Archive for the ‘How we work’ Category

Our new risk-reward model for online marketing services

In the near future I’ll be revising the service modules that we offer around blogging. Blogging is one part of the online marketing mix – an important part, but only part. The new services we will be offering will be to help people setup their business and market effectively online. We’re hiring, and have a specialist marketer joining our team (hi Kate!) next week. We also have additional freelancer relationships so we can bring critical marketing, technology and design skills to bear at just the right time. All of this so we can can help a small business clarify their online business strategy and online marketing plans, and get to execution very rapidly.

I hope to make it far easier for small business to try out a new style of online presence. Our small-business sites will create an opportunity to test and measure – quickly and without major upfront costs – new online marketing strategies and tools. We have invested a lot of time and energy into creating a fantastic platform for this purpose. It goes well beyond our initial offerings for small business blogging – this will still be included (of course!), but only be part of the offer.

When we launch these services, we are going to change our pricing and also the risk-reward mix. The price will go up, and for those clients who are midway through an offer process with us, pricing will remain at the existing rates.

The major change will be in the way we take out risk for our clients. Rather than require clients to pay for setup costs up front, we will divide the costs by 12 and charge a monthly fee for 12 months. If during that 12 months the client thinks the value isn’t there, they stop paying their monthly fee. Or they can take their site content elsewhere and stop paying our monthly fee. There is no contractual lock-in. And because we set people up online using widely used open-source tools, there is no technical lock-in.

No lock-in means if we develop a business strategy with a client AND setup the foundations of their business AND they leave us after three months, we forego 75% of our setup fee. Theoretically they could just put their site onto another host and keep executing their marketing strategies. Naturally I don’t want that to happen – ever. To avoid it happening, we will have to be good at explaining what we do so expectations are clear. And deliver results during the harder stage – execution. Of course we will only engage with clients where there is trust and clarity on both sides (and maybe some people won’t understand why we decline to offer services).

I personally believe the no lock-in approach sets a tough standard (and yes, we will never be Microsoft). But I also believe that the proliferation of open source means that before long online businesses like ours are going to have to be able to succeed in this type of environment, regardless. No choice. So I want to get there early.

I’m betting that clients will love our up front strategy ideas, but will value the execution even more. We’ve got a great set of services to work with and deliver results. After the first twelve months is up and the setup costs are out of the way, I hope to see our clients eager to get their latest online marketing initiatives off and running, because they can see the return on investment.

Transparency in our margins and pricing model is something I’ve already talked about, and now you know about our new risk-reward model. Bruising critique and robust suggestions of improvement very welcome.

How to have a transparent pricing model

To answer the question about transparent pricing – easy, simply tell the world (in some detail) in your blog. Read on to find out about ours.

Why? Well, in a recent comment on Getting To Online Marketing, Edmund Pelgen asked about my thoughts on pricing for services. I’ve also found it refreshing to read some bloggers/online marketers speak frankly about their actual revenues, such as Yaro Starak in his Making Money Online series.

As I’m about to update our pricing to launch our new online marketing services, I figure I should outline our pricing strategy. It is an important part of our philosophy, and think it worth having clients who understand it. I realise businesses aren’t usually about their margins and pricing model. But think of this as a variation on open content. By disclosing not just our price (we have published our prices on our website from Day 1) but also our margins and pricing strategy, we do make it easier for our competitors to understand what we are doing (hi y’all). But we also make it easier for our clients to understand how we operate, and why. So I’ll post this here, and maybe even link to it next to our pricing tables.

When we launched, my initial voodoo-magic-finger-in-the-air spreadsheet came up with something that was real close to:
$1 variable cost (labour) + $1 overhead + $1 profit = $3 sell price.

