their own version of the “pet rock.” They have ranged from bras that eliminate visible bra lines to magnetic wine pourers that make a 2008 Cabernet Sauvignon taste like a 1998 and web businesses that coach, cajole and sell. No matter what kind of business, to me, they are all “products” with tremendous potential.
Some succeed. Most fail.
It was the failures that inspired me to write a book called the PR Handbook for Entrepreneurs. After getting thousands of calls from excited entrepreneurs with great ideas who just wanted to get their product to market, I thought, “Why don’t I just share what I know to teach them to do it themselves?”
So one of the shortcuts to learn how to find that tipping point is to go here and get started on the chapter called “The Mechanics of PR.” It will teach you everything you need to know about positioning your product so it stands out, how to talk about it in a way that gets people’s ears pricked, and how to get interviewed by the press so that millions hear about your product at once.
Sounds like a good option for very few bucks? You betcha.
Making dreams into reality seems like a daunting task, but I’ve learned that the secret to success all comes down to one thing:
Focus.
Then, there are two things that you must focus on:
A grand vision
And
Moving your feet in the direction toward that which you want to create.
Of course a healthy dose of tenacity and fearlessness help – a lot.
Winston Churchill said something that, to this day, I think is one of my favorite quotes: “Education will not. Privilege will not. Experience will not. Tenacity will.”
Cool Mr. Churchill, thanks for the advice, but now what?
How about some short cuts? Could you use a template on “How to Write a Press Release” about your product that gets the attention of reporters from TIME magazine or Oprah? Did you know that when you learn how to write a press release that is truly “newsworthy” you could have magazines, newspapers, and TV/radio shows calling YOU?
Do you realize that if your product gets reported in just ONE place that gets thousands to millions of readers/listeners, that this could be the tipping point?
It could make or break your business.
That’s kinda exciting, huh? Usually this costs $5,000 a month for a PR firm to do for you. You can do it yourself… and get FREE press lists here.
I was hosting some friends over for dinner recently. The conversation turned to “manifestation.” One of them was really into it. The other was skeptical. An interesting conversation ensued that I want to share with you because it’s most likely another “Ah ha” you need to know about getting over that hump and finally getting your lucky break.
We, as living, breathing beings with great business ideas, are in effect, manifestors. We create ideas, products, relationships, and good and bad experiences.
The truth is, there is very little OUTSIDE of you that influences your reality.
If you doubt this statement, PLEASE DO NOT READ ANY FURTHER, hang up your ideas of becoming an entrepreneur, and focus on finding a job.
You are the key to your success. Your focus on your dreams MUST be your priority in order to succeed.
Now if you watch The Secret, for example, you’ll learn that imagining your goals and putting yourself into the place of already having them is powerful stuff.
And it is.
It’s incredibly powerful, actually. I manifested my first Porsche that way while driving along in my Honda, hearing the engine, smelling the leather, and feeling the horses yanking me up the Pacific Coast Highway.
But my friend at dinner brought up something that I realized was the necessary twin to manifestation; the other thing that “activates” a desire.
Resistant to the skeptic’s contrarian view of the importance of manifestation, we argued with him for a while until he said, “Well, if manifestation is the only way to create success, explain how a large group of the airy fairy ‘manifestors’ always seem to be in a world of wanting and never getting.”
He continued, “And if manifestation is really the ONLY thing that works, why are there so many successes out there who knew nothing about ‘manifestation techniques,’ yet have become incredible successes by just working their tails off?”
Good question. Hmmmmmmmmmmm. His comment inspired the conversation to roll around in my brain for about a week.
His argument was that working hard – moving your feet in the direction of your dreams – is the ONE NECESSARY thing that gets you what you want. Without the ACTION, you can dream all you want, but the Porsche will not just appear on the doorstep.
The upshot of this is that I discovered that manifestation serves as the template for success, but focused hard work is the thing that fills it in and creates the reality.
In other words, manifestation is powerful, but without action, it’s pretty unlikely to create what you want. On the other hand, hard work without vision can exhaust you and create pessimism. Ideally, manifestation and hard work go together.
So, let’s get back to why some businesses suddenly explode and others languish.
How much love are you giving your dream? And how much action-oriented things are you doing to make it happen?
Here’s another secret:
The entrepreneurs who really win are the ones who fearlessly pursue their ideas. QUICKLY.
In other words, DO IT NOW. Don’t wait for anything. PURSUE your dreams and do whatever you can to make it become a reality.
Don’t get stuck on whether it’s the right thing to do. Just do SOMETHING.
Some entrepreneurs stay stuck in creating legal setups and thinking about staffing their office headquarters for months and even years. You can’t expect to become a success if you don’t have a product and people to buy it. Right?
