No pun intended, but Non-Volatile Memory Express® (NVMe™) is really picking up speed these days. Between the new NVMe storage devices that have become available since the Flash Memory Summit, the number of new NVMe storage arrays that have been announced, and the incredible progress on NVMe over Fabric™ (NVMe-oF™) adapters that has occurred, NVMe is clearly becoming a mainstream technology for the enterprise. This is more evidence that the NVMe market will hit or exceed the G2M Research forecast of $57B in 2020. Please share any news articles that you have regarding NVMe with us, and we will make sure that they are part of our NVMe Market Pulse newsletter (just send them to email@example.com).
“Social media” is a frequently used term, but what does it actually mean? For most, “social media” is a broad term generally used to describe a variety of social media networks: Facebook, Twitter, LinkedIn, Instagram, etc. However, as About Tech points out, “If we use the term to describe a site like Facebook, and also a site like Digg, plus a site like Wikipedia, then it starts to get more confusing.” Especially when you consider that in the IT industry there are also technical forum social media sites that can be vendor driven and business driven (Spiceworks, Quora, Teched, Channel9). So, just what does “social media” mean? By definition:
Social media is the collective of online communications channels dedicated to community-based input, interaction, content-sharing and collaboration. Websites and applications dedicated to forums, microblogging, social networking , social bookmarking, social curation, and wikis are among the different types of social media.
A broad definition, no question, and one which has most likely led to much of the general misunderstandings of what social media is, why it is important and how people and businesses should use it. We’ll dive deeper into the why and how of social media in this blog, but before we do, here’s a quick “social media explained” breakdown from AvaLaunch Media.
“The fact is this: businesses misunderstand what social media is about — as do plenty of fresh-faced college graduates who think the job description consists of tweeting. Social media managers and strategists don’t post on social media. They create, plan and execute marketing campaigns.”
So why does social media matter?
- According to Hootsuite, 92 percent of B2B marketers use social media as a content marketing tactic to assist in supporting sales.
- A recent Content Marketing Institute study showed that the IT/technology industry makes up 23 percent of the total B2B social media market, coming in second behind the advertising and marketing industry at 26 percent.
- Additionally, social media:
- Builds brand awareness and further boosts visibility to current and potential clients, as well as industry influencers
- Drives website traffic, improves SEO and supports sales efforts
- Engages with current and potential clients, as well as industry influencers
- Responds to public questions and commentary
- Supports long-term goals and initiatives
- Monitors competitors
- Showcases expertise and thought leadership
And in case that wasn’t enough, here are a few other facts to think about:
- 56 percent of people check Facebook daily
- The average American spends 37 minutes on social networking sites per day
- 64 percent of Twitter users and 51 percent of Facebook users are more likely to buy products of the brands/companies they follow online
- Only 14 percent of people trust advertisements, while 90 percent trust recommendations on social media
Okay, so now we get the why, but what about the how? For many, social media can be so overwhelming that they shy away from it. This is especially true, because as mentioned above, social media is not just “posting.” So, how do you successfully implement “social media.”
o Understand your audience (B2B vs. B2C, engagement patterns)
- Who is your target audience? This is a big one. In fact, it is one of the most important, if not the most important, question you can and should ask yourself. Defining your target audience will help you: build focus with the right people, understand who to follow and why and better develop your overall channel. So, how do you find/define your target audience? Here are some things to think about to get started:
- What is your target industry?
- Who is your target engager within that industry?
- How often is your target engager using social media?
- What is your target engager using social media for?
- How does your target engager like to receive information?
- What type of content does your target engager respond to?
- How do you stand out from all of the social media “noise” and reach your target engager?
o Choose your brand’s channels (keep in mind, not every channel is appropriate)
o Develop your brand’s voice (what is your brand going to be, how is it going to sound)
- Policy – simply put, companies and organizations need a social media policy that dictates how and who is going to manage the strategy, execution and channel monitoring. It should also detail the level of employee engagement and provide best practices.
o Frequency – how often will you post?
