Sometimes it takes a system design engineer and some cat gifs to really help you see what you’re doing and this funny and informative talk from Boston in 2019 has both! In this BoS Talk April shows you how important positioning is to your product and how you can be doing yourself a great injustice just by positioning incorrectly.
April is an expert marketing practitioner turned executive consultant and author who helps technology companies make complicated products easy for customers to understand and love.
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April is returning to BoS in 2020!
Boy, I always wanted to speak at BoS Con this is so exciting! Thanks for having me!
We’re going to switch gears a little bit here and what I want to do is I want to spend the next hour, hopefully, teaching you something about what I think is one of the most powerful tools we have at our disposal – particularly in startups – and in my experience. And, by the way, that experience includes seven startups that were successful; six of them were acquired that resulted in me working at five big multinational companies and across all of that I’ve launched 16 products into market as an executive. Anyway across that experience I believe that this is probably the most important thing for you to understand and it can make the difference between success and failure not just of the product you’re working on but maybe the whole company; certainly your career.
This is a talk about positioning one of the most misunderstood concepts in marketing, in startups, in business. In fact, it’s so misunderstood, that whenever I give a talk about positioning I have to start by talking to people about what positioning is not. So positioning is not the same thing as messaging. It’s not a tag line. It’s not your vision in the market. It’s not the same thing as branding. In fact one of my pet peeves is people say ‘What are you going to talk about it today’ and I’ll say ‘positioning’ and they say ‘Oh, like you mean brand positioning?’ and I’m like ‘no! There’s positioning. There’s branding: These two things are totally separate things’. Some people will say ‘isn’t positioning just the sum total of everything we do in marketing?’. No, no! It’s not that either. In fact, positioning affects a lot of things outside of marketing. So, in my opinion, positioning comes first. All these things on this slide flow from positioning but you got to figure out your positioning first before you can tackle any of those things. You can think of it a little bit like this. If marketing and sales is the house positioning is the foundation upon which the house is built.
So I define it this way.
Positioning describes how our product is the best in the world at providing something that a well-defined set of customers cares a lot about.
That’s a mouthful. I’ll do it again. Positioning defines how our product is the best in the world at providing something that a well-defined set of customers cares a lot about. Put another way it answers these really fundamental questions: What the heck is this thing and why should I care?
This is super important for startups because this is often the biggest challenge that we have when we have something new. I like to think of it as context setting for products and context setting is important because context is kind of how we figure out new things. If we encounter something we’ve never encountered before we’ll often look for clues in the context to what it’s all about. Things presented outside of context completely are super hard to understand. This is an example of something that I encountered once, completely with no context. Surfing around on Amazon and I found this thing and when I first saw this thing what I thought it was I thought this was a shoe. Yeah. I thought that crocs had really doubled down on that whole ugly shoe thing! Sorry Mark! Yeah. And they thought how can we make this even uglier. Oh I know. Well we’ll chop the toe off and put this thing on the back and whatever. I even sent a picture of it to my friend as I check out these friggin’ ugly shoes and well and then and then later I saw it in context and I realized oh that’s not what it is at all. And so suddenly it became clear what the thing was and what it was good for: what it is is a dog muzzle, what it’s good for is embarrassing your dog in public!
Yeah. You know even a little hint of context can completely change the way we perceive a product. So, I show you this dog thing right. And then I show you this and you might think oh I’m wise to her now that she’s into dog stuff. This is dog thing too. This is like one of those collar things that you dog doesn’t bite itself. And if you thought that you’d be totally wrong because it turns out it is a collar for people. And so then you see it in context and it makes sense that that thing is that you put it on and the noodles don’t splash on your hair. Or something. I don’t know. I don’t know what it is, but what the marketers that took this picture they give you a little clue about what it’s good for because they put that guy in there. And so what this thing is good for is for making people fall in love with you. I don’t think it works. But that’s what they want you to believe.
The important thing is a shift in context can completely change the way that we perceive a product. So when you look at the research on this like how do people actually figure out things that they’ve never encountered before? The research on this is kind of interesting. Basically what it says is:
Customers use what they know to figure out what they don’t.
So they use what they already understand to figure out things that they don’t yet understand. And there are two major touch points for this: The first one is market categories. The second one are trends. Market categories are super important because they answer these big questions what’s this thing. Why should I care. The trends are kind of secondary but they’re cool if you can rope them in and trends answer the big question like why do I care about this thing right now
So I’m going to start with market categories because that’s the big one and you need to understand that first so market categories are mainly important because the markets that we operate in are intensely crowded. All of them. Not just this one I’m showing that I show this one sometimes when I’m trying to freak people out about how crowded markets are. This is – you may have seen this before – a guy puts this together every year, Scott Brinkler – you know him? He builds this thing called the marketing technology landscape and so if you think of it this way like if you think about all the software and all the world to solve problems this is one guy’s attempt to model just one little corner of that universe like not accounting software, not ERP, just marketing and sales stuff and so here it is there’s this there’s 7000 companies on there. And so you can imagine you run one of these companies how the heck are you going to stand out from everything else there. If you’re a customer how does a customer make sense of this and decide what they should pay attention to and what they should not? So market categories in a context like this – which we’re all operating in – help us focus down on what’s important and what isn’t.
