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What is Viral Marketing? (What the buzzwords mean, and why not to use them)

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What the buzzwords mean, and why not to use them

“We will leverage our viral marketing efforts, resulting in widespread adoption of our revolutionary ‘no-revenue’ product, as customers recommend us to their friends.” — Any of a million forgettable business plans

Blech. Let‘s get real. It is mid-2000. Tech stocks are tanking, and VCs have boldly declared startups should have a revenue model. In this brave new world, the old “new rules” don’t apply, and the new “old rules” say business plans need more than New Economy Buzzword Hype.

Nonetheless, every plan I read will blow the world away with “viral marketing.” They almost always use the phrase incorrectly, Let’s explore the correct use of Viral Marketing.

The best plan: don‘t use buzzwords like “viral marketing.” Buzzwords rarely impress your readers. If you can’t say it in plain English (or your native language), then it‘s probably fluff and doesn’t belong in a serious document.

If you must use “viral marketing,” use it correctly. Viral marketing campaigns piggy back on your product, exposing non-customers to your company automatically when your existing customers use the product.

Hotmail spawned the viral marketing revolution. Hotmail is web-based e-mail that appends “Try hotmail!” to every outgoing message. Without any user action, every e-mail advertises the service to the message recipient, who (at that time) probably didn’t know about Hotmail.

Hotmail was weak viral marketing, since the recipient could ignore the ad without trying the service for themselves. Weak viral marketing requires voluntary action. MCI’s successful “Friends and Family” plan gave discounts for calling people in your plan circle if they were also on the plan. This made customers persuade friends to join the plan, and friends could refuse without trying it. The need for both customer and recipient action made this weak..

Strong viral marketing requires the non-customer to try the service. To receive money e-mailed with the “Paypal” payment service, a recipient must register with the service. Since registration means receiving money, Paypal recipients are highly motivated to join. Evite online invitations also require recipients to use the service to confirm an event invitation. Other strong viral applications include Yahoo!’s shared calendar service and their briefcase service.

Pressuring customers isn’t viral marketing. If you’re selling manufacturers a production planning system, and the manufacturers pressure their distributors to switch to the same system for convenience, that’s simple peer pressure. It may be effective, but it isn’t viral marketing, since using the system normally doesn’t automatically expose new prospects to the system.

Word of mouth is neither viral nor marketing. Since it depends on the customer acting voluntarily, it isn’t viral. Since it’s what the customer does, it’s not marketing (marketing is what your company does; not what your customers do).

In short, Viral marketing works in transaction oriented businesses where a customer transacts with a non-customer. The opportunity comes in controlling that interaction so the non-customer must be told about your product (weak viral) or actually made to try the product (strong viral) without action by the current customer.

Conquering the Stress of Uncertainty: Keeping Yourself Sane in an Uncertain World

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A reader writes: I could use some helpful tips in overcoming stress from not seeing success right away.

For many of us, the economic slowdown has meant less business. We can no longer count on steady growth and reliable money. It’s easy to become stressed when we aren’t seeing the results we expect.

In Western culture, we are rarely taught coping skills for uncertainty. It can be especially hard having patience and a clear mind when things aren’t going the way we want them to (witness our country’s difficulty with two weeks of uncertainty around our Y2K Presidential election!).

If you haven’t been seeing success right away, start by asking yourself “what constitutes success?” If you’re attached to an outcome—say, doing $10 million of sales in your first year—you’ll find that success is all-or-nothing; you’ve either reached the outcome or you haven’t. It may help you feel process to subdivide your goal into smaller pieces. Shoot for at least one milestone a week, so your progress is continuous. Your first week’s goal could be to get a face-to-face appointment with three prospects and land one sale. Each goal you meet will help you feel progress.

The key is that you’re not choosing your milestones just to manage the projects. This is about managing your emotions; choose milestones that will cause you to feel progress in your gut, even if the outside results aren’t there, yet.

You can also succeed with process goals. Process goals measure what you’re doing, not where you are. You’re shooting for three prospect appointments? You might set a process goal of calling 10 Widget Retailers from the phonebook daily. That’s a process goal. If you find you’re missing your process goals, asking yourself why can lead to you choosing a better way to reach your outcome. For example, if you miss your ten daily calls because there are only three Widget Retailers in the phone book, it’s a signal that you’ll need another way to find prospects. Process goals give you the chance for daily "wins" on your way to your bigger goals.

