Business of Software Conference USA 2018 is taking place in Boston at the Seaport World Trade Center, 1-3 October. Speakers this year include David Cancel (CEO, Drift), Rich Mironov (Author, The Art Of Product Management), Claire Suellentrop (CMO/Founder, Userlist.io), Jared Spool (Founder, UIE), and Tania Katan (Author, Creative Trespassing).
Tickets are available here at a reduced rate for Software Executive Magazine readers – just enter the promotional code ‘SoftwareExec' to get a 20% discount.
Seth Godin should need no introduction. He's the founder of Yoyodyne and Squidoo, and the author of seminal books such as ‘Purple Cow', ‘Tribes', and ‘Linchpin'. He writes one of the most popular blogs on the internet, and has recently begun recording one of the most popular podcasts of the year. He's been writing about marketing longer than some of you have been alive.
On top of all this, Seth is a world class communicator. He's got a knack of boiling complicated concepts down to simple, pithy comments. His recent talk at Business of Software Conference in Boston was no different. Seth talked about 7 lessons he'd learned from 33 years marketing software, and as you can imagine, it's full of nuggets of wisdom. In 33 minutes, you'll learn:
Watch the video or read the transcript below.
Seth Godin: I was thinking about skate skiing, cause it's a really cool sport. They do it in the Olympics with long skinny skis and poles – it's a good cardio workout. The other thing about it is I used to be good at it! And the third thing is they make this version of it with wheels that you can do in the summer on the bike path. And the fourth thing is I don't do it anymore cause Saturday I fell. So if I'm doing my presentation one handed today, you can feel sorry for me.
With that said, it's possible that you're doing it wrong. This is a video of a bike race in Italy, this guy is in last place, and they come to the downhill and he realises that peddling faster isn't the point, the peddling harder and harder and doing it again and again and again isn't necessarily the point. And it's entirely possible that the way you have been marketing your software, is the result of a lot of effort and history but it might just be that peddling harder isn't the point and you might need to see it differently.
So, I brought 60 slides to get us started – all new stuff for you today and then we will spend the rest of time answering your questions cause I think this group is intimate enough and smart enough that we can really benefit that.
So the 7 things I want to do, before I do that I have to maintain a tradition. It's a tradition cause now we're doing it for the second time which is I share my embarrassing stories from my history as a software marketer. I think it's possible I've been a software marketer longer than any person on earth! I started marketing software in 1976 when I was 16 year old. Very few 16 year olds market software as a hobby. Some of them program, but very few do it as a hobby. I did. I started doing it for money in 1983 just down the street in Kendal Square. When I started doing that, it's been – this was the computer that nobody had but some people wanted. This is the cover of People magazine. I don't even remember Remington steel and this was the toy that every kid had. So the times were really different, I've been doing this for 40 years professionally and I have seen it change so I want to highlight where the changes are.
The first idea is this; the idea that you promote a piece of software by working really hard to get an article written in the women of mensa issue of playboy magazine… that's me – with hair. What happened was a friend of mine who worked at the company saw it come out and called his wife at home and said quick, you have to buy the new issue of Playboy. She said why? He said, you'll find out. 20 minutes later she rings and said who knew that Suzie Bennet was in mensa? She missed the whole point. A few years later, I was fortunate enough to be invited to be on the computer ball. Cliff from Cheers was the host – that's how we knew we were off to a bad start! But Mark Andresen was the anchor of the West Coast team. The West Coast team got to wear cowboy hats because they were the west coast team. I was the anchor in the other sense of dropping it to the bottom of the ocean of the east coast team and we had to dress like pilgrims. This is before Seinfeld. This is very rare footage of me and Walt Mosberg dressed as pilgrims. We will come back to the Mark Andresen thing in a minute, remember that picture there.
1. Good Software Doesn't Always Lead To A Good Business
So where do we start? With start with the first idea. Just because it's good software doesn't mean it's a good business. And engineers hate this, but there is this spectacular conflation of the two things. And one of the best pieces of advice I can give you that will be worth your entire trip to come here is if there isn't a good way to market your software it's not a good business. It doesn't matter if it's good software. I believe one of the big disappointments of the big productivity suite is that outliners aren't easy to find anymore. I use outliners all the time. I love outliners.
This is some of the reviews for ACTA, it was a piece of software I lived in for years. It's really hard to even find the successors to ACTA, it's not part of any productivity suites. Outlining works but outlining was missing a method to turn it into a good business. So good software doesn't always lead to a good business.
