It's Pronounced Chookshaw

The semi-professional blog of Albert Ciuksza Jr.

Category: Entrepreneurial Marketing

Validation

Startup confession: I hate validation with a passion. Not the process of it (whatever that process is, anyway), but the expectations that have been placed on it.

Validation is supposed to determine whether an idea is worth commercializing. The theory is that the innovator goes through a series of processes that lead to a black-and-white answer: either yes, this opportunity will obviously make me a zillionaire; or no, this opportunity should die on the vine. Validation becomes the insurance policy against failure and, with failure being a fate worse than death in many innovation circles, it’s be-all, end-all.

Let me be clear: no one ever, ever, ever does this.* Why else do you think that 90% of startups fail?

The problem is that we’re mostly wired to pursue the new and shiny, to say yes rather than no. Consciously or unconsciously, instead of validating the idea (i.e. empirically determining whether to move to the next step using a rigorous, data-oriented methodology), we try to rationalize all of the reasons to move forward. While we usually need about six positive messages to make up for one negative one, in our “validation” process, we tend to focus on all the data that we’ve got that says that we should keep pushing forward with commercialization.

There are plenty of articles about how best to validate (caution: whatever validation is, it is not a five-minute process), so I won’t duplicate the efforts of the many who are trying to sell you some sort of secret sauce. However, there are four big things that tend to be make-or-break when deciding to pursue a new idea. They are:

  • Degree of Differentiation – Your idea needs to be different enough to compete against other solutions while being tough to duplicate (technically or legally).
  • Market Size – The business needs to pursue a market big enough to meet your goals, whether that’s just to put food on your table or to make enough return to attract investment
  • Resources – You need the time to pursue it, a team that can compliment your strengths, and the financial resources to fill in the gaps, all from the first flick of the light bulb to the moment you put out the “for sale” sign.
  • Marketing 4Ps – Product, place, price, and promotion; they all need to work together to make the awareness-interest-decision-action cycle as short as humanly possible.

There’s other stuff, of course, but these are the big four. If you can rationalize this publicly with your right hand on a stack of enter-your-sacred-text-here, then you’ve done great work. This is what most people want when they want validation. They want some data, some third-party information that shows that you’re not a mad scientist.

For extra credit, I recommend one more step — the project premortem. The idea is simple; instead of waiting for things to get to their logical conclusion before doing an analysis of what went wrong, have a session with you/your team to talk about all of the reasons the project will fail miserably. When this is the goal of the discussion, everyone is open to talking through the potential pitfalls that they might otherwise be uncomfortable expressing in the face of the blinding optimism that comes with launching a new venture. It’s a fantastic exercise.

*This isn’t technically true, of course. Like how some people rotate their tires after every 3,000 miles or balance their checkbook every month instead of checking the balance online, it happens, but not often enough to discuss.

My ‘Buying Local’ Mistake

For those who might not know, I host a radio show for my real job called Pittsburgh Impact Radio (click here for the iTunes podcast). In my most recent show, I interviewed Buy Pittsburgh First, an organization that promotes the idea that companies can, and should, buy from local suppliers. From an economic development standpoint, this is a huge opportunity — between 40%-60% additional economic impact is made when a purchaser buys from a local supplier vs. a national/non-local one. That translates to jobs, more consumption of local products and services, multiplier effects and other good stuff.

As an entrepreneur currently selling into the local and national market, I too have skin in the buy local game. It is easier for me to market and sell product to companies nearby (I can demonstrate how our product looks and works). It’s cheaper for me to fulfill my orders to local companies. And, in the (rare) case where something isn’t quite right, I can fix it personally. Our company is another case study in why buying local makes sense — the service is often far beyond any national vendor and we’re willing to go above-and-beyond in ways that are impossible for our other customers across the country.

So, my ‘buying local’ mistake. Somewhere in the radio interview, and I believe it might have been said multiple times, I mentioned that there is an obligation to buy from local vendors. Given the regional impact, and what it can do to accelerate growth, it sounds like something that is reasonable to say. Further, I have also worked in economic development for seven years, so I’m comfortable talking about connections between buying from companies and how that can impact an economy. But, after more reflection, I realized that I was dead wrong. There is no obligation. And there’s nothing wrong with that.

