Mistakes in Marketing Strategy: From the school of hard knocks

Part 1: Lack of an understanding of source of volume

This is part rant, part treatise on common mistakes I see with marketing strategy at high tech companies in the time I have spent in Silicon Valley. This started off as me listing a compilation of mistakes I have made and witnessed— often from very senior people but as I started doing it, I figured it might be more useful to not just list mistakes but also provide simple tools and tips that could lead to a better way to think about the problem and hopefully lead to better outcomes.

I have focused this exercise on B2B companies aka firms selling solutions to enterprise customers, where in the absence of a lot of data (vs direct to consumer firms like Uber where marketing tends to be more evolved due to a lot of data and perhaps more structured A/B testing), there often lacks a structure and consequently a poor understanding of how startups and established firms ought to think about planning and executing a successful marketing strategy.

As I started to write the first in what I hope to be a series to help folks with a better mental model on how to think about their marketing strategy, it also became increasingly apparent to me how intertwined and tied to the hip marketing and product strategy have to be for success and how this is such a poorly understood concept. Too often, product managers execute towards a product strategy with little input from marketing and marketing folks are asked to execute a plan to create awareness/demand for the product that was built without their involvement. In my mind, this is a failing strategy and probably a reason for why so many firms do such a poor job at marketing and consequently fail.

The first edition of my series focuses on “Source of volume” and how a more structured understanding of this aspect is a key to nailing down an effective marketing plan for any product introduction

Does this scenario sound familiar? Product manager(PM) “A” works on a new product. He/she conducts extensive market/competitive research either to enter a new market or to enter an established market to take share from a competitor. The product gets developed and the PM develops a positioning / feature benefit document that details the core capabilities of the product and provides key talking points on how to position the product. This then gets handed off to marketing to help drive their marketing strategy and go to market (GTM) activities. What emerges is marketing collateral and campaigns that focuses on all the capabilities the new solution delivers with no clear focus on who it is targeting , what the primary source of volume is (the central issue I have focused on for this article) or clearly establishing in the prospects mind a unique value proposition and why they should care

Something I have seen happen often are the following tactics

1. When entering a new market may be to list all the unique capabilities that the product provides or
2. When attempting to enter an established market with entrenched competitors may be to try and demonstrate competence for entering the category. The GTM highlights all the ways in which the product meets the category requirements and unique differentiation

This approach is fundamentally flawed because while it intuitively makes sense, at the risk of sounding blunt is extremely lazy reasoning and in an attention deficit filled world, lacks the precision needed to create perception of unique value and does not optimize for success. You may still be successful but it may be in spite of and not because of your efforts.

An important exercise that is missed at almost every company is what I call a “Source of volume to marketing objective” mapping exercise.

Simply put, your source of volume for any new product introduction is either

1. Stimulating demand for your product that didn’t exist prior or
2. Stealing share from competitors in an established category

Your marketing objective is to grow the business by either

1. Acquiring customers or
2. Retaining customers

Matrix that maps marketing objectives to source of volume

If you map your core strategy and place an “x” on this matrix, the marketing objective / tactics ought to come into focus.

1. If your core strategy is to stimulate demand through acquisition of new customers, you are in the business of attracting new users to a category you are defining. Successful examples of this are companies like Aruba Networks, AirSpace that set out to become pioneers in the wireless networking category or Palo Alto Networks that pioneered the app aware firewall category
2. If your core strategy is to acquire customers by stealing share, you are in the business of attracting users already in the category to switch from a competitor’s solution to yours. Successful examples of companies that have stolen share are Splunk in the log management space from established competitors like HP/ArcSight
3. If your core strategy is to retain customers by stimulating demand, you are looking to increase consumption among your existing users. This could be through expansion of your product footprint or introducing additional solutions on top of existing purchased. Examples of this in the tech world are companies selling infrastructure and then selling analytics solutions on top of the infrastructure as a value added sale e.g. VMware sells a hypervisor (acquire customer / stimulate demand) and then sells networking solutions on top of it (retain customer / stimulate demand)
4. If your core strategy is to retain customers by stealing share, you are looking to expand the usage of your product within the category. Examples of this could be a firewall vendor who has excellent products for branch locations and is now looking to expand their footprint within existing customers by addressing their campus or datacenter firewall needs. Examples of companies that have executed to this strategy were NetScreen in the firewall space against Cisco where their initial insertion strategy (acquire customers/ steal share) was as branch firewall and eventually expanded their footprint to meet campus needs (retain customers/ steal share)

In summary

For any new product introduction, it is critical for PM and marketing to jointly go through this exercise to identify based on the initial products core strengths and weaknesses, the likely path to source of volume and the marketing objective that needs to support that

