I had my first guest blog post in TechCrunch on how I see big data and SaaS becoming relevant for small business owners in 2013 and startups that are leading that trend. Check it out and reblog if you agree!Tweet
What’s next for local businesses in 2013?
The tools in a local business owner’s marketing toolkit typically drive discovery, promotion, and loyalty for his/her business. For many business owners, this is also the typical order of operations. First, a business needs to be “discoverable.” This means it should be in a good location, have good signage, and be able to be found by customers looking for it—online and off. But business owners are not typically satisfied with the traffic that comes from Google search or Yellow Pages, so this leads owners to promotional efforts. Oftentimes, this is an advertisement placed in the local newspaper or a direct mail piece with coupon. In recent years, some merchants have tried daily deal promotions and relied on the reach of the daily deal company and a deep discount to drive foot traffic. But we all know that many local businesses have been burned by unprofitable bargain-hunting consumers who never return after a daily deal. Loyalty has often been the last marketing tool deployed, and traditionally the methods used to drive it have been rudimentary. Sometimes coffee shops will use a punchcard to drive repeat business and increased frequency of visits. Another method is to collect email addresses at the point-of-sale in return for a prize giveaway. In recent years, capturing relationships to drive loyalty has gone online with businesses posting their Twitter handle or Facebook Page at the counter. However, businesses continue to struggle with having their Facebook fan counts match their actual foot traffic and translating fans into increased frequency of visits and word-of-mouth acquisition.
So what’s next? How will these tools continue to improve with technological innovation? Two trends are currently transforming the local business owner’s toolkit: Mobile and Software as a Service (“SaaS”). We all know that Mobile’s impact on local business owners has been percolating for the last 2 years. As an example, business owners can claim their Foursquare place today, and when smart phone users “checkin” to their business, they can communicate with those customers. While this is really interesting, checkins via social networking apps remains a niche behavior that has had relatively minor impact on local business owners. What about SaaS? Are we seeing powerful cloud-based software delivered to local business owners at incredibly low costs? Square could be the first example of this. Instead of having to buy expensive credit card processing terminals, Square is giving any smartphone-owning small business owner access to low cost credit card processing at incredibly competitive rates. But I would argue that Square is also a niche phenomenon that has primarily impacted zero employee businesses and freelancers.
If we can innovate to reduce friction in mobile app adoption and make modern SaaS applications ubiquitous among local businesses then we can revolutionize ALL the tools in the local business owner’s toolkit. Mobile will drive discovery, enable relevant location-based promotions, and fuel universal loyalty programs. SaaS will help merchants capitalize on the mobile-driven traffic and mobile-enabled identity immediately at the point-of-sale and facilitate ongoing relationships that result in word-of-mouth over time.
What will this look like? The primary tool for discovery for smart phone users today is to just go into their Yelp app and find nearby restaurants. Some fraction of users then typically go into another app to checkin to a store, but then the merchant still does not know who you are at the point-of-sale. But what if you could go to your mobile phone and find lots of nearby restaurants that are highly rated AND have a timely happy hour promotion AND where you can earn more rewards based on your past spend? And then if you could walk into a restaurant, and they would know immediately who you are, your preferences, and if you’re a VIP? At the point-of-sale, they would be able to call you by name and give you a free drink since you are one of their most frequent customers. Sound far-fetched? All of this can happen in 2013 and be ubiquitous by 2014. My company, FiveStars, is one of the many companies trying to make it happen. Merchants will be able to drive discovery, promotion, and loyalty all in a single platform that can be described as part POS, part CRM and part marketing automation platform.
In my opinion, there are some startups out there that aren’t seeing this complete picture or trying to assemble all of the pieces. They think it’s all about earning points but not about facilitating a better service experience. They think it’s about more app downloads and not about driving ubiquitous adoption and transforming all of commerce. I see a world where the local business owner has the tools to turn every transaction into a real, ongoing, two-way relationship. If this happens, I think not only will local businesses be stronger but so will our communities. Looking forward to a great 2013!Tweet
Today we’re excited to announce the release of the largest upgrade to our Instagram iOS camera since it was revamped just over one year ago. The camera has been the core part of the Instagram experience since the day we launched and as a result, we’ve made significant improvements to its look and…
I surprised some people when I said I was taking November off Twitter.
I’ve been using Twitter since July 2006 (user #1568!) with almost completely unbroken usage since late 2007, so that reaction is understandable—most especially from those in my life who consider me addicted to my iPhone.