- This is a hot button issue; in fact, its spawning a lot of social media chatter (see what we did there). Historically, best practices have dictated that certain social media channels require a certain number of posts per day, and at certain times. However, more recently, many have started advocating for a more fluid approach, which promotes utilizing brands’ specific channel analytics to track engagement rates and then determine a frequency schedule based on that.
o Content development and management – what is your content? Who is responsible for its development? How do you ensure it is updated? Depending on your frequency schedule, the amount of content is crucial to the success of your social media channels.
o Best practices – research on best practices is always a good idea, but be careful – while helpful, it’s always best to default what is most effective for your brand.
o Ongoing education – when in doubt, more social media education is always best, both for yourself and for your team. A personal favorite of ours, for continuing education, is The Online Marketing Institute.
- Execution – your brand’s voice has been defined, strategy set, policy in place, frequency established and content determined. Now, it’s time to execute. In the words of Kevin McCallister “This is it, don’t get scared now!” (And you shouldn’t be, you’re ready for this.)
- Measurement – analytics are essential. Once you begin posting, it’s imperative to track your results. Most social media channels have built in analytics platforms. Or, you can engage a third party platform – Hootsuite is an example of a third party platform that offers superior analytics tracking and measurement.
Stay tuned for more upcoming social media-focused blogs. Now that we’ve touched on the what, why and how, next we’ll get into best practices. Everything from paid content, hashtags, keywords, at replies, analytics and more.
Recently, I was getting ready to board a flight from Austin to Dallas, and as a (far too) frequent flyer, I get to request to have my seat upgraded. Since these upgrades are not automatic on the airline I was flying (I won’t say which one, though other frequent flyers will be able to easily guess), the standard process is to go to the desk at the gate and ask “did my upgrade come through,” which is exactly what I did prior to this flight. The response that I (politely) received from the gate attendant was “First class has checked in full.” While, as a frequent flyer, I understood what that meant (no upgrade), it really didn’t answer my question directly, and reminded me of what a friend of mine who gives classes on strategic selling used to say – “You have to speak your customer’s language.”
You might ask why speaking your customer’s language is important, to which I would say there are at least three reasons which might apply, depending on the customer-seller relationship (and yes, there is always a customer and a seller in every business interaction):
- Speaking the customer’s language shows that you know something about his/her business. By using the customer’s language, you show that you might actually understand at least some of the important factors that drive the customer’s business. This is an especially important consideration for customers with complex needs. At the very least, it will give you an advantage over your competitors who don’t speak the customer’s language (everything else being equal), because if the customer perceives that you know more about his business than your competition, he will also likely believe that you will be more likely to meet his needs.
- Speaking the customer’s language shows that you respect the role of the customer. There is nothing more off-putting than feeling you are powerless as a customer. When you look at industries with consistently low customer ratings, they tend to be ones where customers feel “locked in,” and really have no choice. Examples of these are utilities (especially cable companies), airlines (think of that frequent flyer program I spoke of earlier), and banks. For each of these examples, it is not hard to think of situations where the customer is forced to think, act, and speak in terms of the provider/seller, rather than in his/her own terms. The companies that have the most positive ratings in these industries are the ones that look at each customer interaction as an opportunity to improve customer perceptions, and the language that these companies use seldom contains the “jargon” that their competitors’ communications materials do. In essence, you, the seller, are saying, “I respect that you are the customer, and I will demonstrate that to you by speaking in your language.”
- Speaking the customer’s language shows that you understand the customer’s role in his/her organization. In complex sales transactions, there are often many people who have a say in the buying decision. Each of these people have very different roles, and each looks at the seller through their own particular viewpoint. Using the right terminology with each person shows that you not only understand his/her role, but also which factors in the transaction are important to them. Talking to a network engineer about the “quality of service” feature of a network switch makes sense – talking to that same engineer about whether invoicing will be “X-works” or “FOB destination” just makes the engineer think you don’t know what his role is.
Unfortunately for us in the high-tech industry, speaking your customers’ language is generally not “natural.” This should not be surprising – after all, how many of us have servers, network switches, and storage arrays at home? I have spent much of my career in the data center and storage networking business. When I started in this market (1990s), most marketing messages were competitively focused on how one company’s products were faster than the competition. At some point in the mid/late 2000s (possibly during the Great Recession?), customers decided that buying a product simply because it was faster was not necessarily in their best interests. This forced us to become better at creating relevant messages that were focused on communicating our products’ business value to our customers, rather than on what we now call “speeds and feeds.” If one of our target market segments was customers utilizing desktop virtualization software, we spoke in terms of how many more VDI sessions our product could support than those of our competitors. This not only increased the relevance of our messages to our end customers, it also increased our value to the server OEMs that were our route to market, which made it easier for them to position their own products against their competitors’ offerings.
