An Inside-Out Branding Guest Post by David Frankil, President of NAFCU Services Corp. (bio)

Everyone has heard the cliché — “We know that half of our marketing budget is wasted, we just don’t know which half.”  And the corollary, that marketing is just the law of large numbers – “We’re going to get a 1/2% response rate no matter what we do, so let’s just do more.”

In the venture capital world, the short-hand term for business models built on such brute force market response assumptions is “China Bicycle (CB).”  It refers to a presumably mythical entrepreneur seeking funds for a bicycle factory in China, with optimistic revenue projections based on a sketchy analysis — that “All we need to do is get just 0.01% of a billion people to buy our bicycles.”

‘CB’ is the proverbial kiss of death if a reviewer writes it on the title page of a business plan, because it says the entrepreneur is inward-focused on the business or technology, and has not thought carefully about which segments of his or her target market are most likely to respond to marketing initiatives. CB assumes that all one billion consumers are identical in terms of their desire and willingness to purchase a bicycle, whether they be young or old, rich or poor, healthy or infirm. And that there are no differences in style, construction, or performance which might be more attractive to some than to others.

An example from my inbox today: Washington-Reagan airport is most convenient for flights from my office.  An unnamed airline–on which most of my flying occurs and which has easy access to data showing my preferences – sends me a weekly e-mail with “My E-Saver Fares.”  However the flights are usually originating in cities other than mine and terminating at destinations to which I’ve never been.

How much more effective would it be for this company to tailor the e-mail with an offer that might actually get considered?  Flights out of my location and preferred airport to the destinations I’ve been to in the last 36 months.

So now the e-mail just gets deleted, because past experience has shown that there will be nothing relevant to me in that communication. More fundamentally, they’re telling me that they care more about themselves (inward-focused — the fact they have plenty of extra seats on flights between Toledo, Ohio and Buffalo, NY) as opposed to my needs.

Marketers are better served by understanding their value drivers, segmenting the needs of target markets, and then looking for the intersections of values you provide with needs they have.  A process that sounds simple but is all too often overlooked.

If you get the process right, you’ll never see CB written in the margins of your marketing plan!

See related post: David Frankil on London, Ink

You may have heard the expressions, “we’re drinking our own Kool-Aid,” or “seems like we’re talking to ourselves,” referring to a business plan, market assumptions or even brochure copy that doesn’t seem grounded in the customer’s reality. These cliché’s exist for a reason: too often, companies use only internal assumptions, layered with gut instinct and perhaps an excerpt from a Forrester Research report to formulate their plans.

To help shed some light on why and how emerging companies should go to the marketplace to validate and refine their basic assumptions, the Northern Virginia Technology Council’s (NVTC) Emerging Business Committee asked Bob London, President of London, Ink LLC, to be the featured speaker at its Spring, 2005 event.

The event, titled, “Don’t Fear the Research,” was an engaging discussion of the importance of doing primary research and solid market analysis to back up projections and assumptions without significant expenditures. Subjects covered by Mr. London included:

• What prospects or relevant subjects have critiqued your product?
• How can you approach these subjects to turn them into prospects?
• From what public sources can information be mined with little or no expense?
• How can you construct a basic, credible situation analysis?

Those who missed this informative event can download a copy of the PowerPoint presentation here.