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.

We all know what marketing strategies are.  It will probably come as a surprise that I don’t use the Strategic Marketing Group to do those strategies.  For one thing, as head of marketing, that’s my job!  For that matter, calling this a “group” is usually a misnomer because it frequently consists of just one person.  It’s easy to consider these points and conclude there’s no reason for such a “group,” yet I’ve never seen a serious company that did not have one or two people doing this function, regardless of what they were called.  Let me explain.

First, although I don’t have them formulating strategies, they are kept busy doing strategic activities, hence the name.  For instance, the way I do the annual marketing plan is to set some basic guidelines, and then have each of the six marketing groups write their section.  I use the Strategic Marketing “group” to manage that process, oversee the drafts, the schedules, and get the thing assembled for review.

I also use this group to keep track of the various industry associations and conferences.  Several of these may look to our company for data about our shipments that will be merged into industry reports that the members can then use to calculate share-of-market numbers.  It’s important to me that this data be calculated in a consistent way, because I don’t want industry analysts taking off on us due to some misreported data.  By the same token, the research services deliver volumes of expensive reports, and I want to be sure these are kept in one place and not lost.  In this case, strategic marketing provides data to the individual product marketing managers and acts as librarians to people “checking out” the reports.

I actually go a step further and charge Strategic Marketing with massaging the data from the research services, arriving at an “official” company model, and providing that to the product managers.  Why do this?  Because the services almost never present data in the form you really need… they group some products together with others and you really need them broken out.  Sometimes they define product categories in ways that don’t fit the company product map well.  In any event, I want one person to work through that data, call the research service and test their assumptions and chat with them about what went into the data, and then come up with a model that makes sense for us.  And there are two things that are critical if you go down this path.  First, your approach has to be defensible.  Second, it has to be used consistently from year to year.  The only way you can get this level of attention and consistency is by having a disinterested group charged with doing it — Strategic Marketing.

I have also used strategic marketing people to make high-level contacts with high-profile customers.  Many times people carrying sales titles find it hard to penetrate these customers at higher-management levels.  But something about the title, Strategic Marketing Manager, cuts through that resistance and can create an informal relationship between the companies at the highest levels… a relationship that, over time, will be turned into a customer / sales relationship.  It’s especially true in relationships that are more of an alliance than a sales relationship.  In the semiconductor industry, companies frequently agree to “second-source” each others’ products.  It would be inconceivable to have that type of an alliance explored by sales people, but someone carrying a strategic marketing title is perfectly situated in the organization to do it.  They have both the credibility in the company to get action taken and, at the same time, are not caught up in the details of individual product pricing or quoting.  They have just the right amount of power and distance.

Finally, I’ve found over the years that I frequently end up inheriting a senior manager whose experience and judgement I respect.  But they no longer have the energy or the desire to work the hours it takes to run a product line as a Product Marketing Manager.  Keeping them on board as the Strategic Marketing Manager lets me have continual access to their experience and advice, and gives the company a valuable channel for working industry associations and strategic relationships with other companies.

One of the best guys I’ve ever had in this role was Jerry GIbbs, the product marketing manager that hired me into the business back in the 70’s.  He worked for me as Strategic Marketing Manager at both Zilog and ZyMOS and did a spectacular job at it.  At Zilog he had a strategic group of about four people and even had a lab for prototyping little systems and checking out new market directions for us.  By using such an experienced manager like this, it gave the whole marketing department some real depth.

The term “sales channel” is used all the time, but what does it mean?  I think the easiest way to get your mind around the sales channel is to consider the functions it serves.  We’ve been describing the six functions that make up Big-M Marketing, but you can’t consider these in a vacuum because side by side with that Big-M Marketing Group is a sales channel, and the boundaries between the two can get fuzzy at times.  So let’s pause for a moment in our description of the marketing functions to describe the functions of the sales channel.

I like to break the sales channel into six basic functions.  Just like the six Big-M Marketing functions, you have to be sure your sales channel is doing all four of these.  But whereas in marketing, there is little or no overlap of the functions across marketing groups, in the case of the sales channel it is common to find the functions being repeated in two or more groups.  In this post, we’re not really going to describe those groups, but concentrate instead on the functions.

