Revenue Models: Performance Based vs. Cash Upfront

In today's economy, you want low barriers to entry. I've worked on setting up models which are all performance based. This is a great way to drive in new business, but can also create cash-flow problems later when it comes time to collect payment. The credit markets are tight, people are cautious and business owners usually have some of the worst track records with paying on time. Just ask the people at Amex, they're usually the first ones to be moved to the bottom of the pile when it's time to pay bills. Without any track-record with a new client, how can you ensure you'll get paid net 15 / net 30? I actually knew a business owner who once told me that he wanted to put all vendors on a Net 90. That's hilarious considering that his company collected payment from their customers weekly. "We get paid weekly; we'll pay you 4 times per year". That sounds like a recipe for success.

The salesman in me wants to just sign the contract and get rolling, but you sometimes can't take any chances. If you're risk adverse and want to hedge your bets, it's a great idea to collect an installment up front. In the marketing world, as with any industry, we have costs of doing business as soon as the relationship starts including; campaign development, strategy, creative's, programming.

Once the relationship starts you'll begin to incur costs whether you collect upfront or performance based. The meter starts ticking and cash is being spent. If your client isn't financially committed you might have the contract and work, but when it's time to push the button they may have a "change of direction". There's nothing like working on a project, then later finding out your client isn't fully invested and you won't collect your return.

I've seen this countless times over the years and it's always avoidable. Although I hate to cut checks for pre-pay items, I can't argue with the logic. In my experience, as soon as that check is cut, I want to know when the work will be completed and how quickly I can get my ROI. In contrast, with no commitment, they may find that I'm hard to get ahold of later for some reason. It's not on purpose, it's just how that seems to work. Nothing gets your attention like a line item on your budget.

Suggestions on collecting upfront pre-pays and still closing the deal

• Provide clear direction on what the deliverables will be once work begins, detail it out in a scope document if necessary. People are visual, they'll want to see what their getting.


• Detail your initial costs on commencement of the agreement (design, programming, staffing, etc.)


• Explain why you collect fees upfront, it engages clients and ensures they're committed. This might not work all the time, but it makes sense and it's logical.


• Use friendly lingo: Words like pre-loaded expenses, will work much better than "Deposit, Down-Payment, or Installment fee".


• If necessary, use a retainer: If push comes to shove, you might want to consider withholding a portion on a retainer. It allows you to sign the deal, secure some funds and confidently begin work. You can call it "sharing the risk".

In today's economy, cash flow is tight for many industries. In order to be successful, new business is critical, but getting paid should rank higher. In a presentation at Launchup last week, I heard a great quote from Ben Peterson. "In business, Cash flow is more important than your mother". Although we all love our Mom's, it's hard to disagree with that quote.

What do you think? Is it possible to have a 100% performance based model, without avoiding certain deals that have unpredictable results? I'd like to know your thoughts...

Twitter: Does it have any legs?

Unless you've been living under a rock, you're likely familiar with Twitter. It's the big buzz in SM right now. I've been using it regularly for about a few months and have found some interesting uses for it. However, unless your a die-hard tweeter, or marketer it's hard to see a lot of the value in the service. It's basically a public-facing, searchable, text message repository. In my opinion, if it's going to have any legs, they're going to have to make some updates to the interface. There are already a ton of app's that have sprung up offering the features that Twitter should be offering themselves already.

As far as I can tell, there is no clear revenue model with the service as of yet, but apparently it's in development. They're not making a dime yet, but I'm sure their rev model will involve advertising. Theres no way subscribers would pay for the service, not the critical mass anyway.

It's ironic however that there are a ton of users already advertising their products and content through tweets all day... It's possible that the folks at Twitter have been watching how the users are interfacing with the system, to decide how to best monetize all that traffic. It's an insane amount of traffic, and at present it seems that's all they have. It's enough traffic however to get Google's attention. Theres a rumor released this week that they've offered Twitter $250 Million for their platform (read the techcrunch article here).

As I was researching their revenue model, I found an interesting article discussing this issue. Silicon Alley recently completed a contest titled "Create a Twitter Revenue Model" to help generate ideas for the service. It's a cool idea, I'm sure there were some intersting submissions.

There are already a ton of people jumping on the bandwagon, building services and tools around the platform. Last week I attended a local entrepreneur "Barn Raising" in Utah called Launchup. One startup presented their idea called TweetBooty, multiple online twitter accounts, which you can follow, that publish coupons from local businesses. I was having a hard time seeing the value of building an online coupon distribution system on the coattails of Twitter, but they even had VC money behind them...very surprising. They plan to make 5 cents per published ad. That's alot of nickels boys and girls... With advertising appearing to be ultimately controlled by Twitter, I wonder how that will factor into their business model.