Looked at another way, that is a 33% gross margin. Gross Margin is profit ($1, being $3 less $2) divided by revenue ($3), or 33%

From my experience in the services/consulting field, companies tend to like a 30-40% gross margin. In highly competitive/large deal situations, they will settle for 20-25% or even less. Some companies go lower – sometimes as part of a cunning plan, but more often than not as part of an (unplanned) downward spiral. Since we have no way of achieving the economies of scale of larger companies (and the math was compellingly easy) I decided to adopt the 1+1+1 rule of thumb and go for a 33% gross margin. I figure we can deliver services that will look like great value with a 33% gross margin – if not, we have to find another business.

Where we can achieve economies is in online marketing, and all things going well our overhead component will reduce as we get better at finding customers online. My experience in the first 12 months is that its hard to separate your cost base into ‘one off startup’ costs and ‘normal’ operating expenses. We certainly aren’t achieving 33% gross margins yet. But you gotta have dreams!

After more than a few discussions with accountants and small business owners it seems that what we are doing with our pricing is quite common for small businesses. Please let me know your experiences in this area, either privately or via comments.

Anyway, that explains margin. But what about pricing approach?

We use fixed price wherever we can. More commonly services businesses use a time & materials based approach. Value pricing (where you price based on the value delivered to a client) was also mentioned. These are the three pricing models I want to discuss.

Value pricing

Trying to price based on value is a great concept. But its not much fun if you are the client:

How much for the car over there? Depends, what do you want to use it for?

Not many clients respond well to that philosophy. In my experience, a value based pricing contract needs to include a genuine risk-reward component. So if you deliver a defined benefit AND have a defined exposure to the risk, you can ask for a share of the benefit (and cop a share of the risk, if it doesn’t pan out). That requires intestinal fortitude on your own part. That said, what I found in practice was that value pricing was often very interesting to the client at the beginning of the discussion, but once it got close to signing up, they figured how much they might be paying. Since clients were optimistic, they would then ask you to give them a fixed price, to keep all the upside. For large contracts, this was fine – nobody minds just settling on a fair price in the end.

The downside – particularly for small business – is the time required if you vary your pricing on each deal based on value. How much extra time does it take to sign off and administer a one off deal? What is your time worth? If you look at this on a cost-benefit basis, its hard to see a payback.

Hourly billing

Hourly billing (or time and materials) appears to take away the risk for the service provider. And it isn’t attractive for the client, for good reason. “It was taking longer than we expected – so we just went ahead and did it anyway, and now here is the bill”. Service providers sometimes say that clients are to blame – they change their mind, or they want to try and get something for nothing. No doubt sometimes that could be the case.

Clients see that service providers get paid even if they aren’t being effective. I think it is hard for all parties to walk away happy after hourly billing, and I think clients will rarely raise their concerns. That is partly out of politeness, and partly because even if it feels wrong, they can’t prove it. Oh, and for larger services companies – often time and materials projects are over-represented (and/or the worst offenders) in the ‘troubled project’ lists.

Fixed price

I like offering a fixed price in return for a well defined service. Its clean. You can talk clearly about what you will deliver, and the client can decide if that is value for money – for them.

Sometimes it’s hard to figure out what the fixed price should be. For example, what if the client changes their mind and we have to go back over some work? That is a big risk in what we do. But rather than drop all that risk on the client, my view is we are the experts. We do this work all the time, so we need to help guide the client. So discuss the key factors up front, and write down the scope. Then work hard to manage the service well. People often worry about unforeseen issues and events (for good reason!) Still, over many years I’ve learned that with a good understanding of what the client wants, and a well defined scope, you can deliver a great result. This approach has worked for me on projects large and small.

Working to a fixed price requires trust and clarity on both sides. And this means you don’t take on every client. We certainly don’t. Just a fortnight ago, as politely as I could, I declined to propose our services, in response to a somewhat out of the ordinary request. After I politely declined for the third time, I copped a serve on my ‘attitude’:

since it is obvious you don’t get it, then we certainly will not waste our time with you. Hopeless attitude indeed.