2. Like Selling to Consumers
Number 2 is – quick show of hands, how many of you sell the software to corporation as opposed to humans? That's most of the people here. Ok so B2B is different for a whole bunch of reasons. The first reason is it involves an enormous amount of handshaking. If you type in B2B in google image search, this is all you see, pictures of white men shaking hands with each other. This is the universal icon for B2B.
The second thing to understand about B2B selling is this; it's exactly like selling to consumers cause after all there is a person at the other end of the table. However, they are spending someone else's money and that changes everything. Because we spend our money all the time and we think we have empathy for how people spend their money so it's easier to have a transaction conversation with another person because our perception of money might be similar to their perception of money. But when we sell to a corporation, that's not the question. The question they are asking themselves is not can I afford this?
And in a moment, we will get to that but before we do, last week I was in Boston and I stayed at the Paul Revere hotel. This is not Paul Revere. This is William Dawes. There is no William Dawes hotel in Boston. And Malcolm Gladwell explains why in the tipping point a really good book that most people didn't read. And what it says in the book is that William Dawes and Paul Revere both went on the midnight ride, they both were basically human spam in the middle of the night, racing through town after town, yelling about the British. And Paul Revere got a hotel and William Dawes– this is the only picture of him on the internet where it looks like he's not about to die of the plague. Why is this? And the answer is simple, because Paul Revere was a trusted craftsman, a man about town, a select man, someone who is part of the community and no one knew who the hell William Dawes was. And that trust is in fact what is going on when we do B2B selling, not value, trust. Because the question that every person you're trying to sell software to, unless they're the CEO, asks is this. What will I tell my boss? And if you can't give them something good, they won't buy it from you and if everything is pretty good, they are just going to buy the cheap one cause the tried and truth you can tell your boss is they're all the same and I bought the cheap one. If you're looking at RFPs that means the industry has persuaded everyone it's all the same. Buy the cheap one. If that's the industry you're in, you don't have a good industry, you should switch. You should sell something people will pay extra for.
Here is the problem that B2B marketers have. We think we're the happy people who show up, make kids smile, sell everyone a Big Mac, people are glad to see us, we can prove that it is worthwhile. When you walk in, to market your B2B software, you know what the other people see? They see this. And they see this because what you represent is change. And not good change, bad change. And the bad change that you represent is simple, if they buy your software, and it works fine, no one will remember who bought it. But if they buy it and they have to go persuade other people to change their workflow and to live with the inevitable things that will get worse and in exchange for many things that are going to get better, you just made their life worse. So what you have to accept when you sell B2B software is that your job isn't to increase joy, but to reduce fear, because that is the narrative of the person you're talking to. They aren't spending their money and aren't seeking fulfilment. They're looking for a way to get on the next part of their job and a story to tell their boss that they're glad they told.
3. Connection Ratchet
Number three, this one is the biggest shift since I started doing software and that is the connection ratchet. Now I could call it the connection racket but I think it's better to call it the connection ratchet. Here's a way to think about it. Phone booths don't get better if lots of people use them at the same time, they don't scale well. That's the way software used to work, but it turns out that software is now different. It's a little like the fax machine. The first person who had a fax machine, what did he do with it? You can't use a fax machine by yourself. You need to use it with someone else. So the reason that the fax machine became ubiquitous is because as soon as the person got the first one, he called everyone and said you got to get one too so we can send each other faxes and it spread. The same thing happened with email – go down the list. Software that works, works because it understands Metcalfe's law. It says:
"the power of any network is the square of the power of the people on the network"
As a result, the thing works better if I can get other people to use it. I'm guessing some of you have heard of Twitter. None of you heard it because of the SuperBowl ad they ran cause they didn't run one, unlike Apple; or because they sponsored the world cup because they didn't. You heard about it from someone who wanted you to follow them on Twitter. Because Twitter works better if people follow you on Twitter and so the word spreads. So the way to understand this is there's a dichotomy between Metcalf's law and Fight Club. The first rule of fight club is we never talk about it. And if we follow that rule, no one would know about it. But we broke it all the time by talking about it. If you're gonna build a piece of software that is a good business, built deep into that software has to be the need to talk about it.
If we think about profitable upgrade cycles for Microsoft products, the most profitable ones are where the new version breaks the old one and isn't downward compatible, because just a few people buy the new one, they're making files and all their co-workers can't open it. So they broke the system, so you have to talk about it, you have to talk about the fact that there's a new version of Microsoft Word which is what you have to go get if you want to open the file I just made for you. And so the ratchet continues, in one direction, upwards.