Simply put, the sales channel has to accomplish six things:

1. Find customers
2. Service those customers
3. Provide technical assistance
4. Provide credit to the customers
5. Deliver the goods
6. Administer the whole thing

Finding Customers

This may seem obvious but we like to explicitly make finding customers the first function to separate it from marketing, who by and large does not find customers. It is a common mistake in marketing to think they provide valuable sales leads to the sales force.  The truth is these “leads” are typically unqualified responses to an ad or press release — marketing tracks the numbers with great enthusiasm and mails them to the sales offices with notes like, “more hot sales leads.”  Sales immediately throws them out without even being opened.  Remember, the first job of the sales force is to find real customers — not to call on names from computer printouts supplied by marketing.

Servicing Customers

The process of interacting with customers is done in a well-rehearsed dance known by both sides.  Sales people get their parts “qualified’ with the customer… basically evaluated and found acceptable.  Then the customer requests a quotation… pricing for the quantities and delivery schedules needed.  The sales people provide that pricing, either quoting “book prices” or getting special pricing from marketing.  Assuming the order is granted and accepted, the customer may need shedule updates.  After delivery, there may be some defective units that have to go through a failure analysis to the customer’s satisfaction.  It goes on and on, but the sum total of all those mini-transactions make up what we call “servicing the customer.”

Providing Technical Assistance

There is a practical limit to how much information can be put on the company website.  At some point, customer engineers need some face-to-face time with an expert.  Filling this need are the company Field Application Engineers (FAE’s), assigned to the sales regions and chartered with making visits to customers to help them with their designs.  Good FAE’s are notoriously hard to recruit, and I’ve never known a good sales manager who wasn’t looking for one virtually all the time.  FAE’s on the company payroll only provide assistance for the company’s products, but distributors and even reps may also have FAE’s, though in these cases they cover multiple product lines and therefore are less knowledgeable about any one of them.  The quickest way to assess a sales channel is to just check the extent of the FAE coverage.  Channels with a full complement of FAE’s are powerful forces in the market and tough competitors.

Providing Credit and Payment Services

Whether the product is a software program or a million microprocessors, they have to be paid for.  For customer / supplier relationships that are ongoing, it benefits both sides to have credit terms extended to the customer.  Normally these are 30 day terms, perhaps with a 2% discount for payment within 10 days.  But sometimes credit terms may be extended over much longer periods in exchange for some sort of exclusivity agreement.  In any event, the extension of credit is a huge function in the sales channel, and one that carries all sorts of risks.  Whereas large customers may deal directly with the supplier and use the credit extended to them by that supplier, smaller customers that are unknown outside of their region may go through a distributor who provides the credit function.  In fact, this is one of the most important roles distributors play.

Delivery of the Goods

Shipping the parts to the customer… who does that?  Before you argue, “not sales,” keep in mind that carrying inventories and shipping to customers is one of the main roles of distributors.  Of course, the company itself must also ship directly to customers.  While this is not normally part of the sales group, it is definitely part of the sales channel.  Making sure customers can get your products in any quantity from one to a million is critical.  I’ve seen too many companies set up shipping systems with minimum ship quantities of 100 or more.  How is the customer expected to do their prototype system designs if they can’t buy parts in handfuls rather than cartons?

Administration of the Channel

Believe me, every sale carries a story, and that story has strong implications for the division of the commissions, hiring new people, expense reporting, and so on.  Marrying the story and trends of the sales in each individual sales region is a time-consuming task and one best left to specialists.  Virtually none of this directly impacts the bottom line, so there is no driving need to have the Finance Department track this information… in fact, unless they’ve got people dedicated to doing it, they don’t have the time.  As companies grow, they invariably hire administration people reporting to the head of sales.  They chase the monthly forecast through the various sales levels and make sure it gets done on time.  They track expenses in the various sales offices and help with things like leasing space for new offices, cars, and expense accounts.  They track the level of credit adjustments being given to the distributors.  And they track, manage, and report what are called commission splits — the division of a commission for a specific sale between the sales person, the FAE, and frequently sales people in other regions.

We will discuss these in detail in upcoming posts, but I wanted to describe them in an overview as we look at the marketing functions because of the way marketing and sales must dovetail.

