Everyone’s a Direct Marketer, Part II

(If you missed the first post in this series, it’s here.)

So, all companies are now direct marketers — their web sites and email lists make it so, they can’t effectively reach their fragmented audience without it, and consumer permission demands it.  Why is this new to some companies and not others, and what lessons can companies who are new at it learn from traditional direct marketers?

First, the quick answer — it’s new because it’s being driven by the new technologies the Internet has brought us in the past 10 years.  Those technologies have opened up the possibility for 1:1 communication between any company and its customers that was previously unaffordable to many industries with low price point products.  You never received a telemarketing call for a movie, because making the call costs $3, and all you’ll spend on the movie is $10.  P&G never sent you a glossy direct mail piece for toothpaste, because they’d spend $1 at a small chance you’ll buy their $2.25 product.  But the cost of a banner ad or a given keyword or an incremental email is so low (virtually zero in some cases), that everyone can afford a direct presence today.

What lessons can companies who are new at it learn from traditional direct marketers?  There are many, but four things stand out to me that good DMers do well that are different from the skills inherent in traditional marketing/advertising:

1. Take the creative process seriously.  Just because you can dash off an important email to your staff in 30 seconds doesn’t mean your marketing people should do the same to your customers.  Put your email campaigns or templates through a rigorous development and approval process, just as you would a newspaper ad or radio spot.  There’s just no excuse for typos, bad grammar, or sloppy graphics in email or on a web site.

2.  Use live testing and feedback loops.  It’s hard to test two versions of a TV commecial without incurrent significant extra cost.  It’s impossible to test 20.  But with today’s software, you can test 10 versions of your home page, or 100 versions of your email campaign, almost instantly, and refine your message on the fly to maximize response.

3. Make transparency part of your corporate culture.  Just as you can have a 1:1 relationship with your customers, your customers expect a 1:1 relationship back.  If they want to know what data you store on them, tell them.  If they want you to stop emailing/calling/mailing them, stop.  If they want to know more about your products or policies, let them in.  Think about marketing more as a dialog with your customers, and less as you messaging them.

4. Merge content with advertising.  Old-school advertisers didn’t have to worry about this one, because their ads were always surrounded by other people’s content (TV, newspaper, radio, magazines).  But in direct marketing, your message is sometimes the only message around.  Make it interesting.  Make it entertaining.  I always think the prototypical example of this as the old J. Peterman catalog, which was trying to sell clothing and accessories by creating stories and mystique around each product.  But there are tons of other examples as well, especially around email newsletters.

Next up in the series:  What does this mean for the way companies will be structured or operate in the future?

Be Ruthless With Your Time

I have historically been very open with my calendar.  For most of my career, people who want to meet with me, both internally or externally (with the exception of random vendor solicitation), generally have gotten to meet with me.  Some of this is generosity, but I’m also a compulsive networker and have always made time proactively to meet with people just to meet them, learn more about different pockets of the industry or finance, meet other entrepreneurs and find out what they’re up to or help them, and connect more broadly from there.  I’ve also routinely been on multiple boards at the same time, as I’ve found that’s a very helpful part of my management routine.

But of late, I’m struggling more and more with calendar management.  There are more and more demands on my time internally as Return Path gets bigger.  There are more asks from people with whom I really don’t want to meet.  More travel, which sucks up a lot time.  A longer commute and more people who I want to see at home who have early bedtimes.  So I’ve taken to being more ruthless with my time.  I could probably do an even better job at it than I am now.

The main shifts I’m trying to make are to be proactive instead of so reactive; to cut meetings, shrink them, or group them when appropriate internally; to use videoconferencing instead of travel where possible; and honestly to just be a little more selfish and guarded with my time.  If the meeting doesn’t have something in it for me or Return Path — some promise of learning something or meeting someone either directly or indirectly helpful — I’m unlikely to do it any more as I once would, or I’m pickier about it (it has to be in my office so I don’t have to travel…it can only be 30 minutes long, etc.).