In any business transaction, the decision comes down to what option brings the most value. Some of these are objective measures (price, turnaround time), and some of these are completely subjective (brand, reputation). A commitment to buying local is decidedly a subjective perception of value. Regardless of how much value we might individually place on buying local, that doesn’t mean that we do it at each opportunity, or that it’s right to always buy local. Sometimes, the local option just doesn’t deliver the value we need, regardless of proximity.

I won’t say that it doesn’t hurt when a local company won’t take a meeting or consider our product. I’ll admit to getting irritated when a company decides against giving us a chance to prove our concept. But, the reality is that it’s not their fault for not buying. It’s our fault for not delivering enough value (or, worse, targeting the wrong market).

This doesn’t mean that I will not continue to be an advocate for buying local — I think it’s a great opportunity to have a disproportionate impact on the local economy (and get exceptional customer service at the same time). However, I have made a decision to stop making it personal, start delivering more value, and eliminating the words “should” and “obligated” from my vocabulary.

Groupon is Bad for Everyone

Yoga should be peaceful...

Yoga should be peaceful…

Yoga. It’s more popular than ever, with studios popping up on nearly every corner. Everyone does it. Hell, Troy Polamalu does it.

So does my wife.

My wife also used to buy Groupons (I’ve since convinced her to stop). And, unlike most Grouponers, who buy them for the awesome deal, my wife tends to go back to those places. She is the ideal situation for the small businesses who choose to do the daily deal dance.

Unfortunately, her recent experience with Groupon — and a business that didn’t understand what it was getting into when it chose to offer one — is a classic case study for why it’s easy for everyone to lose in the pursuit of new customers or a great deal.

The story goes as follows — my wife bought a Groupon for the yoga studio near our home (Yoga on Fremont) for $65 that gave her 20 classes. Unfortunately, due to a crazy schedule (she’s a physician) and lost password, she didn’t redeem any of the classes before the March 19th, 2013 expiration date.

In the early days of Groupon, having it expire meant that the entire value of the deal had been lost (i.e. she had paid $65 to get nothing in return). However, with lawsuits, the threat of lost customers, and any number of other factors, Groupon changed its terms of service such that the paid value never expires. This gave the business a way to limit some of the cost damages of offering a Groupon while insuring the customer against losing their money. Win-win.

When my wife went to the studio, she brought her Groupon with her, expecting to apply it to individual classes ($14 each) until she ran out of value. The owner, however, stated that the company policy for the expired Groupon is to honor what the value the owner received ($31.50), not the entire paid value. Despite a couple of emails between my wife and the owner, including my wife sending the actual Groupon that includes the text “The amount paid for this voucher ($65.00) with Yoga on Fremont NEVER EXPIRES” at the very top, the owner would only honor the $31.50 earned from the sale.

I don’t blame the owner of Yoga on Fremont for not wanting to lose any more money on her daily deal. Groupons are a horrible financial decision for small businesses. However, like most deals with the devil, you don’t get to change the rules when things get uncomfortable.

The net result is this — my wife is upset and won’t ever return to a yoga studio within walking distance to our home. She’ll get a refund, but does that really matter? And for the business, they’ve chosen to alienate a customer that could have not only become a loyal one, but a customer who works at a hospital that serves the community and regularly recommends yoga (and yoga studios) to her patients.

So, if you’re a small business thinking about doing a daily deal, just don’t do it. The implementation is difficult, you make 20%-25% of the revenue you normally would on a sale, and the Groupons tend to create more problems than new customers. And, if you’re someone thinking about buying a daily deal, please reconsider. It might be a great short-term buy, but it hurts the local small businesses you’re hoping to frequent for years to come. It’s a bad long-term deal for everyone.

BA323 #4: Bonus Journal – Value in Purchasing Decisions

What dimension of value do you use to make purchasing decisions? How will that change in 10 years?

