Notes on "Marketing Software, For People Who Would Rather Be Building It"

02 May 2013

I just finished watching Patrick McKenzie's presentation "Marketing Software, For People Who Would Rather Be Building It". There's quite a bit of good new stuff in this presentation that is based on his personal, hard-earned experience.

I must say that I thoroughly recommend watching it. As usual, I took some notes (this normally takes twice the time, but the takeaways are well worth it). So feel free to look through the notes if you're not sure you want to watch the whole video.

Headline

"A job is a system which turns time into money. A business is a system that turns other systems into money"

Problem observation

Tells about his experience at massage therapist: he was waiting for his massage when a therapist approached him and said that she can do it now, no need to wait for two hours; He asked why? And she said the client is late and if she doesn't do a massage she's going to loose money. She was also reluctant to call her clients with reminders because that distracts her from the main job that actually brings money - massage. He asked her if an automated system that notifies her clients of an appointment would help - she said yes, she'd be motivated to use that.

Takeaways:

Important point to consider - here you already have a permission to communicate with a client, so your call or SMS won't be annoying /cold.

Very cool strategy for verifying a need/problem/pain.

Patrick would approach business owners (massage therapists), offering them to pay their rate for a shoulder massage, and ask them questions that would prove or refute his idea:

  • What do you use for your appointment scheduling right now?
  • How many people don't show up?
  • Is this a pain/problem/loss of money?
  • Do you phone call them to re-schedule?
  • What if I could show you something that would call them, would you pay for that?
  • Would you pay $30 a month which is close to saving one appointment?

And then he'd collect email addresses of those people. Although he didn't make a single sale with those prospects, he verified the idea.

Hint: Use an iPad to show the mock-up of the screens to the potential clients to get the feedback.

Key point: you have identified a problem successfully when people say "shut up and take my money!", not, "hmm, that's kind of interesting, let me know when that exists". So they really need to be ready to pay for that service, I guess.

In online services:

  • Most revenue (50%-30%) comes from most expensive plans - because people are not spending their own money - the most likely clients for this kind of plans are companies/corporations. People try to spend out their budget so they don't get it taking away.
  • Most users - cheapest / free plan
  • Most painful support - free plan, people with wildly unreasonable expectations. Raising price helps to get rid of those.
  • Biggest surprise - most companies

    will have a arbitrary pricing agreement that's not listed online yet they sell it to large corporates at way higher rate, possibly coupled with monthly servicing agreement.

Patrick says selling to businesses is way easier than selling to customers.

Higher is the price, fewer customers you need, fewer cheapskates.

Pricing ranges

Align prices with customer success - the more value they get out of the product, the more you should charge them - i.e. value-based pricing. Can you measure the value they get out of it - put a number on it? 

Doesn't have to be linear.

It's easier to charge a higher price to an enterprise that is 1000 people big, than charge 1000 of small businesses a smaller price.

Drip email marketing

Emails get read instead of RSS.

People who sign up for your lists are giving you permission - they want to hear from you.

Email is perceived as more important than a lot of other things such as RSS, web pages etc.

Collect emails -> educate people -> sell them stuff.

Collect:

On your landing page:

  • ask for minimum info: name and email
  • have attractive call to action that promises something valuable (as well as the supporting copy), not painful
  • Minimise distractions
  • provide a compelling offer (bite)

Re-cap of PM techniques - attract people with a selfish offer - they don't care about you, they care about themselves.

Also says that you shouldn't use your home page as your landing page since home page should include call to action such as signing up for a trial plan, links to pricing grid. Use dedicated landing page instead.

Collect emails on your free trial subscription too.

You hate emails, real people don't, they like emails!

Email access in exchange for one-off tool that provides some useful information on, say, your site - for example, WP Engine.

Educate

For the first couple emails in a month focus on trust building and education. Supply them with useful info, not necessarily sales-y.

After that start increasing the sales pitch that is ames at selling them something. If they don't buy after that, they are probably not ready, so back down a bit, and keep educating them on stuff, and try to sell a different product offering.

This again raises the importance of having a curriculum of sorts to send to your prospects.

3-paragraph sandwich:

  • hello,
  • problem description (because not everybody in your industry is an awesome expert like you are),
  • ask them to write back with questions (to which you'll respond immediately (or almost))

Sell

With selling, remove any friction - such as decision making - offer them a plan that say is most popular.

Offer them a time-limited bonus for signing up, whether that's a price or a personal assistance from a CEO (lol) for integration.

Pre-answer all their objection. Include customer testimonials that are pointed at their concerns.

First Run Experience

Check how many people come back from using your software the first time. People often never return.

Make those 5 minutes very cool and engaging.

Script their first 5 minutes of experience. Teach them to use the software very gradually with positive feedback loop.

Measure their activity in their first 5 minutes.

Then implement and test engineering/maketing efforts to change that behaviour in those 5 minutes.

Tour mode - useful when the value is not immediately perceivable, like taking them through creation of a fake appointment reminder that makes the system to call them and interact with them.

Explicitly tell them what sort of value they are getting out of the software - say at which point and how it saves them money/time.

Make sure they're having fun.

Social experience - offer them to invite friends (if relevant/appropriate). Do whatever you can to get their friends list - people hate managing their friends lists. Do this in the first 5 minutes of their experience for higher chance of viral effect.

Questions

Consulting

Offer companies one of two things: increase their sales or cut their costs, that's what sells.

Don't compete directly with mass market offering (in here - RoR developers), but instead offer increase in revenue/cut of their costs.

Compare your costs to the projected increase in their revenue, say if they are making 1m and 100% increase that you're hired to reach is 2m then your cost of 100k to them is not so much compared to the gain. Again, value pricing.

No, he doesn't provide a guarantee they'll reach the target. Although h compares the cost of his week time to the engineers's fully-loaded cost of month worth of work, and makes an argument that an engineer doesn't give his salary back if the product fails.

Got offered $700,000.00 by a CEO as his monthly salary after a particular consulting gig that he quoted $20k per week initially.

He refused.

comments powered by Disqus