The Education Business Blog

OK - admit it, trade shows are fun. Sometimes traveling to a distant city, circulating with your peers, and dining out on the company can be a kick. You are learning too - about competitors and about your customers. The deadlines around a trade show can produce drama and tension, and some people thrive on that.

By comparison web marketing can be a daily slog and there isn't much direct contact with the customer. Web marketing requires persistence and patience. Success is metered in small steps and delivered incremental improvements over time.

In this article I explore who should prioritize shows and who should focus on web marketing and I share some ideas about how to compare the two.

I focus on these two activities because in most cases the best source of funds to drive growth in web presence is a bloated show budget. The palette of marketers is much broader - and the metrics used here can be used to compare the full range of options.

What's a marketeer to do?

Big companies are answering this question in different ways. Apple is shunning trade shows in education pretty much altogether (zero presence at FETC last week). Promethean had a campus sized booth, cheerleaders, and free gourmet cupcakes for all.

Who is right? As always the most important question to ask about marketing spending is "compared to what?"

In order to influence customers you need to be present in different media and locations (print, web, trade shows, catalogs, peer to peer, PR etc.). Customers lend credibility to companies they see popping up in different places.

A marketing budget is a series of compromises that should maximize visibility and revenue. One of the challenges in marketing is justifying visibility when there isn't a direct tie to revenue (i.e. when your CRM can't make a direct link). Depending on your circumstances both trade shows and the web can fall into this category.

I believe the relative value of trade shows has declined precipitously in recent years when compared to web marketing. That doesn't mean you should abandon shows, you just need to think very carefully about using them in the right way. At the end of the day what really matters is profitable revenue.

Lets dive into a pool of numbers to look deeper at this question.

Trade Show Economics

Lets make some rough comparisons to get a sense of the relative worth of the two channels.

Consider a trade show with 5,000 attendees.

• A company with a decent presence (a 20x10 space) might get 100 leads a day requiring follow up.
• If the show goes 3 days this equates to 300 leads.
• These leads will require sales time and energy to further qualify and in the end might be whittled down to 50 sales (1% of the attendees at the show).
• The cost of attending the event will probably be somewhere around $20,000 (booth space, shipping, travel costs, entertainment, signage, drayage) with another $15,000 or so staff time in setting up the show, manning the booth, and then qualifying the leads and closing the business after the show.
• Total outlay $35,000 and a cost per lead of $116.

Go to 10 shows and your annual show budget is $350,000.

With a gross margin target of 70% you need to make $1,000 per sale, or $500,000 to make these events revenue neutral. You should be promoting expensive products or reaching decision makers who buy in large lots to make these economics work. If your average order size is less than $1,000 you are losing money on the trade shows (using the lead/order flow assumptions above).

Scale this up or down - the basic economics remain the same. Go cheap and end up in the back corner in a 10x10 and your leads will drop and be lower quality. Glitz it up with rock star lighting and your cost per lead skyrockets along with the required revenue.

Non-Economic Benefits of Trade Shows

There are also non-revenue benefits to being at a trade show and these shouldn't be dismissed out of hand. You build brand awareness, network with other providers in the market, and provide support to current customers.

The most compelling benefit is that full fledged sales conversations can take place at the event itself. If decision makers (larger budgets, more influence) are present at a show then a low number of leads may not be as much of a concern, in fact the show may be an extremely efficient of way of meeting with large number of these folks in a short time.

In education this would argue for attending AASA but not IRA. The attendees do need to be walking the floor not playing golf, so your mileage will vary.

Another valid reason to attend a trade show is influence with the sponsoring organization. If the membership are important customers of yours it is good form to show up and support their professional association.

Brand impressions are less - well - impressive. Assume that 30% of the show attendees are paying enough attention when they walk by your booth that they get an impression. You will reach 15,000 people over the course of a year at a cost of $23 per. Yawn. At the end of the day (or fiscal year) top and bottom line results are all that count - impressions won't buy a cup of coffee.

One other thing - trade shows are moon shots. It is almost impossible to learn and modify on the fly - the event passes so quickly that if your show promotion or materials fall flat you have no chance to recover - until next year.

Internet Marketing Economics

Now lets look at a comparable example for web site.

• The company has invested a significant amount in building out their web presence using an outside contractor to do the heavy lifting which cost $200,000.
• Amortize this over three years and your annual expense is $66,000.
• In addition to this they have three people dedicated to managing the web presence for both content and technical infrastructure at an annual cost of $150,000.
• Ongoing SEO and on-line marketing might cost another $15,000 a year.
• Coding and contract design to tweak and extend the site might cost another $40,000 a year.
• Total annual expense is $271,000.
• Average daily traffic for the site is 700 visits with a 2% conversion rate to leads and 1% purchases.
• On an annual basis this translates into 255,000 impressions, 12,775 leads, and about 6,300 purchases.

