This market is soooo crazy.  Right now company stocks are not being priced by valuations but rather relative to each other, as in who can lose money the longest?  This is what’s going on in airlines and it’s especially what’s going on in autos.  Sadly, there’s some of that going on in techland too.  Companies are being evaluated on how much cash they have, and on that basis Intel, for instance, wins.  Again, this is a relative thing… they look relatively good.  Relative is a funny word, as in when you stop hitting yourself over he head with a hammer, it feels relatively good.

A couple posts back, I mentioned that my wife had gotten us into watching America’s Cup sailboat racing on TV.  At the time this was on a channel/network  named “Outdoor Life Network” which was mostly about fishing and hunting, neither of which we do.  But their handling of a sport that is very hard to translate to TV was amazing.  Somehow they had hooked into a computer program that could show, in real time, the two boats, their courses, the placement of the buoys that marked the turns, the wind direction and speed, and conjure up these fascinating vector displays showing who was actually ahead despite appearances.  It was amazing.  Now my wife was hooked because every morning in her hotel in New Zealand, she’d watch the boats head out for that day’s race, and was now extending the experience via TV back in Silicon Valley.  For me, however, my first introduction was the TV coverage.

The first thing I noticed was that sailboat racing at this level is something of a hit or miss affair.  If the wind was too weak, the race was called off.  Same thing if it was too strong.  As a result, at least half of the days we turned the TV on to watch the race, it was called off.  Now at our house, these races came on right around knock off working time… right in that transition period my wife thinks of as a glass of good wine and I think of as a vodka martini  (Belvedere straight up with a twist, please).  As a result, after the race failed to appear on the screen, we normally didn’t bother to change channels… it kind of ran on in the background… one of those big-screen high def things talking to itself with no one even nearby.  That’s really how we discovered bull riding.  When the boat races were called off, Outdoor Life Network ran bull riding instead.

The first thing that caught our attention were the wrecks.  That’s what they’re called — wrecks.  A typical wreck happens when a bull throws the rider into what would be the second story and he comes down on his head.  Sometimes the bull then rakes him over a bit after he’s on the ground.  Our mouths dropped open.  Now we ride and show horses, and as anyone around horses knows, they buck.  But not like this.  These bulls are 2,000 lbs of muscle and when they throw the rider he sails… I wasn’t kidding about the second story.  I’ve never seen bucking like this.  The riders turned out to be young… 18 and up… an old timer was anyone in their 30’s, and I don’t remember seeing anyone past 40.  Most of them had broken so many bones they had lost track.  But they got back on and kept riding, frequently wearing casts.  We sat down and had another drink… stronger.  Couldn’t believe our eyes.

The events came on weekly and after three or four we had begun recognizing the kids… and a couple weeks after that we knew all the bulls too.  The deal was to ride the bull for 8 seconds… and then get scored on how much style you showed.  The interesting part was the bull got scored too.  My favorite bull was a small one called BlueBerry Wine who could toss anyone… the announcers would say, “… here comes so and so who’s going to ride BlueBerry Wine,” and we’d shake our heads and say, “He’s NOT going to ride BlueBerry Wine.”  And they never did.  Total score for any ride was the combination of rider and bull’s scores.  At the end of the year, a champion rider was declared, and so was a champion bull!  I couldn’t get over the punishment these kids were taking… and then I found out why.  They were riding for a million dollars.  These were basically all farm kids, half of them from Mexico and Brazil, but at the end of the year the champion got a check for a million dollars… not to mention all the little 10 and 20 thousand dollar checks along the way.  This was serious money!

PBR, Profession Bull Riders, was started in 1992 when 20 of these “kids” each put up $1,000 to start a professional bull riding tour.  Their goal was to become the NASCAR of the rodeo circuit.  I’m not a fan of NASCAR — my wife and I are Formula One addicts — but you have to admire the way NASCAR turned a bunch of unorganized little stock car events into a gigantic business.  Rodeos are a bit like that… the stock car events I mean.  PBR set out to turn it into a serious business by focusing on the single event that was the biggest, hardest, highest-jumping, most thrilling part of the rodeo — the bull riding.  They created a tour of events and worked out a point system that ultimately determined a champion.  Today, it’s over 100 events on four different tours, that over 16 million people watch or attend (and that was back in 2004).  Advertisers came… Super-8 Hotels (8 second rides… get it?)… Ford… all sorts of companies lined up to endorse riders and advertise.  People began to breed bulls just for the PBR circuit just like thoroughbred horses. All the major cities began to hold PBR events, and last year PBR began holding them in Mexico and Brazil too.  One reality TV show was based on PBR with the participants learning to ride bulls with the finale being a ride in one of the real events.