The two main tools I’m trying to use to manage my calendar proactively, mostly driven my brilliant executive assistant Andrea, might be useful to others, so I thought I’d share them here.

The first one is a networking list.  Andrea and I created a simple spreadsheet of everyone externally that I like to keep in touch with, and we prioritized it.  Every time I meet with someone on it, we mark the date.  Then when we meet to review my calendar periodically, we look at the list and figure out who I should reach out to in order to set up the next wave of meetings.  (I have one for internal check-in meetings with people other than my direct reports as well.)

The second is a time allocation model.  I am sure I got this idea from David Allen or Jim Collins or some other author that I read along the way.  First, we are religious about keeping an accurate calendar, including travel time, and we even go back and clean up meetings after they’ve happened to make the calendar an accurate reflection of what transpired.  At the end of each quarter, we download the prior three months’ worth of meetings, we categorize them, and we see where my time went.  Then we make changes to the upcoming quarter’s calendar to match my targets based on what I’m trying to accomplish.  For what it’s worth, my categories have changed over time, but currently, they are Free, Travel, Non-Return Path, Internal, Board, Client/External.  Pretty high level.  This exercise has been really helpful in keeping me proactive and on track.

I miss some of the more random networking that I used to do.  I am at least a moderate believer in serendipity, and the likelihood of serendipity goes down as I clamp down on my calendar.  And I will miss being on some outside Boards or helping new entrepreneurs figure out how to be first time CEOs.  But hopefully my combination of being selectively proactive and exercising good judgment about what inbound things to jump on will keep the machine humming.

I Love My Job

The picture below is a picture of my dress shoes in my closet at home.  You may note that they all have dust on them.  That's because I didn't put them on once for six weeks.

When we started Return Path back in 1999, we sat down to write our employee handbook, and all I could think was "what things can we add in here that will make this company a unique place to work?"  And one of them was a six week paid sabbatical after 7 years.  It didn't occur to me that we'd even exist after 7 years.  Then for good measure, we said, "7 years and every 5 years after that."

I'm happy to report that everyone who has hit their 7 year anniversary has taken the time off.  Some have traveled around the world, some have rented a house or villa somewhere, others (like me) did a "stay-cation."  Although my sabbatical was delayed (and quite hard to schedule), it was a fantastic experience.  I completely unplugged from work.  Cold turkey.  No email, no calls.  Spending time with Mariquita and my kids, which I never get to do much of, was completely refreshing and energizing.  And everything went fine at work, as I expected.  Business is in the best shape it's ever been in, and my amazingly talented executive team and assistant handled everything without missing a beat.

But back to the subject line of this post.  I figured a few things out while I was away.  One was that I haven't actually become a workaholic over the years despite working hard.  I *could* unplug without feeling aimless.  Another was that it's really nice to be untethered from the Internet, but it's near impossible to go through life now without some minor usage of the web and messaging.  But by far my biggest insight is plain and simple:  I love my job.  It's not that I didn't know that before, but I had more thoughtful time to break that down while I was away:

1. I love what I do:  I consider myself extremely fortunate to love the substance of my job.  The diversity of experiences that I have within a given week or day as a general manager, the interactions with people, shaping the business strategy, travel — it's all right up my alley. So many people out there don't have that match between interest, passion, skill, and reality. 

2. I love who I work with:  I have to admit that I stack the deck here since I do the hiring and firing, but the reality is that my colleagues at work are also my friends.  Not working was one thing.  Not talking to one particular subset of my life for six weeks was something else and just plain weird.  I just missed them and the interactions we have, which always blend the professional with the social. 

3. I love what we are working on:  We have an incredibly interesting business at Return Path.  It's very intellectually engaging, sometimes to a fault.  The spam problem is incredibly complex, and we're coming up with some extremely innovative approaches to reduce its impacts and hopefully someday eradicate it.  We're not curing cancer as I always say internally, but we're also engaged in some high impact problem solving that I just love.