Once you have an idea, get it out there. If it’s not quite done, you’ll be surprised how quickly you’ll get it done when you start your marketing and find that people want it.
Sound risky?
Think again. Better yet, go here and arm yourself with a copy of “How to Contact a Reporter.” Did you know that you can just call TIME magazine and see if the reporter likes your story? This tool will teach you what to say, how and when to say it, and make it comfortable for you to pick up the phone to anyone and get a compelling story about your product out on the table in less than a paragraph.
If you get reported about in TIME, it doesn’t matter if your lawyer has created a corporation for you yet, or if you have a staff or an office… you’ll have customers. And then you’ll be surprised how things fall into place.
Until next time, keep dreaming and moving your feet.
Every internet marketer I’ve ever met is staunchly defensive of direct result marketing methodologies as the only way to sell an information product. Since the internet has been around and now people are making kazillions of bucks in minutes at a time, it’s hard to blame them.
Ten years ago when the first internet bubble was growing, I remember networking in Los Angeles at the big online social organizations. Aside from the money being thrown at non-revenue generating business models, I noticed one really strange thing about it: everyone was insisting that all marketing had to be online. In response, I started my own “technology,” calling it MarketingBridge and it was meant to teach online businesses how to integrate traditional methods into their marketing mix and vice-versa. My pitch about the value of MarketingBridge was this: “If you are selling a product that is bought by a large number of bus riders, you might think about buying ads on bus benches (instead of just online).”
Fast forward to our new internet world.
As a publicist who has recently started hanging around the internet marketing arena in our brave new online world, I was not sure at first that PR would be well received by this group.
After accepting a gracious invitation from e-marketing guru, Eben Pagan, to talk about PR to his GuruMastermind group of 500 who had flown to LA from all over the world, I pulled my hair out wondering how I can connect the non-measurable, “awareness-centric” value of PR to these folks. During the 3 day workshop, I texted my information product mentor, Chance Barnett, incessantly with requests for encouragement; I needed ideas on how to make this direct marketing/PR connection for my talk on the last evening of the event. Finally, he said, “Listen, what you do is the only way I know that you can get third-party endorsement to millions of people in just one magazine, newspaper article, or TV/radio show. No affiliate marketing program or pay-per-click program does that; so go get ‘em!”
I exhaled, sat back, and thought: “He’s right.”
So, after all that hair-pulling, I decided I’d just talk about what I know and here it is: PR is hands-down, the most cost- effective traffic generation tool that currently exists. In my 20 years in this business, the press clips we have generated garnered a minimum of 350% – 156,000% return on investment and reached multi-millions of eyeballs. Yeah, true.
Did you know that the Los Angeles Times is read by over 1.5 million people daily? How many see TIME magazine? National Enquirer? Oprah?? The Tom Leykis Show??
The beauty of PR is that when a reporter writes an article or reports a story on air, your product is getting the #2 most effective marketing method on earth: “3rd party endorsement.” Ostensibly, they are giving their opinion, which next to a “word-of-mouth” recommendation is the most influential marketing one could hope for. Just think of all the products that Oprah has deemed her “favorite” and tell me what happened to their traffic?
Customers today, whether they are online or in a mall, are savvy. They know the difference between an ad and editorial. They know that an advertiser buys space and has the freedom to say whatever they want. The trust factor that once existed in the advertising world is no longer. PR is objective. Laura and Al Ries, authors of The Fall of Advertising and the Rise of PR, say, “PR is an island of objectivity in a sea of advertising prejudice.”
And if there’s one thing that Eben Pagan taught me, it’s this: internet marketing is all about building trust between a seller and a customer. It’s about getting into a customer’s head and finding a way to solve their problem. This makes the value of PR even more stellar an approach.
I’m not suggesting, by the way, that you ignore the e-marketing basics of looking for rankings, obtaining affiliate relationships, or pay-per-click advertising. You have to do that, otherwise, your website is like a party that was thrown without invitations sent. What I am suggesting, however, is that you find something newsworthy about your product and get it reported about in magazines, newspapers, radio, and TV that is read/seen/heard by your target customer.
To start, you can find free customized press lists here, along with step by step instructions on how to write press releases, how to pitch the press, how to contact reporters and when, and even how to produce a special event.
Do it now. You need this.
When seeking capital, you must decide how much ownership you want
Think about how hard personal relationships are, add in the beliefs people have about money, throw some gasoline on it and then imagine what it’s like to light a match.
BY ALYSON DUTCH
Money.
It’s a loaded word (pardon the pun), because there are so many beliefs about it:
“Money is the root of all evil.”