So let’s say I’m a marketer and I’m looking for a solution I want to have live chat on my Web site. Like I would look at this and you can see Scott’s tried to categorize things here first by color like the orange stuff is content and experience, the yellow stuff is social and relationships. So I might say that sounds like social in relationships and Oh yeah sure enough there’s a little box in there that says bots in live chat. Great. So now I’m not looking at 7000 things anymore I’m looking it like it’s still kind of sucks there’s like a lot in there still but I’ve narrowed it down it’s better than it was. So but that’s not all positioning your product in a market category does. So the first thing it does is yeah it might help you get on a short list or narrow down the number of competitors but one of the main things it does is it sets off a really important set of assumptions in the minds of your customers about what your product is all about. It works a bit like this.
Let’s do an experiment. So let’s say this is like one of those pitch contests you ever go to any pitch contest? I hate pitch contests! But literally it’s one of those TV shows like you guys have ‘Dragons Den’, no what do they call it? ‘Shark Tank’! In Canada we call it ‘Dragons Den’ in the UK it’s ‘Dragons Den’. Here it’s ‘Shark Tank’. So let’s say we’re doing ‘Shark Tank’ but all I’m allowed to tell you is my market category. That’s it. Right. Okay. So I get in. I mean like “Hello I’m April. I have this great product. It’s a CRM.”
So who’s my competitor? Salesforce. Yeah. Name me a couple of features.
Tracking some accounts, pipeline, CRM stuff right. Who do I sell to Vice President of Sales head of sales. That’s how you sell a CRM too. Here’s a neat one. What’s my price? It’s not going to be more than Salesforce is it? Right.
So I just established the upper bound. There a leader can’t charge more than that unless there’s something really special going on. So here’s how this works. If I pick a category for my product and it sets off a chain of assumptions that all those assumptions about my product are true. Great. I just save my marketing and sales team a whole lot of work I don’t have to tell you who my competitor is it’s assumed I don’t have to list every single feature half that stuff is table stakes.
Unfortunately it works the same if I do a bad job. So let’s say I do a bad job I pick a market category it sets off a set of assumptions about my product that are not true then my marketing and sales team are going to have to make a significant effort to undo the damage that my positioning has already done.
I give you an example of this. I get this call from a V.C. in the valley. And they said oh we wrote these guys a check they’re fantastic. You should talk to them though because they have all these customers that are super super happy. People love their stuff when they’re using it but their problem is the first couple of meetings nobody can figure out what the heck these guys do. So OK so we get them on the phone and I said ‘Hey what’s your story.’ And they said “Well we’re lawyers – ex-lawyers – and what we decided we were going to build is email for lawyers.”
My first thought was “Jeez! lawyers need their own email? Like what’s up with that?” But I’m not a lawyer. (Thank god!) So I don’t know. So I’m like Okay. And then they jump into a demo. So they showed me this demo of this thing and it’s cool. It’s got like an inbox and there’s conversations going on and I’m like hey this thing’s pretty neat. How does a calendar work on this thing. And the guy says ‘oh we don’t have a calendar.’
You don’t have a calendar? What? How does that work? Like so. But you compete against Gmail and Outlook. How do I replace my Gmail and Outlook and can I replace Gmail and Outlook with you guys? He’s like ‘no, we don’t have a calendar’.
I’m like ‘No wonder nobody can figure out what you do that doesn’t make any sense.’ You know what you call email without a calendar? Shitty email!
You just don’t buy that email. I would email without a calendar so I’m like we wait. So customers love you I know that because your investor told me so. What our customers love so much about you and they said oh we have this thing we have a patent on it and they had some name for it but I forget what it was but it is it’s basically what it was is super secure context aware file sharing so your lawyer has documents you want to look at those documents. What it does is they had some AI or something that looks at who’s on the documents and whatever it puts the documents in a super secure place and it decides who needs access to it, it only gives those people access to it nobody else can get access to it. It’s like magic. That sounds pretty cool. And apparently the lawyers love it.
But you know what else. It’s just not email, is it? If I wanted to solve that problem I wouldn’t buy email to solve that problem. So what this thing is, in essence, is a pretty cool product masquerading as crappy email. No wonder nobody wants it. So let’s do an experiment let’s pick it up and put it in another market category and see what it looks like. Let’s call it team collaboration for lawyers. I didn’t change anything. I didn’t change a product and it changed nothing. Team collaboration for lawyers though that’s how I’m going to pitch it. Now who’s my competitor? Slack. It’s not Gmail and Outlook. That’s cool. What kind of features do I expected to have. Well I don’t care. You don’t have a calendar anymore do I. No I don’t. Team collaboration doesn’t have that. I do expect you to do file sharing and because your team collaboration for lawyers it’d be cool if you had some special kind of file sharing stuff for lawyers and that’s exactly what they’ve got. So all of a sudden this thing makes way more sense. The best thing was we had the conversation about pricing. So email sucks because everybody thinks that email is free. And so whenever they went to the pricing stage people were you know they were feeling all this downward pressure on price. Team collaboration is better because people pay money for that you expect to pay money for that. So that was good. And team collaboration for lawyers so I said we are having this conversation of pricing us like man you know you should do. You just get the lawyers on the phone and when they ask you about pricing you just lean in there and you say ‘Yeah we built this thing specifically for lawyers so we’re going to charge you by the minute’.