What all of this means is that you have to actively spend time and effort to learn your customers’ languages (no, there will not be just one), and to practice using those languages. Make no mistake – this is hard work, and it takes a LOT of practice and late night/airplane time reading (however, it is a better use of your time than watching the same movie for the third or fourth time!). But if you really want to improve the percentage of prospects and opportunities that you turn into evaluations and sales, it is critical that you learn to do so. In our industry, customer perception of a salesperson or sales team are made in the first couple of meetings (if not the first meeting). The language you use will either help you to make a connection with your prospective customer, or will put him/her off, and negatively influence your chances of being able to move to the next stage of the buying process (whether we like it or not, there is no such thing as a “sales process”).
As a practical exercise, go through a day where you are primarily a customer (maybe a Saturday or a Sunday), and think about the various interactions you have. I will wager that the sellers that you end up having a positive perception of are the ones who speak your language rather than making you speak their language. Try it and let me know!
If you go to Amazon.com and search for “marketing messages” in the book department, you will get over 12,000 results. Furthermore, there are literally hundreds of consultant agencies that will help your organization develop a messaging platform. Yet, large and small companies alike, in the IT space in particular, struggle to create messaging, and more still struggle to deliver this messaging to their target audiences. The reason for this is simple: developing concise, impactful messages is really hard. Harder still is getting your target audience to receive, digest, and act upon those messages in a consistent manner. This is why most messaging processes utilized by messaging consultants focus on message development, and not on message delivery. Much of this difficulty results from a lack of understanding of the purpose of marketing messages and how these messages are implicitly tied to the mediums utilized to deliver those messages, which is the purpose for today’s blog.
Marketing, as we know it today, is a relatively new business field, which developed along with the spread of mass media such as radio and television. As it developed, it evolved from simply making potential customers aware of the product’s existence, to the concept of using marketing to create interest in (and often even a need for) the product. Wikipedia defines the primary purpose marketing as “communicating the value of a product, service or brand to customers, for the purpose of promoting or selling that product, service, or brand.” Thus, the purpose of a marketing message is to encapsulate that value in a concise and impactful way (for simplicity’s sake, we will leave branding out of this discussion, and focus on messaging for products and services). Put another way, the purpose of a marketing message is to get the attention of potential customer, and creating a preference for your particular product or service for that customer’s need(s). As such, marketing messages are a tool that enables sales to be more effective by creating prospective customers (“attention”) and by influencing customer perceptions of your product (“preference”). This is the fundamental reason we develop marketing messages, and why they are important (if they are developed and delivered correctly).
the purpose of a marketing message is to get the attention of potential customer, and creating a preference for your particular product or service for that customer’s need(s).
The medium used to deliver marketing messages has a profound impact on the development of those messages. For most marketing people, message development activities are focused around messaging that can be embedded in marketing content such as white papers, PowerPoint slides, web pages, banner ads, media buys, and the like. While you may be able to (potentially) reach large numbers of people through these mediums, we all know as marketing professionals that the yield of these mediums is relatively low, often on the order of single-digit percentages for lead creation (the “attention” part), and even less than that for actual customer creation. More importantly, this approach limits the scope of message delivery to those mediums which the marketing team controls, which by its nature limits the scope of messaging development to that which is appropriate for these mediums.
Why this is a problem is illustrated by the typical first sales call on a prospective customer. While we as marketers would like to think that this first sales call revolves around the great PowerPoint presentation that we have created, and ends with the salesperson leaving the prospective customer with some of our shiny new collateral explaining our products, the reality for most salespeople is quite different. I have been on more than a few first sales calls where the salesperson never even opened up his laptop or tablet, or only used the marketing or product presentations as ‘backup’ to answer specific questions that the prospect brought up. The reason for this is simple, to the salesperson, the purpose of the first sales call is to understand the prospect’s need, to create a personal connection with that prospect, and to create interest in the prospect around his company’s product. That means that the messaging has to be tailored to the specific delivery mechanism of a one-on-one (or one-on-few) conversation to be effective. Moreover, the salesperson has to be trained on how to effectively deliver the message, and how to respond if the message is not understood. Similarly, successful viral marketing campaigns have to tailor the messages to be able to be spread effectively through social media.
