BERKONOMICS – Business insights from Dave Berkus

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Use video whenever possible.

by on Aug.28, 2014, under Growth!, Positioning

Ninety percent of all traffic on the Internet is in video form. Yes, most of that is from NetFlix and YouTube and others delivering entertainment content. But an increasing amount is now coming from web sites and YouTube videos created by companies looking for an edge in their marketing efforts. The average time spent on a static website, one without videos linked to the home page, is under a minute. That time more than triples when videos are positioned to be delivered with just a home page click.

Dave’s Top Ten Trends workshop promo video   Check this example by clicking on the link to the left – from my site.

Videos are no longer expensive to produce, even though a poor amateur effort may be much worse than none at all.   One way to create great company videos inexpensively is to contact your local college or university and ask if there are interns signed up for such work with local companies. Another is to combine clips you’ve accumulated into a professionally edited video without creating any new shots.

[Email readers, continue here...]  Each video, especially those on the front page of a site, must be compelling, to the point, and short. If you are selling a product, a one to two minute demo that is well edited will work wonders for viewer retention. If you are promoting the corporation as opposed to the product, short clips of the company’s previous projects with comments from enthusiastic customers would be appropriate. Finally, content does not last forever.

Videos should be replaced or rotated at least annually to be effective over time. No matter how many videos you have to offer on your site and on your YouTube channel, videos will increase your marketing awareness.

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The “drop dead” question for a customer survey

by on Aug.21, 2014, under Growth!, Positioning

Sean Ellis, the marketing guru behind DropBox and other successes, advises clients that “The most important question on a survey is, ‘How would you feel if you could no longer use this product?’” He goes on to quantify the response. If more than forty percent of the respondents say they would be “very disappointed,” the product should go viral and be a great success. Conversely, if less than ten percent say this, those companies or products would have a hard time getting traction in the marketplace.

2014-0329_OxyTEDx-0276What a great test. It reminds us that our customers, especially early adapters, must want to continue to use our products to the extent that they “would be very disappointed” if unable to do so in the future.

What other questions could we wrap around this critical one to form a great survey that is both short enough and powerful enough to be relevant to our marketing effort, let alone our R&D and production efforts?

[Email readers, continue here...]  Using Sean again as a source, we might ask: “How did you discover our company?” and provide several checkbox answers, including ‘friend or colleague.’ Again, it is a sign of a viral marketing effort to get more than forty percent checking that box. Then “Have you recommended our company to anyone?” Use just ‘yes’ and ‘no’ as possible answers, and look for more than fifty percent ‘yes’ responses.

And there is always the great open door question: “Would it be OK if we followed up by email to request a clarification to one or more of your responses?” If more than fifty percent say “yes” you have a real hit on your hands. It means you can use this respondent as a resource for case studies and marketing quotes in the future.

Keep your survey very short to insure a large number of responses. But do include at least one specific question about your product to be sure the respondent is an actual customer.

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Do you really want to be the first to market?

by on Aug.14, 2014, under Positioning

Over the years, as I managed my several computer companies as CEO or executive chairman, I made the decision to go to market with a brand new product that had never before been exposed to my customer’s marketplace. In each case, after overwhelming publicity, certainly noticed by a great number of potential decision makers, and after record-breaking sessions at industry trade shows to introduce these to the potential buyers, the products failed in the marketplace.

I recall the introduction of artificial intelligence into the hotel reservation process, a “one-up” on the airline method of yield managing the price of airplane seats. With the cover story in the industry trade journal, record-breaking overflow education sessions at the international trade show, and even glowing reports from the first hotel user’s management, the product failed to attract more than two customers and had to be withdrawn from the market, even though it was an unqualified success for the first users.   As a side note, we returned to market with the application as a software-only product without artificial intelligence and without some features, reduced the price from $150,000 to $8,000, and had a subsequent hit on our hands.

[Email readers, continue here...]  In another instance, we introduced the first kiosks for hotel lobby check-in. They were large, a bit clumsy looking, and gathered cobwebs in the lobbies of some great hotels.

Cover story for industry magazine.  Best possible press: too early to market.

Cover story for industry magazine. Best possible press: too early to market.