“Money doesn’t grow on trees.”
“Rich people are greedy.”
We all have thoughts about money that unconsciously lurk in our brains. They are different for every human—and they are all based on our past experiences, scars, fears.
The beliefs listed above are ridiculous. Money is not a thing with a personality that is “good” or “bad,” it’s simply an energy and our current system of exchange.
Based on my POM Principle (P for product, O for operations and M for marketing), money is a very important part of your operations. You need money to run a business, and some businesses that are more capital intensive than others.
This is a primer on your choices.
Bootstrapping v. financing
How to choose? Do you go after money first so you can hire who you want, build an office and have money for prototypes, manufacturing and marketing? Could you sell your services with your own investment in a minimum infrastructure and market slowly until it builds?
Your choices depend on:
Personally, I would rather use my own credit, seek money from a bank and retain 100 percent control. As wonderful as partners may appear on the surface, it’s very hard to share the creation and growth of a business with another human.
Think about how hard personal relationships are, add in the beliefs people have about money, throw some gasoline on it and then imagine what it’s like to light a match.
The easiest route is a bank with which you already have a relationship. For a small business, I cannot stress enough the importance of this.
When you can pick up the phone and say: “Hey, I need your help, or I need 24 hours for a deposit to get through the gateway and other checks are out there about to hit my account,” amazing things can happen. I’ve met bankers who spent hours with me, teaching me things that I cherish.
Bank loans are usually the cheapest and have less strings attached. Sometimes you can find revolving credit lines or factors who will provide upfront cash based on invoices you’ve procured.
The Small Business Association does loans; just call your local SBA office.
I also love credit unions. They are very small and personal.
Grants and other means
Another consideration: grants.
At Consumer Product Events, we just started a scholarship grant for kids who are in entrepreneurship programs in U.S. universities as part of a new award program called Consumer Product Marketing Awards. Because we are giving the money, we can dictate how it is used and where it goes. There are grants out there in every industry, for every type of ethnicity and lots of other reasons; go find them!
Friends and family are always a great resource because they believe in you. The tough part is how those relationships may be affected if your venture fails.
Make sure you treat this money as you would any other legal arrangement and have agreements in place. They should include clauses on risk and how you agree to failure. Contracts are made for “when” and “if,” not when everyone is feeling good about things. Use them.
If your credit is bad, there are options—albeit very expensive. There are lots of “hard money lenders” out there. Some are big companies such as OnDeck and other private groups with cash that just want a huge return. Their terms might be as high as 12 percent to 30 percent, and they require repayment on a daily or weekly basis in auto debits.
For some businesses, these companies serve as a bridge loan and can usually be done quickly. We love a company called Fora Financial.
Crowdfunding on sites such as GoFundMe, Kickstarter or Indiegogo is a unique animal you might choose for lots of reasons—other than a place to find money. It’s good for search engine optimization; you may even choose to use it as a selling platform or a place to test your product to find early adopters and get opinions.
You may raise a few bucks, but don’t expect this to be a sole manner of fundraising. It’s a small-potato universe.
Most companies start with “friends and family rounds.” Sometimes this is called “seed funding” or “angel investment”: The amount you ask for is based on what your product is, what it costs to make it, get it to market—and spend at least 1-2 years of marketing. That could be from $50,000 to $5 million.
With investors on board, you must use their money for your business—not your rent, dinners, or personal life. There is a very heavy penalty (read: prison) for those who misuse this money.
The next phases
Series A and Series B are the next rounds of tranches that are usually sought after a company has proven viability.
Series A is the second stage of start-up financing and the first stage of venture capital financing. B is a type of equity-based financing, which investors are provided with preferred shares in exchange for their money.
This kind of funding method usually is leading up to a desired IPO—which is the sale of shares that makes it a public company—and of course with that comes loss of control as well, boards of directors and big-boy/girl business time.
The thing about investors is, they invest in people. The only time they keep the entrepreneur onboard is if that person is smarter than the investors.
Entrepreneurs should stay focused on the reason they started: to make money. But first, you need money to make it go.
All things considered that involve the structure of your invention’s business
Choosing a distribution method for your product is a key operational setup that determines how it is sold. The choice is based on your end customers; where do they buy what you have to sell?
BY ALYSON DUTCH
In a concept I introduced in last month’s Launching Pad debut, every business and product is comprised of three parts: product (P), operations (O) and marketing (M). These are the only requirements needed to turn an invention into a business that makes enough money to pay the mortgage and put your kids through college.
I call it the POM Principle—the three pillars needed to create (and sustain) any business. This is a simplified “go-to-market strategy” for any business or product in any industry. You need only the willingness to follow the recipe’s instructions.
