Expand Abroad Consulting

Ads in a new publication

2011-06-16T17:43:00.000-07:00

From time to time, I have answered questions on selling ads from others looking at starting a publication. Figured I'd take some of the answers I have given and provide them here, in the hopes that this would be useful for others.

I started California Kayaker Magazine, a magazine given out for free through sports shops and such in California. This is what is called "advertiser supported" - the only income is ad revenue. Readers love it, as they love free stuff (and it having good content and being quality printing makes it even better). But just because the readers love it doesn’t mean advertisers will also. So I had to determine how to price ads, and then needed to go out and sell ads. Here is some information on the process I used:

How to price ads:

First step is determine what you need to make. Add up your costs (printing, distribution, editorial costs, etc.), and divide this by the number of ad pages you plan to have (magazines are often 30-60% of total pages as advertisements, newspapers up closer to 80%). This tells you how much you need to make per page. I added a small percentage to allow for ad discounting and such, and then used this to set my minimum price for a full-page ad (at which you need to make, or you go out of business). I then looked at price sheets for other similar magazines to see what ratios they used for smaller ads (which charge more - for example, 2 half page ads would get you more than a single full page ad) and for multiple frequencies (which charge less) to determine ratios for half page, quarter page, etc., and for advertisers who buy 2 ads a year, 4 ads a year, etc.

Second step is look at what competitor publications are charging for ads (sometimes they will have their ad rates online, other times you will need to find a way to get it). The goal here is to see ow your minimum price matches up against competitors prices.
Divide the cost for a full-page ad by ow many thousand copies are printed. The goal is to get to a cost per thousand (CPM), which is a standard unit for magazines. Make sure you are comparing apples to apples - California Kayaker is all color, so I made sure the comparison publication prices were also for color. Also, make sure you are using number of copies printed, not the much larger number of readers (publications often report readers, which they get by multiplying the number printed by some multiplier which compensates for pass along readership, often using a multiplier of between 2 and 4).

While you are at it, get a hold of the competitive publications and count up how much ad space they have, so you can see if your percentage is in line. You can also multiple the ad space by the ad pricing to estimate how much income that publication had.

This all lets you get a feel for what ads are commanding and what you need to make, allowing you to hopefully determine what price to set.

How to sell ads:

When you have a new publication, you have no track record for potential advertisers to look at to see if you are something they’d want to advertise in. So selling ads at first is hard, and only gets slightly easier over time as you can show prior issues as examples of who you are. So, you need to tell a story of your vision to the potential advertisers, focusing of how advertising in your magazine would help them. Include who the readers will be, how you will get the magazines into their hands, etc. Hopefully you have a niche so that you are reaching a target market that advertisers can't reach that well through other media sources.

You also will likely have to discount or make deals - more up front than later, but it never really goes away. When discounting, I tried to structure it so that I would get long term advertisers - say give 1 a large discount on one ad if they place ads in next 4 at regular 4X price. But for the first issue, truthfully, I was happy just to get an ad at first for just about any price.

And see if you can figure out when the decisions are made by larger advertisers. They usually budget for each year in advance (in my case, they use calendar year and make decisions in October-November). If you miss this, chances are you will not get any ads from these companies for that whole year, as I found out the hard way (starting the magazine in January).

I also took an added step to make it a bit easier for advertisers in that I would bill for the ad after the magazine is run (many magazines require pre-payment of ads). Does add to cash flow challenges for me, as payment is not always timely.

Even with all of this, it took a year and a half before I got the magazine where the ad revenue covers all the costs of each issue.

All of this info would go into a Media Kit - a few page document that covers basic info about magazine, pricing, mechanical requirements (what size and format the ads should be), etc. You can see California Kayaker Magazine's here (PDF format).

You may want to check out a book called Starting and Running a Successful Newsletter or Magazine by Cheryl Woodard. Good read on some of the background of starting a magazine.

Niche is nice

2009-04-28T10:13:00.000-07:00

It seems that in times of economic downturns, there are lots of people who become "consultants". Some are serious. Some are just looking for some income until they find a new full time job at a company. Most won't make it.

A friend who has been working for a while in marketing communications approached me, and she said she plans to become a consultant. We talked about her business idea and how to go about starting a business (including my strong recommendation to get a book that describes the basics of starting a business (link to blog post)). One area that made me feel better about her business idea is that she does have a niche (link to Wikipedia definition of niche) she will target. Not just that she wants to focus on e-marketing, which I don't think is a tight enough niche by itself(lots of these new consultants say they do e-marketing). But she has a specific business idea where she knows potential customers have pain, is in an area she has expertise with, and even has contacts at potential clients who she can contact that she thinks her system would improve their lives.

As I've talked about before (link to blog post), one common problem with people who start a new business is they want to sell to anyone who could possibly use their business. Unfortunately, this is not a focus. You just don't have the resources to do this effectively. Instead, it is much better to "pick the low hanging fruit".

Another company I work with is a local bicycle retailer (link to store's web site). The owner is a friend of mine, and I helped him a lot when he opened the shop (including investing in the shop, so I am actually a part owner and on the board of directors). I saw right from the start that he has a very targeted niche - high end mountain bikes used for "all-mountain" style riding. Yes, he gives up potential sales of children's bikes, road bikes, commuter bikes, etc. But he is doing well with this very tight focus. His customers would often drive 30 minutes to come to his shop, passing over a dozen other bicycle shops on the way to see him. His shop filled a need that other shops didn't.

Of course, there is no guarantees for my friend and her new consulting business, but I feel much better about her idea than I do about many others of the new consultants that are out there.

Trade Show Focus

2009-04-24T11:48:00.000-07:00

I went to a sports trade show last weekend and saw some booths that it was obvious weren't going to succeed. Basically, a trade show booth needs to have a specific goal, and then take steps towards reaching that goal.