Implicit in the concept of marketing messages is that they are customer-oriented. For most marketing people, this means identifying the market segments that you are trying to reach, as well as the roles within prospective customer companies that you are targeting with your message. However, to be effective, you must also identify likely customer needs, so that your messaging can address those as well. This is one of the areas that makes messaging development so difficult in the IT world – since most of us don’t utilize IT equipment in our daily lives, it is often difficult for us as marketers to understand what real problems IT decision-makers deal with, and how our products might solve them. This often leads to a messaging approach that focuses on product positioning vs. competitors (e.g., why my product is better than yours), and leaves it up to the reader to figure out how the product being marketed might address his needs. This approach also neglects the fact that most IT needs are driven by business needs, and the expenditures for those IT needs have to be justified in terms of the business benefits they will provide. It is critical that your marketing messaging include these business benefits if you are going to get your messages noticed by your prospective customers. It is also critical that your messaging speaks your customers’ language, utilizing the standard terms and concepts in his/her industry, as this helps the messaging to be more effective in its impact.
As you think about messaging, one of the most useful concepts to consider is that of a message tree (sometimes also called a messaging platform). The messaging tree illustrates how your core message (the product promise) is tailored to reach different audiences via different delivery mechanisms (the sub-messages). Optimally, the message tree is organized along three axes: vertical market, prospect role and delivery mechanism. Formally developing a message tree has three benefits: i) it allows you to see gaps in your message coverage; ii) it shows you where your messages might be contradictory (i.e., what you say to one audience is not consistent with what you say to another audience); and iii) it lets you evaluate how changes to your core message impact the sub-messages. The best message trees also combine verbal messages with graphic messages to further standardize the delivery, improving customer retention of the key facets of the. While creating a message tree would seem to have obvious benefits, it is more often than not something that most marketing organizations do not practice on a regular basis.
One final thought: one of the most critical (and most overlooked) aspects of messaging development is message validation, or put another way, do customers believe and agree with your message? After all, the most critical person that you need to ‘buy in’ to your message is not you, your marketing VP, your CEO or your investors – it is the prospective customers you are trying to sell products and services to. A rigorous process of message validation can help you to identify where your perceptions about your company, your products and your services are misaligned with those of your customers. If done on a regular basis (we suggest annually), it will also allow you to identify market changes and how they affect your positioning and value. We will deal with approaches to each of these concepts in this blog series. Let us know if there are any other messaging subjects you are interested in discussing. Thanks!
Our last blog talked about some of the reasons why it is important for outbound marketing people to think like salespeople. In this installment, we are going to provide a quiz to measure your “sales empathy quotient.” While this may sound too “touchy-feely,” the rationale is to help demonstrate how different things are important to salespeople than to marketing people. After the quiz, we will talk a little about how you can improve your sales empathy quotient.
One quick note – this is not a quiz on sales techniques or anything like that – we are not attempting to turn marketing people into salespeople. So take a couple of minutes (it is short), and approach it with an open mind. Here are the questions (total point value is 50 points):
- How is the commission for your company’s sales team calculated (revenue-based, margin-based, design win-based, MBO-based, or a combination of these)?
- What is your company’s sales (revenue) quota for this quarter?
- What is your sales group’s attainment so far this quarter against their revenue quota?
- What are the top five accounts that your sales team needs to win this quarter?
(2 points each, with a maximum of 10 points)
- How many sales calls have you been on in the last 3 months?
(2 points for each one, with a maximum of 6 points)
- Which sales region/geography showed the greatest growth in the last fiscal year?
- How many salespeople have you exchanged emails with this week?
(1 point for each one, with a maximum of 4 points)
- How many salespeople have you talked to on the phone or met with this week (don’t count sales calls that were counted for question #5)?
(2 points for each one, with a maximum of 10 points)
If you had to look up the answers, you don’t get the points for those questions. Now total up your points, and see where you fit on the scale below:
43-50 points You are very in touch with your “inner salesperson.”
30-42 points You are not terribly off, but you need to do some work – you either don’t communicate with your sales team much, or you don’t know how they are paid.
20-30 points You are on the edge of failure – tell your VP that you would like to spend the next three months in the field with the sales team.