The prospective client wanted publicity services on the basis we only got paid if we got them coverage – not a problem in itself, we can work that way. But for a variety of reasons, they could not tell us much at all except to assure:

The services offered will be extremely easy to explain – it will only take a one sentence tagline for anyone to know what the website is about and what it can do for them. Let me assure you this will not be brain surgery, it is a very simple idea (as all good ideas are). Whipping out one of your release templates, changing it around and sending it to your media contacts you deal with on a regular basis, coupled with a follow up call will suffice to get it published in industry news and on Today-Tonight or similar.

Hmm. We don’t whip out ‘templates’. Our site makes it pretty clear how we approach publicity. But if the story is so easy, why even use a publicity specialist? So, maybe I declined to offer services to what would have been a great client. But as I said earlier, working on a fixed price requires trust on both sides, and in this case I decided it was too much of a risk (call it ‘going with your gut’). As a complete publicity campaign is well under $2,000, you might argue that the chance of finding a good client outweighs the risk of losing our cost + overhead if the publicity didn’t eventuate. Maybe. But a complicated project (and demanding or unhappy client) can consume more than just cash – it distracts from more important things.

So I am most comfortable when we work on a fixed price basis. Even though some might say the risk is higher, we have a far greater chance of delivering the right outcome (because we have to plan well) and meeting the client’s expectation. And I’ll decline to offer services if I can’t see reasonable chance for clarity and trust to underpin each engagement.

Ok, that is enough for this post. I’ve got a follow up for you about how we are going to adjust our pricing strategy to introduce a new element of risk-reward.

Transparent marketing

WaterThis is a phrase that has popped up several times recently in the marketing and small business blogs I monitor each day.

It’s at the heart of our business and right at the marketing edge as consumers become increasingly cynical towards “opaque marketing” such as advertising and spin.

Thankfully it seems to be a healthy cynicism – one that rejects suspect messages and embraces honest ones without labelling them naive.

Try this:

  • Be authentic and straightforward – no manipulation or exaggeration.
  • Be totally human in admitting your mistakes and weaknesses while showing how you are learning through them.
  • Allow quality to speak for itself through word-of-mouth.
  • Converse with your clientele by embracing social media, rather than talking AT them, billboard-style.

These qualities enable others to journey with you and come to trust you. Do they make you more vulnerable? Probably. That’s where product quality and service delivery come in – you have to be able to step up to the mark. And that’s a good thing.
Transparent marketing isn’t a difficult concept to grasp. In fact, it’s what used to happen before we became cynical in a bad way – convinced that the only way to sell was through manipulation.

There are still hoards of old-school marketers out there who firmly believe that opaque marketing works best.

Don’t believe them. Believe this study by Marketing Experiments.

Effective publicity rests on good content

Fingers on keyboardWe started PublicityShip on the premise that media exposure through story-telling is the best form of marketing for small businesses. At the same time, we included an undercurrent of blogging – something that we believe carries huge potential as a marketing tool for niche enterprises.

These two apparently disparate marketing methods are inextricably linked within our business model as two of the most important ways to acquire customers and build trust.

Their common attributes rest on one fundamental philosophy – good, authentic content is your most powerful marketing weapon.

And effective publicity rests on good content.

Entrepreneur and expert blogger, Seth Godin, goes so far as to question the value of chasing media exposure in How Do We Get One of Those?

From another blogger I might have turned away with a sceptical grunt, but Seth is always worth taking seriously. And he has a point. Media exposure is fantastic – if you can get it. And thankfully we have been pretty successful so far in getting articles about our clients into the print media.

But Seth’s message, as I read it, is that this isn’t the be-all and end-all of content marketing.

The long-term potential lies in the Internet world of blogging, networking, linking, and generally engaging your communities of interest online

By continually producing good, authentic content in a strategic and planned way, you are more likely to attract the customers you want and keep them coming back for more.

The 5 Basic Rules of Internet Marketing briefly outlines the potential of what I prefer to call online content marketing.

There are several ways to harness the potential of the Internet, and this is where our energies at PublicityShip are currently focused – along with our Hidden Jewel Awards, which in themselves are a great example of how direct marketing can work quickly online.

As we build on our business-blogging model, more ideas and services will begin to appear on our site.