This booth in particular was a Japanese firm who had a line of lights for bicycles (bicycles and Japan - both interests of mine, so definitely caught my eye). Guy came out and told me about the products, which looked like an Ok product. Not sure they were that different than the other products on the market, but perhaps it was good enough to make a go.

But what was not clear was whether they were making sales of lights at the booth, or trying to sign up dealers (how most products are sold in the bike industry). If they were selling lights there, they should have had some sort of offer very obvious. Many booths have "show specials" listed, usually at a discount of of standard retail. The guy never mentioned anything when we talked.

If signing up dealers, they were at the wrong place, as this particular trade show was a consumer show (the industry has a different show in the fall). And truthfully, a product like this would be best sold through one of the big bike industry wholesalers (BTI, QBP, etc.), as bike shops buy most small goods from them (and only go direct for major manufacturers).

I have seen this many times before, including with a client I work with. This client went to an industry show the first year they were in business, but to save costs did everything themselves and also brought friends (who lived in the area where the show was, but weren't really knowledgeable on the products) to man the booth. They were just launching their product in the US. The booth was beautiful, so no problems there. But the only goal they did meet was to see if there was interest in their product, which there definitely was. But the number of customers they gained out of it was not what they hoped for. They assumed that if they just showed the product, the sales would follow. Unfortunately, it doesn't work this way. That was a $50k lesson.

The second year, I was involved and made sure we talked about goals up front, then put some processes in place to meet those goals. The main goal was setting up showrooms, so we set up a process to really work with showrooms who showed interest, including signing up some right at the show if they were open to it. This proved to be much more effective for them.

Good site for info on other countries

2008-04-16T11:23:00.000-07:00

Australian Trade Commission (Austrade) site is meant to help Australian Companies do business with other countries. Some of the site is Australia specific, but much of what they say would be valuable to read for anyone working with any country. Check it out at http://www.austrade.gov.au/Country/default.aspx.

Business Magazines

2007-10-16T16:12:00.001-07:00

A client of mine, along with having an import business, is also a lecturer at San Francisco State, and invited me to come in and speak to her students about my experiences when I was Asia Marketing Manager for Tyco/Raychem. I have worked as a lecturer myself (for University of Phoenix) and enjoyed standing in front of students again.

In response to a question, I advised the students to get in the habit of reading business magazines constantly. Here are the ones I recommended:

Business Week - this is a good weekly business magazine, particularly for American focused information. I read this continuously from when I was in undergraduate program (late 80s) up through a few years ago. Benefit is that it is the least expensive one listed here. Downside is that it is really US focused (not as much international content as the others).

The Economist - this is what I am currently reading. It has a lot more international focus than Business Week, which is good considering my work. It is also more expensive, which is a downside. And it has too large a section (for me) on Britain, but it is easy to just skim past that.

Wall Street Journal - Ok, I actually can't comment too much about this. I never had the time to read a daily newspaper in depth (I do subscribe to the local paper, but I skim most of it).

Note - the links I included should go to free trial offers for each of the magazines, so feel free to give them a try and see which you like.

Cost, quality, and speed in product development

2007-06-29T18:41:00.000-07:00

There is a saying in product development that goes something like Cost, quality, and speed - pick any two. And this is so true - the best you can do is 2 out of 3 (and most can't even get that).

I hit this with my Japanese Soaking Tub client. Truthfully, this company really only has 1 right now - quality. The tubs are all hand made, and of a very high quality. These take time to make (4 to 6 weeks), and another 4 to 6 weeks to ship by boat to America - so definitely not speedy. And the tubs are rather pricey (as you would expect of hand crafted items from Japan).

This all came to mind when we were talking to one of the company's distributor/retailer. They often want it all (not uncommon for people in sales). It would be great to be able to give them everything (high quality tubs right away at a super low price), but it just isn't possible. You have to make trade offs to improve one area, at the expense of the other areas.

If someone really needs the tubs faster, they can pay more (sacrifice cost) to have it shipped by air instead of boat. This would save a few weeks of time, but at a cost of some $4-5,000 (was done once - for luxury goods like this, sometimes people are willing to pay). But beyond that, there isn't much that can be done to speed up the process, at any cost.

I guess quality could be improved by having the manufacturer take more time with each tub to ensure it is shaped and colored just right (sacrificing time for quality), though in this case there quality is so high that I am not sure there is much room for improvement.

Price could be lowered by getting similar tubs made in China or other low cost country, but this would likely affect quality (at least for a few years as they went through a learning curve to figure out how to make large ceramic bath tubs).

So - cost, quality,and speed - pick any 2.

Brand and branding

2007-04-30T12:51:00.000-07:00

Way too often, you hear someone say that they are trying to improve their brand, so decide to update their logo. This helps keep logo firms and print shops in business as new letterhead and business cards are printed, but generally wouldn't do much for a company's brand.

My definition of brand: what people expect from a company. What they get, type of quality, price, level of service, how the company interacts with the community, etc. that people expect are all part of this. The term 'people' is vague on purpose, as it is not just customers or prospects, but also employees, suppliers, the community, etc.

So branding would be the process of trying to change these people's perception of the company.

Changing a logo will not really change what people expect to get from the company. You do this by changing the product and service and how the company interacts with the outside world.

Did come across an interesting brand situation. In Belmont, CA, there is a restaurant called Habibi. The restaurant's slogan is "A taste of Asian Cuisine". Middle East is also considered part of Asia, so the perception of what I was going to receive was Middle Eastern food.

But actually, it is South East Asian foods - a mixture of Chinese, Thai, and Vietnamese. So the name is working against the brand. And this shows up in their Yelp reviews - those who went looking for SE Asian foods rated them well, but those that thought they were getting Middle Eastern foods rated them poorly.

So, it is good to make sure that logos, names, slogans, etc. are not working against your brand. But, beyond this, I am not a believer that changing a logo or similar can really impact your brand.