So there you have it.  My work shoes are now dusted off and back in action.  It's great to be back.  We'll see how long I can stay in "mental vacation" mode, how much more time I can try to make for my family now that I'm back in my work routine, and whether the fresh perspective translates into any new actions or decisions at work.  But the best thought of all is that my 12 year anniversary is only another year and a half away!

Counter Cliche:  But It’s Ok If Some of Them Turn Out to Be Frogs

This week, Fred says You Can’t Kiss All the Pretty Girls, meaning that it’s easy for VCs to get a little carried away, get outside their strike zone or core thesis for investments, put money to work in too many places, and make some mistakes.  Sure, some pretty girls turn out to be nightmares when you actually start to date them.

But if you’re a VC, it’s ok if some of the pretty girls turn out to be frogs.  You have a diversified portfolio.  You invest in dozens of companies, and as many VCs have said over time — you lose all your money on 1/3, you more or less break even on 1/3, and you make money on 1/3.  And my memory from working in VC years ago is that 1 in 20 is a magnificent home run.

So yes, you can’t kiss ALL the pretty girls, because some will turn out to be frogs, but you can get away with a lot of frogs and still be a great investor.

There’s been much coverage in the news of Saturday’s passing of President Ronald Reagan, but I will add a new wrinkle by trying to distill down what I know and remember of The Great Communicator’s leadership style into a few simple lessons of note for CEOs.

Lesson 1: Sunny optimism motivates the people you lead, but only when it’s balanced with hard-headed realism. Reagan’s message that tomorrow can be a better day than today was powerful and timely for the American psyche, but he didn’t just assume that because he said it, it would be true. He backed up his message with (a) an understanding that the American economy itself was in the doldrums in the late ’70s, and (b) policies designed to fix the economy. Whether you agree with those policies or not, you have to respect the fact that Reagan as a leader wasn’t just talk — he combined the talk with reality-based action. That’s super important when communicating key messages to a company of any size.

Lesson 2: Simplicity of messaging beats out measured intellectualism in broad-based communications. Reagan’s view of the 40-year-old Cold War when he took office was “we will win, and they will lose.” Much easier to rally around than messages of detente and containment (this quote came from an editorial by former Reagan staffer Peter Robinson in today’s Wall St. Journal). Similarly, the bigger and more diverse the group you’re talking to inside your company or in a speech or in the press, the more important it is to boil your key message down to something people can easily take away with them and repeat at home later to their spouse or friends.

Lesson 3: Nobody’s perfect, and you don’t have to be perfect either. He may have been, electorally, the most popular president of our generation, but Reagan certainly had his many and sometimes glaring faults. History will acknowledge his faults but overall judge him on his performance. It was noted (also in today’s Journal, I think) that Reagan got a lot of little things wrong, but in the end, he will be remembered because he got a few big things very, very right. Perfection is something that most mortals can’t achieve, certainly not in a high profile position like President or CEO of anything, whether a 10-person startup or a nation.

Love him or hate him, the man was one of the most prominent leaders of our time. I’m sure there are more lessons from Reagan’s legacy than these three for CEOs, but this is a start, anyway.

A while ago, Fred Wilson wrote a posting about the incredible ubiquity Starbucks has achieved in recent years. I wrote a comment at the time, but I never know who actually reads blog comments other than the author.

The comment was:

Talk about ubiquity…my wife and I were just travelling in Asia and saw many Starbucks there, which was not a surprise. The one that WAS a surprise, however, which completely blew me away, was the Starbucks located in the middle of the Forbidden City/Imperial Palace in Beijing, the 600+ year old home of China’s emperors from the Ming and Qing Dynasties. To be fair, it was tastefully done (no big green awning), and if it weren’t in its particular location, some other refreshment stand would be in its place, but still, I couldn’t help but feel like the conspicuous American in the crowd as I walked past it.

Anyway, now that Mariquita and I have finished our vacation web site, here’s the image of the implausible Starbucks Forbidden City location, in all its glory (even without the big green awning).