Last month, we talked about “P” (product) and what’s needed to bring a product out of a concept and into form. This month, we’ll talk about operations—the structure that makes a business go.
Main components
Because the operational components are different for every business, we’ll discuss the basic ones that every business needs in order to, well, be a business. Some products are services; others are hard goods; others are apps. This applies to all.
One of the most important operational considerations is money. You may have already found the capital to create your product, but now you need the cash to support the running of your business—and even more dough to find customers to buy your product (more on the “M” of marketing next month).
Choosing a distribution method for your product is next, a key operational setup that determines how it is sold. The choice is based on your end customers; where do they buy what you have to sell?
For example, if you have an app product, will you sell it through the App Store or Google Play? Will you put product on a retail shelf somewhere? Will it be at a grocery or markets such as convenience, discount or luxury retailers, maybe duty free in airports? Is your product an original equipment manufacturer part that must be sold to manufacturers? Will you sell something online? Through wholesalers?
How you set up your distribution will then help you determine who will sell it. You might hire a sales team or add your product to a rep’s catalogue. You may choose to sell it through an online affiliate referral program.
And speaking of “affiliates,” don’t get stuck in jargon. Today, “affiliate marketing” is seen as an online method in which unique links are provided to those who send site traffic, and in return a commission is paid. However, an affiliate is any network of people through which you can sell something.
Japanese ecommerce and online retailing company Rakuten and CJ Affiliate (formerly Commission Junction) have plenty of online affiliate options. You might find a network marketing organization like Amway as a distribution point.
I read recently that an entrepreneur started her business using flight attendants who needed extra cash and could take meetings in their off time in cities throughout the country. How brilliant is that?
Building efficient systems
The next important operational aspect is systems.
As an entrepreneur, you are likely what I call a chef/cook/bottlewasher—which means you’re wearing a lot of hats. As you hatched your product into being, no doubt you discovered there are some things you do repeatedly. Now it’s time to create systems that do those things without you and the same, every time, flawlessly.
With my company, some of our most pivotal systems required an autoresponder/database to capture customers and sell to them. Another system was something old-fashioned; we call it the “Everything You Need to Know Memo.”
This document outlines for our event exhibitors all that’s needed to load in to our venue, where to send their exhibits, what to say to visitors, where to stay, how to park, what’s needed to pitch their product to the influencers they’ll meet at our events—even what to wear. Best yet, this memo is automated in an email every time someone is tagged as a customer.
And don’t waste your precious start-up money on hiring a bookkeeper; get QuickBooks for your accounting. It’s a miraculous and cost-effective accounting system.
Regarding income, here’s an important system. Have you thought about how you will you accept money? Will you need a merchant account to take credit cards? Will you use Paypal or Apple Pay? Will you incorporate or be an LLC?
You will need a branding system for the colors, fonts and style in which you communicate so that customers recognize you. If you are a service business like us, you will need systems for emails, structures for proposals, ways that you onboard a client, as well as routine service and accountability methods.
Other operational considerations include manufacturing, legal and hiring/firing.
The people part
People are a huge part of the operations, so putting together an organizational chart with matching job descriptions will puzzle it all together.
Another operational consideration is how you plan to work your team. Offices are going out of style but sometimes very necessary for certain kinds of businesses. If you are making hard goods, you may need warehousing. You have decisions to make about whether you use shared warehousing or buy your own building.
For teams, inspiring leadership is the driving force whether you’re physically together or not, so you should think about how you’ll handle meetings and manage benchmarks.
Have you thought about the culture you want to create? You could have a culture like Virgin that’s youthful and risk-taking, or you could have a buttoned-down, service-oriented culture like the Ritz Carlton. You may wish to have dogs in the office like Chipotle Mexican Grill does or enforce a “no pantyhose zone,” like we do in our sunny and creative Malibu office.
Operations may seem like a boring subject, but I’m hoping that the above outlines why this is the stuff that separates the top companies from the bottom ones.
The companies that skyrocket are the ones that have been planned out and then execute toward a specific goal. They measure along the way with metrics so that progress is measurable. Think like an MBA (even if you’re not one)!
And if this has opened a can of worms that just brings more questions, I’m happy to help.
Follow the POM Principle to help overcome the low odds of getting to market
Whatever got you to where you are now will not be what’s needed to get you where you want to go. You need the right people, tenacity, and adaptability.
BY ALYSON DUTCH
Inventing something is just the beginning.
Getting your product to market, building operational systems and finding customers who will consistently buy your product is what needs to happen next.