Social Media Has Failed Local Businesses
When I was at Facebook, I created and promoted a step-by-step formula for small and medium businesses to achieve success. We called the system Facebook’s 4 Steps to Business Success. They are to: 1) Build your Facebook Page, 2) Connect to fans with Ads, 3) Engage your fans with quality content, and 4) Influence friends of fans with Sponsored Stories. I was and remain convinced that if any business can follow these four steps that they will find measurable success with Facebook. Companies like Tough Mudder and Hubspot follow these steps and have built huge fan bases on Facebook and more importantly, have driven substantial revenue directly from Facebook.
However, following these steps is not easy for many businesses, especially ones that do not have full-time marketing managers. For example, with step #2, you have to be comfortable with multi-variate testing of different combinations of images, ad text and targeting to find the most efficient way to acquire new fans. In step #3, you have to carefully test strategies to drive engagement and play around with images, video, questions, and fill-in-the-blank status updates. Finally, in step 4, you have to understand the difference between a Like Sponsored Story, Page Post Like Sponsored Story, and a Check-in Sponsored Story and understand that some of these Sponsored Stories may have limited reach, while others will not.
I did not write Twitter’s prescriptive steps to success, but I imagine that their steps look similar to the 4 steps outlined above. You still have to figure out how to scale your audience, engage them, and turn that engagement into influence and word-of-mouth. It’s not at all straight forward to do this well and requires time and significant investment.
Living in San Francisco, I interact with many successful local businesses. They include places like il Cane Rosso, a super popular restaurant in the Ferry Building that always has lines at lunch-time, or Jasmine Garden, my favorite Vietnamese restaurant in the Castro. I have gotten to know their owners and the people they put in charge of social media, which is often one of the wait staff or the owner on a part-time basis. I love these businesses, and my wife and I would be devastated if they shut down. However, I don’t think I can reasonably expect them to master social media. il Cane Rosso has probably hundreds of people coming through its restaurant on a weekly basis, but it still only has 795 fans on Facebook. When they post, their posts are probably seen by 100+ people. Even if 5% of people take action based on each post, the impact is minimal. Jasmine Garden doesn’t even have a Facebook Page, and I can’t imagine explaining to the owners, who are immigrants from Vietnam, how to implement the 4 Steps.
But the good news is I actually don’t think my local business owner friends need to spend a lot of time mastering the 4 Steps. Instead I recommend that they invest in doing what they do best—constantly improving their product and service experience. I love how we’ve gotten to know the managers and waitresses at il Cane Rosso by name and how they always treat us well and give us the best tips on the menu. I love how Jasmine Garden’s owners always give us hugs when we walk in and how they even thought to get us a Christmas present one year. But most importantly, I love how both of these restaurants have some of the best food in their category in San Francisco. This is why I keep going back.
But does this mean they shouldn’t invest in social media at all? After all, social media can drive word-of-mouth at scale, something that has previously been a huge challenge for local businesses. But the challenge has been how to turn the asset of loyal foot traffic that is built on a quality product and service experience into a online or social media connection that can be amplified. Wouldn’t it be so awesome if we could turn a satisfied customer coming into the restaurant into a social media connection automatically?
This is exactly what we are trying to accomplish at FiveStars. By enrolling customers that come in the door into a loyalty program that is activated with a simple phone number of email address, we are giving local businesses what they really need—a way to turn existing relationships into social media connections. Once local businesses have the connection, they can keep doing what they do best—delivering great product and service experiences—and then FiveStars does the rest, including driving repeat purchases, customer referrals, and social media amplification.
I am hoping other technology companies in the local space will help local businesses focus on their comparative advantage—delivering great products, services, and experiences—instead of asking them to master new forms of social media marketing or to take on unprofitable trial customers via a deep discount coupon. Social media companies and daily deal companies have potentially failed local businesses by taking local businesses away from their core competitive advantage and the basic foundation of their business—delighting their customers. I foresee a future where innovation in local will empower local businesses to get back this basic tenet.Tweet
From Facebook to FiveStars
After over 2.5 years at Facebook, my last day was this past Friday. I decided a few weeks ago that I wanted to pursue opportunities at B2SMB startups based in San Francisco. My strength is building sales and marketing efforts from scratch, and I wanted to get back to that kind of environment. Initially, I sought to help a few startups on a part-time basis to get my bearings, but when I met with FiveStars, I knew that I had found the right company for me. In December, I’ll start at FiveStars as their VP of Marketing and join the amazing company that Victor Ho and Matt Doka co-founded.
FiveStars has created a simple loyalty platform for local businesses based on a universal card that integrates with 90% of merchant POS systems. It has gotten great traction and adoption because of its simplicity and has so many possibilities. From my time at Google and Facebook I have realized that there are generally 3 segments in SMB: local businesses, e-commerce companies, and medium-sized businesses with marketing managers. Most of Facebook and Google advertising dollars are made in the latter 2 categories, but local businesses remain a conundrum. The reason is local business owners are busy and committed to delivering great service or product experience, so they have little time to master new complex marketing strategies or to learn how to evolve from a non-social world to a social one.