PBR became so popular that it changed the network… the original hunting and fishing network, Outdoor Life, changed its name to VS (Versus) to pick up on the contest between man and animal.  Las Vegas now hosts the championship — the final event that settles the million dollar question — and if you don’t have your tickets for Mandalay Bay six months in advance, forget it.  Oh, and those 20 kids that put up $1,000 each… when PBR was sold to a large company, they each reportedly received $4.7 million.

Now this is serious marketing.  At each step, PBR understood how to make the attraction even bigger… how to turn a weekend rodeo into a gigantic business… how to attract advertisers and endorsements… and how to make the thing work on TV.  They did something I always advise service companies to do… turn their service into a product.  Give it a name (Blueberry Wine is already taken), and put a price on it.  Every company regardless of the product or service should have a price list.  Potential customers are always reassured when they see a list of “products” with prices on them — it implies you sold a few before.  The real test is can you do a datasheet on it?  Think about it… could you do a datasheet for a bullriding event.  I haven’t seen it but I can pretty much guarantee PBR has done it… and they send them to all the potential advertisers.  Find a way to turn your “thing” into a product and put a price on it… then you can treat the special versions by just having price adders for the various features and addons.  PBR did that by providing a product to their cvonsumers — the people that came to the events and watched them on TV.  That product constisted of a consistent scoring system backed up with knowledgeable and colorful commentators, lots of instant replays, a button the rider could push (and pay a $500 fee) to get the judges to look again if he thought they had hit the 8-second buzzer early, and lots of quick interviews after the big rides and background stories on each of the riders.  That’s a complete product.  They had a second product they delivered to the advertisers… millions and millions of fans who tended to buy Ford trucks among other things.  The point is, these people understood how to take the enterprise out and ride it hard, always moving up to the next step when the time was right. Never seen it?  Give it a try, it’s addictive.

That year at Christmas, my wife gave me a little stuffed copy of BlueBerry Wine (did I mention PBR has merchandise?) and he still stands proudly in the wine bar along with the bust of Voltaire… great conversation piece.  And after watching a couple of seasons of bull riding, my own skills on horseback got better… well more relaxed anyway.  I’ll never forget how the 2-time champion Chris Shivers, finding himself on a less-than incredible bull, started selling to the judges.  Whipping his white stetson off and swatting the bull on the butt with it and then waving it over his head to the crowd as the bull jumped for the sky, Chris sold the ride.  It was like something out of the movies.  Now in my case, taking horses into the show ring to warm them up frequently starts with the horse bucking under you… they’re a bit nervous and that’s how they show it… nothing personal against you but let’s buck some.  That’s not my favorite thing.  It’s way down my list from Italian food, for instance.  But honestly, if you don’t let it stress you out and you stay focused, you won’t get dumped and it only lasts a few seconds.  But horses can not buck like those bulls on PBR… not even close.  Hard to take it that seriously after watching the pros ride those bulls.  So when, in the practice ring at my last show, my horse began to rodeo buck, I just let him do it… let him buck across the arena and as he got to the stands, pulled him over to the side and put him into a nice trot.  And as my eyes met the spectators sitting in those stands right in front of me, I said, “wahoo”… as in… big deal.  Jeeeez, if I had only had a serious hat.  WAAHOOOOOOO.

Think of this as part 2 of my last post… on using an ROI based value proposition in tough times.  OK, I admit it… I thought of this AFTER the last post.  Here’s another way to look at the situation.

You know the story about the bear and the two hikers? You probably do, but to be safe I’ll repeat it.  Two hikers in the woods encounter a bear who immediately gives chase to them.  After it becomes apparent that the bear is not to be dissuaded, one of the hikers stops and begins putting on his running shoes.  His buddy stops alongside and remarks, “what are you doing that for… neither of us can outrun that bear.”  And, tying up his running shoes, the first replies, “I don’t have to beat the bear… I just have to beat you!”

Selling stuff in normal times is like selling to that bear.  The bear already was in the buying mood… he was fantasizing about hiker steak.  The only question was which he going to catch.  Now change the situation.  You come home to your family and sit down to eat dinner.  Tom, the old tomcat, has just finished a big bowl of tunafish, so he’s going to leave you alone and not be a pest.  Then as one of the kids runs in from outside, the front door is flung open for a second… just long enough for Tom to shoot through and out.  You know from past experience that he’s going to be gone for a few days and as a result, your life is going to be living hell for awhile.