This story actually starts with Consumer Reports.  Every year they pick Volvo as the car of the year and I just hate them for it… hate Volvo’s… hate Consumer Reports.  We live in Northern California.  That means no mosquitoes so we tend to leave the back doors wide open to let the breeze in and the dogs out.  Although we have no mosquitoes, we do have an occasional fly, and they invariably decide to join the action inside.  That’s what I use Consumer Reports for.  You can always spot the Consumer Reports on our coffee table from the fly guts embedded in the cover.

I first got upset with Consumer Reports when I read their stereo equipment reviews — my dislike goes back a looooong way.  They had disqualified my favorite Marantz receiver because a child equipped with a double-jointed 18″ finger could get it in the back of the chassis and touch a 120VAC point inside the box.  I threw the magazine at the dog, something he had gotten skilled at dodging.  Over time I realized that whenever they reviewed equipment I knew something about, I totally disagreed with their conclusions.  Why then, I asked, did I blindly accept their conclusions about dish washers, etc?

The last straw to me was the car issue.  They evaluated cars on the basis of repair reports from current owners, mileage, cost, etc.  The object, in their eyes, was to get the best value.  That was not what I was after.  Had I done the questionnaire, it would have looked something like this:

1. Is the car red?  - 10 points.
2. Is it Italian? - 20 points.
3. Is it a Ferrari? - 50 points.
4. How fast is it?  - 1 point for every mph over 150mph.
5. Does the engine sound like a tiger having it’s paw cut off? - 20 points.
6. Is it a Ferrari? - an additional 50 points.

Nowhere in my list do the words “repair record” or “mileage” appear.  How do they rank styling?  I want a car that supermodels like to be seen with.  How can they pick the Volvo?  MY REFRIGERATOR HAS MORE STYLE THAN A VOLVO!

OK, putting an end to this rant, even though I now feel much better for it, the point is knowing your customers.  Consumer Reports clearly know some of theirs, but not me.  Actually, I don’t want to be their customer, something I regularly point out to my wife who is in charge of this particular subscription.  I bet the people at Consumer Reports would be shocked to find that not everyone shares their values.  I have an image of a Ferrari pulling up in front of their building, while they evacuate everyone out the back door to be sure they’re not contaminated by its red, Italian style.

In the last post, we talked about how I moved the Zilog chip architects out of engineering and into marketing.  That certainly brought a big dose of respect.  These guys were big guns — maybe the biggest, baddest architects in the industry.  And they now worked out of marketing.  Another thing I did — tried might be a better term — was to have a monthly marketing party.  Each month we’d rent a banquet room at a nearby health club that just happened to have a pretty full-featured bar and restaurant, and marketing would host a party for the company.  People had gotten pretty depressed before we got there and I wanted to lighten things up a bit.  I told all my marketing people to identify an engineer, focus on them, extend a personal invitation to the party, then watch for them and more or less “host” them when they showed up.  It didn’t work.  Oh we all had a lot of fun, and it got to be an highly anticipated monthly event, but my people didn’t understand how to work an event like this in their favor.  Instead of bonding with the engineers, they spent their time huddled with each other in a way that reminded you of a Jr. High School dance.

In retrospect, what finally happened to gain the respect of the engineers should have been obvious.  It’s something so obvious I have never understood why product marketing people don’t do it routinely, but I rarely see it.  Here’s what happened.

We (Zilog) had been working on a new single-chip processor.  These are used as controllers for all sorts of things, and it’s a little known fact that they vastly outnumber the processors the public focuses on… the ones used in PC’s.  Intel single-chip processors had 64 bytes of RAM on the chip with 1,024 bytes of ROM for the program.  Zilog had gone well beyond this and had 128 bytes of RAM and 2048 bytes of ROM, along with many other features.  Now Zilog was working on a successor, and engineering had decided to keep the 128 bytes of RAM but increase the ROM size to 4096.

I was very skeptical.  128 bytes of RAM was not a very natural number.  Although people didn’t use the term “packet” in those days, they did send data in bursts over the serial links, but those bursts tended to use 256 bytes of data.  While 128 was certainly better than 64, it was not enough to conveniently handle those 256 byte packets.  I thought that, since engineering had no real customer feedback they had to guess about the features, and — might as well guess something that was easy to do — had chosen to double the ROM size (which was trivial to do) instead of doubling the RAM size which was a lot harder.  I pushed on this, and got no response from my own product marketing people.

“Look, go out and ASK people… do a survey… find out what they need.”

No reaction.

“Do a survey and find out how important that RAM size is.  Go back to your office and draft a survey questionnaire… bring it back to me when you’re done.”