The cost per impression is $1.06, cost per lead is $21.31 and the cost per sale is $43.01. The breakeven cost per sale (using the same 70% gross margin) is $61.44 and annually $387,000.

Non-Economic Benefits of Web Marketing

The brand impression argument is much more compelling for the website - the cost per impression is a fraction of a tradeshow's ($1 vs $23) and the volume is higher.

Even better - the quality of the raw leads you get on the web are often the highest short of personal contacts from your sales force. I carefully chose the phrase "raw leads" because the downside of web leads vs. show leads is that they are unqualified - no one has talked to them yet to get a sense of how truly interested they are.

But - these customers are actively seeking you out when they search on the web and then put their hand up for attention. At a trade show most of the people who stop are just chatting - they were walking down the aisle and needed a break. This is one of the fundamental differences in on-line lead generation and all other forms (here is an extended post on this subject).

While websites generate leads at a slower pace, over time they greatly surpass tradeshows in high quality leads because the volume is so much higher. It isn't even a tortoise and hare story since the leads from a 3 day trade show are equaled on the web in 10 days (100/day vs. 31/day).

The Bottom Line

So lets break it down. The following chart maps out the examples I gave above.

From a marketing investment standpoint these are equal - the return to the company after the cost of goods and cost of sales is zero. But this isn't realistic for a specific company - it merely shows the price points at which each option starts making a net contribution to the larger business. Between $61 and $1,000 the web is going to be a much better deal for you.

Get Real

The key is to make this specific to your company. You do that by applying your average order sizes and gross margins for shows and the web and your specific metrics (costs, response rates etc).

Here is an example from an average of a few supplemental companies that I have familiarity with. Their trade show related sales are typically double what they earn on the web largely because a Rep is actively working them. BUT - even with the benefit of this difference they are losing money on trade shows and are wildly profitable on the web.

To get to parity on the contribution margin if we hold the web order size at $250 the comparable trade show revenues need to be $4,000 per sale.

But what about gross margins - won't they affect this result? Somewhat - but order size has a bigger impact on this decision. If your gross margins are 90% you have a breakeven of $778 on trade shows and $48 on the web. If they are 40% breakeven is $1750 for shows and $108 for the web. The essential story doesn't change.

This example makes clear why Apple is shunning shows and Promethean is investing heavily. Apple sells tons of individual computers at something less than $4k with moderate gross margins while Promethean is mostly doing building or district level deals that bring in orders in six and seven figures with higher gross margins. The gearing all works in Promethean's favor for shows and in Apple's favor for the web.

In Conclusion

The conclusion is pretty clear - if your average order size is modest you probably should not be prioritizing trade shows (or you should be focused on dramatically increasing your average order size). Most companies should go to a handful of shows for the non-economic benefits - but choose carefully and scale your presence appropriately.

Don't be seduced by the work and "prestige" involved in trade shows - its easy to think that because you are busy and talking to customers that you are doing the most productive thing. Dig deeper - challenge your comfort zone on this.

Do you think about your web presence as a 24/7/365 trade show booth or is it something you feel like you have to do? Is it getting the same level of sustained attention that major events get?

Shouldn't it?

In this second of a two part series, guest blogger James Mayfield Smith responds to my post on Storyline in Textbooks and Video Games. James is an educational consultant, sales executive, and trained applied mythologist.

Part 1 can be found here.


Part 2 of 2: The Tactical Use of Story to Sell

By James Mayfield Smith

When done well, story can be an effective tactical approach for facilitating the buy cycle of a teacher or administrator. It can engage customers, humanize the sales process, build strong emotional connections, and stimulate passionate customer evangelists.

Lucky for us, the teachers and administrators who are our customers long to hear stories and share them with others. We can engage them with the power of business narrative as we architect conversations about our educational solutions. Far more than simply telling the right story at the right time, such a process involves.