Less Than 20 points If sales/marketing “interlock” is at all important in your company, you might want to start looking for a new job…
For executives (SVPs, VPs, and directors) in sales-centric companies, you are probably a third wheel if you scored less than 35-40 points. Even if you did well, how would your people do on this quiz? You are not doing them any favors by taking all of the sales calls and chances to work with the sales team yourself. If you think your marketing team would do poorly on this (less than 40 points), you are in danger of having marketing seen as being unimportant and/or irrelevant by your sales team – you need to turn things around.
So how do you fix this situation? Here are some ideas you might consider to improve your “sales empathy quotient:”
- Spend time with the salesforce more often than at the annual sales kickoff. More importantly, when you are at events (tradeshows, sales calls, etc.) with the salesforce, spend non-working time with them. You would be surprised what a dinner or a few drinks together can do to create the kind of bond you need to be successful in a sales-oriented company.
- Sit in on revenue calls, and take notes. You don’t need to go to every weekly call that happens, but you should try to be on one a month. If you have questions during the sales call (“how can marketing help you win that deal,” “did that last piece of collateral make a difference,” etc.), don’t hesitate to ask. Ignorance is no excuse when the next layoff comes around.
- If your company has a field sales function, get out in the field and spend some time with them. They should be closer to the sales team, and can help you to understand the ropes.
- If your company has an inside sales function, spend time with them – sit in with them when they do call-outs, and see what works/doesn’t work.
- Pick a salesperson, and be his “swim buddy” (if you are an executive, pick a sales management person at a similar level to you). Have a call with your sales swim buddy weekly to understand what he is seeing, and what is working for him. You need to create a bond that will allow you to ask frank questions (like “what does the salesforce think about marketing and about me?”).
- Take a sales training course that people in your salesforce recommend. Again, the point is not to become a salesperson, but to learn to look at things like a salesperson does.
This is not meant to be an exhaustive list, but hopefully it will help you improve your “sales empathy quotient” and make a greater contribution in your company. Happy hunting!
Outbound marketing people have many challenges to overcome in the high-tech world. One of the most universal challenges is to create a constructive relationship with the sales force. This is usually difficult due to the fact that salespeople and marketing people think about and approach their respective roles very differently (more about the differences in sales and marketing psychologies in the next blog). It is also complicated by the fact that both groups need access to customers to do their job, with both organizations wanting to “own” the customer relationship. In consumer-oriented companies, the “customer ownership” role tends to be led by marketing, who creates the consumer “need” for the product, and channels that need towards fulfillment vehicles. This is true even when products are sold through retail channels, as the retailers still expect the vendor company to build and nurture the need, as they are (largely) there to satisfy that need.
In contrast, sales owns the customer relationship in all but the largest high-tech companies, especially in high-tech companies where the sales model is indirect (channel-focused or OEM-focused). In those cases, the opportunities for outbound marketing (or even sales) to interact directly with customers are very limited. In this business model, the indirect actors (OEMs, integrators, and distributors) are often seen as proxies for customers. Since indirect actors tend to have multiple product vendors who can satisfy a given need, their desire to help any vendor “get close” to actual customers is rather limited. This naturally leads to a competition between sales and outbound marketing for the limited time available to interact with these proxies. Since sales usually owns the relationship with the proxies in most high-tech companies, the challenge for outbound marketing people is to show the salesperson the value of engaging the marketing team with the customers
To be clear, my intention is not to turn you into salespeople; rather, it is to help you understand what drives a salesperson’s behavior.
Which brings us back to the purpose of this blog series – why high-tech marketers need learn to think like sales people. To be clear, my intention is not to turn you into salespeople; rather, it is to help you understand what drives a salesperson’s behavior. Contrary to the perceptions of many, salespeople are not just social animals whose primary focus is maximizing their commission checks. To be sure, these are important considerations to any salesperson’s decision process, but there are other considerations that are just as important. More importantly, which considerations are “front of mind” with your sales team (and even individual sales people) will vary greatly, depending on your company’s position in the market, your customers’ current fortunes versus their competitors, and the company’s competitive position with the salesperson’s customers. My goal is to help you identify which are the critical motivational factors for your sales team, and show how you can demonstrate to your sales team how you can add value to their efforts as they go about their job.