And just let that dangle, and then and then wait for them to say ‘but that’s not fair!’. And you say ‘I know it isn’t.’ Just leave it there.
So, if you believe that that’s important how do you do it? Like how would I know if I’m those folks and I’m trying to decide am I email or team collaboration. How do I pick. How do I know which one to do and this vexed me for a long time. And in fact when I started out – I don’t have a degree in marketing. I have a degree in systems design engineering from the University of Waterloo. Anybody here from Waterloo? Waterloosers! So it’s a fancy tech school in Canada. I’m Canadian. And in first couple of companies that I worked at I noticed this pattern right. We did not position deliberately. So we’re kind of like my lawyers. We built a thing and it just was the thing we set out to build and we never bothered to check in on the positioning until something was gravely wrong. So you know my lawyer guys they’re like we’re building email and that’s what it is it’s email right. Until they can’t sell any and then they call the positioning lady and then they’re like oh maybe it’s something else. This was the repeating pattern in every company I ever worked at. We didn’t position deliberately
So I’ll give you an example of that. So I worked at a company and fairly early in my career and they’re a database company and it was founded by two guys with PhD and database science and so they decided to have a startup and guess what they built a database. Yeah. So they built a database but it wasn’t just any database. They had this patent on this thing and what it could do is if you wanted to do a query on just a mountain of data like terabytes and terabytes of data they could do a certain kind of analytic query really fast. So the first one they sold to was a bank that was running this query overnight because it took 12 hours to run but with this database you could do it in three minutes. Magic. So they sell a few of these things and then I get introduced to them so they bring me on as the V.P. marketing. So what I’m going to do is you know sell a whole bunch of this stuff so I get in and I spin up a bunch of campaigns and we were doing trade shows and all kinds of stuff. And I’ll tell you nothing worked. So for two months: nothing. No one opens my email no one clicks on my ads. No one like nothing. Worst was we were doing trade shows and we would set up the booth and people would come to the booth and they’d be like hey what do you guys do. And we say oh we have this super magical database with the super fast queries where people would literally go “Microsoft has T-shirts” and I just was like no one would even talk to us at the booth. It was totally depressing. And so after a while I thought I don’t get it but we have this magical database technology seems really cool but nobody wants to talk to us about it. So I decided what I was going to do is go on ride along with this V.P. sales because there’s something in there I’m just not understanding.
So the V.P. sales is fine I’ll set up a bunch of meetings you come with me. So he sets up seven meetings across five days and we go and every single meeting goes exactly the same way. So it goes like this. We come into the meeting we plug in, customers come in and it’s like Chief Information Officer, database administrators, techie database people right. They come in they all sit in the room and then my sales rep who’s very good by the way my sales rep gets up and says ‘hello thank you for coming. I’m glad you’re all here. I’m here to talk to you about this revolutionary new amazing patented database’. And everybody in the room does that thing that they do and they don’t want to hear what you have to say like everybody in the room goes like this database. [Pulls out phone] ‘Look, cats’.
I was like this we lost everybody in the room and then and then he does like this tap dancing thing where he’s like ‘No no no you don’t understand. It’s a special database special special. We have PhDs and patents and it does the thing 12 hours three minutes and he’s galloping along trying to explain why this they why they should pay attention to this thing. We have a 60 slide sales deck. We get to slide number four what happens is the senior person she puts her hand up. Yeah yeah hey sorry to interrupt. Yeah. That’s awesome. That database thing you got. But you know we don’t need around here. We don’t need a database we’re Oracle people. We all are. We have Oracle that’s our standard database. Everybody in this room is certified on Oracle and you know it sounds cool that thing you’re doing. I’m sure it’s cool. Did the patents and the PhDs. That’s awesome. But what we really want you to do right now is just you know… get out.
And they kick us out and we’re on Slide 4 of 60 and then we’re going to you know. And so out we go. And after like three or four of these I’m in the car with my V.P. sales and I’m like ‘dude does this happen every time you go into a sales rep?’ and he says ‘Yeah pretty much’. Yeah. And I’m like why are we going to the next one we should be at home looking for new jobs because we’re all going to die. This is not going to work at all. And so anyway so but we had the meetings booked I guess we’re all bummed out so we’re going to do them all. And in this case we got lucky and what happened is very last meeting we had. The sympathy sales call you know with the sympathy sales call is? That’s when your CEO knows a guy who knows a guy that gives you an hour because he feels sorry for you. So we had one of those. So dude comes in the room and he’s CIO of a really big insurance company in Canada and we come in he doesn’t bring his team because he’s pretty sure this is a waste of time. So we come in the room and we sit down and my rep launches into the thing and the CIO is he’s super super nice and he lets us go through the whole thing and he’s super polite. He’s like Canadian. And we go through the whole thing. We get to the very end of the pitch and we say ‘so what do you think’. What do you think?’.