Expanding abroad takes time and effort

2006-09-25T16:54:00.000-07:00

A while back I wrote an article on the Basics of Expanding Abroad which was published on the AsiaPreneuer web site. That article talks about the different levels of expanding abroad starting with exporting through partnerships and on to having your own office in the target country. It talks about some of the pros and cons of each level.

No matter what level you are at, there are two guidelines you need to understand:

1) Expanding Abroad Takes Time. Lots of It.
2) Expanding Abroad Takes Continuous Effort.

I bring these points up because they are common errors that I have seen companies make.

On time, it will probably take longer than the average American company plans for to get everything in place and the income rolling in (Japanese companies, on the other hand, take a much longer view, so often do better when it comes to things like this). You likely will need to plan for a couple of years before everything is in place and going well. In my last post, I said that entering a new country is like a start-up. Actually, it is like a start-up where you don't speak the language, know the business culture, and are trying to manage from 8 time zones away. So you get Rick's Law on steroids.

On effort, you need to keep working with partners, customers, etc. in the target market before everything will be set. One of the biggest mistakes is for a company to put some effort in up front (a visit or two, maybe a training class, etc.), and then sit back and wonder why the sales aren't rolling in. For the U.S. market, this may work Ok, as our business culture is based a lot more on a customer buying based on the virtues of a product, but in other countries (especially east Asia), the relationship between companies is often more important than the product.

Add these two points together, and you get an interesting effect. You have to expect that the people at your company trying to grow sales abroad will be less productive for a year or two. They will be busy working on the new market, but wont be able to show results right away. But if they are putting enough effort into these new markets, they also won't be able to put as much effort into other markets/whatever they were doing before.

If all you are doing is waiting for someone from another country to find your product and says they want to buy it, then what I said here really won't matter. But if you want to take an active approach to increase your sales abroad, then it would be good to heed this advice when planning your approach.

"Expanding into a new country" equals "Start-up"

2006-09-25T16:36:00.000-07:00

When people ask what I do, I tell them I focus on start-ups in 2 areas. But, isn't my company name "expand abroad" which is related to countries, not start-ups?

You are correct. It comes down to a bit of a nuance. Of course I work with the "standard" start-up that involves someone trying to start a company here in the States. The other focus is when one wants to do the start-up of starting a business in a new country.

Yes, I am calling expanding into a new country a start-up. Basically what you are doing is trying to start doing business in a new country, so you effectively are a start-up in that geography.

And many of the things that I have said about start-ups (such as Rick's Law) hold true whether you are starting up a local business or entering a new market.

Of course there are some difference. But I think there are more similarities than differences.

Hints when Traveling to Japan

2006-04-14T18:42:00.000-07:00

As of last count, I have taken 16 trips to Japan during my career, and have spent over 6 months of cumulative time there. This has given me some insight into traveling to Japan, which I thought I would provide here:

Transport
Recently, international airports are popping up around Japan, but it is still likely you will fly into Narita, the international airport for Tokyo. Allow 1.5 to 2 hours from Narita airport to downtown Tokyo, as the airport is pretty far from the city. Taxis are expensive (~$300 from airport to downtown), so take the shuttle bus or Narita Express train (either is about $30) to downtown, and then a taxi from there to your hotel. The Kansai (Osaka) airport is similar - trains or buses are much cheaper than taxis.

In taxis, the taxi driver will open and close the door for you, so don't bother reaching for the door handle. It is often good to have someone at your hotel or from your office write the name and address of where you are going in Japanese on a piece of paper, along with the name and address of the hotel for your return trip. This way you can just show the paper to the taxi driver, rather than worry about language barriers. Taxi drivers in Japan (and Japanese people in general) are very honest, so you don't need to worry about them taking you for an extended drive to run up the meter.

Money
American credit cards and ATM cards are often not accepted outside of standard business locations. Instead, cash is used for most purchases (a guy I worked for told me once he bought a car with cash). To add to the challenge, they have coins for anything less than about US$10, and only have bills that are about equal to a $10 (1000 yen), $50 (5,000 yen), and $100 (10,000 yen). I found I was always carrying around pockets full of change.

I suggest bring about $500 per week, and change the money into yen at the airport currency exchange counter, which gives decent rates. If you do need to get cash from a credit card or ATM, skip the banks and instead go to the post office, which has ATM machines that will often accept your cards (and have English instructions to boot).

Tipping is not common in Japan, so no need to leave tips after a meal.

Travel (trains, taxis, etc.) and entertainment costs are a lot higher than in the west. Other costs (food, hotels, etc.) are similar to the west.

Eating/Drinking/Entertaining
In Japan, it is very true that many decisions are made after work over drinks. Expect to have dinners (and maybe more) with those who you are meeting. Even if no work is being talked about, you are building a relationship that will be required for business, so it is important that you go to these. If you are not a fan of sushi, there are many restaurants that serve other types of Japanese foods or western foods.

Wear loose shoes (preferably ones that sip on and off, rather than have laces) and socks without holes if you go to a Japanese restaurant, as you will be taking your shoes off.

Never pour your own drink, but do offer to pour for the others you are with if their glass is less than half full. If it is some form of shared food, always offer food to others before taking for yourself.

After dinner, you will likely go for a "2nd round." This will likely involve going to a drinking establishment, probably a karaoke box. There will be more drinking and likely singing. Do try to sing a song or two, even if you are bad. After this will likely be a "3rd round," as a smaller group will continue on (often the more senior people leave, so you are just with the people who you will be working closely with). This all often ends at between 11 and midnight, as everyone scurries off to catch the last train home.

Sources of Funding

2006-03-25T11:00:00.000-08:00

Recently, a question was posed to me about sources of funding for a start-up, and I figured this would make a good posting for my Blog.

The general sources of funding for a start-up in the order they are often obtained are:
1) Bootstrapping
2) The Three-Fs
3) Angels
4) VCs
5) Public Markets

Bootstrapping - bootstrapping means self-funding. The person starting the business uses savings, takes out a second mortgage, uses their credit cards, etc. to pay business expenses. If you can do it, this is generally the preferable route, as you keep full ownership of the company and don't have to go through any hassles of convincing others to fund your business. This was the form of funding I used when I started helpUhire Solutions.