They did.  It literally said, “How much RAM do you want?”

“Argggggh.  You can’t do a survey like that.  People will say they want a million bytes… that’s not an answer… that’s a fantasy.”

Look, I’m not a survey expert, but I’ve done enough to know a bit about them.  I’ve done enough to know that if you word the questions right, you can literally get any answer you want.  Being able to get any answer you want makes the survey meaningless.  We’re in the middle of a presidential race, and the surveys are flying left and right.  And the numbers are meaningless.  Let me give you an example.  Ask the question, “would you like total health care as part of your social security?” and 100% of the respondents will say yes.  Ask the question, “would you be willing to pay additional taxes to gain complete health care benefits?” and the result will be close to 100% yes.  Meaningless.  Now try my version of the question.  “Would you like total health care as part of your social security benefits?  Wait, before you answer, if you say yes, you’ll have your television reception cut off… no cable, satelite, or magic waves to rabbit ears…”  Health care in the left hand… Desperate Housewives in the right.  I believe, that a significant percentage of the public would opt for TV as opposed to health care.  Until you put a price on something, just asking if people want it, is meaningless.

I’ll give you a real-life example.  Intel had run a survey of people using semiconductor memory chips.  They kept adding to the survey questionnaire, using essay type questions, until it had reached four full pages.  Then, realizing that no one was going to fill that form out, they decided to add an incentive.  Anyone filling out the form would receive a free copy of their Memory Design Handbook.  When I joined Intel, the stack of survey forms — 1500 of them — was sitting in the corner of my office.  I skimmed through them.  People had literally written in careful answers to all of those questions, but no one at Intel had ever read them.  Because they were essay questions, they could not be tablulated by a clerk into a simple table of numbers… so no one looked at them.  One of the questions naively asked, “How much would you like to pay per bit of memory?”  Almost 1/3 of the respondents had carefully written in, “zero.”  Doh.

After a couple of false starts and a lot of prodding, I got the survey questionnaire I was looking for.  It was very simple.  There were about 10 features listed, including 256 bytes of RAM and another, 4096 bytes of ROM.  People were asked to just write numbers next to them to rank them in importance.  There were a few other questions, but that was the main thing.  We got back about 500 responses from a fairly small mailing.  Total cost in those days was about $1,000.

I was there in the meeting with engineering when my product marketing manager for that line spoke.  “We’ve surveyed the customers and with 500 people responding, over 70% of them want 256 bytes of RAM.  Only 5% want more ROM.”  He went on to list the other features that customers were looking for and how they ranked.  The meeting was devastating.  The chip was put on hold.  A few days later, engineering came back with a new schedule, one that now had the large RAM and no change in ROM.  They were happy.

What had happened here was that marketing had finally… finally done the most basic marketing function the company expects them to do.  They had talked to and understood the customers.  Here were the results.  No more “we think…” but hard numbers… real data… not a single voice was raised to dissent.  Engineering was happy because they no longer had to guess what people wanted… marketing was finally doing their job and telling them in a TIMELY and CREDIBLE way what the market was looking for.  Think about the millions of dollars saved or gained by that simple $1,000 expenditure.  Think of the impact a few numbers with percent signs had on the company.  That was the day engineering began to really respect marketing.

In this post, I’d like to make a couple of points.  First, titles don’t matter.  Although you’ll almost always find people with product marketing titles, you’ll rarely find them with tactical or technical marketing titles.  I really don’t care, nor should you.  What’s important is that the functions are getting done and that they’re assigned to specific people.  I want to be able to look at an org chart and know who is doing product, technical, and tactical marketing.  And I want to be able to point to people and have them tell me which of those functions they’re doing.  Technical marketing people typically carry titles like Product Marketing Engineer, but as long as they’re working the technical literature and issues, and answering customer technical questions, that’s all I care about.

The second point, and the real subject of this post, some functions can be spread across several places in the organization.  Now with one exception, I resist doing that because I want people to know they own their functions and take responsibility for them.  In the last post, I implied that I had “invented” technical marketing, and that is not strictly true.  When I got to Zilog, there were already engineers embedded in the Product Marketing triads doing the technical function.  What I came up with was the idea of having a separate group, this time actually called Technical Marketing, in addition to the tech marketing engineers in the triads.  How this came about is an interesting story.

