Rethink Marketing

An Interview with Rosemary Remacle: Is Technology Changing the Face of Startup Marketing?

 

We continue our series on marketing evolution with a conversation with Rosemary Remacle, principal of Market Focus and past venture partner at Sevin Rosen Funds. Join us to learn what has changed and surprisingly, what still remains the same when it comes to marketing at startups and early stage companies.


Rosemary, fill us in on the trends in the venture capital (VC) market over the last couple of years.
The biggest change is that there just haven’t been very many IPOs lately. For the first time in recent history, there were no IPOs in Q2 2008, which means that the exit strategies for startups are a little limited. At the same time, the expected-time-to-money has gone from five years to seven years and VCs have to wait longer for their returns. As a result, there are a lot more mergers and acquisition than IPOs. 

In terms of areas of investment, some of the traditional IT companies are still getting money but the really hot areas are Web 2.0 and green applications. Green is a huge category with lots of subcategories of innovation and some of the big VC houses have even started a separate green fund. 

Are Web 2.0 applications driving the Internet these days and why is it such a hot investment option?
Actually, the Internet is driving Web 2.0 rather than the other way around. There are so many factors for this: universal broadband availability at reasonable prices, enhanced technical capabilities associated with the Internet, and a higher level of comfort with computers and putting data on somebody else’s servers by small to medium sized businesses. It is also driven in part by the new generation of people entering the business world – they have grown up with the Internet, expect work to be done only on computers, and all applications to be delivered over the Internet. 

It is drawing the attention of all companies, big and small. Big software giants like Microsoft are keenly watching these little business applications that offer cost-effective alternatives to their expensive, enterprise-wide offerings. They too are beginning to offer their own Web 2.0 applications targeted at small businesses. Customers like it because they can buy an application a bit at a time with immediate results. Today, these are mostly used by early adopters but there will be wide scale adoption in the next couple of years. 

Social networking applications are another high impact area. Most companies haven’t figured out exactly how to make money off of them yet, but it’s certainly influencing how we live and communicate on a day-to-day basis.
  
Do these technology innovations really change marketing in startups?
Yes and this really goes back to basic relationship marketing. In the past, all customer information was captured manually, put in a manila file folder, and then eventually they were stored online, so that marketers and salespeople could build a database and form a basis for closer relationships with them.

Technology has changed that forever. Any marketer that isn’t taking advantage of technology and the power of the Internet will be left behind. Startups need to build a company culture around building customer and partner information databases. Marketing then has to figure out how to leverage that information, generate better quality leads, create tighter relationships, and design more effective marketing campaigns.

One of my first mandates to startup companies is that they must capture customer information and build a corporate database from day one. This is not just persons who’ve signed a PO but others in the customer organization, potential customers and partners. 

How do the large companies score on relationship marketing?
Not too well. One of my pet peeves is the number of times one has to repeat information when calling a credit card company, public utility or airline customer service. Companies say it’s for security purposes but it is unnecessary with today’s technology - they just haven’t taken the time to do it.  

This is a huge opportunity for companies to rethink the customer experience from the user’s point of view. American Airlines’ frequent flyers program is a good example of great personalized service. Given the tough fiscal environment in which airlines operate, AA knows that its frequent flyers are its most profitable passengers, and, these are the customers that it wants to keep happy the most. They use the Internet and AA.com to maintain a dialogue with those loyal customers. 

Such large scale relationship marketing is possible with a systematic approach that allows marketing to figure out how to take the data from multiple of back office systems, turn it into marketing programs, and use the Internet, social networking, etc. to either deliver products or to build relationships with its customers and partners.

How should technology companies and B2B companies run their marketing in today’s Internet environment and social networking capabilities?
The Internet has made it easy to access tons of data, reach people through easy survey tools, and gather consumer opinions through blogs. When there is a need for primary research, particularly in early markets with early products, we’ll still have serious, person to person discussions to get those really important answers – but blogs based upon leading edge technologies and innovation can also be major help in understanding early markets and customer segments.