The Three-Fs - the 3 Fs are friends, family, and fools. This terms comes from that fact that the vast majority of new businesses fail, so only friends or family have a connection with you that makes them willing to risk money on a start-up. The money is often easier to obtain (these people are investing because they believe in you, not because they really know if the business will make it), but there is an added risk that if the business fails you may be taking your parent's retirement funds with it. The bike shop I am working with was started by a friend of mine, and I have put up some money as an investment (hopefully as a friend, not a fool).

Angels - Angel investors are rich people, who for some reason decides to invest some of it in startup(s). The reason they do this can be to make more money, but it can also be for other reasons (the thrill of startups, to see a technology make it, etc.). Being that they are already rich, they are often willing to take bigger risks than others, so are usually the first outside funding a company gets (often well before a VC would consider investing). They generally invest between 10's and 100's of thousands of dollars into a company. I have never been involved with getting money from Angels, so don't know the process of finding and courting them.

Venture Capitalists - VCs are people who invest money into companies for the sole reason of making more money (hopefully lots of it). They will invest money in exchange for an equity stake in the company. They do often want a significant stake in the company (often controlling), and have been known to oust founders if they feel that the founder is not getting them to profitability fast enough. They target companies that they think can grow and prosper to the point that in a few years it will be either acquired or can go IPO - which are when the VC is able to cash in any profits. VCs are looking to minimize risks, so won't invest in a company unless they see significant upside - so usually won't talk to you until you have working products, customers, income, etc. (the exception are for the marquee names - the serial entrepreneurs who have started and successfully run companies before, which most of us are not). There is a pretty significant dog and pony show required to get VCs to invest - which is time spent producing reports and presentations for them, and not spent growing your business. One client I worked with had angel funding and was considering VC funding, but felt they wanted too much control for the money they would put in, so decided not to go for it.

Public Markets - public markets are where you have a listed stock on a stock market, and anyone can buy shares in your company. This is not a stage of funding for a start-up, but instead is for a mature company.

There are other sources of money, such as bank loans and supplier terms, but these generally are limited in that the lenders won't want to put their money at risk without some sort of protection (such as collateral, proof that the company can pay for the items, personal guarantees, or similar). The bike shop I am working with is using supplier terms for a portion of their inventory, but the owner had to personally guarantee he would pay off the loan even if the company went bankrupt.

There are some government grants and SBA loans available, but I don't know anyone who has used them. It seems the paperwork and hoops you have to jump through, along with significant limitations, make these funding sources less useful than one would hope.

A good book that covers a lot of this is Art of the Start, by Guy Kawasaki. Guy is a VC in Silicon Valley, and has been involved with many start-ups. Definitely a useful book for those looking for funding, particularly if you think you may want to go the VC route.

Marketing is not equal to Advertising or Sales

2006-03-03T10:59:00.000-08:00

I am a member of the Silicon Valley Product Management Association, and while attending a meeting last week, I heard a common issue - that people (generally Engineers) think that marketing and advertising are synonymous. Though this is a step up from those in the general public that think marketing is the same as sales, it is still incorrect.

Marketing vs. Sales

Marketing involves dealing with matching products that a company makes with what customers want to buy. But so does sales. The difference is in scope and timing.

Marketing's focus is supposed to be larger scope - what I call a "one to many" communication. What products would many people want to buy, and how do we communicate about these products to all these people. In sales the scope is much smaller, a "one to one" communication. They are concerned with what products does this particular customer want to buy, and how do I communicate the benefits from our product to him in a way that convinces him it is the right product? Actually, marketing should have been the one that connected that sales person to the prospect (through getting leads), and given the salesperson the tools they need (information about what to say, sales literature to leave behind, competitive information, etc.) to allow the sales person to do their job.

Timing is also different. Marketing is concerned about a much longer term (how to make a product most profitable over its life), where sales is concerned about closing individual sales this quarter.

Marketing vs. Advertising

Ok, without a doubt, advertising is a part of marketing. But it is just one tool that marketers may use (and many marketers don't use this tool, and are still quite successful). So what is marketing then?

Most marketing text books talk about the 4-Ps - Product, Price, Place, and Promotion - as the main functions of marketing. They are:

Product - basically, do you have products that meet the specific needs of the customer? Marketing should be involved in product development and acts as the voice of the customer. Marketing obtains data on what the customers want (market research) and bringing this information back to the people who make the product (engineers, designers, developers, etc.).

Price - this is whether you are selling for the right price. Customers generally want as inexpensive as possible, where companies want to make as much profit as possible, so the challenge is to balance this.

Place - basically this is whether you have the products for sale where the customer wants to buy it. Choosing whether to sell through stores (and where the stores should go), online, direct, distributors, etc., or some combination of these, is all part of this.

Promotion - basically this is whether you are getting the correct message about your product and what it can do to people who may want to buy. Advertising is one method of doing this (but not the only one) and a lot of thought needs to be put into what you say (the message) for all this promotion.

So, as you can see, advertising is not equal to marketing, as advertising is just a very small part of what someone in marketing does.

Rick's Law - advice for people thinking of starting a company

2006-02-12T21:06:00.000-08:00

Before I started the start-up software company a few years ago, I went for advice from just about anyone I thought might have good advice for me. One person I visited was a guy I know through bike riding - Rick Sutton. Along with being a rider, he has successfully started and run a few different businesses, including a printing/promotion company and a bike race management company that created a bike race that became the largest bike race in the country (and possibly the world) - the Sea Otter Classic (which I did some work for after I left Tyco).

Rick definitely provided me with some good advice, but one piece sticks out after all these years is what should probably be called Rick's Law. He said "no matter how conservative you are in estimating your numbers -- it will be harder to get sales, and start-up/operating expenses will be higher than you expect." And this proved quite true in my start-up.