Arriving at Zilog I found myself heading a combined marketing department for two divisions that totaled about 120 people!  The structure was very confused, and to be honest, it took awhile to work it out — the result is the six functions that make up the complete marketing function, what Mindpik calls Big-M Marketing.  But one of the shockers was finding that the major new products being developed were being done with no customer contact, and not even any marketing involvement.  The design engineering group had defined what they thought the next generation of products should be, but they had done it in a vacuum.  Now they were several years into a long design cycle on three major new product families.  To be fair, when I looked at what they had defined for those new products, I was impressed.  But walling this off from marketing and customers was just insane.

As I dug into the people in the engineering group finding out who did what, one key person kept popping up.  Dave, a soft-spoken Ph.D. from Carnegie Mellon, had done his doctoral work on cache memories… the key to all of the new microprocessor architectures across the industry.  He was responsible for one of the key new product families and was working a second, behind the scenes.  Doing a new processor literally meant writing a book — a design specification book that spelled out in excruciating detail how each instruction worked, the interplay between the registers, and even elaborate descriptions of the circuitry tying things together.  Dave had written that book for his family, and it now served as the design bible for the team of chip layout designers who were implementing the chip.

Perhaps one of the reasons that engineering did not work with marketing on the new product definition was that it was so complicated.  That book was several hundred pages long!  But the fact that these new products were being done totally in design engineering had an unintended consequence.  Engineering was ignoring marketing — worse, had no respect at all for them.  Truth be told, I was sypathetic with their view, because marketing had not been doing their job.  And getting them to do that job was my job.

There was no way that I could educate them (or cause them to become educated) in the technology to the level necessary to make real contributions to that new chip definition process.  So I did something that ultimately turned out to be better.  I moved the chip architects out of engineering and into marketing.  It was not a one-call sale.  I had that Carnegie-Mellon architect out to lunch, to dinner, to meeting after meeting while I worked that sale.  At first, he was incredulous.  My response was, “join marketing and I’ll make you a star!”  I wanted our chip architect to be out in front of customers, to be at the industry conferences presenting papers, to be available to the sales force, and to be responsible for actually getting the new chip to market.  In the end, I think that was the telling argument.  By joining marketing he would be able to continue to work his baby and make sure it was successful.  A lot better than just throwing it over the wall into marketing which was the original practice.

It worked spectacularly.  First, the company was shocked that Doctor Dave had left engineering to join marketing.  It obviously signaled a sea-change in the way the company was going to define products and take them to market.  Dave went on the road speaking at many of the industry conferences and traveling to the key customers.  I always knew that when the going got technical, I could just leave the room for a half-hour, and when I went back the customers would have come over to our side.  Having a tech-talk with Dave was such a pleasant experience you never noticed how he manuvered you onto his side of the issues.  I have no idea how many customers he turned around for us.  And he continued to be the architect, making himself available to the engineers at all times to answer their questions and sort through issues with them.

A few months later, the other key architect knocked on my door and came in to to ask if he could join the new group too.  Clearly marketing was where the action was!  We took him gladly and then added some staff help for them.  One of those additions was the best presenter and press contact I’ve ever known.  When we were done, every time a competitor announced a new product, the press would call Zilog Technical Marketing to get our reactions and we would get paragraphs of editorial coverage in those stories.

At this point, you should be asking how this Technical Marketing group related to the tech marketing people embedded in the triads.  My rationale for having a separate group was that the new products were not going into any of the existing triads.  When they actually got close to going to market, we would create brand-new triads for them.  Technical Marketing, the group of architects that had defined these new chips, would work the transfer of responsibility over an extended period of time to make sure nothing was dropped in the hand-off.  Zilog was always doing new chips, and many of these were straightforward extensions of the existing products.  Those were handled by the triad that ran the original products.  It was only the giant departure products that were handled by Technical Marketing.

It took more than just moving the key architects into marketing to get respect from engineering, but with those moves we were on our way.  I’ll talk about the other way we got their respect in the next post.  Oh, one more thing — we did make stars out of those Tech Marketing wizards.  There’s no point in having wizards if you hide them.  You have to give them star status to give them the credibility and impact you want.

