There are many ways to lead ranging from fear to example but I've found that one is more effective than any other. We've all been taught both in life and school that leading by example is the clear choice, probably because it is a permutation of the Golden Rule.
Those who do lead by example are likely to gain the respect of team members who share similar values, most frequently of hard work, ethics, dedication, etc. What about those team members who do not necessarily value the same things? What if the example you set is not so obviously observed? Much of a manager's job is done behind closed doors or after hours so it becomes difficult for those examples to be demonstrated.
So what leadership method could be better? Leading by serving. If a leader adopts this mantra of leadership through servitude it encompasses the positive aspects of the aforementioned example but also implies a mindset that will resonate with all team members. No matter what values and viewpoints a team member might have, s/he will always appreciate a leader that consistently has his/her best interests in mind, always seeks to provide assistance or advice, and always puts the needs of the team first.
I do not mean to imply that a leader should cater to every individual's demands. There are many times that a leader has to act in a way that is similar to "tough love" in order to mentor, advise and guide both the employee and the team to long-term success.
To illustrate this point, I'll share a story. At one point I had to deal with a subordinate (we'll call him Joe) who was feuding with several other employees. It started out as playful banter but eventually caused tension to form between Joe and several employees from other departments. During this escalation, there were several accusations made against Joe for fairly insignificant yet still inappropriate actions.
Part of servitude is loyalty and as an expression of this my first action upon hearing of these accusations was to pull Joe aside and ask, "What really happened?" This way he knew that my first commitment was to him keeping him from becoming defensive. We were able to discuss his view of the situation and what actions had caused the escalation and misunderstandings. I was then able to offer suggestions for behavior modifications that might lead him to better outcomes in the future and he was very receptive. My suggestions were taken to heart because I immediately saw him working to modify his behaviors.
I believe that the servitude mentality is also the fastest way to become what the book "Good to Great" defines as a Level 5 Leader. By viewing your leadership position as one of serving your team, the only logical path is to assemble the most competent individuals whose individual skill sets are likely superior to your own. Since they will know that your loyalty is to the team, not yourself, they will return that sentiment and you're team will be highly effective.
Ultimately this concept of leading by serving is only mildly different than leading by example but I believe the nuances create significantly different outcomes. Ultimately you'll find that leading with a mentality of serving the needs of your team is rewarding and effective because it helps to build a trusting and collaborative team dynamic.
Saturday, November 1, 2008
Friday, March 28, 2008
No Profit in Pay Per Click
There are now many companies offering to setup and manage pay-per-click (PPC) campaigns for other businesses. Some of these providers are even funded by venture capital and headed by lots of smart people. In fact, I used to work for one of these such firms and watched them burn more than $5,000,000 trying to create a PPC campaign management business. That money bought them about 2,200 customers, of which less than 200 were retained. Two questions abound from this:
1. Why were they not able to keep more than just 10% of the customers?
2. Is this company unique, or are other, similar companies in just as poor shape?
A Little Background:
These companies are all trying to setup and manage PPC campaigns such as Google's Adwords and Yahoo!'s Search Marketing on behalf of small, local businesses. The idea is that they can be experts in search engine marketing (SEM) and gain some economies of scale to be able to deliver better value to the client than the client get for him/herself.
The Problem:
On the surface it seems like the perfect marriage of two buzz words, "local search" and "pay per click". The problem is in the value proposition to the business owner. With two hours of time from the business owner's teenager, most small businesses would have no problem setting up an Adwords campaign. Of course it will not perform as well as a professionally designed campaign, but you have to look at the incremental value, which is probably around 50% or less. When you start adding in a 25%-50% markup on the click costs, outsourcing this becomes cost prohibitive very quickly, especially when you are talking about hundreds, or even thousands of clicks per month when only 1%-2% of them convert into sales.
The model that many of the companies are using is basically the same. They select some keywords, create a 1 page landing site, and then drive paid traffic to it. Some record the calls, many provide detailed reports to prove how well the program is or is not working and then bill the customer for as many clicks as they can generate. This produces widely varying invoices at the end of each month, and can end up costing the small business hundreds of dollars per converted customer.
It is also very important to realize that the goals of the PPC provider are not necessarily the goals of the advertiser. The advertiser is looking for more customers, but the PPC provider doesn't typically get paid on the volume of customers sent, but rather on the volume of visitors sent. The metrics typically used to measure success of a PPC campaign are things like Click-Through-Rate (CTR) which measures the ratio of impressions (number of times the ad is shown) to clicks (number of times the ad was clicked). That has very little to do with the rate at which those clicks turn into customers, and that's where the value proposition degrades because the business owner doesn't need visitors, s/he needs customers.
Even though clicks can be a path to new customers, by themselves they are useless to a small business and are expensive to buy. If you don't believe me, ask your friendly neighborhood plumber how much value he places on a click, or a visit to his site, and he'll surely say zero. But a competitive word like "plumber" will cost you more than $1/click in most cases. Multiply that by even a modest 200 clicks per month, and the guy just paid $200 and probably only got a 1% conversion rate!