For some time I have been thinking that the best marketing solution for local businesses needs to leverage the greatest asset of local businesses—a great product or service experience— and translate that into loyal repeat business and word-of-mouth in an automated and amplified way. However, the challenge has been that most local businesses have no way to capture the customer relationship after delivering a great experience to their customers. They try by collecting email addresses or try to ask people to like them on a Facebook, but these do not fit naturally into the traditional processes and flows of local business transactions. FiveStars has their merchants hand out FiveStars cards at the point-of-sale and thus immediately captures the relationship. Then as customers come back, the FiveStars merchants know who they are and their purchase history at the POS. FiveStars also has the ability to encourage loyal repeat customers to drive referrals or to refer other customers in its network to its merchants. Finally, we may have a marketing solution for local businesses that is easy and amplifies the power of their greatest asset—satisfied customers who come back time and time again.
I can’t wait to get started!Tweet
Risk of Social Media Ambivalence
A lot of companies are dabbling with Facebook. They might have a few hundred fans on Facebook and a junior marketing manager is helping to post regularly. That checks off the social media box on VP of Marketing’s mental to do list, but the math makes it clear that this is not going to be very effective for driving business results and might not even be worth the time you take to post. If you’re in this situation, you need to decide if you want to go “all-in” with social or if you should double-down on your other tools to manage customer relationships, including sales and email.
Let me illustrate with some basic math. Let’s suppose you have 500 fans for your Facebook Page. Every time you post, if you’re not promoting your posts with ads, you most likely will only reach only 80 people with your message. Using typical conversion rates, perhaps you’ll maybe get 1-2 people to take some action based on your post. If your product is more of a considered purchase, it might even be lower than this. Is this going to be meaningful to your business? Most likely not. But change 500 fans to 5000 fans. It’s starts to get more interesting, especially if you’re posting multiple times per week.
I honestly don’t think I’ve seen a company find success with Facebook with an ambivalent approach. Companies like Hubspot and Marketo in the B2B space are all-in and incorporate social into everything they do, and it’s working. They are building a targeted audience, driving influence over time, and converting their audience into leads and ultimately sales.
So the question is, do you want to go all-in? What does “all-in” look like? It means building social into every aspect of your business. This sounds like a huge undertaking, but in reality it’s not. Incorporating social into everything your business days may require only small investments but achieve huge returns.
1. Are you acquiring social media connections with every interaction with the customer (e-mail, phone, in-person)?
2. Have you empowered multiple people, including your senior management, to post engaging content to your Page?
3. Are you investing creative resources to build out your brand personality on your Page and using visual media to engage your fans?
4. Are you measuring referral traffic from social media or asking people at your point-of-sale how they heard about your business?
5. Are you spending on social media advertising to acquire connections to build your audience and your word-of-mouth influence?
Sometimes in Poker, it does not pay to be safe and to make small bets. Because your impact on social media is based on the size of your audience, you will either have to go all-in or double down on other bets. Certainly, don’t be ambivalent about it, or a few years from now, you could risk being left behind as your competitors have built out huge networks of influence, while you’re still left with non-social channels like email to drive relationships, referrals, and influence.Tweet
Using Facebook check-ins to drive ROI
On Sundays after church, my wife and I often head to lunch to a small Vietnamese sandwich shop in the Castro called Dinosaurs. They have great sandwiches, as this Yelp review testifies, but they also have a prominent sign at the counter, which says you can get 10% off if you check-in on Facebook or Yelp. The measurement-oriented marketer in me has been wanting to figure out if this is a good strategy for them. While I have not spoken to their owners, we can still run some quick back-of-the-envelope calculations to figure stuff out.
Cost of the Promotion
Since this is a promotion that is only promoted at the counter (there’s a sign that says “Check-in on Facebook and get 10% off”), let’s assume for now that there’s not a significant increase in demand from offering the discount—at least in the near-term. Basically, if the average price per order is $5 (the sandwiches are cheap), as an example, the restaurant is effectively paying $0.50 for the customer to check-in. Is that $0.50 money well spent? Let’s do some calculations.
Return of the Promotion
When a customer checks-in on Facebook, a story is generated in the customer’s newsfeed on Facebook that shows that they checked in. On average, let’s assume that the customers who check in have 200 friends, which is slightly higher than the FB average, but it could be reasonable given that the customer who likes to check-in on FB is a savvier FB user than the average user. Given the dynamic nature of the newsfeed and the fact that not every friend is looking at Facebook every day, let’s assume only 20% of the friends will see the story or 40 people. But the free exposure does not stop there. Let’s assume that 20% of the time, there’s someone who comments or likes the customer’s check-in. You might get another 40 people seeing that, so that adds ~8 people seeing the story (20% multiplied by 40).