These and other efforts to be first over the years have led me to ask my current crop of CEOs as I serve on various boards, “Do you have the resources to evangelize the market, educate your potential customers, AND sell your product?” The answer is invariably ‘no,’ because the cost of evangelizing a new product is completely unknown. A marketing professional or the marketing department certainly can work to obtain good press, appealing to curious journalists and early adapters. Early meetings with potential customers will yield enthusiasm for a “free test” of the new product. But if it is a radical departure from the comfort zone, the cost of promoting and marketing the new product will be beyond the capability of most small or medium sized companies.

Even Apple rarely attempts this, with all its resources. Apple is well known for building upon the work of early adapters. After failing with its early Newton tablet, Apple waited for fifteen years before reinventing and repositioning the tablet as a much friendlier consumer device. The same occurred with the iPod. Apple was not first or second. They just added the infrastructure needed to seamlessly purchase and download content to their offering, and produced a friendly way to use a product that previously required early adapters to manually download songs to their devices.

I will readily admit that the half million I spent on the artificial intelligence system that failed generated the greatest positive press we ever had. As a corporate promotion, it was a hit. As a product marketing effort, it was a failure.

If you are going to be first in a market, plan on a very long time from introduction to acceptance. Triple the time you estimate for the effort, and add four times the cost you estimated for marketing.

Does anyone know how much Toshiba lost with its HD DVD format marketing effort? First to market over blue ray with what some say was a better product, Toshiba dropped over a billion dollars into that one and lost it all. There are numerous examples like that one.

You might be an exception. Chances are that you’d do much better by inventing a better mouse trap, and marketing it for its advantages over a product that the consumer already understands. But there is always a winner at a table with the odds stacked against the player. It just doesn’t happen often enough to expect success.


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The LALA School of marketing

by on Aug.07, 2014, under Positioning

Let’s focus not upon the process of marketing and positioning, but on you. How should you become the best marketer you can be, even if you are a first time entrepreneur or a seasoned CEO?

There’s an answer for that. The title of this insight helps us find a formula: LALA.

Berkonomics books available at

Berkonomics books available at

Listen! The first rule of marketing and positioning is to listen to the marketplace. Interview potential customers, hold focus groups, meet with existing customers. Hire consultants. Attend trade show education sessions. Ask you field representatives to debrief you about what they are hearing. But listen!

Adapt! Create, change, throw out, tweak or put more resources behind those efforts or campaigns that are working. Listening does no good without action. And the first thing in marketing is to adapt your product or service to the needs of the marketplace.

Learn! Measure the results of your changed program in as many ways as possible. Create metrics for customer acquisition, retention, conversion, reach, or anything that helps you to better understand the effects of your changes to the program.

Adapt (again)!   It’s not unfair to reinforce the cycle by again adapting to the market after learning from your changes. Start the cycle all over again, and never stop.

LALA: Listen, adapt, learn, adapt.

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The three legged stool of marketing excellence

by on Jul.31, 2014, under Positioning

Marketing is a science devised to help drive customers to your door. There are lots of ways to define how to market well, including the four P’s of marketing (1): product, price, promotion and place. This is considered to be the producer-oriented model. These are still the driving focus behind most marketing courses, and deserve to be so.

Then there is the four C’s, the consumer-oriented marketing model (2). The four Cs: Consumer, cost, communication and convenience. This makes sense too, and surely deserves time.

Oh boy. Then there’s the compass or cardinal definitions model for marketers:  N=needs, W=wants, S=security, and E=education. We can go on forever. But I have my own model that is even simpler.

I’ll call it my IDC model, just to fit into the scheme of the conversation.

[Email readers, continue here...]  I= increase revenues. Find a way to position the company and the product to be wanted so much that it moves into the needs column for the consumer. Use all the techniques you learn in marketing classes to drive demand. Higher demand results in higher prices – if there is EA-9817limited supply. Or, with or without limits on supply, higher demand results in greater revenues, satisfying the “I” in the formula.

D=Decrease costs. With greater demand comes the option to increase production and gain efficiencies of scale, driving costs down in the process. Even without higher demand, reducing costs should always be a focus for management to provide breathing room for increased profits.