If you want to be tortured by a full complement of China and Japan pictures and the accompanying travelog, feel free. From the Wall to temples to big Buddhas to a well-chronicled sashimi dinner, it’s all here.

Americans have long operated under an unwritten deal with media companies (for our purposes here, let’s call this the Old Media Deal). The Old Media Deal is simple: we hate advertising, but we are willing to put up with an amazing amount of it in exchange for free or cheap content, and occasionally one of those ads slips through to the recesses of our brain and influences us in some way that old school marketers who trade in non-addressable media can only dream of. Think about it:

– 30 minutes of Friends has 8 minutes of commercials (10 in syndication!)
– The New York Times devotes almost 75% of its total column inches to ads
– We get 6 songs in a row on the radio, then 5 minutes of commercials
– The copy of Vogue‘s fall fashion issue on my mom’s coffee table is about 90% full page ads

The bottom line is, advertising doesn’t bug us if it’s not too intrusive and if there’s something in it for us as consumers.

Since I started working in “New Media” in 1994, I’ve thought we had a significantly different New Media Deal in the works. The New Media deal is that we as American consumers are willing to share a certain amount of personal information in exchange for even better content, more personalized services, or even more targeted marketing — again, as long as those things aren’t too intrusive and provide adequate value. Think about how the New Media Deal works:

– We tell Yahoo that we like the Yankees and that we own MSFT stock in order to get a personalized home page
– We tell Drugstore.com what personal health products we buy so we can buy our Q-tips and Benadryl more quickly
– We tell The New York Times on the Web our annual income in order to get the entire newspaper online for free
– We let PayTrust know how much money we spend each month so that we can pay our bills more efficiently
– We let Google scan our emails to put ads in in them based on the content to get a free email account
– We give their email address out to receive marketing offers (even in this day and age of spam) by the millions every day

Anyway, after a few years of talking somewhat circuitously about this New Media Deal, my colleague Tami Forman showed me some research the other day that backs up my theory, so I thought it was time to share. In a study conducted by ChoiceStream in May 2004, 81% of Internet users expressed a desire for personalized content; 64% said they’d provide insight into their preferences in exchange for personalized product and content recommendations; 56 would provide demographic data for the same; and 40% said they’d even agree to more comprehensive clickstream and transaction monitoring for the same. All of these responses were stronger among younger users but healthy among all users. Sounds like a New Media Deal to me.

Don’t get me wrong — I still think there’s a time and a place for anonymity. It’s one of the great things about RSS for certain applications. And privacy advocates are always right to be vigilant about potential and actual abuses of data collection. But I think it’s becoming increasingly clear that we have a New Media Deal, which is that people are willing to sacrifice their anonymity in a heartbeat if the value exchange is there.

P.S. Quite frankly, I wish I could give spammers a little more personalized information sometime. They’re going to email me anyway — they may as well at least tell me to enlarge a part of my body that I actually have.

As I mentioned in a previous post, I’ve recently started writing a column for The Magill Report, the new venture by Ken Magill, previously of Direct magazine and even more previously DMNews. I share the column with my colleagues Jack Sinclair and George Bilbrey and we cover how to approach the business of email marketing, thoughts on the future of email and other digital technologies, and more general articles on company-building in the online industry – all from the perspective of an entrepreneur. Below is a re-post of George’s column from this week, which I think my OnlyOnce readers will enjoy.

Guest Post: Staying Innovative as Your Business Grows (Part One)

By George Bilbrey

As part of The Magill Report’s Online Entrepreneur column, I’d like to share some of Return Path’s learning about how to stay innovative as you grow. In Part One, I’m going to cover some of the organizational techniques we’ve been employing to stay innovative. In Part Two, I’ll talk about some of the practices we’re using in our product management and development teams.

When we were starting our deliverability business at Return Path, staying innovative was relatively easy. With a total of four people (two employees, two consultants) involved in selling, servicing, building and maintaining product, the environment was very conducive to innovation:

• Every employee had good conversations with customers every day—We could see the shortcoming of our tools and got great, direct feedback from our clients.