What reminded me of this is a bicycle shop that I am advising (and a minority investor in). I passed on this advice to the guy who is starting it as he was preparing his business plan, and he took this into account when choosing numbers. But now that the actual numbers are coming in, he is finding that Rick's Law is coming true for his business. Sales have been slower and start-up costs higher than predicted.

So, if you are thinking of starting a business, do use conservative numbers when running your numbers, but also expect that even your conservative numbers won't come true. Build in some extra funding so you can get past Rick's Law and make the business a success.

McAfee thinks out of the box

2006-01-29T10:06:00.000-08:00

I have to applaud McAfee for thinking out of the box.

Prior to 2005, the major makers (Norton, McAfee, etc.) of virus protection software sold using the same model. People would buy the product with 1 year of subscription online or in stores for about $40.

Many of the store purchases would come with rebates for $20 if you are upgrading or switching from a competitor's product. If you consider the money that had to go to retailers, costs that go to those who did get the rebate, costs of printing books, disks, boxes, shipping to stores, etc., the company would likely take in less than $10.

They do have an online download option that would get around most of these costs to the manufacturer. They charged full cost for this. I think the buyer could get a rebate, but it sure wouldn't be as easy to do as through a retailer (who gives you specific receipts for this process). What it really did was make it very convenient for someone to renew a subscription, but many people I know didn't use this because they knew they could get a lower cost by buying a box from a store and getting the rebate.

This always confused me some as a business model for the anti-virus manufacturers, as they get less income selling through a channel that costs them more. In my mind, I thought they should be more competitive with the download option (unless, of course, they do get a high percentage of people who do pay the full price online - in this case the dual channel model makes sense).

Last year, McAfee changed the system by adding a channel. They partner with ISPs like AOL and provide the anti-virus software to all the ISP's users. This is a big change to the system from someone who thought outside of the box. There are many benefits to this that I can see:

they probably get something like $1 a month ($12 a year) per user for this, which compares favorably to their likely income from store sales.
product support is likely done by the ISP, so there is a cost savings to McAfee.
they also get money the entire time the user is signed up with the ISP (I often let my antivirus expire, as it still works but just doesn't have the newest virus definitions, and then renew it after up to a 6 months lapse - so instead of a net income of $10 for 12 months, it is for 18 months).
many of the ISP users, particularly AOL, are considered to be less computer literate, so a good portion likely did not have anti-virus software before. This means they have access to what could be a lot of new customers.
many of those ISP users who already had anti-virus were likely users of Norton or another competitor, so McAfee now is likely taking some business from them.

I applaud McAfee for this step. Seems like it could be very positive for them.

Disclaimer - I am just musing about something I see in the market, not something that affects me in any way personally. I am not connected to McAfee at all, and currently use Norton Anti-Virus.

Book recommendation for those doing business in China

2006-01-19T17:55:00.000-08:00

China is both a huge potential market for products, and a low cost source for items we sell elsewhere in the world, but doing business there can be a huge challenge. "China can be a scary place to do business. The legal concepts that govern Western business practices -- the sanctity of contracts, the separation of regulators and competitors, and the protection of intellectual property, for example -- simply don't exist in any dependable way in China".

The quote above is from the book, One Billion Customers: Lessons from the Front Lines of Doing Business in China by James McGregor, and it matches what I have seen in China.

But the book also goes well beyond just stating problems that many of us have seen. Each chapter of the book covers a particular area that may be a challenge that you hit while doing business in China. He starts with a narrative example to show you what it could be like and what can happen. Then a section covers what this means for your business. And each chapter is finished off with a summary of the main points.

James McGregor has the experience to be the author of this book. Not long after China opened its borders in the 80s did he arrive there and started studying Mandarin. Along the way after that he was a reporter (and bureau chief) for the Wall Street Journal in China, was CEO of Dow Jones' China business, headed the American Chamber of Commerce in China, and has advised both the US and Chinese Government.

The book is definitely well worth reading for anyone who is involved with business in China. I found the book both an interesting read and an excellent resource for doing business in China.

For convenience, I have added a link to this book on Amazon.com

Intellectual property primer

2005-12-20T19:17:00.000-08:00

Intellectual property (IP) generally falls into 4 categories in most countries in the world:

Copyright - rules on copyrights protect artistic, written, and musical works. The owner of the copyright can control how the work is used, if it is copied, etc. If you wrote a book, it would be covered under this category.

Trademark - rules on trademarks protect logos, slogans, and similar used by a business to identify a product and distinguish it from those of its competitors. For Coca-Cola, the Coke logo (down to the colors used), the slogans they use ("It's the real thing", etc.), and even the shape of their bottle are all considered trademarks. If a logo, slogan, etc. is used by a service to distinguish their work from others, the mark is officially termed a "service mark", but the rules are the same for service marks as trade marks.

Patent - covers inventions. In almost all countries, the invention must be novel, useful, non-obvious, and man-made. A patent gives the patent holder the right to have a monopoly on the use of the invention for about 20 years (length varies from country to country). Patents are enforceable only in the jurisdiction that issues it (and the 3 areas where most patents are currently issues are US, Europe, and Japan).

The U.S. allows patents on designs, software, and business processes, which are not always offered in other countries.

Trade Secrets - Nolo defines trade secrets as "a formula, pattern, physical device, idea, process, compilation of information or other information that 1) provides a business with a competitive advantage, and 2) is treated in a way that can reasonably be expected to prevent the public or competitors from learning about it, absent improper acquisition or theft." So a trade secret is just that - a secret. In regards to an entrepreneur, just about anything that they would write in a business plan would be considered a trade secret, and should be treated appropriately. One way to get additional protection off trade secrets is to use a non-disclosure agreement (NDA) when you need to share the trade secret with others.