One great example of how sales and marketing people differ is the situation we started this blog with – customer visits. Marketing people have been trained that the ability to influence customers is directly related to the number of times we “touch” a customer, and the quality of each “touch.” The idea is that, even if the odds of a “win” (in marketing terms, a prospect) are low for any given opportunity, a large number of opportunities will result in some number of prospects. It is a law of large numbers approach, and not that dissimilar to a sales pipeline. However, it is not the way a salesperson looks at things. For a salesperson, it doesn’t matter if he/she has 20 opportunities that statistically should turn into 4 or 5 or 6 wins – the salesperson wants to win each and every one of the opportunities. As such, the salesperson controls the one thing that he/she can – the pace of the engagement, which is often referred to as the “sales cadence.” To a salesperson, each encounter in the cadence should bring something new to the customer that pushes the sales along, whether it is information or new players. This means that a salesperson will balance both the potential risk and potential reward for each new person that is introduced into a sales encounter. This is true whether the person is an engineer, a product manager, the salesperson’s manager or the CEO of the company.This risk vs reward factor is what makes it difficult for outbound marketing people to insert themselves into the sales cycle to validate messaging, understand customer needs, or any of the other important reasons for marketing – it is hard to show that engaging them in the cadence of a sale will have any positive effect on that sale. In fact, the reason that the outbound marketing person wants to get involved in the sales call is to improve sales and marketing collateral for future sales calls. While there are salespeople who will “invest in the future” in this manner, they are by far and away not the norm. Most would rather bring in outbound marketing people after the sale is complete (after all, at that point the marketing person can’t derail the sale). Worse yet, if the engagement is ongoing, rather than transactional (think of OEM design wins), the work isn’t done when the salesperson gets the win – it is just starting. By that logic, the marketing person will never touch the customer. I have been a marketing person in companies where this was the reality, and it makes for an extremely difficult situation at best.There are several ways around this situation. The worst approach is the “end-around” approach. Examples of this include: using executive management to force sales into engaging outbound marketing with customers; setting up customer visits without the knowledge of the sales account manager; or utilizing sales engineers to ask the questions that marketing needs to have asked. The first two approaches generally don’t work more than once, and if anything “bad” happens with the customer, the likelihood that marketing will be blamed for it is high. While the third approach can provide some useful information, the problem with it is that the information tends to be skewed (even sales engineers won’t ask some questions that marketing people would like them to), and it suffers from the “telephone game” problem of multiple levels of indirection. In contrast, approaches that provide value to sales can consistently produce good results. Examples of this approach include deal discounts for success stories, funded marketing heads for OEMs, or workload/application-based solutions that help the OEMs compete with their competitors. While these approaches generally require significant investment by the company, they provide the desired outcome (marketing involvement with customers) while improving the chances of winning for the sales team. Note that this is not meant to be an in-depth treatment of this issue (we will save that for another blog), but hopefully it illustrates how “thinking like a salesperson” can help marketing engage in a positive manner with sales.Hopefully, this first blog has helped you to understand why it is important for marketing people to try to bridge the gap between them and sales by understanding what motivates the sales force. Just like marriages, creating constructive relationships between sales and marketing requires communication, honesty, trust, and the creation of win-win situation for both parties. While I won’t use the idiom “marketing people are from Venus, and sales people are from Mars,” understanding that the motivations of the two sides are not necessarily congruent is critical to creating situations where both parties get something out of the relationship.
Whether your company is public or private, increasing the company’s valuation is always one of the end-goals of all your activities, whether they be engineering, sales, or marketing. Valuation tends to be driven by a handful of factors, with the most important ones being current revenue, revenue growth potential, profitability (often gross margin %), execution versus competitors, thought leadership, and defensibility of the company’s position in the market. While company valuation itself is usually expressed either by a company’s market capitalization or enterprise valuation (market cap plus debt/liabilities, minus cash/similar assets), the premium that a given company gets is often expressed in terms of the company’s “multiple”, which is typically market capitalization divided by yearly revenue. As an example, a company with a $5B valuation and $500M/year in revenue would have a multiple of 10 ($5B/$500M). If a company in a given industry has a significantly higher multiple than its competitors, it means that the company is perceived as being much better positioned for success than the competitors.