Solutions?:
What's the answer then? Does PPC not work at all? My personal experience of working for one of these PPC campaign management companies (the one that blew $5 million) taught me a few things. For ease of reference, let's call them "Leads Team". Leads Team showed that across all their customers, the small business could expect to spend a total of about $65 per call generated. Of those calls, probably only about 1 in 5 (on a good day) were motivated buyers. Of those motivated buyers, let's just say the business closed 2. That means that of the $325 spent to ring the phone, only 2 sales were generated. In order for that program to make any sense at all, each job obtained has to make at least $165 in profit...which can be a tall order. You might be thinking that Leads Team was simply incompetant, which may be true, but you should also know that they outsourced the campaign management to another, more experienced firm that handles many other company's campaigns.
So if PPC doesn't work, then why are VC's dumping millions into companies doing it? Think back about 10 years and you'll remember this is not the first time VC's pumped money into hopeless ventures. PPC DOES work! It's this particular model that is hopelessly flawed. Putting all your eggs in the PPC basket is ill-advised but it does have a place in a well laid out Internet marketing plan and there are companies out there with better, more effective approaches.
The way Prospect Genius structures its offering is quite different, and in my opinion will work much better for both the vendor and the client. By using a more substantial microsite, rather than a landing page, they can leverage the power of SEO and supplement it with PPC. That allows the business to pay only for a few, highly valuable keywords, and do the rest of the heavy lifting with the SEO.
Service Magic on the other hand, takes another approach that also seems to work. They do not charge for clicks at all, but instead charge only for the call. They SEO their own directory heavily, which allows their customers to be found in search engines. Once a customer places an inquiry, they then deliver that lead via email to at least 3 advertisers in their directory, who then compete with each other to woo the customer.
Conclusion:
If you are looking to start a business offering PPC services to other businesses, you'd better have an extremely unique way of doing it. Right now the only people making money at it is Google and Yahoo! and that's because the VC money, and all the dollars spent on PPC goes directly to those two companies. Until they start offering reseller pricing to companies like Leads Team, there will not be sufficient margin to provide value to the customer and earn a profit at the same time.
1. Why were they not able to keep more than just 10% of the customers?
2. Is this company unique, or are other, similar companies in just as poor shape?
A Little Background:
These companies are all trying to setup and manage PPC campaigns such as Google's Adwords and Yahoo!'s Search Marketing on behalf of small, local businesses. The idea is that they can be experts in search engine marketing (SEM) and gain some economies of scale to be able to deliver better value to the client than the client get for him/herself.
The Problem:
On the surface it seems like the perfect marriage of two buzz words, "local search" and "pay per click". The problem is in the value proposition to the business owner. With two hours of time from the business owner's teenager, most small businesses would have no problem setting up an Adwords campaign. Of course it will not perform as well as a professionally designed campaign, but you have to look at the incremental value, which is probably around 50% or less. When you start adding in a 25%-50% markup on the click costs, outsourcing this becomes cost prohibitive very quickly, especially when you are talking about hundreds, or even thousands of clicks per month when only 1%-2% of them convert into sales.
The model that many of the companies are using is basically the same. They select some keywords, create a 1 page landing site, and then drive paid traffic to it. Some record the calls, many provide detailed reports to prove how well the program is or is not working and then bill the customer for as many clicks as they can generate. This produces widely varying invoices at the end of each month, and can end up costing the small business hundreds of dollars per converted customer.
It is also very important to realize that the goals of the PPC provider are not necessarily the goals of the advertiser. The advertiser is looking for more customers, but the PPC provider doesn't typically get paid on the volume of customers sent, but rather on the volume of visitors sent. The metrics typically used to measure success of a PPC campaign are things like Click-Through-Rate (CTR) which measures the ratio of impressions (number of times the ad is shown) to clicks (number of times the ad was clicked). That has very little to do with the rate at which those clicks turn into customers, and that's where the value proposition degrades because the business owner doesn't need visitors, s/he needs customers.
Even though clicks can be a path to new customers, by themselves they are useless to a small business and are expensive to buy. If you don't believe me, ask your friendly neighborhood plumber how much value he places on a click, or a visit to his site, and he'll surely say zero. But a competitive word like "plumber" will cost you more than $1/click in most cases. Multiply that by even a modest 200 clicks per month, and the guy just paid $200 and probably only got a 1% conversion rate!
Solutions?:
What's the answer then? Does PPC not work at all? My personal experience of working for one of these PPC campaign management companies (the one that blew $5 million) taught me a few things. For ease of reference, let's call them "Leads Team". Leads Team showed that across all their customers, the small business could expect to spend a total of about $65 per call generated. Of those calls, probably only about 1 in 5 (on a good day) were motivated buyers. Of those motivated buyers, let's just say the business closed 2. That means that of the $325 spent to ring the phone, only 2 sales were generated. In order for that program to make any sense at all, each job obtained has to make at least $165 in profit...which can be a tall order. You might be thinking that Leads Team was simply incompetant, which may be true, but you should also know that they outsourced the campaign management to another, more experienced firm that handles many other company's campaigns.
