Brace Yourself
A tidal wave of change is here: the Internet is rapidly becoming the dominant media channel. It will eclipse all other media channels in terms of ad revenue, and already has in the U.K. Every day there's a new startup bringing us a step closer to a world resembling Minority Report.You can see the change happening around you: in smart phones, in TVs, in newspaper revenue, in the growth of the tech industry, and in social change. Facebook posts get people fired, while a brilliant Facebook campaign results in promotions. We're standing in the dawn of a Brave New World: a world where computer driven analysis trumps the best executive opinions... A world where we can target a nearly infinite array of interests and demographics... A world where marketing is the new finance...
In this New World, the availability of information has intensified competitive pressures. Consumers can find competitors and company reviews in seconds, and local retail is threatened by global competition. To excel in this New World, it's more important than ever to kick ass online.
And that's what this post is really about. Having an online presence is becoming easier every day, but truly kicking ass will never be easy. If you're content with where you're at, save yourself and stop reading now. A mind once expanded by a new idea never regains its original shape.
Now, for those that have the vision, resources, and drive to excel, Valitics' Online Revenue Model is key to success. If you consistently execute at every level of this model, you will find yourself knee deep in wealth sooner or later.
Valitics Online Revenue Model
The Pyramid
The pyramid goes back to a 1925 book, "Theories of Selling". Every sale, at every time, in every country, for every person, has followed this fundamental model.
A lively (and explicit) study of AIDA
Modern marketing technology can do some incredibly cool and mind-blowing things. But if it doesn't move people up the pyramid, or expand the size of the pyramid, then there's no business value.
Explanation of the Axes
The X Axis
The width of the pyramid tapers off because people drop out. You will never convert 100% of people who see ads into clients. You'll never convert 100% of website visitors into revenue. At each step in the sales process, there is dropout. Reducing dropout is awesome, but your pyramid will never be a rectangle.
The theoretical maximum width of the pyramid is also constrained by your market share and market size.
The Y Axis
As your prospective customers "climb the pyramid" they exert effort, invest time and attention, and endure opportunity costs (i.e. they could be doing something else entirely -- like grocery shopping). You need to be mindful of this, and ensure there are clearly communicated rewards for your visitors at every step in the process.
A website is a Skinner Box for people. If you're serious about influencing behavior to expand revenue flows, use reward schedules.
KPI's
Key Performance Indicators are measurements of success. All performance improvements boil down to one fundamental.
- Increase the yield of inputs
- Increase efficiency of output (more visitors, more revenue, more revenue per visitor, etc.)
- Increase efficiency of inputs (more sales per marketing dollar, increased revenue per employee cost)
Measuring is essential to achieve these two goals. You can improve something if you don't measure it, but how would you ever prove that an improvement was made? Without proof, how would you argue for increased budget or influence decision making? Luckily, computers make measurement and recording easy. Businesses can automatically collect millions of data points per month (or day!), with no ongoing cost, by using Google Analytics.
Even if you don't have clearly defined KPI's today, make sure you're collecting data. Data is a commodity that rivals the scale and value of old world resources like oil, cotton, and diamonds. Start gathering it now; it's one of the best investments you can make.
Attractors
Attractors create psychological momentum that pulls your prospect up to the next level of the pyramid. Effective attractors require:
- Data, to measure and record on a regular basis. Every business has a lot of this already!
- Software, to reduce labor costs through automation. If we could only do web analytics by hand written logs, it would be so expensive it would hardly make sense.
- Analysts, to make sense of all that data and make it actionable. As Avinash says, invest 10% in software and 90% in people. Data doesn't make decisions or profits by itself. The temptation is to get cheap/free software and keep your costs low, but the opportunity cost of doing that is giving up double-digit revenue increases. Think about it.
- Designers, to visually message your web prospects in a compelling way.
- Copy writers, to capture the attention, imagination, and desire of your audience through words.
- Programmers, to implement data collection, code web pages, and build features.
- Knowledge, of business and psychology.
- Communication skills, to navigate a slew of political, IT, personal feelings, and internal business issues that all stand in the way of improvement
It really does take all of these things to kick ass on the web. Having a few of these resources will still help tremendously. If you can't afford this investment now, work on it a piece at a time.
Detractors
Detractors create psychological momentum that causes visitors to regress to a lower level of the pyramid, or worse, dropout entirely.
What's good about detractors? Well they don't take any of the skills listed above, and they don't take smarts or hard work either.
A new Industrial Revolution?
In the industrial revolution, we had Spinning Jennies and trains. We created capital machines to increase production. In the process, we reduced people to inputs that we hadn't automated yet. That's why production jobs don't pay well, and continue to be replaced by machines.
In the information revolution, we have new capital machines to increase demand. The new capital machines are information properties (websites, Facebook pages, iPhone apps), and data driven marketing. The new capital machines convince people to buy, connect buyers and sellers, and provide a mechanism (payment processing) to transfer revenue. They don't make any tangible goods or services, but breathe life into production by providing previously unavailable demand. Case in point: this blog has readers from all over the world. Some of those readers will be future clients.
The Fallacy of Conflation
Often times, we think "yeah, I have a website/Facebook page/email campaign" -- so I'm covered. Right? Wrong. The barriers to entry have come down (it's cheap to build a basic website), but viewing all sites as the same is a very unprofitable mindset. Would you ever compare an amateur YouTube movie to a George Lucas film? Of course not. So don't confuse a small business retail site with Amazon. It's almost a certainty that your site can create more revenue, but before it can do that you have to accept that it isn't perfect and needs to change.
Parting Shots
The new demand generation capital machines are changing the world every bit as much as the Industrial Revolution. You might be lucky enough to see more technological, economic, and social improvements in your lifetime than generations before you did.
Marielaina Perrone DDS commented on 13-May-2012 06:08 PM