And finally: C=Customers, and more customers. Marketing should provide a pool of ready to listen customers, no matter what the price or complexity of the product. More importantly for management, finding a way to focus on extreme customer service will be the most inexpensive, effective marketing tool of all. Existing customers have low acquisition costs, addressing the “D” in the equation. Extremely happy existing customers are the greatest marketers you will ever have.

Increase revenues, decrease costs, and better serve customers. IDC: that could be a motto or even a manifesto for any good management team. And it’s a good place to start a focus upon positioning.

(1) First proposed by Jerome McCarthy in 1960

(2) Robert Lauterborn, 1993

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Create a ten percent profit model.

by on Jul.24, 2014, under Growth!, Protecting the business

Most entrepreneurs, when starting to model their business operations using a spreadsheet, start with expected revenue by month. Then they calculate cost of sales, and then project their expenses, to find the bottom line profit or loss each projected month.

There is a rarely-used twist that makes lots of sense. Add a new row at the bottom of the spreadsheet. Project your revenues and costs as in the original exercise. Then consider that an operating entity should be able to generate a ten percent operating profit based upon revenues, and add a row to your spreadsheet immediately below “operating profit” that calculates 10% profit from sales each month. Compare that with the operating profit as calculated, which surely will be

From Basic Berkonomics: Available Amazon, B&N, and booksellers everywhere.

From Basic Berkonomics: Available Amazon, B&N, and booksellers everywhere.

lower, probably negative, for months or even years. The difference is something new – a target for reduction of expenses or addition to revenue for each month in which the calculated number is lower than 10% of revenues.

[Email readers, continue here...]  We are not taught to think this way, but rather to find the month in which we break even in our plan, then calculate the accumulated losses to that point, add all the cash needed for investment in fixed assets, and end up with the amount needed to finance the business to breakeven through equity or debt financing. This new tool gives you that number plus the amount needed to make the business a viable entity with a chance of long term survival.   The longer the time it takes to break even, the higher the number of dollars needed. Sometimes, the difference is a reminder to consider a reduction of expenses, if revenues cannot be raised from projected levels.

And sometimes, it is just a reminder that we are all in business to make money, not to break even. Just like assuring that your own at-market salary is included in a forecast even if not drawn in cash during the earliest periods, the 10% target reminds us all that the target must be higher than merely breaking even, even if that means reassessing all expenses until the target is met or exceeded.

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Don’t be defensive, but defend.

by on Jul.17, 2014, under Raising money, Surrounding yourself with talent

When meeting with investors, during the period devoted to feedback after your presentation, you will hear comments and recommendations that don’t resonate with you. Some will be from a misunderstanding of your explanation. Some listeners will challenge your assumptions. Some will seem to ask just plain show-off questions, in which the questioner wants you and others in the room to know that s/he knows more than you do.

You are in a vulnerable position in that room, the salesperson looking for money before individuals who have nothing to lose but risky profits far in the future. You cannot appear to be standoffish, or above responding to some of these inappropriate questions.

Berkonomics books available at

Berkonomics books available at

Defend your position when appropriate. But listen carefully.   Although you may be completely right, the questioner’s comment may indicate that you are not getting your points across. That’s just as valuable for feedback as hearing a good, new idea.

[Email readers, continue here...] Sometimes, you will have an opportunity to present to several levels of an investor organization, from first prescreening, to a screening session with many present, to the final meeting of the members or partners. Plan to incorporate the appropriate responses to earlier questions in the presentation to avoid those being repeated. Show that you are both humble and adaptable.

Investment groups including venture capital fund managers will tell you that the very process of defending your plan will help you better think through the rough spots, better launch the business with fewer holes in reasoning, and better connect with resources that can be used to accelerate your growth to breakeven and beyond. The process is always time-consuming and grueling. But approached correctly, the time is well spent and the results almost always positive, even if money doesn’t come from the present effort.

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Don’t get hung up on valuation.

by on Jul.10, 2014, under Ignition! Starting up, Raising money

I can’t tell you how many times I’ve walked away from deals where the entrepreneur insists on a start-up premoney valuation that is so high, no angel could expect to make a return upon the investment, even with a reasonable sales price for the company down the road.

Raising_moneyThere is always another attractive deal at the ready, and most have reasonable expectations of valuation. Why fight about valuation, or disappoint the founder at the outset? The real focus should be on smart planning, finding ways to launch and build the business with smart but frugal use of money.