The kids run out after him, and Tom, sensing capture, elects to shoot up the neighbor’s tree.  You stand beneath it looking up while your wife pleads for you to do something, and your kids scream for you to do something.  Living hell.

Only one thing to do.  “Bring me the tunafish can,” you command.  But it doesn’t work.  For an hour you stand under the tree waving the can around hoping the fumes waft up into the tree to Tom.  But the problem is, Tom isn’t hungry.  He’s not buying… in this case cause he had just eaten, and from where he is the situation on the ground is looking very strange…even threatening.

Good times and bad times.  In good times, you can sell to bears just by beating your competiton.  There was no need to convince the bear he was hungry… hell, all the buy signals were in.  The only question was which “product” he would chose.  But in bad times, you can’t sell to cats by just claiming you have the best tunafish in town.  You have to find other motivators, and in fact, you have to reestablish their need.  That’s why the ROI pitch works… the product pays for itself in a short period of time making it essentially free and after that it’s saving the customer money every day.  In the case of Tom, tunafish doesn’t work, but I bet that lady cat he so obviously admires would do the trick.  Just wave her around under the tree and I bet Tom will buy… err, come down.

A few years ago my wife returned from a working trip to New Zeland and informed me that we had to turn the TV to one of those little niche satelite channels so she could watch her new love, America’s Cup Racing.  She got me hooked too.  The scenes of these incredible racing sailboats fighting for gains measured in inches was fascinating.  We began to follow the races and soon had picked favorites.  It all brought back a memory of a day many years ago when I walked into an acquaintence’s office who happened to be an avid racer himself.  He had a poster nicely framed of one of these boats, going all out and leaning at what looked like a life-threatening angle… it was all waves and wind and action and you could almost smell the salt air.  It was captioned… “Winning is not a matter of life and death… it’s more important than that.”

Tech companies in good times and bad times use what’s called the value proposition to explain their products… what does their product do for the customer?  What value does it bring?  Does it save time or money or bring in new revenue streams?  Exactly what does it do for the customer that is so compelling the customers will buy it?  This is sometimes explained to newbie marketing types as making the pitch in terms of customer benefits instead of features.  A chip may use 100mA less current, but that’s a feature… the benefit to the customer is that it’s cheaper to run because it uses less power and generates less heat. Customers buy benefits… you explain those benefits by pointing to the features, but you always start with the benefits.

This example is also a case of lazy thinking.  Uses less power than what???  Why it uses less power than our competitor of course… or less power than the last generation… or less power than a competing approach.  In reasonable times, this works, but we should do better.  You see there is another competitor in the room — one we frequently don’t acknowledge.  That competitor is named, “Do Nothing.”  When product marketing people — and it is always product marketing that formulates the value proposition — in terms of less power, they have made the assumption that the customer is driven to do something… ie, save costs by using smaller power supplies and smaller fans.  The reason this works is that in normal times, customers are always thinking in terms of the next generation of their product and how they can improve it.

But when times are tough, really tough, a lot of times that assumption is wrong.  The customer may have reluctantly decided to NOT bring out a new generation at this time.  Or if you’re selling internet routers, in the past customers were always interested in buying “up”… in increasing their internet capacity.  But when times are tough, their web traffic may be down and they don’t need to do anything right now.  In bad times, you need a stronger value proposition that does NOT start with the assumption the customer is going to buy something, and that all you have to do is beat the other guys.  In tough times, your value proposition has to begin with why they should do something now, and then move onto why your solution is the best.

These days, the best value propositions are ROI based.  “The payback on this unit is only 9 months… after that you’re getting a net savings.”  Even stronger, though I hate having to use it, “this unit requires fewer people to operate”… you get the idea.

Think about what’s going on at the customer.  Internally, no one is sending messages around saying, “cancel all projects… we’re going to layoff half our engineers.”  No, what happens is almost nothing.  The messages that are sent around are along the lines of, “we’re going through tough times and we all have to work harder,” or something to that effect.  When your sales person goes in to pitch your new widget, they don’t get turned down, they get delayed… no decisions are being made… no one knows if the project is going to go ahead because parts of it are still running (the parts that either don’t cost anything to finish or are too far committed to pull back)… the parts that actually commit the company to any serious expenditure somehow can’t get out of the approval cycle.  They’re not rejected, they’re just… um nothing.

That’s why value propositions that are expressed in terms of ROI and short payback get attention.  Hard to do? Sure.  Are all products suitable for this approach? Nope.  But believe me, these days, the better you get at approaching the value proposition this way, the more sales you’ll make.