What's the value?

What’s the value?

In last Wednesday’s lecture, we talked about the critical importance of value. Beyond simply the dollars and cents of it all, value is often defined by qualitative goals (how you feel) rather than something more quantitative (getting x amount of utility for $y).

Broadly, we identified four dimensions of value:

  • Performance – how well something is perceived to work
  • Price – what it costs vs. what one gets out of it
  • Relational – individual, personal relationship with the company/brand
  • Status – the reflected glory of owning/using the company/brand

In class, I asked what one dimension of value the students most often use to make purchasing decisions. I was surprised when most students mentioned performance and status rather than price (looks like the poor college student caricature might be waning).  At the end of class, I offered a bonus journal to further reflect on that question as well as share what they would expect to value ten years from now.

For me, price tends to be the first value on which I make purchasing decisions and that hasn’t really changed much in the last ten years. However, the way I look at price has changed, and has allowed me to also begin to look at the other areas more readily, particularly performance and relational.

Ten years ago, I was a year out of college and working in my first job trying to figure out how to pay bills. I left school with a mountain of debt, a car payment, and ancillary expenses like my cell phone and credit card debt. Like many recent graduates, I wasn’t making a lot of money and had to often settle for lower-quality, low-price products. In the following ten years, I had a few different careers, including one as a not-quite-successful entrepreneur, which made financial resources even more scarce. Even after getting a new job, it took years for me to settle the financial challenges that resulted from that setback.

Now that I’m a bit more established, I’m also aware of the importance of good quality, whether it be in vehicles, clothes, housing, etc. As such, I balance other areas of value, particularly performance, more heavily than I once did. I’m also incredibly loyal to certain companies or brands, especially in my community, so the relational value is more important to me now.

In a decade, I expect that I will still be financially prudent, though the other dimensions of value will likely be even more important or will trump price. Despite my experience in marketing, the status bug will likely bite me as I expect to have access to more financial resources, for better or worse. Even if I know I’m being duped, I likely won’t be able to resist.

What do you value now? Ten years from now? Do you think it will be the same?

BA323 #3: Journal #1 – What’s So Hard About Entrepreneurial Marketing?

As promised, I’m following the class with my own journal entries/blog posts about the subject. Our first is:

What’s so hard about Entrepreneurial Marketing?

As we covered in class, Entrepreneurial Marketing is (for better or worse) more than just the Four Ps (Price, Place, Promotion, and Product for those of you who can name three-of-four and inevitably forget one of them). Unlike traditional marketing, which can simply focus on who is going to buy the product, entrepreneurs must market to a variety of stakeholders: suppliers, customers, the end users of those customers, market intermediaries (gatekeepers that might exist in your market), investors/potential investors, and business partners/employees/potential employees. Each group requires its own strategy and tactics, all when resources are incredibly scarce.

Sure, the money problem is obvious, some of it can be overcome with good research, strategy, and tactical execution. What isn’t quite as easy is balancing multiple priorities among a diverse group of people who often have competing interests. Not only must entrepreneurs focus on selling their product or service, they must also be constantly thinking about how to market their business to raise money (through equity or loans). Finally, they must do this while promoting the overall image of the company, ensuring that suppliers and talent are both on-board as partners in the company’s success. Not an easy task.

Interestingly, most entrepreneurs seem to do this automatically. They work to build relationships with all of these people and tend to manage those relationships well. However, many entrepreneurs can suffer from tunnel vision — maybe focusing too much on sales while neglecting investors, or working hard to raise money without making sure the customers are happy. Coming back to the money issue, entrepreneurs often don’t have the capital to recover from a major error when marketing to any one of their diverse targets. This makes attention to all marketing strategies incredibly critical.

Personally, I find maintaining relationships with market intermediaries to be the most difficult, since they are acting as gatekeepers and offer third-party interference with your customers. When these relationships are good, they’re excellent. When they’re bad, they can make an entrepreneur’s marketing job much more difficult.

What do you think? What would be your biggest marketing challenge?