So far we’ve talked about the Product Marketing function — the managers that drive the product line and worry about the gross profits, the forecasts, the product launches, the literature to support the line, and so forth.  And we’ve talked about the Tactical Marketing function — typically reporting to Product Marketing, that drives the day to day transactions, the quotes, the deals going down.  What remains is the third and last of what we call the marketing “line” functions — Technical Marketing.  Like Tactical Marketing, the technical marketing people typically report to Product Marketing.  That means that in a typical product marketing centric marketing department, each product line has the three functions arranged as a triad — Product Marketing (at the top), Tactical Marketing, and Technical Marketing.  The more product lines you have, the more of these marketing triads you’d have.

I came up with the idea of a separate Technical Marketing function at Zilog.  The problem was that the product marketing people were not technical enough to talk spec issues with customer engineers.  The tactical marketing people were even less so.  But in a chip company, for instance, there is a daily stream of technical requests for explanations of specs, proposed parameter changes, applications design assistance, and so on.  Much of this work is done by Field Applications Engineers, FAE’s, working in field sales.  But where do they get their information?  Customers that don’t contact marketing directly, go through the FAE’s and those requests are funneled to marketing for answers.  Technical Marketing is made up of engineers who enjoy working with customers.  They work the data sheet issues, drafting new ones for new product variations, writing applications notes, and responding to technical questions from customers and FAE’s.

Much of your reputation for responsiveness will come from how well Technical Marketing deals with the stream of customer questions.  Without a separate group, whether it’s one person or several, marketing and sales will be dependent on company design engineers.  Make no mistake about it… answering those questions is a full-time job… perhaps for several people.  If you make this a secondary responsibility for your design engineers, they will never get anything designed.  You could streamline the process a bit by having customers contact your design engineers directly, but that would be a disaster.  The main reason is that the flow of questions and answers between the company and its customers is a key part of the sales process.  Detouring them into design engineering would be a serious setback to sales.  What’s more, I always want conversations with customers framed in the terms and messaging that marketing has constructed.  That takes practice and total understanding of the message we want to send… not something we can send an expanatory note to design engineering and hope they’ll remember it and manage the messaging nuances when talking to customers.

The addition of Technical Marketing gives each product line a championship marketing group.  Between the three, Product Marketing, Tactical Marketing, and Technical Marketing, you are able to manage the line, set strategies for it, work the forecasts, make presentations, and plan new products.  You can do effective product launches, and provide customers with complete literature and respond to their technical questions.  And, with Tactical Marketing, you can drive the sales force, working quotes and chasing deals.  And you can do it all quickly and efficiently.

Breaking marketing line responsibility into these three functions makes it easier to find people to work those functions.  And it’s an easy organization to scale.  Add a new product line, and you add a marketing triad to manage it.  Now there’s more to marketing than these three functions, but these are the marketing “line” functions.  There are three others that are not line functions but work to support the product marketing triads.  We’ll talk about them in upcoming posts.  Stay tuned.

We’ve talked about Product Marketing — the first of the Big-M marketing functions — as the person or group that “manages” the product lines.  They worry about the gross margin dollars their line is bringing in, what it takes to “complete the product” in terms of complementary parts and software, the literature and promotional lineup, sales training, customer adoption rates, and so forth.  If this sounds all inclusive, it’s not, mainly because of the personality of the type of person who takes on this job.  These people are managers and, as such, they tend to be locked up in meetings working over the line forecasts, new product launches, customer presentations, and so on.  In short, they can be a little hard to get hold of.

Tactical marketing takes on the job of “making the market” for the products.  If you picture the Product Marketing Manager in a conference room going through a PowerPoint presentation to the company management, then the picture of the Tactical Manager is the person at a desk with two phones to his ears working with the sales force to close deals, or in the commodity pits trading oil futures with frenzied gestures.  This is someone who always has to be available.  And if the sales force isn’t calling him, then he’s calling the sales force… “What’s happening out there???  Let’s get something going!”

As large customers work with the sales force to get quotes on the company products, those requests for quote are relayed into Tactical Marketing where the pricing is assembled and passed back to the appropriate sales person.  Prices are never given to customers directly — they are always passed through the sales force.  We’ll have a lot more to say about this process in future posts.