If you find yourself stressed even when you reach smaller progress goals, you might want to tackle the stress directly. Meditate for a half hour a day, get some exercise, and set aside time for yourself to relax and unwind. Choose a time for the day to be over and when it is, go home and do something completely unrelated to work. It can be a challenge, but separating work and home life can save your sanity. At least three times a week, leave your office by 6 p.m. and go play. Clear your mind. Get a massage. Indulge yourself in a bubble bath. Treat yourself well! (My personal touchstone is yoga.)

Of course, it’s possible your business might not be truly sustainable. The market may not be there, the distribution can’t be worked out, or competition makes it impossible to build a business that makes money. Set boundaries for yourself to keep yourself healthy. Decide now how much time/money/effort you are willing to put into the business, so you don’t someday wake up having overspent yourself. Also, think hard on how you’ll know if the business really won’t work. Just setting those limits can help. If you decide three months of consecutive losses is the signal that your specialty Pokeman Roller Skate Shop has outlived its usefulness, then you’ll know when it’s time to quit. And knowing there’s a defined exit point can really be calming.

But meanwhile, give it your all! With well-thought-out process and outcome goals, you may never have to worry about your exit conditions. You’ll know early on if what you’re doing isn’t working, and you can take action to insure your success. With hard work, skill, and a little luck, you main worries will be plotting your multibillion dollar expansion …as you relax in your mansion’s new whirlpool bubble bath.

So take a deep breath. Calm your mind. And Go For It!

Living Your Life with Quality

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A story by Mark Albion of Making a Life, Making a Living.

An elderly carpenter was ready to retire. He told his employer-contractor of his plans to leave the house-building business and live a more leisurely life with his wife enjoying his extended family. He would miss the paycheck, but he needed to retire. They could get by.

The contractor was sorry to see his good worker go and asked if he could build just one more house as a personal favor. The carpenter said "yes", but in time it was easy to see that his heart was not in his work. He resorted to shoddy workmanship and used inferior materials. It was an unfortunate way to end his career.

When the carpenter finished his work and the builder came to inspect the house, the contractor handed the front-door key to the carpenter. "This is your house," he said, "my gift to you." What a shock! What a shame! If he had only known he was building his own house, he would have done it all so differently. Now he had to live in the home he had built none too well.

So it is with us. We build our lives in a distracted way, reacting rather than acting, willing to put up less than the best. At important points we do not give the job our best effort. Then with a shock, we look at the situation we have created and find that we are now living in the house we have built. If we had realized, we would have done it differently.

Think of yourself as the carpenter. Think about your house. Each day you hammer a nail, place a board, or erect a wall. Build wisely. It is the only life you will ever build. Even if you live it for only one day more, that day deserves to be lived graciously and with dignity.

The plaque on the wall says, "Life is a do-it-yourself project,"

Who would say it more clearly? Your life today is the result of your attitudes and choices in the past. Your life tomorrow will be the result of your attitudes and the choices you make today.

Dealing with Overwhelm

The overwhelm can be worse than the backlog!

From my March 2001 newsletter

A client of mine discovered that the feelings of overwhelm can be more harmful than the fact of overwhelm itself. The feelings lead to stress, which makes one less productive. The less productive, the more work piles up. Bigger piles lead to more feelings of overwhelm, and the cycle repeats.

But what if the work really is manageable? How can one address the feeling of overcommitment and go ahead to get things done?

Getting a lot done is really a matter of doing one thing at a time, whether or not you stress. When the stress is from volume of work, locally reducing the volume can help the stress…

This article is continued in “It Takes a Lot More than Attitude … to Lead a Stellar Organization!" Click here to purchase.

Take Time to Recharge (Pushing Yourself, You'll Get Less Done Than You Think)

Taken from February 2001 newsletter and private correspondence

One of my clients was feeling under the weather last. Motivation was down, stress was up. Instead of an attitude of optimism and cheerfulness, the world was melancholy gloom. Overall, a bad scene, and not one to set a good tone within the business–a CEO‘s mood can infect the entire company. The problem? He wasn’t getting enough sleep, was working through his normal exercise time, and was making up the energy deficit with coffee during the day.