BA323 #2: The Sound of Your Own Name

Customization done well…

In Dale Carnegie’s How to Win Friends and Influence People, he says that the sweetest sound in any language is the sound of a person’s own name. In entrepreneurial marketing, it’s even more true.

I was reminded of this when I received a catalog from pc/nametag, a small company that makes custom name tags for events and sells other premiums that are often handed out at trade shows. As you can see in the image, the front cover was printed with my name on it as it would appear in one of their products (they also assume I’m an All Star, #1, and an Achiever … that’s just pure flattery). This would be the first time my name has been on the front of a catalog and, I have to say, it’s well done.

When running a start-up or small business, it takes a lot to cut through the noise and overcome natural skepticism from customers who are likely being courted by a multitude of vendors. However, with market research and a little creativity, this company was able to get my attention rather easily (and tell you about them as well).

Advances in digital printing technology have made individual customization cost-effective, presenting an incredible opportunity for companies looking to make an impact. And, despite the advances in email marketing, there is something much more remarkable about a well-developed custom print piece (anyone can create an email blast with a name form field). The lone exception was a marketing piece I once received from the American Marketing Association that made my name part of their url (i.e. albertciuksza.marketingpower.com, but it is no longer active). I thought that was an excellent way to get me to visit their website.

For companies that don’t have the financial resources to make a big splash, it’s important to remember that you don’t always need to make a big splash to be effective. Sometimes, you have to play to your target’s sense of self and say the sweet sound of their own name.

BA323 #1: Preview of My Entrepreneurial Marketing Course at St. Vincent College

Yikes. A bowtie.

I’m only an adjunct, so I won’t be required to wear one of these.

I couldn’t be more excited about the opportunity to engage the students at St. Vincent College, my undergraduate alma mater, in the newly-minted Entrepreneurial Marketing course that has been added to the Entrepreneurship minor under the McKenna School of Business. To some extent, I’m incredibly jealous of the students pursuing this minor and wish I had the chance to integrate this track into my studies when I attended 11 years ago.

One of the ways that the students will explore the material is through nine journal topics that will be submitted over the course of the next four months. In the spirit of fairness, I will be exploring those same topics here on my blog and will adhere to the same deadlines (though not for a grade). You’re welcome to follow along and critique my own thoughts through this journey in the comments section.

Finally, I thought it might be useful to mention a few of the themes that will be sprinkled throughout the course. Regardless of the tactical discussions we will have, there are a few takeaways that are absolutely critical to marketing in the entrepreneurial context:

  • I use the phrase “marketing in the entrepreneurial context” because I believe that these principles are as applicable to the corporate world as they are to early-stage and small ventures. Despite often blockbuster budgets, corporations are beginning to realize that they can’t just throw money at their marketing departments and expect customers to open their wallets.
  • Entrepreneurial marketing is different than traditional marketing in that there are more targets and, therefore, more people to consider when building and executing a strategy. While many marketing professionals in more traditional roles can focus on the customer alone, entrepreneurial marketers must consider customers, end users, suppliers, competitors, potential and current investors, the current team, and talent attraction.
  • Resources are somewhere on the scale of scarce to non-existent. This requires a completely different and creative approach. This means being personal and selling yourself as well as your concept. This is an unavoidable aspect of new or small ventures, and one of the most challenging aspects of entrepreneurial marketing.
  • There’s a common assumption that entrepreneurial marketing instantly means using social media. It’s just not so. While the entry costs to social media are low (platforms such as Facebook, Twitter, YouTube, and Pinterest are free), the time costs associated with those platforms can be prohibitive. Like any other tactic, social media has to be analyzed on a strict ROI basis.

A few other random things:

  • After arguments with editor friends, I use the Oxford comma, regardless of how little care Vampire Weekend might give to it.
  • I will likely drink four cans for Diet Dr. Pepper each class.
  • I’m going to experiment with Skype to virtually bring in speakers who have had their own experiences and successes in this space.

I’m looking forward to the adventure and hope the students are as well. Class begins Wednesday, January 16th and ends May 8th.