And the guy says I love it. I love it.
It’s amazing. I’ve never seen anything like it. It’s incredible we need this. How do we get it in here. It’s fantastic. Me and the rep are like ‘Yes! Somebody likes our stuff!’ and the guys goes ‘you know, halfway through I was a little not sure about it but then all of a sudden the light came on and I figured out what you were. And I realize you’re not a database at all.’ And we’re like yeah he loves us. What?! The end he says ‘No you’re not a database.’ He says ‘you know I think what you are is like maybe a business intelligence tool maybe a data warehouse. You’re definitely not a database.’
Now I had been with the company like two months and even I was so stuck on this idea that we were a database what else could we be. Then my first instinct was to have an argument with him. So, I was like we can’t be a business intelligence tool. We do not have reporting and then we got a big fight about it. And we went back and forth and he says okay fine maybe you’re not to be a tool but I think you’re a data warehouse maybe a data warehouse. And I said no we’re not and he said yes we are. And finally he got really mad and he said look databases do all kinds of things. What your thing does is just this one little narrow thing which is analytics if I really wanted analytics I would buy a business intelligence tool or a data warehouse or something. And I like I can’t believe it. You’re the vice president marketing. You don’t even know what you are. Who gave you that job?
This is the thing about Canadians. I’ll just say it because I’m a Canadian I’m allowed to say this but Canadians say everybody thinks Canadians are so nice. Right. But they’re not. Like they make like they’re so nice they’re all Justin Bieber, Celine Dion, so nice. And then when you least expect it they sneakily creep up and hit you with something terrible. Like Nickelback.
Yeah. Later when you’re filling out the forms did you learn something in this session. You say yes. Five stars.
So importantly what happened years. So we had this revelation maybe the problem is our positioning. So we came back to the office and we had this discussion at the office. Maybe we’re not a database. Maybe we’re a data warehouse. And I’m telling you that was a hard conversation to have. We were so used to thinking about ourselves we’re database people we do database stuff. The first thing we tried was let’s just change the pitch and see how that goes. So we changed the pitch. That was it. Then no not touch product or anything else we just changed the pitch and it was completely different meaning in the meetings.
We come in and say we’re this revolutionary new, we got a patent and whatever and where this did is data warehouse for doing these analytic queries and everybody go “Oooo” that sounds cool. At the time everybody knew what a data warehouse was. Not everybody had one. So you know we had no problem getting through to slide 60 and actually selling some stuff that was the first thing that change. But interestingly it changed everything on the back end to it completely changed our roadmap because we thought about ourselves differently. We were now not trying to build out the best database in the land we were trying to be a great data warehouse. Different features, different roadmap, different pricing. Databases we’re commodity. At the time data warehouse you could charge of money for that we jacked the prices way up sold more. Everything changed. The biggest thing was we actually made some money. So that’s the first thing is you have to be deliberate about this. You have to check in and say you know maybe what we always thought we were is not what we are.
Following a positioning process
Second thing is if we’re going to do positioning you need to follow process. So again I’m not a marketer by training so I sort of ended up in marketing. And so and how I did that was I graduated from engineering, my friend was working at a startup, she put in the word for me. I got a job at a startup. We almost immediately got acquired about a year later.
My boss left and I was like last woman standing and they gave me the department. So I’m two years out of engineering school and I’ve got 35 people globally, tens of millions of dollars of budget against spell marketing. Like I have no clue what I’m doing. And so I embarked on this self study course. So I took a bunch of classes and I read a bunch of books and what I learned there was a lot of good stuff actually but we kept coming back to this idea of positioning. This is this thing we’ve got to do first and this vexed me. I’m like How do we actually do it? And there didn’t seem to be anything. We all read this book Positioning The Battle for Your Mind Ries and Trout. And this a great book. It’s like it’s like two hundred pages and it tells you what positioning is and when you get to the part of how do you do it. You’re supposed to call those guys and they’ll do it for you because they’ve got an agency or something. They work with like Coke or something and they’re super expensive. Meanwhile I’m working at the start right. I know how to do this. I’m not calling them. How do we do it? So I took this class and there was this module in the class where we were going to learn positioning. So I’m at this class in this fancy marketing department at Northwestern University – where the fancy marketing people go – and the professors up there and he puts this thing up and he says this is how you do it. Positioning and it’s this thing and positioning statement you ever done one of these it is kind of Mad Libs fill in the blanks thing. And so you’re supposed to just go along and say you know for blank you fill in your target market what you’re offering is in your market category and all this stuff and that’s it. That’s your positioning.
And so I’m sitting in the back and at that point I had already repositioned two or three different products and you know one of them being this one that was a database/data warehouse thing. And I’m at the back going who will move my hand up and I’m like my dude the blank there that says market category. How do I do that? Like how do I know which one? Because I’ve already done a bunch of these and you know what how do we pick which one’s the best one going blank. How do I fill in the blank? And the guys is you know kind of older guy professor type. Right. And he he’s up at the front like kind of like me I’m like you back there and he did this thing reading glasses and puts glasses down. He did this whole thing where he’s like. And he goes “trust me April, you’ll just know”.