Let me tell you two stories that are linked. The first is of a 2004 startup that I cofounded and led the investment group for several early rounds, then VC rounds. The company has grown to forty employees and a healthy eight figure gross revenue run rate, but has absorbed over $36 million of angel and VC money to do so, and without yet reaching breakeven.

[Email readers, continue here...] The second story involves a founder who is using outsourced development, support, outsourced customer relations and more. The total capital raise will have been under $600,000 if all goes as planned, and the founder retains majority control of his baby through this and even one optional future round.

For the first, company, the founder’s remaining portion is under 4% after all the subsequent rounds, and not yet at breakeven. The second company finds the founder with majority control even if the original raise is not enough. For the founder to see any return at all in the first company, the ultimate selling price must be above $40 million. In the second company, better planned, the founder would be made pleasantly wealthy at a selling price of $10 million. The chances of the latter occurring are much greater than the former. This founder was not hung up on valuation for the second company, just upon efficient use of capital.

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Don’t over-estimate the knowledge of your audience.

by on Jul.03, 2014, under Finding your ideal niche, Positioning

When making a presentation to a new audience, the smart thing to do, if there is an opportunity, is to ask your audience by show of hands, if they have some knowledge of your industry or space. If you are making a one-to-one presentation, don’t start without a conversation about the other person’s knowledge of your space. With that conversation, you create an immediate connection with your audience even before beginning to present, and you know better how much explanation you will need to accompany your most elementary statements. And you will ventureforwardweb-237not insult the industry experts by appearing to talk down to them.

When I give a keynote address, I often start by asking my audience, by raise of hands, to tell me how many are angel or VC investors, and how many are entrepreneurs, how many are service providers such as attorneys. Immediately, I can tell how to orient the explanations behind my pre-cast slides, based upon the response. It always works, and the audience should appreciate that the speaker takes the time to orient the talk to the audience, not the other way around.

If your audience is composed of PhD’s in organic chemistry, would you want to explain the most elementary teachings in the field? On the other hand, it is most often true that only one or a few of your audience members is knowledgeable in your area of expertise. Address them directly with “I hope you will put up with me as I spend a few moments explaining some of our elementary knowledge to the others.” That makes these experts a part of your presentation, able to nod their heads when you do explain these things to the others, instead of looking a bit disdainful that you don’t recognize that there are experts in the room.

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Turn the tables: What’s an angel look like?

by on Jun.26, 2014, under Raising money

Angel investors, particularly those in organized angel groups, are typically former entrepreneurs who have had successful liquidity events in their pasts, or executives of companies who’ve retired with the funds from their stock options.  Occasionally, an angel is a member of a wealthy family, having little experience managing a business.  But most often these angels are skilled at growing companies, calling on their past experience to evaluate and then help entrepreneurs in their early stages of growth. Several times in our angel group, one of the largest in the United States, we have queried our group as to their motives in being active, risking their money, taking their time to research, perform due diligence and then coach entrepreneurs of young companies.  The result of these surveys over time is universally the same.  Although

Order all 3 Berkonomics books for $49.95,a 33% discount.

Order all 3 Berkonomics books for $49.95,a 33% discount.

most every angel member joins a group to find great investments that will make money for the investor-member, all have other, sometimes more personally important goals.  These include giving back to the community in the form of time and investment, or learning about new industries, new advances, and a generation of new ideas.  Members want to socialize with those who have similar backgrounds and interests.  And members want to participate in the creation of the excitement they universally once felt in the growth and ultimate liquidity event they experienced with their previous company. [Email readers, continue here...] Angels come from technology, real estate, medical specialties, and many other industries, bringing a wealth of experience to the table to help evaluate and then coach entrepreneurs. So how an angel responds to your pitch depends upon his or her background.  You should try to find a way to get information about your audience before or even when standing in front of them.  What industry specialties do they like, or where did their experience come from?  Do you know any people in common?  Are they interested in your industry either to be educated or to share their skills and experiences? Connecting with these people often requires a bit of effort.  Networking events are great starting points.  Although many of these angels will appear standoffish at the start, if you can find some information from one or more of them before making your pitch, you will be in a far better place to succeed when pitching your idea to an individual or a group.

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