• Getting clear about our own story of who we are as a company (and as an executive, regional manager, sales rep, etc.) and the value we bring so that we can be remarkable, as Seth Godin puts it.
• Utilizing data to follow the breadcrumbs to the story that districts are likely to be telling themselves. This allows us to ask the right questions when engaging administrators.
• Listening deeply to the needs of administrators and teachers, with the intent of discovering their deeper story of who they are and the underlying values that drive their decision-making. Such values are often very different, even for those who share a similar role across districts.
• Asking the right questions to find the polarities that plague them. For example, do they need to boost test scores with students who are on the cusp of proficiency, but lack dedicated staff to implement an intervention? Identifying the duality of where they are being squeezed is one effective approach to finding the precise lever that will close a sale, especially during tough budget times.
• Engaging our customers in genuinely relevant dialogue at each stage of their buying cycle. It’s the district’s buying cycle that determines the timing and outcome of the deal. We can facilitate targeted decisions at each stage to keep the purchase moving forward. In contrast, when a sales rep has entered “Presentation made. Awaiting decision.” into the CRM system and doesn’t continue to facilitate the buying cycle, odds are that the purchase may stall with a key contact who is overburdened with other decisions. We can bet that a competitor is moving their own deal forward to take the zero-sum dollars from the budget that might otherwise fund our solution.
• Using business narrative techniques (a.k.a. stories and conversations) to facilitate and co-create a shared future story featuring our customer as the central character and our company as a solution provider that meets their specific needs.

Find The Right Tool For the Job At Hand

At different stages of the buying cycle, such stories will look very different. Some stories are simply brief conversations. Others are facilitated by the salesperson and told by the customer, with a focus on the administrator or teacher feeling heard and important information being discovered. The intent of the conversations and stories are to move the buying cycle forward towards a solution that meets the need of the district and provides lasting value.

These types of stories might include:

• The Expectations for This Meeting story
• The Curiosity Arousal`story
• The Company Founding story
• The Why I’m Different Now (Transformational) story
• The Who Are You and What is Your Pain story
• The Consequences of Not Changing story
• The Greater Possibility story
• The Why I Care about This and Can Serve You Well story
• The Fostering Safety and Managing Risk story
• The How to Move Forward story
• The Cost and Benefits of the Solving this Problem (Price) story
• The Winning over Other Key Decision Makers story

Although a seasoned sales professional will immediately recognize the conversational value of such stories, each of these uses of story deserves an entire blog post of its own. For more information, the innovative financial planner and author Scott Farnsworth has done some excellent work in this area and provides a good explanation of how to use such stories for sales.

In Conclusion

As educational publishing professionals, we can harness the power that story offers as a vehicle for change. We can utilize story to help us serve educators, students, and our own organizations, and we can do so in ways that our minds and hearts are designed to do and even long for.

On a tactical level, you don’t have to be an applied mythologist to appreciate the benefits of utilizing story to generate revenue. Using powerful conversations and stories to help sell is an ideal approach for educational publishers.

Part 1 The Strategic Use of Story to Sell of this two part series is here.
Lee’s original post Storyline in Textbooks and Video Games is here.

Posted by Lee Wilson | Permalink | Email This Post | Comments (0)

Posted In: Culture , Data Driven Selling , Good Marketing , K12 Publishing , Sales Management

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In this first of a two part series, guest blogger James Mayfield Smith responds to my post on Storyline in Textbooks and Video Games. James has the coolest job title I think I’ve ever seen – Applied Mythologist. We worked together at Pearson several years ago, he speaks about Education Publishing from direct experience on the front lines of selling and authoring.

Part 1 of 2: The Strategic Use of Story to Sell

By James Mayfield Smith


I’ve enjoyed your posts on the potential of storyline for instruction. As a former teacher, educational sales consultant, and reading program designer, I’ve had many opportunities to see how a good tale told well can engage both students and adults in genuine conversation. Yet teachers are often left to work around their story-averse textbooks. Your analysis of why publishers in our industry are wary of strong storylines when designing instructional materials is insightful.

Story in Sales?

Many publishers also miss the boat by failing to see how the power of story utilized well can impact their sales revenue. Much of my consulting involves training executives to appreciate how humans respond to stories, imagery, and metaphor. By examining how we have told stories about ourselves for thousands of years, we gain valuable clues about the impact that telling and living into our stories has on us. With this information, we can begin to harness the power of story to teach, to create, to market, and to sell.

I discuss story-savvy selling in particular with sales training analyst Dave Stein in his Commentary on Sales Leadership blog. While Dave is quick to point out that story-savvy selling is an advanced selling skill, the five sales trainers who comment on the post enthusiastically share how they bring the power of story to bear with their own clients. Educational publishing executives may be interested in tapping into this power for their own marketing and sales force efforts.

On a strategic level, leveraging the power of story can be seen as a framework for the selling process in general. We all live out and perpetuate stories in our lives. For any sale to close, a buyer must let go of an old story of how to do something. The buyer must then embrace a new story that involves a different solution and a new way of accomplishing an objective. From a mythological perspective, trying to force a behavioral change while continuing to live an old story is rarely successful.