Like nothing in my world has worked like this yet. Like this is going to be the thing and like I’m good at this company full of PhDs like we’re not stupid but we didn’t just know, you don’t just know. That’s a that’s a stupid answer. So I decided nobody knows that’s it. Nobody knows how to do this. There’s this thing no one knows how to do it but you know. But by now I’m on company number three or four. I’m like I’ve done this a bunch. I can figure this out. So I had this idea here’s what you’re going to do it like, you know, and it’s me applying my engineering thinking here but I’m like it’s a problem we’ll break it down into piece parts. We’ll solve for the piece parts. I figure you can take positioning if you look at all the positioning statements in the land all the positioning statements the common things are the blanks. I figured I could split positioning into component pieces and the component pieces are these five things.
- What’s my market category
- What are my competitive alternatives.
- What are my unique attributes or features things I’ve got that competitors don’t have
- What’s the value that I can deliver to customers because of those features.
- Who are my customer segments. So who are the customers I’m trying to sell to.
And that’s it. I figured that’s it. There’s five things all I got to do is figure out how the best answer for those five things I got great positioning. You think this is easy right? But the problem is once you start looking at this you realize the five things all have a dependency on each other. Something the positioning statement didn’t give you any clues about. So all of these things relate to each other. I could pick any of them. Let’s pick value the unique value that you can deliver to a customer is completely dependent on what your unique features are. But my unique features are only unique if I compare them to a competitor. My customer segments that I’m targeting. Those are the people that care the most about my value. So those things are related. And what’s my market category? Market category is actually the context that I weave around my product that makes my value obvious to those target customers. Oh it’s hard. This is why nobody figured this out because they all these things relate to each other. So then the next question is where do I start. And does it matter where I start.
So for a long time I thought it doesn’t matter where you start you’re just going to have to spiral into it. You pick one, you spiral around and you go and if you’re techie people you start with features because that’s what you like and you know that the most. So you start with features then you say what value. And then you circle around. But what I learned after doing this literally like nine thousand times is if you start anywhere you will generally end up with neat positioning that isn’t necessarily differentiated and if you want positioning that wins in a market you have to show how you’re different than everyone else. Which means you have to start with competitive alternatives.
Once I figured that out. Then I was like Oh this is actually not so bad. We can actually do this. So it actually needs to go in this direction. So you start with competitive alternatives then you say what have I got that they don’t have. Those are my unique features. Then I say are those features translate into what value. Once I got the value I can say what are the characteristics of a customer that makes them care a lot about my value. That’s my customer segmentation. And once I have the customer segmentation then I can say what’s the best context for this value to make sense to these people I wrap it together that’s my positioning. It sounds easy. There’s a thousand ways to mess this up. Holy cow. And I’ve done all of them.
So if that’s where you generally mess this up is on step one – competitive alternatives. So I do a lot of work with startups and they get this one wrong and how they get it wrong is I’ll say “hey neat little startup with three people, who’s your competitor?” and they’ll say “Oh we have so much competition” and they’ll give me this list and it’ll be like 15 other three person startups that nobody’s ever heard of. “These are our competitors” and I’ll say “Great. So how are you better than them?” and they’ll say stuff like “oh well we have way better ease of use these folks would look to do this thing takes 19 clicks and do it with ours it only takes two. Ease of use is our thing” and then they do the rest of it. Right. But then I go talk to their customers and I say “hey if these kids got hit by a bus next week and you couldn’t have that product anymore what would you do?” and they say “yeah… do it in a spreadsheet or hire an intern” that’s when you hear a lot in B2B just a hire an intern to do it. Oh. So if my actual competitive alternative is hire an intern can I hire an intern on ease of use. You know what’s really easy to use – ‘Joey the intern’. He’s great. I’m like go on out there. Get me a coffee. Double double – that’s a Canadian thing, two sugars two creams. Double double. You come back, fill up the spreadsheet first, come back then and then we’ll talk about what’s next.
Like if you get the competitive alternate route so the competitor alternative actually has to be if your thing didn’t exist what would folks do then you got to go down the list by that if you get them first went wrong then you’ll get the rest of it wrong. There’s other ways to mess this up. This is actually a little bit more complicated than it looks. But lucky for you and the world. I wrote a whole bunch of notes on how this works. Two hundred pages of them in fact and for like the cost of a beer you can buy what is essentially the thing that took me like ten years to figure out.
What a world.
How Niche play became a Unicorn
I’ll give you a story. So here’s a story about where you can get halfway through that process and mess it up. So I worked at a company and we were in the enterprise CRM space. And this was years ago and so Salesforce was still kind of small and they were mainly focused on the low end of the market – small medium businesses where they were selling. So the King of enterprise CRM at the time was this big company called Siebel.
They were giant. Dominating the market completely. And we launched our enterprise CRM and so not surprisingly every time we got into a meeting with a customer the first question we get is how are you better than Siebel. And the answer was the we kind of weren’t. They had 8,000 employees we had 30. They had $2 billion revenue. We had $1.3 million revenue. They had 400 customers. We had four. And so but we had two things that we thought made us special. The first was we had this feature that they didn’t have. In fact no CRM on the planet had it. And what it was was the ability to model the relationship between people not companies.