Now you may be asking, “if the Product Marketing group is responsible for the success of the product line, how does that work if it’s Tactical Marketing that is working the sales force and generating the price quotes?”  Well, usually Tactical Marketing works for Product Marketing.  For instance at Zilog, we had three major product lines, each driven by a Product Marketing group.  Each of those three groups had their own Tactical Marketing function that handled the minute-by-minute sales activity, worked the sales force, drove the quote process, and helped build the sales forecast.  Newer product lines that had not yet been adopted by many customers only had one tactical marketing person.  The biggest line had three.  Since Zilog was a silicon valley company, it was three hours out of sync with the east coast.  The tactical marketing people were assigned geographic areas, and that meant the one handling the east coast came in earlier so she could work the sales people there when they were most likely to be at their offices.

One of the benefits of organizing Tactical Marketing like this is that the individual sales people always talk to the same tactical person, at least for any given product line.  That means they build up a working relationship and a level of trust that is critical for the success of the line (and the sales person).  It also means that when the monthly sales forcast is being judged by Product Marketing, there are essentially in-house specialists for that product line and that sales territory intimately familiar with the deals in progress, their liklihood of closing, and where the prices will ultimately end up.

Obviously the type of person that thrives in tactical marketing is totally different than the person who gravitates towards product marketing.  For one thing, product marketing people tend to be more technical, so they can understand and weigh the various technical product features against the competition.  For another, they are comfortable presenting to management groups, and taking responsibility for the line forecast the company will build to.  Tactical people tend to have what is sometimes called “street-smarts” and could sell any kinds of product, technical or not.  They excel at reading people and understanding when buyers are fibbing about their delivery requirements, quantities, competitors’ pricing, and so forth.

By assigning these two functions — product and tactical — to different people, you take advantage of the differing personality types to get the optimum results.  And an active product line definitely requires this amount of attention!  Having a set of really sharp tactical people will improve your gross margins faster than anything else you can do!

A few days ago, we introduced the idea that there were six basic functions every high-tech company has to do in order to market their products. Why six?  Actually there are many more… dozens… of things that marketing has to do but when you organize them they fit nicely into six groups.  And for me, I have always found that the kinds of people that can best do those functions fall into six different personality types.  If you find a single person that can do them all… the renaissance man… you’ll probably be working for him!  But by breaking things into six different groups, you’ll be able to find people that are by their very nature, good at the tasks in that group.

Now let’s delve into the first of these in some detail.  In this post, we’ll look at the function that many consider to be the heart and guts of marketing — Product Marketing.  The idea here is to have a person or group of people assigned to each of the major product lines.  Those people then drive their product lines, meaning they plan the new products, push them out in major product launches, see that all of the necessary literature and applications material gets done, sets the basic pricing, trains the sales force, and even makes sales calls on major customers, accompanied by the appropriate sales person, of  course.  Here is where the competitors’ products are studied to make sure your products have clearly defined differentiation points — features or specifications that set them apart from the competitors’ products and can command higher margins.

This is where the products are “managed.”  Want to know when something is going to be introduced?  Ask Product Marketing.  Want to know how it compares to the competior’s product?  Ask Product Marketing.  Want a PowerPoint presentation on a product?  Call Product Marketing.  Need datasheets and app notes? You guessed it… Product Marketing.

One of the most important things Product Marketing does is to “judge” the sales forecast.  In future posts, we’ll talk about the way a sales forecast is put together, and it will come as no surprise that it starts with a sales person creating a personal forecast.  But that’s not the forecast the company turns into their business plan for that period.  No no.  For one thing, the forecast may be for more parts or systems than the company can produce?  Just adding up all the individual sales forecasts to build a combined forecast is almost never the final version.  What happens after that combining takes place?  Product Marketing gets it and judges it up or down.  In many companies a significant portion of the sales come from small customers that never find their way into a formal forecast… in fact, they call the company directly with orders and get shipment of their stuff the same month, something frequently called “turns business.”  Turns never get into the raw forecast… it’s added later by Product Marketing.  That’s a case of judging the forecast up… judging it down is what happens when the company can’t produce everything the sales force forecasted. Consider this:  Product Marketing has commissioned a new product from engineering, now it’s built and ready for sale.  Who is going to do the forecast for it?  The sales force has never had one of these new widgets before, and while they certainly have ideas about where to pitch it, the responsibility for this product belongs to Product Marketing and they’re the ones that build the forecast for it… they own that part of the forecast.