If I were Twitter, I'd take the $250,000,000 and run. They've done all the work to create the market for the platform, get people behind it. It's time to let the folks at Google work their advertising magic and get out of dodge.

What are your thoughts? Do you see the system evolving more, filling the needs such as applications such as Tweetdeck, Twitseek and others? What ways do you see the company monetizing all that traffic?

Direct Mail: Is it dead, or under-utilized?

It's been too long since my last post... In the past few months, I've been seeing an increased interest in Direct Mail, so I thought I'd post some thoughts and get feedback from everyone out there.

There's no question, that direct mail isn't considered one of the cheapest marketing channels lately, especially with the volume and production you can get out of email. However, there's alot to be said of mixing your marketing mediums and attracting a different type of customer. When digging through my bills and other junkmail (i'll classify bills as junk mail), I always appreciate a nice, high-quality, personalized mail piece in my mailbox. It's old school, but get's my attention sometimes more than an email with blocked images and no visible text (yes marketers still do that, I know some of the worst offenders out there).

I've had the opportunity recently to visit with a new friend of mine Kent Merrill with Merrill-Remington Direct Marketing. Kent has a tremendous amount of Direct Marketing experience, and has been a direct mail powerhouse since the 80's. I had to ask Kent how direct mail has changed over the past ten years, and he said that "he's seeing constant, steady production, really not much has changed in that regard". After talking with him further, and seeing some of his work, it's not surprising why he's had such great success. Kent's a very creative thinker and can leverage his experience to produce great results with any direct mail campaign.

In the past, I had overlooked the power of geographic and demographic targeting with my mailings. When you implement appended data such as geo and demographic data, you can produce the same volume of responders without all the waste in mailing those who aren't likely to respond anyway. I've put together an awesome proposal for a large group, which will leverage real-time delivery using variable data mailers as an upsell for a lead partner. In addition, I'm also looking for new ways to leverage this channel further within the financial, insurance and consumer product verticals.

One of my favorite Direct Mail stories involves American Express. Yes, I'm a card holder, I have two; blue and gold. I've actually signed up with both cards through their direct mail offers, so I guess you could say that I'm one of their DM success stories. However, the success stops there. Amex: When are they going to flippin' figure out that I have both of those cards? Note to American Express: Please cross-check your database when mailing me offers to sign up for the two cards I ALREADY CARRY. It's a huge waste of your money! Instead, you could be offering me other products and services. I think everyone out there can relate to that story, it seems to be fairly common. It's so important to know your customer and ensure you're sending them the appropriate offers. It would be hard for me to believe that Amex doesn't have my products flagged in their marketing database. It can get very annoying, especially for consumers more observant than the average bear, like myself :)

Please share any experiences you've had in the past few years with Direct Mail campaigns, or other effective ways you've used this channel to generate new leads and convert prospects...

Inspiring words...

This is a great quote that my good friend Bryce told me about last year, he even engraved it on a plaque and gave it to me to hang on my wall. I've been staring at it for the past twelve months and it's always refreshing.

"If you don't take action to accomplish your goals, you will be used to accomplish someone else's."

If you're the type of person that's "bigger than your fishbowl", you might find these words inspiring. I believe that there can be great honor in helping others acheive their goals, especially when you're recognized and rewarded for your hard work. However, if it's keeping you from achieving your personal, professional or family goals and it's not fulfilling, then you truly can't be happy. This week I finally felt the meaning of this quote that's been hanging on my wall for the past year. Here's to dreams, goals and the opportunities we all face.

Thanks Bryce!

Twitter Marketing

I've been out of touch for the past week, preparing for LeadsCon and getting back and caught up with everything. In the past month, I've been using twitter for personal communication, and it has it's pros and cons. I was reluctant to use it, since it seems like a gimmick. I can tell you this, there are a crap load of spammers on there already, hitting everyone up with all sorts of crap. It kinda reminds me of some friends of mine. Anyway... I've used my personal twitter account to communicate with friends, post to my facebook, grow my network and promote my blog. Overall, It's been a useful tool and somewhat addicting...

In the process of preparing for the event, I had a late night epiphany, one of those ones that hits you at 2am when your sleeping. You have to get out of bed and move on it right away, cuz it's so cool. I realized that I needed to setup a Twit account for my biznass, so I quickly set it up and customized the design to fit our branding. Then, I searched out everyone tweeting about the conference using http://search.twitter.com It allows you to find people talking about the event, the same people that are going to the event... I quickly added 200 people that commenting on LeadsCon. In addition LeadsCon had a Twitter account, so I added everyone connected to them. It wasn't long before all the add requests started coming back to me. I quickly had a list of people, a captive audience of people attending the event. I was back in bed by 3:00am and able to have that all wrapped up. Then throughout the event, I sent out promo updates, links to our site, and funny stuff to generate some buzz...