And so every time we did a demo or we talked about our stuff it was all over our web page. That was our big thing. We’d show this thing. We could model relationships in a different way. And the problem was nobody got the value of that. So we got the unique feature we just didn’t really think about how it translated into value. So we go into demos and we show this thing really ‘Hey we got this cool feature and show thing’ and the customer go “What. Yeah. What’s a good for?” And we’d say anything you want. We were hoping eventually a customer would figure it out.
Then we went on and if they weren’t interested in that then we would move on to the second thing that, you know, made us special is basically we were always just about to not make payroll because we were so broke. And if you ask for a discount we would happily give you a discount. And so we were the cheapest thing in town. So if you came in and said Oh I can’t afford that really no problem we’ll drop the price. I don’t recommend this at all. That’s a really bad way to build the business this is our this why we never got more than 2 million revenue. So needless to say business is not going so good. We’re not selling a lot.
One of the big problems we have we couldn’t keep sales reps because the sales reps would come in and not sell anything and then they would leave. And so how we got out of this mess again not so much good planning but luck is we. We hired a new sales rep and at this company the CEO is kind of a character. He was a jerk. And he did this thing if you came in and interviewed for a job he had this interview style where did so the sales rep prospect walks in and the CEO goes. Give me one good reason we should hire you for this job. You know kind of like this and this sales rep was from New York. So he just gave it right back. He sat down and he said I’ll give you one good reason you sure. You guys should hire me. My buddy is the head of investment banking at Goldman Sachs and I’m going to get you a meeting. We’re like sounds good you’re hired. So I get hired. He gets a meeting at Goldman Sachs and so I decide I’m going to ride long as I like doing that. And I also want to see what the book The Office of the head of investment bank Goldman Sachs looks like. It’s like this room basically.
And so we get in there and the rep goes in does the demo and we show the thing our special feature like we always do. And when he shows the thing guy gets really excited and he starts asking a whole bunch of questions he’s like ‘hey wait so do you mean if these two people sit on a board together I can model that?’ Yeah. And he’s like ‘well these people used to work together but they don’t work together anymore’ Yeah we can do that. He says ‘Oh my gosh I need some vice presidents’. And he runs down the hall and he comes back with three vice presidents that work for him and he says ‘Show them the thing. Show them the thing.’ So we showed them the thing and then they get really excited and ask the same questions. They’re like ‘oh if this person used to be the lawyer at that and now they’re not. And you can model’ and we’re like ‘yeah we can model that’. And then they all turn to each other and started speaking their secret banker language like and they’re jumping up and down and me and the rep are over in the corner going ‘what’s going on?’ Have you ever been in a room of really excited investment bankers? It’s terrifying.
So anyways then they decided they love this stuff and they want to have it and when can we get it in or whatever we’re all excited. So we’re like hey maybe investment bankers love our stuff. Let’s try this with another investment bank. So we manage to get a meeting with Merrill Lynch. And same thing happens we walk in. We show them the thing. They jump up and down. We close the business.
We’re like this is good. So we do two or three in a row. Importantly though we got to thinking maybe we’re not enterprise CRM. Maybe we’re not. Maybe we’re just CRM for investment banks. I thought this was a great idea because from a marketing perspective I was like ‘Look our biggest problem is we’re still getting into head to head battles with Siebel. Nobody knows how we’re different than Siebel if we’re a CRM enterprise CRM. We look just like them. If I have CRM for investment banks two things will happen one I’ve got a way to maybe run around Siebel two maybe the investor banks who call us instead of us having to go find them. So you know who didn’t like this idea? Well the CEO guy came around but who really didn’t like it was the investors. Like the board hated it and the investors in particular were like ‘look we didn’t write you this big juicy check to go be some niche little thing’. How many investment banks are there going to make any money doing that. We wrote you a check to take Siebel out and kill those guys. Now you’re telling me you’re running away from them. That sucks. And so here’s how we convince them: two things. So one was look we’re not going to stay in investment banking forever. We’re going to do investment banking and once we dominate that we’re going to go out to all the other departments inside the investment bank as we’re already inside. Then we’re going to go to retail banking then we’re going to go to insurance. By the time we get to insurance we’re going to be a great big company. Then we’re going to go take on Siebel then we’re going to go kick their butts.
The other reason was you know and I kept saying this I was like Look it’s not like we’re giving anything up. We can’t sell anything here we’re like a million revenue. It’s like we’re turning down the big business here. So anyway we said Yeah let’s do that. So we did this big shift in positioning where CRM for investment banks that’s what we are. And that shift was super transformational to the entire company. The biggest transformation was we never got in a head to head battle against Siebel again. So these are the way our sales meetings went we’d go in and it used to be we go in and they’d say How are you different in Siebel then we go in and we say we’re CRM for investment banks and they go ‘don’t you guys compete with Siebel?’ And we’d say ‘Ah Siebel we love those guys. They’re fantastic. They’re built so much revenue so many employees don’t just like the world’s greatest general purpose CRM you could possibly have if you’re a call center in India or a manufacturing plant or I don’t know a retailer or some not you Wolf of Wall Street you need something special. Let me show you the thing.’ And then the up and down we close the business. And so yeah. So we went from $1.2 million when I joined in the next 18 months we came in a little under $80 million. We hired so many people it was bananas a little under $80 million and then the best part is the end of this story is Siebel got so kick Sega was kicking their tail all up and down Wall Street and then all up and down we went to London and then we went to Switzerland and then we went to whatever and we’re killing it banking and they got so mad about that they came and acquired us for $1.3 billion dollars.