You can see a great illustration of this by looking at the three companies in the I/O networking space (Mellanox, QLogic, and Emulex). Based on data reported by MSN Money on April 24th 2015, the companies had similar annual revenues, with all three falling between $440M and $465M/year. All three companies also reported had slight net income losses (ranging from $18M to $29M). However, their multiples were significantly different, ranging from 1.28 for Emulex to 2.87 for QLogic, and 4.77 for Mellanox. The primary difference between the companies is the market’s perception of each company’s growth potential, indicated both by their historical growth and their potential growth based on the markets they are in. To illustrate this even more, Nimble Storage (a “next-gen” storage company) had a market capitalization on April 24th 2015 of $1.92B and a multiple of 8.43, even though their annual revenue was $228M, and they reported a net income loss of $98.85M. This compares with NetApp, which had a multiple of 1.77, on annual revenues of $6.3B and net income of $638M. The key differentiator is that Nimble Storage’s revenues grew 81% from FY2014 to FY2015 (Nimble Storage was founded in early 2008). Clearly, the market’s expectation of growth potential for Nimble (as a percentage of revenue) is significantly greater than that for the other companies in this example. What drives these perceptions of growth that have a significant impact on company valuations? Obviously, historical data is helpful, but that alone is not the only indicator the market looks at.
One important factor in driving growth potential perceptions is whether a company is seen as being a leader among its competitors. While this is generally related to technological leadership (after all, this is the high-tech industry), it can also apply to go-to-market leadership, supply chain leadership (think Dell in the 1990s), customer service leadership, or other similar factors. Another important factor is whether a company is seen as participating in hot new “high-growth” or “catchy” markets such as big data, cloud computing, or social media, or if the company is in unexciting, low-growth markets such as general-purpose servers and storage for the enterprise. From a marketing perspective, these perceptions are often called “market leadership.” For better or worse, a company cannot just expect that going after the right things and the right markets will automatically lead to the right perceptions about the company’s thought leadership. Rather, thought leadership has to be nurtured and promoted just like products do. Which brings us back to this blog’s title – are your markets and marketing efforts creating a buzz about your company, or are they are a buzzkill. Make no mistake, customers make judgments about your company with every interaction that they have with you, from what you emphasize and how you communicate on your website, to the look and terms you use in your collateral and your sales presentations, to how analysts speak about your company.
The “hot markets” that we spoke about earlier also have their own vernacular and jargon, and if you are not using that language correctly (or at all), customers and investors will not perceive that you are really serious about those markets. The companies that are seen as thought leaders may not have the best products and/or be the furthest along technologically in their target markets; rather, they have engaged their key personnel deeply in these markets, whether through industry associations, by having them speak as experts at industry gatherings for these markets/technologies, by writing articles and blogging on the subject, or by conversing extensively with analysts on the reasons for explosive growth potential in these markets. Thought leaders also have websites and collateral that reflects the dynamics in these markets, creating the perception of the leadership that they strive for.
A good example of this was Fusion-io, who was one of (but certainly not the only) the pioneers in PCI Express flash storage cards. Fusion-io differentiated itself in its target markets by hiring experts in the verticals that they targeted (banking, media/entertainment, etc.), and making sure that those people were “front-and-center” in the company’s marketing and sales efforts. It provided the perspective that Fusion-io not only understood how to make PCI Express flash cards, but also how customers would and should use this new and disruptive technology. Similarly, nVidia is seen as the undisputed leader in general-purpose computing on graphics processing units (GPGPU), which has changed the nature and architecture of supercomputing in a variety of industries. Like Fusion-io, nVidia has many experts on its staff for specific vertical industries that are a target of its GPGPUs (oil and gas, high-performance computing, etc.). Additionally, nVidia sponsors numerous conferences on GPGPU computing, provides universities with grants to utilize GPGPUs in their research, and provides tools for these communities. In both cases, these companies have been able to differentiate themselves far beyond simply the product level with their efforts, and are seen as undisputed thought leaders in their respective markets.
At G2M Incorporated™, we believe that a company’s thought leadership must actively be marketed for the company to achieve the valuations it aspires to. The G2M BuzzLine™ Market Index identifies candidate applications that have the halo of rapid growth that are critical to driving market perceptions that your company aspires to. Based on your company’s current products, roadmaps, and positioning, G2M will help you develop a strategy to exploit those markets, including methods to participate in those markets and PR/AR/IR efforts that will utilize your participation in those markets to drive valuation. The G2M Media Manufacturing Model™ is one example of a method that G2M utilizes to create compelling stories to achieve the media, market analyst, and investor analyst coverage necessary to drive increased valuation. Contact us to see how we can help your company achieve the valuation it deserves.