Once identified, this helps set up a set of tactics for success

1. Acquire customers/ Stimulate demand

Your marketing goals are to build the category. This is a highest risk, highest reward scenario as it is hard to do but if executed successfully. In this case, you need to be emphasizing category attributes and the benefits of the category more than product attributes. This is a crucial distinction that is often missed. Building the category will yield long term benefits for your product. If done correctly, every time a new customer starts to think about purchasing solutions in your category, your name will be the first that pops up in their mind when it comes to evaluating/purchase. Aruba and AireSpace were well served by highlighting benefits of wireless networks over wired networking e.g. wireless allows your users to roam and not be tethered to a cable and so become more productive vs. talking up the capabilities of their product. Imagine if everytime the customer has a painpoint associated with this category, you are top of mind as having a credible solution for. That is sustainable differentiation. Subtle but important distinction that is worth keeping in mind

2. Acquire customers / steal share

You are in the business of identifying the right segment/ competitor to go after (more on segmentation in my next writeup). This is a very hard challenge because it isn’t sufficient to have a unique point of view or differentiation as it is very likely that your competitor a) is an entrenched incumbent b) can respond to your differentiation with several years worth of capabilities built into their product that you are unlikely to have built into your product on day 1. You have to either

1. Identify a segment that is willing to value your key differentiation and overlook your competitor’s strengths and/or
2. Identify competitors that may be flailing and target their customers who may be dissatisfied, looking for an alternative. In this scenario, the customer better be part of the segment i. or they may buy from another entrenched player in the market
3. When Splunk announced a log management product, they didn’t go head to head against ArcSight deployments in the log management space selling to IT departments, They went after the business units within a company and their need for local indexing / storage of information and only after they entrenched themselves did they take on ArcSight in the mainstream log management category. Identifying the initial source of volume and segment that is likely to provide that helped them tune marketing tactics to execute to that strategy

3. Retain customers / stimulate demand

Your marketing goal is to try and get existing customers to buy more of your product. Identifying the right metric and executing to that is key for e.g. do you want them to buy more of your base product or buy more subscription add ons. That will determine your appropriate tactics to execute towards. When VMware started bundling in the Nicira software defined networking product, they were now creating additional value for their customers by not just providing a hypervisor but also networking. It is important to realize that in VMware ‘s case they were able to execute to this plan successfully because they were doing the additional upsell also to the same buying center. Different buying centers / channels to get to those buyers are all elements that need to be accommodated in determining if this is the right strategy and the marketing tactics to support that

4. Retain customers / steal share

Your marketing objectives are to expand your footprint by grabbing more of the wallet of your customer for your product for e.g. you could have a great firewall for an enterprise branch and the reason you may have traction is that you are easy to deploy. If you choose to go down this path, you may be looking to expand the footprint inside that customer by also becoming the firewall of choice for their datacenter and the core attributes

Your marketing tactics — sales, channel, analyst engagements and messaging need to line up accordingly to the strategy you are executing towards

It doesn’t just end there. On a continual basis, your PMs have to make sure that the product strategy and development efforts line up behind your marketing strategy to establish a virtuous loop

1. Acquire customers/ Stimulate demand: PMs have to be aware that with category leadership, comes the onerous challenge of making sure your roadmap continues to support aggressive innovation to keep raising the bar on the minimum acceptable requirements for the category. This ensures that even if competitors emerge and try to imitate you, you are able to stay one step ahead

2. Acquire customers / Steal share: While establishing initial traction in a sub-segment that care about your key differentiation, you have to keep your eye on the large segment that you need to attack and the roadmap that entails

3. Retain customers / Steal share: While expanding footprint, it is likely that you have multiple core attributes that you need to satisfy e.g. in the firewall example highlighted above, you may need to continue to be easy to deploy for the branch location needs and high performance for the datacenter and you have to make sure your development resources are lined up to execute to a more aggressive development plan and not lose sight of your core attribute strengths that put you in this position in the first place

Finally, the marketing objectives are not set in stone forever. Your source of volume and marketing objectives almost definitely will change over time. For e.g. an acquire customer/ stimulate demand strategy, if successful, over time will lead you to have a dominant market share in the category and may at some point lead you to having limited upside in growth from continuing with this strategy. This may necessitate new capabilities that lead to a retain customer/steal share strategy to get a greater share of the customer’s wallet and you would have to adjust strategy and tactics accordingly

Am amazing resource on this topic and others around marketing strategy is https://bigpicturepartners.com/methodology/module/strategy/

Hope this was useful. Want to engage? Ping me at Karthik.k16@gmail.com