So if PPC doesn't work, then why are VC's dumping millions into companies doing it? Think back about 10 years and you'll remember this is not the first time VC's pumped money into hopeless ventures. PPC DOES work! It's this particular model that is hopelessly flawed. Putting all your eggs in the PPC basket is ill-advised but it does have a place in a well laid out Internet marketing plan and there are companies out there with better, more effective approaches.
The way Prospect Genius structures its offering is quite different, and in my opinion will work much better for both the vendor and the client. By using a more substantial microsite, rather than a landing page, they can leverage the power of SEO and supplement it with PPC. That allows the business to pay only for a few, highly valuable keywords, and do the rest of the heavy lifting with the SEO.
Service Magic on the other hand, takes another approach that also seems to work. They do not charge for clicks at all, but instead charge only for the call. They SEO their own directory heavily, which allows their customers to be found in search engines. Once a customer places an inquiry, they then deliver that lead via email to at least 3 advertisers in their directory, who then compete with each other to woo the customer.
Conclusion:
If you are looking to start a business offering PPC services to other businesses, you'd better have an extremely unique way of doing it. Right now the only people making money at it is Google and Yahoo! and that's because the VC money, and all the dollars spent on PPC goes directly to those two companies. Until they start offering reseller pricing to companies like Leads Team, there will not be sufficient margin to provide value to the customer and earn a profit at the same time.
Wednesday, January 9, 2008
Embrace Technology or Die!
When I look at the situation the RIAA has created for itself, I see one glaring, and soon to be fatal mistake. The RIAA zigged when i-Tunes zagged and that difference is why i-Tunes brings in massive amounts of profit when all other forms of music sales are going broke.
The "zig" that the RIAA made was a fundamental decision to resist technology. Admittedly, it is the same mistake that I started to make in my hesitation to get into the blogging world. At first, I saw it as a silly way to pass time and a great way to beg for identity theft. In much the same way, the RIAA has looked at peer to peer networks and digital music as a great way to steal music and nothing more.
I was shoved into an epiphany of sorts by a former colleague of mine when his blog post suggested that a digital footprint could in fact be used as an asset for things like college admission. This got me thinking about all the positive ways to utilize these new technologies, and ultimately lead to this blog's creation.
Unfortunately, the RIAA has no such former colleague, and as such is digging it's grave. The market clearly doesn't want to buy CD's any more. We demand much more convenience than before, and more importantly, easier access to our music and videos than ever before. CDs are now seen as cumbersome relics of an era foregone, but the RIAA clings tightly to it regardless.
Before the RIAA began to sue its customers (another HUGE mistake), they should have looked more objectively at the data surrounding music and file-sharing. If they had put their biases aside, they would have realized that file sharing actually INCREASED the volume of CD sales, largely attributed to the "try before you buy" scenario it presented. This singular piece of information should have forced them to find a way to embrace this new technology, rather than fear it.
It is amazing to me that the industry insiders missed such a golden opportunity. They has all the knowledge, power, and resources available long before Apple ever thought of i-Tunes. They could have put their heads together and created at least some viable alternatives to the i-Tunes model, but instead the took the opposite approach and tried to stop the adoption and usage of this technology. As we're seeing now, that is going to be their undoing as they spiral ever downward into oblivion as i-Tunes continues to perform very, very well.
The "zig" that the RIAA made was a fundamental decision to resist technology. Admittedly, it is the same mistake that I started to make in my hesitation to get into the blogging world. At first, I saw it as a silly way to pass time and a great way to beg for identity theft. In much the same way, the RIAA has looked at peer to peer networks and digital music as a great way to steal music and nothing more.
I was shoved into an epiphany of sorts by a former colleague of mine when his blog post suggested that a digital footprint could in fact be used as an asset for things like college admission. This got me thinking about all the positive ways to utilize these new technologies, and ultimately lead to this blog's creation.
Unfortunately, the RIAA has no such former colleague, and as such is digging it's grave. The market clearly doesn't want to buy CD's any more. We demand much more convenience than before, and more importantly, easier access to our music and videos than ever before. CDs are now seen as cumbersome relics of an era foregone, but the RIAA clings tightly to it regardless.
Before the RIAA began to sue its customers (another HUGE mistake), they should have looked more objectively at the data surrounding music and file-sharing. If they had put their biases aside, they would have realized that file sharing actually INCREASED the volume of CD sales, largely attributed to the "try before you buy" scenario it presented. This singular piece of information should have forced them to find a way to embrace this new technology, rather than fear it.
It is amazing to me that the industry insiders missed such a golden opportunity. They has all the knowledge, power, and resources available long before Apple ever thought of i-Tunes. They could have put their heads together and created at least some viable alternatives to the i-Tunes model, but instead the took the opposite approach and tried to stop the adoption and usage of this technology. As we're seeing now, that is going to be their undoing as they spiral ever downward into oblivion as i-Tunes continues to perform very, very well.
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