One of the challenges we have is to help our product designers see that our goal in trying to make the world better is to not think about funnels. Because funnels are really cool and marketers loved to talk about funnels, you put a tension and buy google AdWords and it's leaky, not everyone keeps going but out the bottom comes a customer. That's what marketers like to talk about. You know what you need instead? You need a megaphone. What you need to do is to hand your best customers something that lets them talk to other people about what you do.
So my wife has transportation narcolepsy which is a fictional disease she got shortly after we got married. I know it's fictional because she never falls asleep if there's a good movie on the plane but the rest of the time if we're in a moving vehicle she's asleep. And 15 years ago, we planned a trip to France and we had 2 little kids and we missed a flight and the connection and for 17 hours my wife was asleep and for 17 hours my kids made a ruckus. And finally, we're almost there and driving through this pasture and it's a beautiful day and I noticed in the backseat it's finally quiet. My kids are asleep. I look in the rear view mirror and they're not asleep – they're staring out the window, transfixed by this perfect specimen of a cow for about 4 seconds and then they went back to making a ruckus. Because cows are boring, they're all the same. No one talks or cares about cows. What if it had been a purple cow? If it had been a purple cow, I would have pulled over, my wife would have woken out. She would have taken pictures of the cow to show her friends. I would have called people to tell them I was looking at a purple cow. My kids would have ignored me as usual, opened the door, run across the street, jumped over the fence and rubbed the cow so when they went to show and tell in 2 weeks, they would talk about that they had seen and touched a purple cow. All a purple cow is, is remarkable. And all remarkable means is it's worth making a remark about it.
And I understand why someone who's pulled 20 all nighters wants to remark about the software because can you believe a computer can do this? But your customers don't care. The challenge we have is whether you're selling B2B or B2C is to take the power of what software can do and make sure it does it in a way that's worth talking about. I'll give you another tiny example. Do you remember when all cell phones sounded the same when they rang? I know I'm dating myself here but judging by the appearance of everyone here, you get it right. So how did ringtones get marketed? Cause it used to be a billion dollar a year industry. Its simple, you're in a room, your phone rings and it makes the mission impossible sound and everyone says what's that? The marketing of the ringtone was built into the ringtone itself. That's on purpose, that's what builds it into a business. So this is hard and the reason it's hard is it requires us to do something we have been programmed not to do, that no one taught us to do, to go against the conventional wisdom which is this.
Daedalus and Icarus are sent to the island by the Gods and are banished for life, Daedalus fashions wings out of feathers, fixes them to Icarus' back with wax and says to his son we're gonna fly out of here but don't fly too high. Cause if you do the sun will melt the wax and you will perish. Well Icarus disobeying his father, getting uppity, all the things the industrial complex doesn't want us to do, flies too high and dies. That's the myth. Interesting to note that 200 years ago that's not what it said. They changed it. That for 1000s of years the story started the same way but ended with and also my son, don't fly too low cause then the mist in water will weigh down your wings and surely it will perish. They left that part out now – it's not in any of the books. Because they don't want us to fly too low, they just don't want us to fly too high. But every piece of successful software that was made has flown too high for a while, it's done something software didn't dare to do before – that's what it means to be remarkable.
To finish this notion of what we're capable of doing, let me rant a minute about golf. I hope we can admit that it's the worst spectator sport in the world. And there's two reasons for this, nothing good ever happens and if something good does happen, you're not allowed to wildly applaud. So show me that, give me the measliest golf clap you can muster. That was terrible, thank you. Can you double it? Again? And one more time? Beautiful! Thank you! That is what I'm talking about, that is all what we get to do with software. We can't force someone that's not interested to adopt or install new software. We can get a few people who are interested, who are listening and paying attention to do it and once they do we can make it easier for them to engage with other people. If I was going to do marketing in a textbook and I only had 1 page to put on it, this is what I would put. People like us, do thing like this. This is the secret of marketing in 2017, that's all we get to do. We cannot afford billboards to make a big ruckus, to put all this noise into the world. What we can do is establish who the people like us are and then help them understand what things like this are.