This is an all-too-common spiral…

This article is continued in “It Takes a Lot More than Attitude … to Lead a Stellar Organization!" Click here to purchase.

The Macho Test, by Shelle Rose Charvet

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by Shelle Rose Charvet

One of the most irritating aspects of day-to-day communication is trying to convince someone who takes a Macho attitude. Women are often dismayed to find that while amongst ourselves we can build on and critique each other’s ideas, it is sometimes much more difficult to do this when male colleagues are involved. And sometimes even women become Macho!

When a person is running a Macho Pattern, they operate as if they believe the following:

  • They already know everything there is to know.
  • They do not have any problems; they and everything connected with them are perfect.
  • If there are problems, they are of someone else’s making.
  • They are better, higher, more important, more knowledgeable than anyone else.

How many times have major decisions been made to assuage someone’s ego or to simply not lose face? Just listen to radio interviews. When the interviewer asks if someone were surprised by the turn of events, rarely if ever will the person admit to being surprised. That would be saying that they did not already know everything there is to know. Once I sold a training program with optional follow-up coaching. No one took up the coaching offer because that would have meant conceding they needed help. Now the coaching is just part of the training program.

All of us become Macho at times. Notice your reaction when one of your parents tells you what to do!

To make sure that even someone who has become Macho will consider your ideas, you could use the Macho Test as an editing technique. While I have formalized the Macho Test, you may have already done something like this yourself to make sure your important messages get through.

Write the document or prepare what you are going to say using the 4 step formula for presenting ideas to skeptical people. Then look it over and ask yourself the following questions about what you have prepared:

Is it anywhere stated or implied that:

1. There is something they don’t already know,
2. I am telling them what to do,
3. They have a problem and I have the solution,
4. They are not perfect in some way, and/or
5. I am better than they are in some way.

If any of the above are stated or implied, it does not pass the Macho Test! You may wish to rephrase as follows:

1. As you probably know….(then state the thing you suspect they do not know)

2. Use the language of suggestion: You may wish to consider.

3. I understand that other organizations have had this issue and what some of them have done is… How have you solved this problem? (implies they have already solved all the problems)

4. With your experience and knowledge in this area….

5. Your role is…. My role is… (establishing different yet equal roles)

Next time you get the sense that if you present a ‘new’ idea, the person will deny it’s actually new, try suggesting that it may be something they have already considered. You probably already know exactly who the Machos are in your life. I find that once I rephrase to pass the Macho Test, the people I’m addressing stop being Macho and become more willing to participate in the free flow of ideas.

I published an article entitled: "Ten Tips for Surviving the Health Care System." The title passes the Macho Test as "tips" are only suggestions. It would not have received nearly as much attention had I entitled it: "Ten Rules for Getting Through the Health Care System."

From my years helping people solve communication problems, I have learned that most of the effort is in getting someone into a mental and emotional state of openess, where they will be able to hear what I am saying. When we are successful at getting people to listen and take us seriously, it is because we have cleared enough mental space in the other person for our words to go in. Don’t believe me? Try it out for yourself!

Published in Profit Magazine on-line version: www.profitmag.com

Losses and Responsibility: How everyday business language lets us engage in accounting…deception.

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How everyday business language lets us engage in accounting…deception.

We’re living in interesting times. Worldcom announced $4 million in losses that had been buried as, um, capital expenditures (oops. Don’t you just hate it when that happens?). Enron’s collapses from horrendous mismanagement, taking Arthur Anderson down for obstruction of justice. Tyco apparently funneled billions of company dollars straight to the founder’s family. Global Crossing… Xerox… Merck … Everyone is so upset about the losses. We’re losing so much money. Losses, losses everywhere. But wait!

What does that mean? When I "lose" my wallet, it’s because it got accidentally (and thoughtlessly) misplaced. Getting into the cab, it was there. Six tequila shots later, when it was time to pay, the wallet was gone. Whoops. I must have lost it. Fortunately, the realization comes after the six shots, so the consequences (while probably severe) seem like little more than a hazy dream…

This article is continued in “It Takes a Lot More than Attitude … to Lead a Stellar Organization!" Click here to purchase.

What is Leverage? What the buzzwords mean and why not to use them.