Most of us know a friend or relative trapped in an old story that they just can’t seem to shake behaviorally. When the old story is released, however, and a new story is fully embraced, the behaviors that result naturally from living into this story support a successful implementation. Applied to sales, the sale simply makes more sense and becomes more compelling within the new story than it would from the old perspective.

This change management aspect of sales is critical. Intelligent use of story is a powerful driver for facilitating change, particularly on the emotional and behavioral levels. Buyers usually make decisions on the emotional level, justify them with logic, and act on them behaviorally. Any long-time sales executive can regale you with stories of buyers who bought a product based on emotion rather than on the best fit for their circumstances.

An Example

As a young teacher, I once set out to buy a used Volvo, and then became emotionally enamored of a great deal on an “inexpensive” high mileage Mercedes. I bought the car and for the next two years, used a credit card to pay far more than my teacher salary allowed for the expensive maintenance. I had even heard that Mercedes vehicles were expensive to maintain. Yet this data was impersonal to me, and I had no emotional connection to it, so it didn’t even factor into my decision. I made an emotional decision based on my story that successful people drove a Mercedes rather than finding out all the facts about Mercedes ownership.

A good story that personalized the possible consequences of my decision might have curbed my romanticized story. This could have encouraged me to make a better decision for my circumstances. Telling the right story at the right time humanizes the sales process and accesses this emotional region, so that a seller can help a buyer make a more informed decision from the place where such decisions are actually made.

Three Reasons to Use Stories to Sell

But why the focus on stories, you might ask, rather than the emphasis on questions and conversations found in many sales training methodologies? Of course those are essential, as are other selling basics. But understanding the power of story is oft-neglected, so we’ll address this in particular here.

First, naturally talented salespeople are already (often unconsciously) using the power of story to sell. These naturals engage buyers with stories and tell key stories about other buyers to leverage a sale. Yet they are usually unable to articulate or teach what they are doing. Companies often joke about cloning their top sales reps – compelling storytelling is often one of their defining traits you should consider teaching it reps who are not using it.

Second, the selling power of story is a direct result of how our psycho-emotional-behavioral system responds to stories. After thousands of years of an oral storytelling tradition, we are hard-wired to respond to story in specific ways. After millions of collective bedtime stories and many millions more stories told for entertainment, humans have developed both a longing to hear stories (which supports the Hollywood film industry), as well as a calming and accepting approach to story. One effect of this conditioning is that stories allow buyers to bypass the somewhat irrational emotional defenses often triggered during a sales interaction.

Instead of reacting to a salesperson in a guarded way, buyers have the opportunity to relax into a story about a student whose life was changed or an administrator who successfully increased achievement in her district. Buyers are given the freedom to identify with any character whose wants, needs, and values match their own. This identification with characters process usually happens during a story. This self-selection dynamic draws our customers toward us and facilitates trust, like we are drawn to the heroes and heroines of a good novel. By allowing our customers to build emotional connections to characters and scenarios that are meaningful to them, we also build valuable bridges to ourselves as solution providers.

Third, and paradoxically, while stories relax our customers on one level, it stimulates them on another level by heightening attention and memory recall. The myths, legends, and stories of the tribe usually conveyed key data about where to go and not go, how to get home, what to eat or not eat, and other life-preserving information that was critical to remember. Thus, thousands of years of using story to convey important survival information has conditioned our brains to remember story well. Thus teachers and administrators will leave a conference and forget much of the data they took in, while remembering the stories they heard. By embedding sales calls within a story-rich framework, we provide our customers with anchors for retaining the key information about our company, our products, and the solutions we provide.

Coming in Part 2

Our next post in this 2 part series will address the tactical use of story to sell. We’ll discuss how to use the power of stories and business narrative to architect conversations about our educational solutions. We’ll also identify the different types of stories that are useful at different stages of the buying cycle.

James Mayfield Smith is an educational consultant, sales executive, and trained mythologist who applies the principles of depth mythology and the power of business narrative and story-savvy messaging to sales, marketing, and educational product development projects.

Lee's original post Storyline in Textbooks and Video Games is here.

This article is based on notes from a panel at the Ed Tech Industry Forum in New York that took place in December. The insights the panelists shared are no less relevant now that we are into the new administration and sorting out the economic stimulus.

The panel consisted of:

• Moderator - Todd Brekhus - VP and CMO Plato Learning
• Francis Alexander - VP - Scholastic
• Robert Iskander - CEO VIP Tone
• Dr. Steve Ritter - Chief Scientist Carnegie Learning

The panel members are operators which stood in contrast to most of the investor oriented agenda at the ETBF.