So part of my mantra here is you must begin by identifying the smallest possible people like us. You've heard of the MVP, this is the minimum viable audience, which is the smallest group of people that would be sufficient to get it started, not the biggest, the smallest. Because if you can get the smallest to the point where they can't live without you, then you have a shot at spreading the word. Another way to remember this almost nobody gets a Suzuki tattoo. The thing is that if you want to get from here to Cambridge, a Suzuki is way better choice than a Harley but that's not why people buy a motorcycle. The fact is Harley is a better business because people like us do things like this.
4. Packaging is not obsolete
Number four, in the internet age, I'm being metaphorical here, packaging is not obsolete. So when I was at Spinnaker in 1983, I launched the first line of graphic adventure games on the computer. Our competition was Infocom, just down the street. Anyone have a game? So you remember the packaging! This is what it looked like on your screen. So when we launched our stuff, I was proud of the packaging but what I realised as we built it is packaging is in lots of places.
The typical wedding in US costs $85k now. It's not a marriage, a wedding. What are you paying 85k for? The packaging. The canapes, the hall and all the things that go around a ceremony that ultimately is free. The music industry is over, it's gone! At exactly the same moment that the packaging disappeared. What we have to remember is that's our memory of it so when you believe that you've marketed your software properly, I'm not talking about the physical box, maybe it's the conference it comes with, maybe it's the sales person who calls you on the phone, maybe that tech support team that you view as a cost centre is actually a profit centre cause it's the core of your marketing. Cause maybe, just maybe, if I have a choice between corporate software I have to pay for and corporate software that's free but the paid for stuff eliminates my career limiting move of putting a piece of software cause it has amazing support, maybe that paid for the whole thing and that's the package that your software comes in now. That they answer on the first ring and the person who answers is Broadway actor who will make you feel super for calling and if you press any key, that button – you get my point. You get my point – we can do this on purpose, but spending money on that might make way
more sense than spending money interrupting people who don't want to hear from us.
5. How do we get in the door?
So lesson number 5, how do we get in the door and the customer in the first place? I talked about Ronald McDonald before, the thing about clowns is they always arrive in a car and the car they arrive in is the car of promises. That when you are busy promising people that your software does everything, that it does it perfectly and now, just to get people on-board, what you have started is a cycle of disappointment, that one of the problems we have with the universal marvel superheroes is that they're all in the movie, then we start to not care so much about so many of them. That maybe it makes sense instead to say it does this thing, and mean it and then over deliver. Because when we over deliver on a promise, in a B2B setting, that customer becomes an evangelist for us whereas when we get in the door by overpromising – and I'm in the middle of this right now with an expensive piece of B2B software. I will never recommend this company to anyone ever because they could have just told me the truth and maybe I could have talked about them now. But I can't because they overpromised and they overpromised more than they needed to and because the ratchet is so important they blew it because now instead of one person saying people like us use software like this, they have zero people doing it. There's pressure on your sales and marketing teams to promise everything but that's not necessarily the right answer.
Number 6, it's you know what? It doesn't cost anything to deliver software over the internet. So therefore, let's make it all free! I'm not buying that, because free and cost have never been related, price and cost. I looked online, this container of creed toilet water, weighs 4oz and it probably costs I'm guessing $4 to make. It costs $585 because it's vibrant, clean and understated. And it's a tribute to Britain's young royals – the next generation of the house of Windsor heirs and it's a perfect balance. The point is when someone buys this, they aren't saying there's only $4 worth of ingredients inside. What they're saying is I get $600 of joy out of this bottle so I'm yes I'm happily paying $585.
There are 3 reasons to make your software free. The first one is to earn permission, to talk and educate people, to engage with them, we're gonna come back to that one. The second one is to get people hooked on a piece of software they can't live without so eventually they have to upgrade and pay you more money. And the third one is to start the ratchet, to spread the word, to get things to spread.
As Steve taught us, the most important thing as entrepreneurs we can do is get customer traction. Probably not this kind of traction, but customer traction nonetheless. What it means is getting people to use it and talk about it. Well this has worked a few times with free software, but because it's worked before doesn't mean it will work for you. And just because it doesn't cost
you anything to get one more customer, doesn't mean that free is the way for you to grow it if you're not doing it with intentionality.