In general, unless you are working on leading edge works (developing new technology or working in a laboratory), I would not recommend getting a patent. The filing fee is a few thousand dollars, legal fees can run many times that, and it currently takes over 3 years from time filed to when given. And this is all assuming that the process goes smoothly... None of the products I worked on were considered to be so new as to justify patents, so I have never gone through the patent process. Instead, we have used trade secrets.

I had recommended books by Nolo before, and find they are also an excellent reference point on intellectual property for the United States - for more information, check this web site.

Outside of the developed world, things can get awfully murky. It has always amazed me to be in China or Thailand and walk through malls offering counterfeit and duplicated goods for sale. All forms of intellectual property was blatantly ignored. This is obviously a challenge both to people wanting to do business in those countries. Less obviously is the challenge it brings about to that country as the country tries to become more developed and move towards being more developed (and inventing more things themselves). IP protection is meant to foster innovation, and without protection, there may be limits to innovation in these countries.

Targeting customers

2005-11-07T01:10:00.000-08:00

A common issue that shows up with people who start businesses is that they don't target their customers. If I ask the question "What customers do you want to target first?", and they answer anyone and everyone who may be able to use their product or service, then they have this issue. They feel their product could be usable by anyone, and they don't want to miss any possible sales. The problem with this is that by not specifically targeting the best customers, they either don't get the information out to anyone or what information goes out goes to people who won't become customers.

Think of it like shopping. If you don't target what you want to buy, then you are walking in to every store in the area (whether it be a wedding dress store, sporting good store, or grocery store) in the hopes that you find something that you need. Because there are so many stores, the chances of walking in to that store that has what you need at the price you want to pay is small. You may buy some things, but you either got there by luck or in a very inefficient way.

A more efficient approach is to think through what stores you want to go to, what you want to buy, and then go to those stores. Applying this to your product's customers, you should be able to answer some or all of:

what geography/country they are in
what size company they are
what industries they work in
how they will use your product
why they would use your product (what benefit they gain from using it)
how much/how often they would possibly buy and what they would be willing to pay
etc.

You actually do this for different groups of potential customers. Yes, there are many people who could possibly use your product or service, but it is best to choose a specific subset of these and then target them. This is called "picking the low hanging fruit". Look at each potential market and determine its return (how much you get versus how much it will cost you to get into the market). The market with the best return should be the one you go for first. Then the one with the second best return, etc.

Note, the return of later markets may change once you enter the first (and each subsequent) market. For example, if you sell a product to software retailers, their may be synergy to selling to other retailers. So the return on other retailers may increase just because you are already in the software retailer market.

B2B activity NOT worth doing

2005-09-26T08:05:00.000-07:00

I have two posts that talk about what cost effective activities are worth doing for B2B companies. In this one, I am going to talk about some of the activities that most small B2B companies should NOT do as they are usually not cost effective.

One thing that is often asked about is whether branding activities should be done, and for many people that means the look and feel of literature, website, logos, etc. In reality, branding is much more than a logo or a slogan, but is made up of all impressions which a prospective customer has of your business and product. This includes phone calls, whether the product worked or broke down, etc., along with all the slogans and logos.

For small companies, the focus should be on providing products and services that provide a high level of value to your customers, and it will be based on this as to how your brand will be perceived. Have the product your customer needs, don't make them jump through hoops to be able to order it from you, etc. is what I am talking about.

It would be nice if you had the money to make new logos, update all the literature and web, etc., but this is generally not the best place for small companies to spend their limited resources.

Other B2B marketing activities to do first

2005-09-08T08:34:00.000-07:00

In a prior post, I talked about how direct sales is often the most cost effective first step a B2B company should take. In this posting, I will talk about other cost effective marketing programs that young companies could consider.

Once you have the basics (sales literature, pricing, web site, etc.) in place, using press releases, by-line articles, speaking opportunities, and direct mail are the marketing steps you may want to consider.

Press Releases
An easy and inexpensive method for simple marketing is to submit press releases. Many magazines and newspapers have New Products or News sections, and are always looking for pertinent items to list there. Company press releases are one way that they get information to fill these sections.

There is a format that you should follow to write a press release, which is explained in many areas online. More important to that is using pertinent content – you must write the press release so that it is relevant to their readers, or they will not run it.

On submitting your press release, one method is to use a service like PR-Web. Even though it is generally not all that effective, because it is simple and inexpensive, it is probably worth doing. To get the press release published in more media, you would want to also send individualized press releases to the key media for your product. For example, I sent a set of press releases out for the staffing software product. For the media that outside recruiters read, I focused on the benefits of the product for recruiters. For those serving hiring managers within companies, I sent one that focused on how it helped fulfill a hiring manager’s needs. And for local business magazines and newspapers, I focused on the company being local.

By-Line Articles
By-line articles get their name from the “Written By” section of the article, which talks about who the author is. These articles are written by you, and at the end there will be a brief summary of who you are and who you work for. By writing articles, you both become perceived as an expert in the field, and also get some publicity for your products and company.

In order for an article to be published, it must be of interest and benefit to the readers of the magazine. This means the article can’t be overt sales pitches. Two basic types of articles are often published - technology review and case studies.

Technology review articles are kind of like white papers, but in article format. For the recruiting software company, I was able to get an article published that talked about the technology used and how people could actually implement that method by themselves (without using the company’s software). This may sound like you are giving away your crown jewels, but it would cost the user much more in time and effort to do by hand what the software could do, so in reality it was a good marketing piece.

Case studies are articles that review a particular case about how someone solved some problem of interest to others. An example would be why a company chose a particular asset management software - what the problem was they wanted to solve, what options they considered, why they chose the option they did, what it was like to implement, and results. One note – case studies are often better to have written by someone outside of the firm providing the product, as the article may seem less believable if the person writing it benefits from what was written about.

Articles have an added benefit in that once they are published, you can then get reprints of the article to use as additional literature.

Speaking Opportunities
For many products, you can use speaking opportunities as a way to spread the word. Speaking events include teaching classes in your subject, being speakers or panel members for associations in your target area, and the like. Basically, you are using some other organization to bring together people who might be interested in what you have to say. In return, you need to provide interesting and informative content for them (not a sales pitch). Good content for speaking is often the same as good material for by-line articles.