[Applause] Yeah. Yeah. And then it was fun because you got to go back to the board and say oh you guys didn’t think we were going to make any money we did niche niche thing. How did you get that job anyway? Canadian! So that’s market categories.
I got one more thing and this is a quickie market categories are the main thing. But this is kind of like a little secret sauce thing if you can figure out market categories you’ve got to do that first. But trends are this cool thing that can kind of supercharge your positioning if you think your positioning is okay. This is a thing you might want to look at. So trying to the question why now. So we’re really bad in tech and getting confused between market categories and trends. So the way I like to describe it you ever heard of this company Pantone they’re like the color people. Every year they put out this press release and they declare something is the “color of the year” and they do this by like magic and looking at I don’t know what paint or something and then they put out this press release so they do it every year. This year they put out a press release and they said the color of the year this year’s living coral. Pink. Living coral. And so what happens is they put out the press release and 10 minutes later there’s you know pink pants and pink lipstick and pink couches and pink cushions and stuff. If you make a living coral couch you’re still in the couch business you’re market category still couches but you have applied a trend onto that to make that sort of hip and cool and now and people that want to be hip and now maybe they’re going to buy your couch. Works the same way in tech so market categories are things that you buy. I want to buy a security system or CRM or accounting software. Those things are market categories categories of things that I buy. Trends are things that can be applied to those market categories that are new and interesting like artificial intelligence and block chain technology and machine learning a few years ago we were all talking about cloud.
The trends are important for a bunch of reasons but one of them is that these trend these trends start to emerge and then everybody gets talking about them and you know speakers are speaking about them at conferences and people in the newspapers writing about it and the trade magazines are writing about it and so all of a sudden we’re all like you. You know the AI That’s the thing it’s come in man and you better know something about it. And then the customers start getting all stressed out like I don’t know anything about AI well maybe I should because it might be disruptive to my business and I don’t want to be left behind.
So fundamentally they aren’t the market but they can sure as heck make your market a lot more interesting for customers that are interested in that topic. It works a little bit like this. You can’t ignore market category. You still have to loop in a market category so I got a product I’m going to position it in a market category. If I can loop in a trend, now I’ve got something that not only is understandable it’s also kind of cool. Now it’s fine to be down here. Then I spent a lot of my professional career at marketing things down here that are just fine like databases and things that have absolutely nothing sexy about them. But we make lots of money. It’s just. Is it easy to get press. No. And do we get invited to speak at the conference. No we don’t because their stuff’s not all that cool and hip and now. But you know the last database product I worked at that was like this we did a billion in revenue just fine. But again if I can lift it up to the middle some cool things can happen.
So I did some work with this company in the UK called Redgate Software which you know the Business of Software people know and if you’re from the UK So they’re cool okay and they’re not a small company anymore they’re 300-400 employees, super profitable, never raised any V.C., been a thing forever. And what they do is wicked boring like it’s database tools, it’s like backup and recovery and provisioning, it’s like so boring. But every single I.T. department on the planet uses them they have 800,000 active customers. It’s a good business. Nothing wrong with this.
But here’s how they spice it up a little. So they had this idea they had two things actually they were thinking about. So one was they have a suite of 21 products and they noticed that when their sales reps called in they were kind of selling each product individually. Oh you want backup? We got that. Oh you want provisioning? we got that or you want this we got that. When they analyzed their customer base their average customer used 1.6 of their 21 products which is crazy because all the individual products are leading in their individual markets. That’s the first thing.
Second thing they noticed a trend. So this was a few years back and GDPR was coming up and they were getting a lot of questions sometimes their reps would call in and they would say look we’re just doing GDPR this year and all our budgets go into that. We don’t have budget for your thing because we’re focused on GDPR and that’s it and so they thought maybe we better have a story around GDPR and if we were redoing this really good we’d have a story that brings all the products together so they splunked around and their customers and talk to them and said Hey what are you doing in response to GDPR? And they said we’re doing a dev ops transformation. And every single one of their I.T. groups that they talked to said the same thing we’re spending all our money doing a dev ops transformation. And then when they looked at that the Dev Ops transformation never hit data so who better to figure that out than Red Gate. They’re the data guys. So they took a look at it and they said okay how would our stuff fit in a dev ops transformation? How should you be thinking about data in the middle of dev ops? And they developed a point of view on the market. And they name this thing. Database dev ops wrote a big paper on it started talking about it. Next thing you know they’re getting invited to conferences. Next thing you know tech press wants to talk to them hey this is cool is database dev ops thing and all of a sudden they’re thing that sold just fine but kind of boring is now kind of steamy. And everybody’s kind of excited about it. Two things happen as a result. One inbound leads increased by 100% which establish business that’s a lot. Second thing is six months after they roll this thing out their reps on average were selling five and a half products into one account versus one. So this is an example of how you can steam this up a little bit.