So let's talk for a minute about what it means to use media to talk to people in the sense where it's free or not free. That is actually Paul Revere, he's not much better looking than William Dawes. It used to cost money to buy a stamp. When it cost money to buy a stamp, if you got a 3% response rate, you got a promotion. That was a home run. Stamps created friction because you paid money for them. Now we live in a world filled with spam and if you get a 0.003% response rate, you're a hero. I don't know if anyone got this email from my friend in Nigeria. He knows the guy who is the prince. What you may have noticed about his spam is only a really stupid person would hit reply. It's filled with misspellings, the logic is obviously flawed. They're not that stupid, why are they sending out spam that only a stupid person would reply to? And the answer is simple, as soon as you start replying, it costs them money. So if smart people reply and they have to engage with their customer service reps, where who knows where, that's costing them money so they have filtered out all the smart people in the beginning, they only want to talk to the stupid people. That's why they're written the spam the way they have. My point here is with spam everywhere, we don't want to spend our time toiling in the let me sell free stuff to strangers by interrupting them category. There's a different way to engage.
There's two ways to get married. The first one is to go to Tinder and swipe right, proposing marriage to every person you swipe. This is a stupid way to get married. Interesting, I don't know if you know their slogan? Their slogan is it's like real life but better. That's so sad. The other way to get married is to go on a date. If it goes well, go on another date with that person. Then on the third date you tell them you are out on parole! Then you meet their parents, they meet your parents and you get engaged and married. That's how I got married, maybe you too? So why aren't you building your business that way? Why didn't you create a method to turn strangers into friends before you tried to turn friends into customers? When you say to people all software should be free, here it is, only an idiot will pay extra for printing capability cause you can take a screenshot, well people aren't stupid and will say thank you very much and will leave. There's no permission, they aren't looking forward to hearing from you. You haven't earned the privilege, it's not a right, the privilege to have your emails answered?
When I started Yoyodyne, we were the first online email company for marketers. We had a 77% open rate and a 35% response rate to the emails we sent. That's off the charts cause we cheated! We sent it to people who wanted to get it and engage with us. You have something super valuable, that solves difficult and expensive problems, something that's worth a fortune. You can engage with people, if you choose cause you have something to offer them. But to just say oh yeah, we have a free thing cause that worked 20 years ago and other people do it too, That's not intentional and you have a chance to be intentional.
7. Make it matter
Number 7, make it matter. So you remember that picture from the computer bowl – my punishment for being in it was that I had to wear a puffy shirt. Mark's punishment was his hair fell out! But Mark famously said software is eating the world. And the people who are making the software are you. So what's with all the sheepish behaviour? There were sheep walking through incremental minor changes doing things that we think are smart business. Slowly, moving forward.
This is a slide from one of my favourite movies Singing in the rain. And this is the key scene where Gene Kelly is singing and dancing up a storm. What you may notice about the picture is he had an umbrella the whole time. But it's not called singing with an umbrella. The rain is the point, the vulnerability is the point. The point is this might not work, the point of being on the frontier and breaking some expectations so much that people choose to talk about you – intentionally creating community. Not because it matches what an engineer wants to do to solve their productivity problem but because it's important.
Leonard Bernstein famously said I don't know what the question is, but the answer is yes. And when they write the history of these three decades what they will write about is that software ate the world, that software changed everything! We have all these categories of software that have been stagnant for as long as I've been a professional, where utilities are just barely good enough, all this software that is free and should be expensive, we have all this customer service that is neither about service or about customers. We have this race to the bottom, this grinding mind dead race to the bottom, as if you all worked at Walmart and you don't! What's happening here is you're on the cutting edge of what we are becoming and it shouldn't be determined by what can we do 1% better than someone else who is doing things with code? Some people if you give them a mile, they take an inch and I don't think that's you and the companies you work for.
So the last story I want to tell you and then we're going to move on to my funky little orange box here is; about 3 years ago, I was really lucky and invited to this event with my family in New Mexico and it was really cold. And there were all these fancy people there and they gave us blankets and we went outside and we built this big campfire. And we're all sitting around the campfire and there's musicians, authors and it was a very special evening. And Neil Armstrong got up to tell us a story. And as he stood around the fire, a giant full moon started rising right behind him. And he looked over his shoulder and said I've been there! And I started to cry, I cry every time I hear that story. There are footprints on the moon and they got there because some software engineers including my aunt wrote some code so small, it would fit on a Timex watch. And there are footprints on the moon. So it's really easy to minimise the role of our job. Really easy to say well it's just some code, it's just an app, it's just a utility. But it's not, not if you care about it. If you care about it, not to just be a success, but to choose to matter, you will be able to do something that will change everything! If you want to see it in writing, there you go! The people who are waiting to be connected by you are asking you to show up and lead them.
Thank you for your attention! I appreciate it!