Marketing’s “China-Bicycle” Syndrome According to the Venture Capital Community by David Frankil, President, NAFCU Services Corp.Monday, October 20th, 2008
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