The common threads that emerged from the comments are summarized as:

• There is opportunity in this economic climate - children still go to school and it is a political priority.
• Everyone needs to sharpen their game and focus on articulating value more effectively.
• SaaS is a mixed bag - lowering initial costs but setting up a long term commitment School Districts may hesitate to commit to in this climate.
• The Obama Administration will be friendly to NCLB reform and technology.
• Technology enabled individualized instruction is a growing trend.
• Customers are implementing books first, technology second.

The panel organized the discussion around a few core questions and it is presented below in that format and sequence. I have generally refrained from editorial comment - even when I disagree with a panelists statements. As you read the comments remember that some of the them were tempered by the fact that both Plato and Scholastic are publicly traded.

Q - The Education Market has observed downturns in the past, yet companies have come out stronger with new products and more efficient business models. What is your view of the current economic situation and the education market.

Francis Alexander (Scholastic) - There is one evergreen resource - children. There is opportunity - but you have to be a lot more focused and sharper about how you approach your customer base. Even in California there are categorical funds that are available. Warren Buffet still sees education as the one growth sector in this economy. There is still a demand for innovation and schools have an urgency around closing the achievement gap and improving test scores.

Scholastic has found that a message about being safe and proven and being proactive about helping customers find federal funding for products resonates.

Robert Iskander (VIP Tone) - The economy is disruptive on a scale that was unanticipated even 3 months ago at EdNet. Education is going to be fine - the downturn will be selective. Companies that have a balanced portfolio of consumer and enterprise will do better than pure play on one side or the other.

There are areas of growth - but they share a focus on cost savings for the customer. Virtualization, technology consolidation, etc. Value propositions that will save money based through innovative technologies will be the winners. It will be a selective process. Virtual learning will keep travel and other expenses down.

Steve Ritter (Carnegie Learning) - Making the transition from relatively good times is going to require a huge amount of focus. It requires knowing your customer and keeping them satisfied. One of the nice things about education is that doing well saves them money by reducing dropouts - efficiency is not just about running operations less expensively but about improving educational outcomes the first time around.

Todd Brekhus (Plato) - Subscription based SaaS models are going to be a real challenge from an ongoing retention model because budgets are under pressure. On the flip side the up front cost of SaaS is lower so it is a mixed bag. They work hard to define a return on investment in dropout prevention etc. and articulate that for their customers. The ubiquity of data systems is helping here. Forty two states now have data systems to monitor policy in action.

Q We are at an inflection point. What is your long term view of long term trends.

Steve Ritter (Carnegie Learning) - More individualized instruction is a broad trend.

Robert Iskander (VIP Tone) - Everything is going to move to a web service given the cost savings vs. legacy systems. Content as a Service, Software as a Service, People as a Service. How do we integrate all of these into a single platform with 24/7 delivery and platform independent. This is what his company does - so his perspective is understandable but a bit narrow on this topic.

Francis Alexander (Scholastic) - ACT.

• A - Accountability is stronger than ever even post NCLB but the nature of the assessments will change. Obama's people are tired of "autopsy" assessments - they want more "well kid" check ups (more formative assessment and less focus on summative measures). Response to Intervention (RTI) is going to accelerate because of this.
• C - They expect a big push to college readiness starting all the way back at early childhood education. This will be accompanied by a move to IEP's for all students and long term mentors beyond their teachers.
• T - Technology is the enabling environment for this. It will move the emphasis from textbooks to on-line delivery.

Todd Brekhus (Plato) - Interoperability is a big issue. SIFA is going to a web services model. When combined with content metadata from the publishers we are approaching a point where differentiated learning can be tied to accountability.

Q - We have a major political change in Washington and throughout the country. What impact will will these changes have on funding at the federal, state, and local level. How will this affect the education market?

Francis Alexander (Scholastic) - Obama's team are starting to talk about where education fits into the stimulus package. The UKs stimulus package does address this - particularly for infrastructure things like e-Rate. Obama has talked about $500 million education in matching grants for education technology. [Note: the final Education number in the stimulus was over $50 billion].

Robert Iskander (VIP Tone) - e-Rate is tied directly to the economy since it is tied to phone bills. As people switch to VOIP it will decline. NCLB is a bit question mark. The eventual revisions may involve more technology but it isn't clear yet. Hopefully the bailouts will affect the Department of Education as well.

Steve Ritter (Carnegie Learning) - He expects Obama's administration to be more friendly to education technology. They also expect to see technology spending to become more mainstream in schools - it is becoming part of the way they do business.

Q - What tactics can companies employ during a time of economic difficulty to remain healthy and vibrant.

Robert Iskander (VIP Tone) - If you don't have cash you were expecting business as usual. Companies in this position are going to be making severe cuts. Strategic investments will have to wait. If you do have cash in the bank this is a great time to buy people who don't have cash.