Update to privacy policy

We are about to launch our Hidden Jewel competition for the travel and tourism sector, and this prompted a thorough review of our Privacy Policy.

Its definitely time to be a bit more specific about how we manage privacy. For us, its not just a theoretical or compliance matter, there is a very practical perspective. We are an online services company, and for clients to do business with us online, they have to trust us. Seeing that your service provider takes privacy seriously is an important part of building trust.

Of course, a privacy policy is only as valuable as the implementation. A few of you who know me may be chuckling here – hey, its what I’d call a healthy level of paranoia! As the saying goes, just because you’re not paranoid doesn’t mean they’re not out to get you. A particular event at the local library gave me a clue a line was being crossed. The library had just implemented a new computer system for borrowers, and wanted to keep a drivers licence number on record. A driver’s licence, along with name and address? Hadn’t they heard of identity theft? Even though I just wanted to let the librarian know why I wouldn’t leave my DL#, I noticed both of my daughters trying to melt into the floor… one of those father-daughter moments – be cool!

Anyway, we take privacy seriously here. Any business providing services online needs to take it seriously.

The superseded policy can be reviewed Superseded PublicityShip Privacy Policy, as of 6 Nov 2006here.

Building trust with a blog

A recent post on Seth Godin’s blog discusses manipulation and trust.

I think that two of the most significant uses of blogs for small business are building trust, and acquiring new clients. Using a blog to build trust doesn’t depend on having lots of inbound links (although that would be nice!). Rather you are looking to capture – over time – layers of authentic information about how your business ticks. So when potential clients find you, they get a chance to read about your story in a personal way. People are looking for your story, and a blog gives you the chance to write lots of different stories (using categories/tags to group them), and let potential clients self-select as to what they are interested in.

When I read a good blog, I feel like I know a bit about the person writing it. If its a good business blog, then I feel I know about the company. I feel like I get to understand how they think, and how they operate. Its totally different to just reading a website. These tend to have a third person voice, and its hard for it to be anything other than just an online brochure (no matter how sophisticated).

Over time, a good business blog should become communicate what your company stands for – it tells your story. By authentically representing what you are and what you do, it will help build trust so potential clients can feel more comfortable working with you online.

And if small business blogs help link themselves into their community of interest through honest contributions of content, they may earn links from trusted sources. Trusted links will be a highly valued commodity. And authentic, small business blog marketing will be one of the best ways to go about earning it.

The virtues of publicity

Publicity requires faith, patience and commitment.

Advertising brings instant gratification.

Ross Wallace WAPPA winning entry

We ran a publicity campaign back in June and July for the Australian Institute of Professional Photography.

Publicity has been phenomenal, yet some of the coverage has yet to appear.

Magazines that publish quarterly or bi-annually will sometimes sit on a story for a couple of issues if it’s not time-sensitive, which means a long wait and lots of nail-biting.

But when the coverage comes, it has enough impact to blow advertising out of the water.

The photography campaign enjoyed local and national coverage in mainstream and specialist media, and it keeps on coming. This week we saw coverage in Scoop magazine, and Flourish has a full page coming out in its November issue – a full five months after the release.

So if it’s instant gratification you’re after – advertise – but don’t expect the same return on investment.

Photo: Ross Wallace, student category winner

The zen approach to publicity

Fish hookThe secret to a successful publicity campaign is having a story that captivates your audience.

This means finding a ‘hook’ – the thing that captures the attention and imagination of the media as the crux of a great story.

For a new small business, the hook is often the thing that sets that business apart from its competitors – but sometimes this isn’t enough. Sometimes a business’s point of difference simply isn’t different enough – or fascinating enough.

So how do you find a sharp hook?

In my experience, the thing you expend heaps of energy looking for is more often than not right under your nose the whole time (hence the zen appoach). You just don’t see it because it’s too close – or you might even perceive it as an obstacle and be desperately trying to get around it.

This is where brainstorming with an objective consultant can be helpful. And while we are willing to enable our clients to run their own publicity campaign, one aspect of our service that I would highly recommend they pay good money for is our publicity planning session.