• Every employee was involved in every other function in a very detailed way—This gave everyone a strong intuition as to what was feasible. We all knew if the feature or function that the client was asking for was within the realm of the possible.

• We were very, very focused on creating customers and revenue—We were a startup. If we drove revenue above costs, we got to take home a salary. Every conversation and decision we made came down to finding out what would make the service (more) saleable. It was stressful, but productively stressful and fun.

We were lucky enough to come up with good concept and the deliverability services market was born. Our business grew rapidly from those two full-time employees to where we are today with about 250 employees in eight countries supporting more than 2,000 customers.
Growing our business has been one of the most challenging and fun things I’ve ever had the chance to take part in. However, growth does have some negative impacts on innovation if you don’t manage it right:

• Supporting the “core” comes at the expense of the new—As you grow, you’ll find that more and more of your time is spent on taking care of the core business. Keeping the servers running, training new employees, recruiting and other internal activities start to take up more and more of your time as the business grows. Clients ask for features that are simple linear extensions of your current capabilities. You don’t have time to focus on the new stuff.

• Staying focused gets harder as the business get more intricate—As your business grows, it will become more complex. You’ll build custom code for certain clients. You’ll need to support your stuff in multiple languages. You find that you have to support channel partners as well as direct customers (or vice versa). All this takes away from the time you spend on “the new” as well.

• Creating “productive stress” becomes difficult—At the point our business became profitable, life became a lot better. There was less worry and we could invest in cool new innovative things. However, it’s hard to drive the same urgency that we had when we were a start-up.

Of course, a bigger profitable company has advantages, too. For one, there are the profits. They come in awfully handy in funding new initiatives. And while they can remove the “productive” stress that comes from needing revenue to keep a venture going, they can also remove the distracting stress of needing revenue to keep a venture going. Second is the ability to capitalize on a well-known brand—the result of many years of marketing, PR, and thought leadership within the industry. Third, we have access to a much broader array of clients now, which I’ll explain the importance of in a minute. Finally, back-end support and process—an accounting team that gets the invoices out, an HR team that helps make strategic hires—makes the folks engaged in product development more productive.

So what have we done to leverage these strengths while also combating the forces of inertia? We’ve done a lot of different things, but the major focus has been, well, focus. For the two to three key initiatives that we think are fundamental to growing our business, we’ve built a “company inside the company” to focus on the project at hand. A good example of this is our recent Domain Assurance product, our first product to address phishing and spoofing. Initially, we tried to run the project by assigning a few developers and part of a product manager’s time with some part-time support from a sales person. It didn’t work. We weren’t able to move forward quickly enough and some of our folks were getting fried.

Our answer was to create a dedicated team inside our business that focused entirely on the phishing/spoofing product space. The key components of the “company inside the company” were:

• Fully dedicated, cross-functional resources—Our team represented very much the kinds of folks you’d find in an early stage company: development, system administration, sales and marketing. This team worked as a team, not as individuals. Many of these resources were fully dedicated to this new initiative.
• Deadline-driven productive stress—When we launch new products, they go through four discrete stages (I’ll explain this in more detail in my next column). We set some pretty tight deadlines on the later stages.

• Customer involvement, early and often—The team involved customers in building our new product from the very beginning. From continuously reviewing early wireframes, prototypes and then beta versions of the product, we got a lot of client and prospective client feedback throughout the process.

We’re still working on the exact right formula for our “company inside a company” approach, but our experience to date has shown us that the investment is worth it.

Everyone’s a Direct Marketer, Part III

With every company as a direct marketer, and with (hopefully!) every company embracing some of the best DM principles, what does this shift mean for the way companies will be structured in the future?

First, let’s talk about the internal structure of a company.  The biggest shift going on here is that customers are becoming a more important part of all employees’ daily lives, not just those in the advertising department.  I wrote an earlier posting called Everyone’s a Marketer which applies here.  Most likely, more and more members of your organization are touching customers every day — and they need to be trained how to think like marketers.