During the past 30 years, I’ve worked with thousands of products and inventors. Many of them get stuck in that first phase.
Some remain inventors by choice, creating widget after widget and successfully selling them to companies that do the rest. A very small percentage either do the rest themselves or hire the right people to build out a spark of an idea into something that is needed by a customer—and eventually loved by a customer.
After launching products ranging from grocery store ice cream product extensions for Mrs. Fields Cookies to the first blue-labeled bubbly for champagne Mumm and setting up thinkThin nutrition bars to sell to Glanbia nutrition group for a whopping $217 million, I’ve seen a lot.
Most of all, I’ve worked with many one-person companies—inventors who created bras that eliminate visible bra lines, basketball shoes that prevent ankle sprains, and wrinkle-releasing beauty serums that were born in kitchen sinks. Through it all, it’s easy for me to identify the qualities and reasons products succeed and fail.
3 factors in success
The reasons are the same ones that attract or repel investment.
There are very specific qualities in inventors that I can identify quickly. Some products will get far enough down the field to pay the inventor’s mortgage and get their kids through college, but many will not.
Only 2 percent to 10 percent of all patents make money—a daunting statistic but not insurmountable. The question is, are you willing to rabidly uncover the path to success? And when you do, will you execute on it and are you willing to fail, get up and do it again?
The success quality is rare but doesn’t need to be intrinsic; it can be cultivated.
Anyone with enough desire to do what it takes to get out of his or her comfort zone can be wildly successful. It’s self-evident, but whatever got you to where you are now will not be what’s needed to get you where you want to go.
I’ve seen so many amazing products fail miserably. Ironically, most of them are incredibly innovative and helpful with obvious consumers who would love to buy them. As a matter of fact, I would say that a majority of the most interesting and useful of products are ones that never see the light of day or succumb to a very short life.
Why?
The first factor is the people. Even the greatest products and ideas will not succeed without the right people driving them to market.
The second thing is that success requires super-human tenacity, people who refuse to take no for an answer. The most successful entrepreneurs are unbelievably resourceful; they will create their own PhD without a day in college.
Third, the successful ones are adaptable and never married to their ideas or things changing into something else entirely.
This stands true for inventors who just want to hand off their product to an entity that will develop it and bring it to market. They need to know how to make that happen in a way that pays them for their intellectual property in intelligent ways.
If they are not the one to take it to market, they must have the good sense to step out of the picture yet make a deal that is deserving of their creation while providing the freedom for life-giving breath.
The other kind of inventors create with the big picture in mind. They create a product for which there is a viable use, a company that supports scaling, and spend most of their time and money on marketing to keep finding customers who will buy it.
The winning framework
Three pivotal components of any business must be completed in order to get to the end of the rainbow.
I call it the POM Principle. “P” stands for product, “O” for operations and “M” for marketing.
Your product could be an app, a food, a technology or a service. All of the POM Principle must be set forth if you are expecting your venture to succeed.
In subsequent months in this space, I will break down the POM Principle concept by concept so that you have the framework to get your invention out of your brain and onto a shelf.
For the moment, a basic outline:
P for Product. This is all it requires to have a widget, a finished product or service ready for sale. It includes all of the sourcing, costing, prototypes, market research, competitive analysis and consumer demand for whatever you want to create.
Before you produce any product, however, you must do a profile of who you think will buy it. After all, if you have no customers, you have no business. Everything about the development of your product must be based on who that customer is and why he or she might want what you have to offer.
O for Operations. This starts with a distribution methodology, the way you intend to sell your product. Direct sales on the web? In a store? Through Amazon? Via direct response television or radio?
Is it an OEM product (original equipment manufactured), such as an Intel chip inside every Dell computer or B to B product? Is it a multi-level marketing concept? Will you wholesale only?
Operations are underpinned by money that allows you to, well, operate. How will you capitalize it? What systems can you create that will allow you to roll out, launch and support your customer base before you have a large staff to manage it? What people are needed to make it go? Human capital is key.
M for Marketing. Marketing is anything you do to get your product off the proverbial shelf and into the hands of someone who not only wants to buy it but will pull out his or her credit card quickly to have it.
Your marketing mix is a list of marketing activities that are chosen based on one thing only: your customer. If your consumer is younger than 15, chances are you might find him or her through school and might have to market to parents.
If your consumer rides buses, online ads will not be helpful—but buying bus bench ads will be the winning strategy. If your customer is a hard-hitting young entrepreneur who commutes via airplane, it’s possible you may advertise in airports or on airline apps.
So, there is a winning formula. If you need or want more, we’ll explore the “P” of product in more detail next month. Meanwhile, here’s to your success!