This is where the hook or hooks come to light. More often than not, a client will be talking about their business features and benefits, history and personality, when something small and sharp slips into the conversation – a hook. Instinctively I grab it with both hands (carefully of course) and show it to the client.

That’s a hook?, they exclaim in surprise.

The hook might be something that defines the way they do business, something that occurs between them and their clients every day, or even something that’s holding them back from their audience – but they don’t see these things because they are so used to them.

One example is our client, Mardon Recruitment. They wanted to raise the profile of the company. During our publicity planning session while examining Mardon’s services and business model, proprietor Angie Mardon happened to mention that she always provides a human resources consultancy service and report for every client – free of charge.

This had become such a familiar part of her business model, that she was surprised to see our jaws hit the table.

What a great hook.

Another client runs an IT cooperative, where programmers concentrate on producing innovative technology and software, sharing a communal workspace in a highly desirable seaside location, coming and going during hours that suit them, and enjoying regular brainstorming sessions over a beer and game of pool.

The products they aim to promote are remarkable – but their work environment even more so – providing a hook that’s likely to attract attention from a wide range of IT consultants and businesses.

For more inspiration on finding your hook, check out How to Find the Hidden Hook, which also links to Fishing for Hooks.

Personalise your press release

Here’s a tip from the other side of the editor’s desk.

When you send your press release to your targeted media contacts, remember to focus on the editor’s needs as well as your hopes.

Just as every small business has an edge – something new or different that sets it apart from the competition – so does every publication.

So when you create your distribution list, don’t just decide which publications you want to be seen in. Choose those that will see the benefit to them in running your content.

If you have time to tailor the release for each publication, so much the better, but you can also facilitate this process by going to each publication’s website to study the official profile.

Look for the About or Profile section on each site. If these don’t get you enough information, look for the section created for advertisers. The publication’s agenda and demographic will often be described here as a way to help advertisers decide whether to invest their dollars.

Then, when you email your news release, express clearly in a short email message why you think your content is ideally suited to this publication.

Few PR agencies do this well, it doesn’t take long, and it could just save you from the email trash.

Finding an authentic business voice for your blog

We’ve been having an absolutely fascinating month, with two new clients currently establishing business blogs with us. Our role in both cases has been to work with the clients on the blog strategy and to be part of the content team. In one case we are also setting up their blog (and upgrading their website as part of the process).

Its important to Jane, Julia and myself that in helping our clients with their blogs, that we help them find an authentic business voice. Hmmm, I hear you say, what do you mean?

Well, for a lot of people involved in blogging, the blogger’s voice has to be personal. In some cases that even means they want it to be directly ‘penned’ by the individual. And I understand exactly what they are talking about, even if I don’t subscribe to their rule books.

Small business blogs are personal and conversational, but they are not ‘personal’ like that.

Small business blogging usually means blogging for some kind of commercial purpose. It involves investment of resources (time, attention and money) to achieve an objective. Our take is that effective small business blogs have an authentic voice. And this means they must accurately convey the thoughts of the business – whether that is the owner, their key team members or extended members of their content team. Its no good investing resources in a blog and not trying to find an authentic voice.

What happened today that was so fascinating is that we fooled ourselves. Julia interviewed our client – really listened – and wrote down their thoughts. Its very informal, and they continue working while they are talking. Anyway, they loved the words. Julia sent the draft for Jane and I to review, but she used their email account. Jane and I were blown away that the client – and it was so clearly the client – had found their blogging voice so rapidly. It was so authentic!

And yet Julia wrote it. We fooled ourselves. But not our client. Or our audience. Because the thoughts were 100% authentic, from the client. So when you are considering your own business blog, consider how you can be authentic with your readers. And consider that you are blogging for a commercial purpose – you aren’t baring your soul or breaking the next story from the front lines of citizen journalism.

Consider how you can find an authentic business voice.
PS: when I Googled “authentic business voice”, I only got 1 hit in Google. Not a proper Google Whack, but interesting.

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