Aside

Make mine the most expensive way to expand

A colleague and friend got $30M in VC funding recently. Good times.
It was more than he asked for, because the VC wanted to see fast market penetration into several verticals. Market expansion can be done in multiple ways — new products, new geographies, new customers, new channels (reaching new customers), etc. In my friend’s case, they needed to design new offers specific to verticals. Speed was of the essence. Not only did they need to learn about the market, build the right product, create momentum and sales — but they needed to do it very, very fast.
These are common challenges. What most high-tech firms try first is to hire. Hire the best Vertical Industry expert who can be the lead product manager and champion of that vertical in the company. Makes sense. But if you want to go after multiple segments at the same time, you gotta hire loads of people. Sales people, marketing people. Good thing when you have someone else’s money to burn. Less interesting if you are using your own capital and need to have a strong ROI.

So it comes down to this fork in the road: Do I spend the money and hope for a longer-term return by hiring all the headcount now, or do I do influencer marketing which allows me to learn as I go so invest dedicated headcount only after seeing market momentum build?

Here’s another approach; a more cost-effective approach. It’s called influencer marketing. Traditional vertical effort calls for the creation of an in-house marketing team for each vertical. Typically these teams need to have 3-4 members in order to be at critical mass, sometimes more. These people live and breathe the issues of the vertical, and create marketing programs aimed specifically at it.
Traditional vertical marketing is very effective, but also very expensive. It requires a large up-front investment in headcount and marketing programs before yielding any benefits. It also creates substantial overhead costs that make narrow verticals uneconomical.
Influencer marketing is a lower-cost alternative that enables a company to leverage enthusiast customers and electronic communication to get many of the benefits of traditional vertical marketing without many of the costs.
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Influencer marketing is much like a rock as it hits in the center of a large body of flat water. If landed with enough impact, it creates larger and larger concentric circles. At the core are the influencers, early adopters who make purchase recommendations and can channel comments and ideas back from a market to the vendor. These are the people who drive buzz and word of mouth recommendations. In every industry, every product category, or every campaign, there are critical opportunities for interaction with your audience at decisive moments of trust. By making the influencers into informal, extended members of your marketing team, you can reach your target consumers as these moments occur. Your brand message is delivered by a trusted third party who has the power to impact your consumers’ purchase decision. And all of this can be done at much lower cost than traditional vertical marketing.
Let me know if you have experiences using Influencer Marketing and how that worked.

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0 Responses:

  1. MKeeffer. March 17, 2006 at 12:07 am  |  

    This really speaks to how powerful B2B word of mouth marketing can be. Particularly when it’s a big ticket tech purchase, influencers are now a requirement – not just an add-on. And, because there are fewer customers in the B2B environment, those influencers speak with even more power than a consumer who purchases a cup of coffee at Starbuck’s.

    Reply
  2. Nilofer Merchant. March 17, 2006 at 5:45 pm  |  

    Marsha -
    Thans for your comment. It’s true… finding a way to support customers as they talk about you or (even better) inspiring them to talk about you in a positive light can really make a broad market influence.
    Nilofer

    Reply

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