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What the buzzwords mean, and why not to use them

“We will leverage our viral marketing efforts, resulting in widespread adoption of our revolutionary ‘no-revenue’ product, as customers recommend us to their friends.”
— Any of a million forgettable business plans

Leverage

Where you put in the same force but get much bigger result.

You leverage "X" to do "Y". You need a second verb in order for the construction to make sense.

You leverage small amounts of money to control a lot of money by borrowing with a small downpayment.

When you leverage X to do Y, Y must be something you could do without X. And having X must make Y a whole lot easier. If having X doesn’t make Y easier, it’s not leverage.

You leverage one person’s smarts by having them be a teacher.

You don’t leverage one person’s smarts by having them do their work.

You leverage your salesforce by having each of them get a dozen customers to become evangalists.

You don’t leverage your salesforce by having them go out and sell.

If you’re going to "leverage your technical expertise," that means you’ll use your technical expertise to produce a multiple of the results you could produce without that expertise, by automating, etc. Fedex has leveraged their package tracking system to lower costs, and increase offerings [web-based tracking, and now at-your-printer printing of airbills]

If "use" is a synonym for "leverage," you can probably safely use "use."

You don’t leverage your people unless you have a mechanism for turning 5 people’s knowledge into many more.

You leverage an expert by having them write a column. Not by hiring them to do work.

You don’t "leverage the power of the internet." You leverage the broad reach of the internet to aggregate customers from around the world. You leverage the speed of the internet to get product to your door faster than any other kind of ordering. You leverage the automation of the internet to … etc.

Click here to read about “viral marketing,” another hot buzzword.

Returning Money to Investors: How to Calculate their actual return

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You’re giving them money, but how do you calculate their actual return?

Your investors give you money. You give your investors money. In the end, they want a good return on the money they’ve given you. How do you calculate the return you’re providing? The number you’re after is the “internal rate of return” (IRR) of the cash flowing between you and them. Most spreadsheets have an IRR function you can use for this calculation.

Step 1: Identify the cash flows

First, lay out the cash flows as a series of numbers. Use negative numbers for cash you receive from the investors. Use positive numbers for cash the investors receive. Each number should represent the same time period.

For example, if investors give you $1,000 at the start of January, and you give them $50 at the start of February, April, and June, and also return the $1,000 principal in June, the cash flows look like this:

 
A
B
C
D
E
F

1
Jan
Feb
Mar
Apr
May
Jun

2
-1000
50
0
50
0
1050

Step 2: Use the IRR function to calculate the rate of return.

If you’ve typed the above into a spreadsheet, the formula to calculate the rate of return is:

IRR(A2:F2) which equals 3%

Example #1: A bank loan

A bank loans you $10,000. They expect $500/month payments for 6 months. They want principal repaid at the same time as the last payment.

 
A
B
C
D
E
F
G
1
Jan
Feb
Mar
Apr
May
 Jun
Jul
2

-10,000
500
500
500
500
 500
10,500

IRR (A2:G2) = 5%

Example #2: Equity investment

Investors put in $50,000 in preferred stock. They expect a $1,000 dividend each year for four years. On the fifth anniversary of their investment, they expect the company to be acquired, with their stake worth $100,000.

 

A

B

C

D

E

F

1
Now
Y1
Y2
Y3
Y4
Y5

2
-50,000
1,000
1,000
1,000
1,000
100,000

IRR (A2:F2) = 16%

What cash do I need to provide them to produce the return they demand?

Often you know how much you want investors to invest, and they are demanding a certain rate of return. What cash flows do you need to provide to give them that rate of return?

If they provide $100,000 and demand a 40% rate of return per year, that means you’ll have to pay them $40,000 each year. If you agree that they get their money in a lump sum when the company goes public, then the 40% compounds. The calculation is easy—the total due each year is the previous year’s total plus the interest (40%):

Year

What you owe them
Now
 $100,000
1
 $140,000 (100,000 + 40%*100,000)
2
 $196,000 (140,000 + 40%*140,000)
3
 $274,400 (196,000 + 40%*196,000)
4
 $384,160 (274,400 + 40%*274,400)
5
 $537,824 (384,160 + 40%*384,160)

If you estimate the company will be worth $5,000,000 at the end of the fifth year, then the investors will need to own 10.8% of the company ($537,824 / $5,000,000) in order for them to get their 40% return.