A big change for all technology companies is that they have to also seriously consider end-user or consumer behavior. In the past, they focused just on B2B buyer behavior and the complicated buying decision process, but now they have added complexity of consumer behavior.

Another area is segmentation: many companies still don’t devote enough time, energy and importance to it. Again, it has become easier as there is a lot more data available behind decisions whether entering a new market, creative programs or Web marketing.

If you want to use a social networking site like Facebook as part of your marketing strategy, it must match your targeted segment’s demographics. Facebook is oriented to people, usually younger, who are really comfortable with technology. If your customers aren’t using Facebook already, developing a Facebook-centric program is unlikely to be useful. An email newsletter may be a better way to reach this constituency. At the end of the day, it just provides it’s another tactic to reach customers - you have to start with a customer and work backwards to the optimal marketing mix.

What’s the impact of marketing technology on tracking ROI and results?
The financial systems to track where the money was spent have always been in place but companies are now focusing on setting up fully efficient closed loop marketing and sales systems. A closed loop system tracks a customer relationship from start to close/loss of business, and even further, to how the business grows over time.  

As we all know, a buying decision is generally not made based on any one marketing promotion or customer experience with a company. Companies have to map potential marketing programs to the various situations where a buyer is exposed to the problem addressed by the product and then, the product itself. If everything works perfectly, the effort of mapping those activities and developing a closed loop marketing and sales system can provide insights into which marketing tools work best, generate the best leads, drive strong customer relationships, and uncover its most valuable customers.

What’s the multiplier effect of Internet + globalization on market adoption and product development?
Well, it’s kind of good news, bad news scenario. The good news is there is a much larger universe of customers to address and the Internet facilitates reaching them more quickly. The bad news is the critical need to focus and manage that opportunity with great care. A start up business, whether standalone or a division within a larger company, has to figure out which customer segments to pursue and in what sequence, and geography is only one aspect of this equation. If there truly is a large global potential customer segment, it is a matter of deciding the priority order of the segments.

In terms of innovation, something entirely new, think the I-Phone, starts off as a niche product in a particular market. As it matures and becomes a more broadly adopted product, it’ll be introduced in other markets once suitable modifications have been made. It does put more pressure on developers to be thoughtful about the sequence of customer adoption of their innovative product. A product should always be designed or defined to solve a customer problem.

Finally, marketing: a science or an art?
It’s both and it’s neither. Many marketing gurus have hidden behind the “art” thing for a long time but in reality, it’s not a mystery. Technology can help with data and analysis, but it takes experience and strategic thinking overlaid on the implementation to make marketing really work. In the end it is all about understanding how a given market works and your potential customer segments.

See the 2005 interview with Ms. Remacle.

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Rosemary Remacle is a principal at Market Focus (www.mktfocus.net) and leads consulting engagements focused on the development of strategies for technology products and services for clients in the US, Europe, and Asia.

Over the years, Rosemary has consulted with management teams in large global corporations such as Hitachi, National Semiconductor, Adobe, AMD, Sun Microsystems, IBM, SGI, Oracle, Toshiba and HP. Most recently, her consulting efforts have focused on developing positioning and market entry strategies and supporting plans for venture-backed companies such as Southampton Photonics, Fuego, Pharmquest, Neoforma, LightConnect, Innerwireless, BeVocal, NovusEdge, LightPointe, Virtutech, Gloo Labs, FusionOne, and Epicentric.

Prior to becoming a strategic marketing consultant, Rosemary held a variety of executive management positions with Memorex, Intel, Zilog, and PriceWaterhouseCoopers, and was a partner with Regis Mckenna, Inc. In addition to her MarketFocus consulting, Rosemary joined the venture capital firm, Sevin Rosen Funds, in 2000 as a Venture Partner to consult with the firm’s portfolio companies.

Rosemary is an author, speaker and guest lecturer at Stanford, Pepperdine, and the University of California at Berkeley. She serves on the advisory boards of venture backed startup companies and is on the Board of Directors of the Silicon Valley Association for Start-up Entrepreneurs. Rosemary earned a B.A. degree from Arizona State University and an M.A. from San Jose State University.

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Winter 2008