Steve Ritter (Carnegie Learning) - The key is focus. Don't try to be everything to everyone. Geographic focus on a state by state basis. A lot of schools don't have enough bandwidth to run SAAS - so a local installation option is important.

Francis Alexander (Scholastic) - Everyone needs to control costs and cash. They expect the market to come back and when it does being in technology will put you in the right place.

Todd Brekhus (Plato) - Stay hyper-focused on delivering only the features that are essential and usable to drive renewals and keep your costs down.

Q - There are a lot of smaller companies and start ups here at the conference. What advice do you have for them to keep in mind during this time in our economy?

Steve Ritter (Carnegie Learning) - Focus more on your customers than on your technology. This is the time to understand what they need and how they operate. Your technology may be great but if isn't filling a real need you won't go far.

Robert Iskander (VIP Tone) - If you don't have money in the bank then stop what you are doing and go raise it. If you do have it focus on profitability in the short term.

Francis Alexander (Scholastic) - Be a good smart partner to school districts.

Todd Brekhus (Plato) - Focus on solutions not products. Make sure your return on investment is well articulated for all stakeholders and customers.

Audience Questions

Q - With all the emerging SAAS models are we exposed to a global marketplace? (Asked by Nelson Heller)

Robert Iskander (VIP Tone) - Knowing customer requirements is essential - US companies have a leg up in servicing this market. With a strong dollar there are some interesting opportunities to invest outside the US (India, Australia). Open source is going to play a big role in this economy.

Todd Brekhus (Plato) - This panel is made up of content companies - we believe good instructional design sells. There is a play for the objects - but the value chain hangs on how the content is presented to students and how it demonstrates improvement against standards. Most of the open source materials don't do this.

Q - Should you focus on print or technology in this climate?

Francis Alexander (Scholastic) - Scholastic drives delivery of book content across multiple media. They are working towards blended delivery. It isn't an either or but what serves the current need best.

Steve Ritter (Carnegie Learning)- They have seen strong growth in the print line. They expected it would be blended - but currently districts are phasing product in by doing the print first and bringing in the technology later.

Can a new product enter the education market and generate organic growth in the market? Not really. This is one of the core issues new entrants have to wrap their heads around as they think about how to sell and market to schools. Education is (mostly) a zero sum game.

Today we tackle issue #3 in our series on selling and marketing to educators.

Part 1 - Obey the Calendar
Part 2 - Education is not a target market - it is an industry
Part 4 - Design for Teachers

In normal times education budgets grow at 2%-5% a year. Most start-ups or new products need to grow at a huge multiple of that - 30% to 300% or even more. Mathematically in order for you to grow someone else is must lose out. Normally in a market that is over $500 billion you would think that there is plenty of room for growth. There is - but it is less than you might first assume.

The Challenge

In a business market, if someone comes up with a new widget that dramatically improves productivity, growth can come from increased profits and/or rapid market expansion. Three underlying facts about education funds make this much harder to leverage.

1. Education funding comes from four primary sources. States provide about 46%, local taxes another 37%, the Federal Government chips in 8% and the final 9% is from private sources (mostly private schools). Over 90% of this is government spending which does not have the volatility (up or down) that one can see in a business or consumer market. Lower volatility is a good thing in bad times - kids still show up in school every fall no matter what (for more on my take on who will do well in the current climate follow the link).
2. Most of the $500 billion + that schools spend is for people and services. Education is people intensive business and roughly 80% of school district budgets go for staff. So take off $400 billion. Of the remaining 20% almost all of that goes for services - buses, food, athletics, accounting, etc. At the end of the day only 1-2% is spent on instructional materials and technology ($5-$10 billion). Another $1-$2 billion are spent on education enterprise systems and services (Student Information, Accounting, etc.).
3. Within the instructional materials market many funds are dedicated to a specific purpose - further limiting the scope of what you may be able to compete for. These are called categorical funds. Examples include textbook adoptions at the state level and Perkins funds for career education at the federal level.

It seems kind of funny to say that the market is only $5-$10 billion. This is roughly the same size as Hollywood or consumer Video Games. But I have seen many business plans from people outside of education who trumpet the $500 billion number. It just aint so, don't be a n00b.

What all of this means is that your amazing new learning widget or software is going to have to steal market share from someone else. You may be thinking to yourself - "this doesn't apply to us since no one else does what we do - we don't have competition." Wrong.

I once heard a Principal tell a technology vendor that he didn't need computers to teach - he just needed a pencil and a pad of paper. At the most basic level he was right. If you are selling instructional materials you are competing with a teacher simply talking. You are also competing for their time and effort. At a more practical level some other vendor or product is going to loose out if you succeed.