Given that about 48 people will see this check-in and the cost is $0.50 in foregone revenue, that’s ~$10 CPM (cost per thousand impressions). How does this cost of advertising compare to other kinds of advertising? It’s actually not bad. It’s probably cheaper than TV ($20+), insert media for print ($30+), and direct mail ($250+) and about what you’d pay if you had to do banner ad on a smaller targeted web-site. From a cost analysis perspective, this looks like a reasonably smart strategy since the “ad” is not a generic one but a personal recommendation to the customer’s friends.
Let’s assume that because of the recommendation, there’s a 2% chance that one of the customer’s friends who saw the check-in will now try the restaurant. That will result in 1 new customer for Dinosaurs, which would definitely pay for the $0.50 marketing investment, even if you have some conservation assumptions about how often that new customer will come back to the restaurant.
But I still think the economics could be improved in case some of my assumptions are aggressive. I notice that Dinosaurs has an extraordinary number of check-ins (1,472) but not a lot of Likes (161) for their Facebook Page. Compare this to il Cane Rosso, another restaurant that I regularly go to in the Ferry Building in San Francisco. They are a really popular lunch-time restaurant, and they have 771 Likes but only 457 check-ins.
What if Dinosaurs was able to capture its check-in customers as Likes as well? That’s yet another story generated, and now Dinosaurs would have a direct relationship with that customer and be able to engage him/her in the customer’s newsfeed with specials, attractive pictures of the latest sandwich, etc., which would further drive ROI.
Dinosaurs would be able to confirm the check-in AND Like with just one click. See below.
This is the newsfeed story generated when I check-in to Dinosaurs:
Clicking through, you can confirm if the customer has also “liked” the Page:
My recommendation, if you have a high foot-traffic store, is to encourage your customer’s to check-in on Facebook AND to like your Page to get a 5-10% off discount. You can check this easily at the counter with 1 click, and you’ll not only get low cost word-of-mouth advertising with great ROI but also a new direct customer relationship that you can nurture over time.Tweet
There are no silver bullets in marketing
Marketing always seems to have a flavor of the month/year. Lately it’s been social, but more broadly, social media marketing fits into a broader movement of inbound marketing. As a result of this phenomenon, marketers are sometimes deceived into thinking that the latest trend is the silver bullet for their company’s needs. I’ve fallen for that fallacy a few times, but the more time I spend in marketing, the more I realize that there are no absolutes and no silver bullets. Every company and situation is unique, and that’s what makes marketing an intriguing career choice.
I started thinking about this recently when I saw an old post from Hubspot on the Science of Inbound Marketing. The tagline for the presentation was “Ever wonder how great companies like Dropbox, FreshBooks, 37signals, and Hubspot are able to generate tens of thousands of leads using marketing people love?” My first thought was “Dropbox? Do they really do inbound marketing?” I have never seen any content from Dropbox and didn’t think that they needed to generate “leads” for their business. Of course, as I dug more, I found another cool preso, ironically from Hubspot, about how the key to Dropbox’s success has been smart use of viral marketing techniques that they have built into their product.
The Dropbox article was fascinating, because it talked about how when they started, they tried to use the traditional answers like SEM but quickly realized that the most obvious keywords were ROI-negative and that tail term traffic was too small to be meaningful. They had to figure out what worked best for them and ultimately saw great success with creating simple ways in the product to have their satisfied customers to refer new customers to them.
In my career, I’ve learned from experts in all different kinds of marketing. When I was at Capital One and Vonage, I learned from amazing outbound direct marketers. I saw how things like how targeted direct mail, even with response rates in the 15-20 bps level could drive huge scale with strong ROI. When I ran my own startup that taught Chinese online, I learned from experts in SEO on how to get traffic with smart website optimization and tail terms. At Google, when I led acquisition marketing in Asia, I figured out that smart targeting leveraging Google’s data on the sophistication of websites could help us make decisions on who to profitably target for AdWords customer acquisition. At Facebook, I am learning about how important it is to leverage the immense reach of our site to acquire new advertisers.
There has been no silver bullets, and when I’ve tried to rely on silver bullets, I’ve inevitably failed. Direct mail worked at Capital One and Google but was less useful at Vonage and Facebook. Co-marketing worked very well at Google but has been less important at Facebook. Even as I’ve observed SMBs using Facebook’s products, I see that some customers in certain verticals succeed by pointing Facebook Ads directly to their web-site to get conversions while others do not and would be better served by pointing to their Facebook Page and using engagement marketing to influence purchase over time.
Don’t rely on silver bullets or the latest trend as you’re seeking to market your company. Use judgment and analytics, experiment a lot, and find the unique solution that works for you.Tweet