Direct Mail
Press releases, articles, and speaking opportunities are cost effective ways to inform the market of your product, but they are not good at asking for the sale. It would be nice if people hear of your product and automatically buy it, but the reality is that more is needed to close the sale.

The next step for many products, direct mail, is a good medium to start closing the sale. The basic method is that you come up with a list of names to mail to, a letter or literature to mail, and put it all together to send out either as email or printed mail.

The names you send to are generally either produced internally or bought from an external source. Internally, you will be given some of these names as responses to your press releases or through collecting names and business cards at networking events. Or you can buy these names from any one of the many list brokers. If you do go the route of buying names, it is worth the extra cost per name to have a reputable list broker sort the list to just the contacts that would most likely be interested in your offer.

What to send is impacted by how many pieces you plan to send. If you are sending many thousands, making a custom direct mail piece just for that program may make sense. But for smaller quantities, usually you send a custom letter, a piece of literature (like a data sheet), and perhaps a relevant article reprint (you did write articles, didn’t you?). As with the press release, what you say and what collateral you include must be relevant to the recipient. For the staffing product, I had had a different letter for the recruiting agencies than what I would send to the corporate HR recipients – each letter detailing what is important to that target market.

Email or Printed Mail?
There definitely are cost advantages to email, but the open rates are much lower. And email has additional laws (CAN-SPAM, EU Directive on Privacy and Electronic Communications, etc.) that you must follow, and even if you follow them, recipients can still feel like you are spamming them. In the end, the cost benefit of email is offset by the negative, such that email often ends up with an ROI that is comparable to printed postal mail. Given this, you shouldn't rule out sending postal mail.

Closing the Sale
Beyond these, you need to go back to doing Direct Sales. Follow up with the people who have contacted you, or those you sent direct mail to, and work on finding their level of interest, overcoming any objections they may have, and closing the sale. This can be done either by someone within your company or by finding a channel partner (VAR, distributor, rep, etc.).

How to price a new product

2005-08-25T17:26:00.000-07:00

One question I often hear is "how do I price my new product?" Assuming a goal of maximizing profit, how can you determine the optimal price to set? This is always an interesting question, and not an easy one to answer.

For B2B products, there are some guidelines that I would follow.

1) Determine what does it cost you to make your product. Many people use this as the basis for determining their price (take this cost and add some percentage to give you a profit margin). This works in that it could give you a profitable product, but this is probably not the optimal profit-giving price. Instead, I recommend that you mostly use your cost just to determine if the price you are selling at is one that justifies making the product. This is the lowest price that you should accept and still be able to have a viable business.

2) Also determine what is the benefit of using your product to the customer. What does it cost them to do what they are doing now to get their need solved, versus what it would cost them with your product. The difference is the benefit to them.
You will likely have to estimate this, as getting accurate data is a challenge. This is the highest price that a customer may pay before the economics say they shouldn't buy your product.

3) the price you set should be somewhere between your cost and their benefit. Choosing the price between these is definitely more of an art than science. On the whole, you want to choose a price as compared to them not using a product like yours that allows them to have a return on their investment of a year or less (e.g. if price for your product is $50,000, make sure they get at least that much benefit within a year from using your product).

Competitive product's prices also play here - if a competitor makes a product that does the same thing as yours, this often should be used as a baseline for your pricing. You would then adjust your price, depending on whether you are trying to be the cost leader (adjust your price down), quality leader (adjust your price up), if there are features which he customer wants that you have which the competitor doesn't (adjust your price up), etc.

For B2C products, I think a much more supply-demand type look needs to be done. In most B2B, you usually have a smaller number of customers who spend more to buy the product, so you can calculate a benefit for the purchaser. But in B2C, there are usually so many purchasers through different channels (who set there own pricing based on your suggestions) that this doesn't work. Instead you probably want to do test pricing (adjusting a price and then seeing its impact on sales) until you find the one which gives you the best profitability.

Setting a price for your product can seem like a daunting task, but by thinking through a few things, you can come up with a pricing scheme that improves the profitability of your company.

What B2B marketing activities to do first

2005-08-24T15:09:00.000-07:00

It is not uncommon to hear someone with a new company ask me what marketing they should do first. Sometimes the question shows up a bit backward - they heard that a certain activity (like branding their product, using direct mail, making a web site, etc.) should be done to start marketing their company. But no matter - they have a new product (or service) and have put things in place so it is now ready to be sold. But no one knows of their product – so they want to know how to get the word out and start bringing in sales?

It would be nice if you had the budget to launch your new product (or service) with full-page color advertisements, 30-second Superbowl spots, and any other media you wanted, but most start-ups are chronically short of money. So, what are the cost effective steps one could take?

I went to a lunch seminar today put on by the Business Marketing Association, and one of the speakers there said what I believe - that the first step for most B2B companies should be direct sales activities. They had done some research on the results of different programs, and found that direct sales had an ROI that was many times that of direct marketing, email marketing, etc.

Of course, there are variations based on specific companies. For example, for many consumer companies (B2C), the first step is usually getting in to distribution channels.

Of course, before you can start any marketing programs, you will want to produce some basic literature for your product, including a data sheet and/or brochure, pricing, web site, etc. You will likely also want to find one or more reference customers, who you can get testimonials and installation photos from. The testimonials will do wonders toward reassuring prospective customers that your product is viable. It is not uncommon to offer discounts to these reference customers in exchange for the testimonials and photos.

Just so you know that I am not saying all this to sell my service - direct sales is not really an area of my expertise. I am good with the relationship part of sales, but generally do not enjoy the prospecting part. This was an area where I didn't do well with the start-up I had. Messaging, marketing programs, etc. all went very well, but I couldn't get myself to keep making cold calls day after day, nor did I step up to the plate to pay someone to do it for me. In the end, it was an expensive way to find out a weakness of mine.