Lessons
There are three lessons to take way from this.

First - be clear about who you are going to take market dollars from and where those dollars come from. This will help you focus your product offerings so that they meet the specific requirements of the funding source you are are going to tap.

Second - you must do your competitive research - too many companies are so in love with their own products that they don't spend the time to understand why customers are already buying competitive/alternative products. Assume you are going to be in a dogfight. You might avoid this - but don't plan on it.

Third - this market grows more slowly than others but once you have customers it is less volatile. When you have grabbed a piece of the market it is often solid for years - if not decades (see Plaid Phonics at 50 years and counting). The downside is that some investors will push you to grow at an unrealistic rate given the time it takes to build a position.

Other Options

At the outset I said that education is (mostly) a zero sum game. The "mostly" is because there are a couple of extrinsic sources of growth.

One option is to bring in sponsorship dollars from corporations and non-profits - essentially making your products free to schools. Channel 1 and Whyville (client) are both good examples of this approach.

Another option is to lobby for additional government spending - earmarks. This is usually more opportunistic than deliberate - policy makers decide on a priority and companies work to bend it to their advantage. Voyager and Dibbels fueled a lot of their growth this way.

Foundation grants are a good way to get started - but with rare exceptions they do not provide a sustainable business model and in most cases they are restricted from overtly supporting commercial ventures. If your product happens to get purchased as part of a larger initiative that is fine, but outright support would be extremely unusual.

Conclusion

Once you have selected a target market (see #2 on the series) you need to do additional homework and determine how those customers are meeting their needs today and who your competition is. Driving the kind of rapid growth a new product or start up demands requires that you know who you are displacing. Your products and messaging can only be tailored to the situation when you have this level of awareness.

Part 1 - Obey the Calendar
Part 2 - Education is not a target market - it is an industry
Part 4 - Design for Teachers

Rookies in the education market make a set of common mistakes. There are five concepts you need to grasp about selling to schools that will help you avoid execution error as you enter the learning market. Consider these the iron laws of marketing to public schools. Accept them, nay embrace them, and your job will be easier.

In my consulting practice I go through these topics with almost all clients who are entering this market from other industries or countries. In this series I will post my thoughts on each of these rules and I welcome your comments and reactions. We will cover:

Part 1. Obey the calendar. Schools buy on a regular schedule, design your business around it.

Part 2. "Education" is not a target market - it's an industry. No matter how great your product you need to pick a target market to focus on.

Part 3. This is a zero sum game. In order for you to win someone else has to lose.

Part 4. Teachers don't have the time to take the rough edges off your product. Teachers make or break a product.

Part 5. It's all about learning - mostly. You need to know the politics of selling to schools.

Iron Rule #1 Obey the calendar.

It doesn't matter what you are selling - 60%-70% of your sales will come in the months of May-July. There are two reasons for this. First - most schools want to install, organize and train on new products during the summer when the kids are off. Introducing big changes during the school year is just too tough. Second, most school fiscal years go July-June. This means that they either have money left at the end of the year to spend in June or they are spending out of new budget authority in July.

This ebb and flow affects the entire business.

Sales - The fall season is spent generating prospects, during winter you demonstrate and write proposals, and spring is time to close the business. Deals do happen outside of this window (30%-40%) but they are spread over 75% of the year.

Product Development - In order to meet your goals you need to schedule product releases so that you can demonstrate them starting January 1 and ship them starting May 1. It may be necessary to pilot products starting Aug 1. If you are shipping an update it needs to be ready by May.

Marketing - Marketing works 2-3 months ahead of sales - creating awareness campaigns in the summer to run in the early fall, sales tools during the fall months, events during the winter months, and then planning for the next year in the spring.

Support - This group will always have a spike during the May-August time frame and it is useful to have a cadre of trained part-timers who can step in during these months to help with installation and training issues.

Finance - Your line of credit also needs to carry you through the lean months - make sure finance understands this.

I've worked in computer hardware, enterprise software, textbooks, supplemental materials, and education technology and they have all followed this schedule. You are not likely to be the exception to this rule.

In many ways this is similar to the retail world with their huge annual spike at Christmas. The good news is that with decent pipeline reporting you can usually tell several months ahead of time what your sales are likely to be. Budgets for education are set at the start of the year so there isn't the kind of economic uncertainty you find in retail. Most of the companies I've worked for were able to predict within 10% what their annual sales were going to be by the end of the 1st quarter (usually January).

Part 1 - Obey the Calendar
Part 2 - Education is not a target market - it is an industry
Part 3 - Education is a zero sum market

Education Channel Partner published a story I wrote about partnerships for companies that serve the education market. Whether you are a textbook publisher, an education technology developer, a fellow management consultant, or a reseller/dealer I hope you will find some useful ideas in the article. Think of it as Business Development 101 for education.