But beyond that, companies will be constructed differently in the future as well.  While not true in some industries, there are many industries founded on the “mass” which will never be the same again.  Here are three examples of how direct marketing is infiltrating — but enhancing the opportunities of — corporate America.

– Disney’s film unit used to make movies only for theatrical release.  Today, they have an enormous volume of direct-to-video (or DVD) movies that never see the big screen but that drive huge sales numbers when marketed to Disney’s customer email database.

– Ralph Lauren used to make Polo shirts with a fixed number of configurations of shirt color and knitting color of the logo.  Now, you can go onto Polo.com and custom build a personalized shirt for someone with the right size and color combination of their college or company or favorite baseball team.

– Barry Diller used to run a studio, then he bought a TV network called the Home Shoping Network (and, I’d add, a lot of people laughed at him for doing so).  He has now turned HSN into InterActive Corp, a true convergence company that mixes content and media with commerce and direct marketing with brands like Match.com, Ticketmaster, eVite, CitySearch, and Expedia.

That’s it for this series.  All thoughts and comments are welcome.

It’s Easy to Feel Like a Luddite These Days

You know, I feel like I’m a pretty progressive, early adapter kind of guy.  I’m a technology entrepreneur.  We got the iPod for Windows the minute it came out.  TiVo Series I.  One of the very first wireless hubs to create our own wireless LAN at home.  I blog.  I have an RSS feed.  But it’s hard to stand still these days, even for a few months.

So here’s my big admission — I still don’t entirely “get” tagging or podcasting.  But I’m making a big push to try them out over the next couple of weeks and see where it goes.  I’ll try tagging first, using, of course, del.icio.us.  Fred and Brad have both posted extensively about del.icio.us and tagging, Fred as an investor in the company and both as users.  So look for the next posting to be a few things I read today on the web and tagged and should automatically become part of my RSS feed courtesy of my friends at Feedburner (but presumably not a blog posting).  We’ll see if this all actually works.

With apologies to all those progressive Luddites out there, of course.

A Ball Bearing in the Wheels of E-Commerce

As an online marketing professional, I’ve long understood intellectually how e-commerce works, how affiliate networks function, and why the internet is such a powerful selling tool.  But I got an email the other day that drove this home more directly.

When I started my blog about a year and a half ago, I set myself up as an Amazon affiliate, meaning that any time someone clicks on a link to Amazon from one of my postings or on the blog sidebar, I get paid a roughly 4% commission on anything that person buys on Amazon on that session.

According to the email report I just got from Amazon on Q2 sales driven by my blog, I am responsible for driving traffic that buys about $2,500 worth of merchandise from Amazon every quarter, which yields about $100 to me in affiliate fees.  All I really link to are business books that I summarize in postings, although people who click from my blog to Amazon end up buying all sorts of random things (according to my report, last quarter’s purchases included a Kathy Smith workout DVD and a new socket wrench set in addition to lots of copies of Jim Collins’ Built to Last and Malcolm Gladwell’s Blink.

This is a true win-win-win — Amazon gets traffic for a mere 4% of sales, a relatively low marketing cost; I get a small amount of money to cover the various fees associated with my blog (Typepad, Newsgator, Feedburner), and people who read my blog pay what they’re going to pay to Amazon anyway – and maybe get something they otherwise wouldn’t have gone out to get in the process.

My blog is certainly not a top 1,000 blog, or probably not even a top 10,000 blog in terms of size of audience.  This is merely a microcosm that proves the macro trends.  If I’m driving $10,000 per year of business to Amazon, now I REALLY understand how there are now approximately 500,000 people who make their LIVING by selling goods on eBay, and how probably another 500,000 people are making good side money or possibly even making their living by running offers and affiliate marketing programs from their web sites.  I’m like a little ball bearing in the finely tuned but explosively growing wheel of e-commerce.

If my quarterly affiliate fees keep growing, I’ll find something more productive or charitable to do with them than keep them for myself.  But for now, I am covering my costs and marveling on a personal level at how all this stuff works as well as it does.