The final result, the judged forecast, has the individual sales people taken out and deals just with total quantities of the various product types.  It is the build forecast for the company, and the company’s financial projections will be based on it.  There are lots of ways errors and bias slip into sales forecasts… we’re not going to go through them all here.  Just remember, it’s Product Marketing that builds the judged forecast the company operates from.

That’s why it’s the appropriate Product Marketing Manager that stands up in front of management and does the review of sales and new projections.  And as part of it, they show the gross margins for that product.  Marketing ultimately is charged with maximizing the gross margin dollars the products bring in.  Notice I did not say maximize gross margin percentage — sometimes you can increase the total gross margin dollars by lowering the price to increase sales (and decrease gross margin percentage).  All marketing should be concerned with is maximizing the gross margin dollars.  That’s their charter.

Each Product Marketing Line Manager runs his or her product line as though it was a business — their business.  That means that they’re setting the strategies for that product line.  Oh, they work within the overall framework set by the CEO and CMO for the company marketing strategy, but within those bounds the line strategy is set within Product Marketing.  Management of the product lines by Product Marketing is the first of the six functions the company does to do the complete marketing function.  When they do all six, they’re doing the “complete” marketing function — that’s what we refer to as Big-M Marketing.

Nothing gets misused these days more than Moore’s Law.  I worked with Gordon Moore at Intel for a few years, and we used to chat about his “law.”  If you know Gordon, you know he graphs everything… ask him about anything, and Gordon will dig around in his desk and pull out a chart he’s been keeping on the subject, points hand-plotted and trend lines drawn in.  He told me how he had been worried about when Intel would have to build a new, more advanced wafer fab and had been plotting the increase in chip complexity year by year.  That plot led to the famous conclusion that the transistor count on chips doubled every two years (actually he modified this a couple of times over the many years he kept that chart).  The answer that Gordon had been searching for came out clearly — Intel should not simply double chip complexity with each generation, it should quadruple it because otherwise it would not be able to build new fabs fast enough.  (It turns out he kept a second chart on how long it took to build a new fab as well, and how that was changing over time).

The big difference between Intel and other companies in the chip business is that, if someone like Gordon charts trends like this, the company acts on it and builds it into its annual planning process.  So at Intel, people translated Gordon’s conclusion into the implications for photolithography, fab equipment, wafer sizes, new chip designs, and so on.  The entire Intel planning system was built on the idea that chip complexity would double every two years.  And the continual drive to meet that trend on Gordon’s chart carried over to other companies as well.  Moore’s Law became a self-fulfilling prophecy.  It’s the basic reason that memory chips go from 4 to 16 to 64 etc… instead of 4 to 8 to 16 to 32…

Since those early chats with Gordon, I’ve reflected on just why his chart was correct (besides the fact that since everyone assumed it was correct, they all drove to keep up).  My conclusion was that what he was getting at was actually the change in “feature size” in the basic chip geometries, and that it was the feature size that was being cut in half every two years and THAT fact was driving the quadrupling of complexity.  Because feature size reductions help you in two directions  — x and y — you’re seeing an “area” or two dimensional phenomena based on a one-dimensional change.  Cut the feature size in half and you can pack four times as many transistors into the same area.

Another technology that follows this geometric trend is hard-drive capacity.  If you cut the size of a magnetic bit on a drive in half, you can pack twice as many of those bits on the track that circles the disk.  But you can ALSO CUT THE WIDTH OF THE TRACK IN HALF, and therefore double the number of tracks.  Twice as many bits on a track and twice as many tracks quadruples the capacity.  Bingo… another technology following the geometric progression laid down in Moore’s Law.

Let’s think of some others.  Um, those are the only two I know of.  Yet in book after book, presentation after presentation, people call down Moore’s Law to show why their particular business is going to undergo staggering growth.  The one I find really funny is the software business.  Not too long ago, Bill Joy, who certainly should know better, expressed his concern in a widely quoted letter to Wired magazine, that as software capability increased according to Moore’s Law, computers would take over the earth and displace us.  Joy, one of the founders of Sun Computer, should know that software capability inches along at a snail’s pace and if anything, has failed miserably to keep up with even the most conservative predictions of new capabilities.

It turns out that Moore’s Law has become the universal arrow in the quiver of every visionary and futurist.  But the next time you run into it, and believe me, it won’t be long, ask yourself, “what is there about this technology that makes it the EXCEPTION that will actually follow Moore’s Law?”