The effect was a TON of people that were hitting up our booth telling us they've been following us on their twitterberry (twitter app for bberry) and asking "Who's the hilarious person writing all this stuff on your twitter account? I've gotta meet them". In addition, I'm still adding people who are talking about the event, and communicating ongoing messaging to the list. I've even had a couple of business offers come through on DM.

That is incredible targeted, mobile, relevant messaging at it's best. I love this stuff...

CP

Lead Nurturing: Cost or Return?

In the past few months I've written several articles about lead nurturing and lead recycling. We're seeing a contraction across the market, everyone is trying to look for new ways to generate more leads. Lead nurturing is an often overlooked way to increase the ROI on sunk costs from front end lead acquisition. However, while these programs generate additional top-line revenue, they come at a cost. It would be nice to generate a steady ongoing stream of leads from a single investment, but that's not likely. You'll need to invest in systems, technology and resources to ensure your program is efficent. Think of it this way, when you nurture leads your recouping revenue and converting customers that you otherwise wouldn't get. I've seen examples of sales people holding onto leads, companies that have no visibility and quality sales leads that end up collecting dust. What is the cost of that?

How you look at the costs depends alot on your companies overall strategy. In some environments, you can continually generate new leads. However, you'll come to find out that after a certain penetration in the market, you're attracting the same people you've already acquired. If you're on a CPL model, working through affiliates and other web traffic, you could even be paying these groups for LEADS YOU ALREADY OWN. It would be far less costly to nurture that lead to the point of conversion. If you're setup properly, the leads you already own should be closer to purchasing than new leads you'll receive tomorrow. If you nurture the leads you already own, you'll increase the return and it has a residual effect over months and years.

Can you afford to nurture your leads? The question that I ask, is... Can you afford not to? What do you think? Do you have any experience in assessing the ROI of remarketing efforts? I'd love to hear your cases....

Previous post: Lead Nurturing: It's time to go deep

Outsourcing Knowledge: When is the right time?

As marketers and decision makers, we need to find ways to be more efficient. We need to tap into the resources we have within our organizations and find ways to produce results with less...fill in the blank (resources, time, money, people). One of my favorite things to do is produce something really cool without alot of resources.

That leads me to tonights post on outsourcing. We've all witnessed recently as many of our friends and family have been let go from their employer. This has hit home for me, because I have some very close friends and family who have been impacted by down-sizing. I've also had to take part in this process as well on my own team, it was one of the hardest things I've experienced. I've had to fire plenty of people in the past for performance reasons, but it's so difficult when the only reason is budget...

It is what it is, but that leaves many people left in the wake who still need to get the job done. In some cases, people have been asked to pickup the roles of 2 or 3 other people. It's not the same environment after that...

As those left in the wake, or trying to restructure... How can we do more with less? In the past six months, I've been working with a consulting group Couch & Associates who has tackled a few key projects. In addition, they've helped streamline a few other issues as well. We orginally contracted with them last summer to help with an integration project. Our success on that project has lead to additional opportunities between both of our groups. I had the privledge of working with one of their main consultants, Sandeep Singh (aka. Eloqua Ninja) last week at our offices for an onsite training and troubleshooting session.

In our session, I was able to see first hand the benefits of having an expert to handle specific problems and issues with our platform. We were able to quickly handle projects that I would otherwise not be able to complete, or would take me days or weeks to figure out.

Here's the highlights of last Thursday:

• Eloqua Program Builder Training - discussion and application in our install
• Best practice consulting on Eloqua forms, microsites - uncovered inefficencies in our current setup
• Built an A/B testing program that will automatically pre-deploy an A/B test on a campaign before we send our main batch.
• Developed integration between our lead gen / offer database and Eloqua.
• Discussed ways in which we can integrate our frontend landing pages and form submissions using Eloqua microsites.

In addition to all of this, we were still able to get up to Sundance and grab a bite to eat for lunch at the Foundry Grill... :) You think I'd pass on lunch?

In some cases it makes sense to fill your team with experts in specific niches. We need to find ways to do more with less, consulting is a great solution to tight budgets when used appropriately. When we originally signed Couch, I had gotten a quote from another vendor that priced the project at 40 hours and $10,000 (I'm not going to name anyone...:). We ended up signing a retainer block with Couch for 10 hours, but felt it would take much less time. Once we dug into the project, Couch found a way for us to complete the project in less than 4 hours and they did most of the work. The ROI on that? Priceless...

In cases like this where you have an experienced user / marketer, you can really enjoy greater efficiency and productivity with some occasional consulting hours with the help of an expert.

In the next few days, I'll post the results and steps to setting up that A/B split testing program. It's pretty slick and easy to use.

CP