Start-up book recommendation

2005-08-15T11:53:00.000-07:00

My work for consumer businesses recently has outpaced my B2B work. This is a bit of a surprise, given that the vast majority of my experience has been in the B2B world.

One client has been working in the bicycle industry for over 20 years, and has now decided to try his hand at running his own shop. He is incorporating the business (something I would recommend any retail business do in the US) and has made me one of the board members. He is still doing all the prep work (arranging financing, finding a location, signing on bicycle manufacturer's products to carry, etc.), and will hopefully open up in the next few weeks.

When he and I first talked about him starting a bike shop, one the first things I did was send him my copy of a book called The Small Business Start Up Kit, by Peri Pakroo. Actually, I sent him the California specific version which they also have. These books are published by Nolo, a service that tries to make legal advice and activities doable by normal people.

I used this book when I was starting my first start-up. I had the technology all figured out and such, but I didn't know how to handle the various government requirements (what forms to fill out, whether to incorporate, how to set it up so I could do business under another name - the "DBA", etc.). This book covers all of this, and more, in a way that is easy to understand (which was a bit of a surprise, given the author is a lawyer). Highly recommended for anyone thinking of starting their own business.

Interesting, this book came up again in conversation yesterday. A good friend is thinking about opening a B&B, so I have ordered a copy of the book which I will give to her.

For convenience, I have included links to Amazon.com for both the National version and the California specific version of this book.

Book suggestion for those dealing with other countries

2005-07-29T20:28:00.000-07:00

From time to time, I have taught Global Management classes for the University of Phoenix. The class I did the most, and enjoyed the most, was called Internal Environment of Global Business. The focus of this class was on how to deal with internationalization within your company. It covered things like different HR requirements in the world, how to work with different cultures within your company, how to work with different cultures when they are outside of your company (such as partners, JVs, etc.), etc.

The course talks about different ways to look at cultural difference, but could no go into specific differences between cultures. For that, I recommended that the students get a book called Kiss, Bow, or Shake Hands by Terri Morrison, Wayne Conaway, and George Borden. This book covers the cultural and business differences between America and 60 countries. Each country is covered in a separate chapter, making this an excellent reference book. I have found the book to be good enough that I actually own 2 copies.

Interesting, I am not authorized to teach any classes at UOP right now. They changed the International MBA program such that the classes I was approved to teach are no longer in the curriculum. I have gone through the process to be approved for an International Marketing class, but my paperwork seems to have been lost somewhere. It was approved by the local dean, and then sent to Phoenix for approval there, but seems to have disappeared. So I won't be teaching any classes in the near future.

For convenience, I have added a link to this book on Amazon.com

Being an Expat

2005-07-26T21:34:00.000-07:00

I received a phone call from a guy looking for advice. Free advice can be fun to give, particularly when doing so brings back good memories.

His company was buying a company in Korea and offered him a position managing it (based in Korea). He Googled some terms, and found my personal web site (http://www.singlespeed.org) and my Blogs from when I lived there.

Ah, Korea. Had some of the best times of my life while there, but also some of the worst. But overall it was a great experience for me. Enough so that I would love to live in another country again.

This guy has quite a few steps up from me when I went to Korea. He is Korean, but moved from there to the States when he was a teen. He has traveled to Korea many times and still has family there, but he is very Americanized, so wasn't sure what to expect about living and working in Korea. And he also wanted to know about what an expat package would be like.

Expat packages are expensive for a company. Here is a web site that talks about the basics of what is usually offered - http://www.expatsingapore.com/getting/expatpak.shtml (this page is for Singapore, so any prices listed are specific to there and in Singapore dollars, but the basic data all holds true). One concern he had was whether his company would be willing to pay for it, or if they even are ready for what it would cost.

When I was in Korea, I figured that it cost my company an additional $100k for sending there (as compared to what it would have cost if I was working in the States). And I was cheap - I chose a relatively inexpensive apartment, didn't get a car, etc., all of which were offered to me. I had heard that $250k a year as the cost for expats is not uncommon.

We talked about some ways to cut the costs down (a big one would be to not live in a westernized house or apartment, which are always overpriced, but instead live as a Korean would).

Also talked about differences between the Korean business culture and the American business culture. Even though he is well exposed to Korean culture, Korean business culture seems very different. Among the advice I gave him was to read a book called The Koreans by Michael Breen. Excellent book for anyone who works with Koreans and wants to better understand who they are and why they do what they do.

I hope it all works out for him.

Leads or not?

2005-07-26T20:04:00.000-07:00

A client of mine has a small company that sells a consumer food product. On the web site, there is an offer for free samples. For many months, they would get a few requests for a free sample every week. But recently, they started receiving hundreds of responses. This surprised them and prompted a call to me.

The first thing I recommended was contact some and find out how they heard about the offer. From this, we found out that a web site that lists free offers has picked up on her offer.

This made me worry, as a while back another client had a sweepstakes listed on their web site to win a Palm Pilot. A sweepstakes site found out about this, and listed this. The goal of the sweepstakes was to get leads, and the folks who came from the sweepstakes web site were not potential users of the software product. At that time, the sweepstakes web site listed the direct URL for the sweepstakes offer (not the home page), so we were able to simply rename the URL (www.coname.com/sweepstake.html to www.coname.com/sweepstake2.html), and the link from the sweepstakes site was broken. My first thought was that we might want to do this here.

The goal of the free sample offer is to also get leads. In looking at the names coming in and information provided, it seems that the requests for the free offer could be good leads. So now the challenge is how to arrange it so they can handle this influx of leads, as previously there were so few they did it by hand. Now they are setting up a simple database to handle the information. Along with that, they will track to see if any of these folks go from sample requester to product purchaser.

In addition, we are watching to see if the number of requests slows down. If not, we will likely change their sample request process to one involving an online database (like MySQL), which will allow them to transfer data directly to their PC database, further automating the process.