You can mess this up and people do by missing the centre in a couple of different ways. So the one where you miss the centre is here you’re get so excited about the trend and talking about how it applies to your product that you forget to talk about the market category. So your thing sounds cool but it’s baffling. So my favorite example of this is I have these guys call me up and this was another one where the V.C. introduced us except they really didn’t want to talk to me because they didn’t think they had a problem. But the V.C. said ‘Oh gosh no one can understand what these guys do you should talk to them’. And so I got them on the phone there’s like we’re doing a zoom call.
There’s like 100 of them in the zoom screen and I’m in my office in Toronto and I said ‘hey what do you guys do?’. And they said what we do is we’re sharing economy for pets. And I was like I have no idea what that is. And they said ‘oh it’s the sharing economy for pets, dummy.’ I was like I still don’t get what it is and they had this whole deck and they just kept saying sharing economy for pets over and over again and I kept saying look are you saying we’re sharing the pets. I don’t want to share my pet. I have a dog. He’s very small. He’s not shareable. He’s too small to share. And they’re like sharing economy for pets and I’m like I don’t get it. I’m getting frustrated they’re getting frustrated. And eventually the CEOs there and the CEOs are like OK everybody get off the Zoom all you guys I’m going to talk to this stupid Canadian lady and he gets in there and he says look I’m going to say it real slow so you understand. ‘What we are is Uber for Cats.’
And I’m like in my office I’m like ‘What does he think that I think when he says that?’. Like what does that mean? And then I had this moment I was thinking somebody wrote them a check like there must be some cool stuff in here. Uber for Cats. And I was and then I had this revelation I was like – Silicon Valley they’ve taught the cats how to drive! And I had this I was like this.
And I was like ‘No you guys are good, you don’t have a positioning problem you send the Cats to my house. We’re fine now’. No that’s not what it is. Then they’re all said you know they actually did is a two sided marketplace for pet services. You want to order up a dog groomer to come to your house. You do it on your phone the dog groomer comes to your house. So the guy is explaining that to me after I mock him for teaching cats how to drive. Then he explains it to me and I’m like Why didn’t you just say that. And then I was like sure you don’t get the cats driving – because that’s way cooler! Anyways, you don’t want to do that.
So you need to tell me what you are. Before you loop in the call is how people get into that problem is raising money because the V.C. like that pitch a lot. Sharing Economy it’s customers had no idea. The other way you can mess this up is by landing on the other side. So you’re super excited about the market that you’re in. You’re super excited about the trends. You just forgot to related to your product whatsoever which is another way of saying it’s just BS. But you would think that no one would do this but this actually happens more than you would think and even big companies fall into this trap.
My favorite example. Do you remember this example? This is long island ice tea. Iced teas in the ice tea business. They’ve probably traded on the Nasdaq. I don’t know why. And ice tea business isn’t doing so well and so the Nasdaq calls them up and says look your share price is going down here your market cap is a big enough we’re going to kick you off the exchange and you need to get that price up. And so they tried a bunch of things and released some new products nothing worked. And so they get another call saying look you got five days to live and we got to kick you off the exchange unless something drastic happens. So they decide they’re going to demand take emergency measures and what they did was they put out a press release and that press release said we’re changing our name and we’re no longer long island iced tea we’re changing our name too long blockchain. Yeah long blockchain.
So they put this out and there’s no details there’s no nothing like there’s no block change strategy. There’s no new product, there’s no partnership announcements, there’s no crypto anything. We just changed the name. And so I see this I’m in my office. I see this and I’m like Yeah. Nice try guys. You can’t just lie. That’ll never work right. And of course it totally works! Like the thing goes up 400% and I’m like yeah Okay maybe you worked for a day because people are being stupid but you know it can’t work for more than a couple of days. Three weeks. Like every day I bring it up three weeks do you stocks would up up up up up it’s like 400% and I’m like holy cow everything I thought was true isn’t true like I should just tell my clients look just sticks a blockchain in there like just stick AI on the end and lie it’s fine. People are stupid you know.
And anyways but eventually what happened is that the stock pickers kept calling them and apparently they wouldn’t answer the phone. So they kept calling and saying look we’re here to find out about you blockchain strategy and they just either wouldn’t answer or they would answer and they’d be like this would be like. “You’re breaking up. you’re breaking up. Blockchain!” and just hang up and then eventually after about three or four weeks they’re like you know what there’s nothing here. So they all sold and then all the people that were in it because they thought the ice tea business was cool. They sold too and the stock went to zero. And I felt better about life and they got delisted. That’s the end of that story.
How do we do positioning?
So you know so you want to kind of be right in the middle. So I want to leave you with three things. So one is you need a position deliberately that’s the first thing. Most folks don’t do that. If you even get to that stage I think you’re doing pretty good. If you are going to change your positioning you need to follow a process and not just try to Mad Libs your way out of that. And the third one is you can layer on a trend if there is a way to do that but be careful because there’s bad things that can happen in there and if you want to send me an email or something that’s my email and that’s it.
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