Too many partnerships fail because the partners didn't work through all the questions they needed to address individually and mutually. This article attempts to lay out a process for evaluating partnerships and a partnership taxonomy to help determine what kinds of partnerships are right for your company. It draws on my experiences at Apple, Chancery, Pearson, and Harcourt.

From the blurb:

Why do some partnerships succeed and others crash and burn? In profitable K-12 partnerships, companies carefully structure the relationship and know exactly what kind of partner they need. Here’s a guide to the elements of a successful partnership and a taxonomy of the kinds of K-12 business alliances out there.

The title - Making Channel Partnerships Work - is a bit misleading since the article covers more than channel partners. I address co-marketing and a couple of other topics outside of channels.

I'm really pleased to be working with the team over at Education Channel Partner. Later this year they are publishing another article from me on data driven selling. That article expands and develops the ideas noted in this post from last spring - Data Driven Selling - Quick Start Guide.

Link to the full partnership article.

What do large school districts need from ed-tech providers? Michael Casserly Executive Director of the Council of the Great City Schools spoke at the Software Information Industry Association (SIIA) conference this week in San Francisco. The speech was direct, honest, and well balanced in tackling some difficult issues like NCLB.

Towards the close of the speech he made the following 10 requests of the Ed-Tech community. I've added my perspective from the industry's side of the conversation.

1. Provide tools that build academic vocabulary and develop high order thinking skills. I found this an interesting request given that all the major publishers and several mid and small sized publishers have materials that do all of these things. Either we are not meeting the real need with our products or we are not getting the word out effectively. This should give all of these providers cause to reflect on their offerings and their go-to-market strategies.

2. Provide targeted intervention materials for Special Education (SPED) and English Language Learners (ELL) - specifically age appropriate materials targeting different ability levels. This is a similar problem to issue #1, there are a fair number of existing resources in the market already, but most of them are print based. One area where technology could make a huge difference is flexibly scaling basal textbook content to the student's ability level. Doing this with print presents two intractable problems - the sheer number of variations needed is prohibitively expensive and the stigma associated with the lower level books causes kids to resist using them. On-line everyone is in the same application and the number of variations is limited only by the sophistication of the software engine.

3. Develop virtual environments to stimulate inquiry based learning when the real materials would be too expensive or dangerous. This is an exciting area with a lot of activity. My article in Cable in the Classroom covered this very ground. Virtual worlds do present a challenge in districts with high poverty around equity of access to technology. The path of least resistance here may be cell phone based interfaces similar to what is happening in Japan and Europe.

4. More group learning resources using technology. Honestly - I was writing like crazy and missed the substance of this request. If you were there and recall please explain in the comments. [Update: see Charlene Blohm's take on this in comments.]

5. Clarity from publishers on what our materials do and don't do. There is a feeling that technology vendors have either over-promised or omitted important product shortcomings. Fair enough. The temptation is always there for vendors to do this - but in the conversation economy it can be deadly. Trust is the coin of the realm. Sales Management has a responsibility to set the right tone of integrity and honesty.

6. Provide clear alignments to standards in a deep and meaningful way. They would also like to know where we don't meet the standards - don't force them to figure it out on their own. Vendors might be more inclined to do this if we feel that it is more than a check-off item. The cost of doing correlations and maintaining them is significant and yet from what we can tell once they are submitted they are never used again. We do this little Morris Dance around the standards and then districts buy the book with the prettiest cover.

7. Stick by them - they are in it for the long haul and they need business partners to trudge that road with them. This is a legitimate request but a hard one to implement due to the management turmoil many large districts suffer from on an ongoing basis. It can take years to position a sale in a large district only to see it derailed by a reorganization or funding re-allocation. Only the largest publishers can make this kind of sustained commitment which limits the range of innovative solutions that the large districts see.

8. Longitudinal follow up with effective professional development. He also requested that we bundle PD into the cost of the products - if PD is an add-on option there is the temptation to skimp in this area. This request is consistent with the thesis that we are going to see a Negroponte switch to districts paying for PD and getting the materials for free. Of course, the easiest way for districts to insure that this happens is to issue their RFPs with PD bundled in. Until that happens vendors who are competing on price are going to leave it out. Amplifying this temptation is the fact that PD is frequently the item with the lowest contribution margin at publishers and ed-tech vendors.

9. We should resist customizing our products for one district - too many districts have had been left behind on legacy code as a result of this. I'm really not sure that the vendors are at fault on this one. This usually happens when a large district flexes their market power by demanding special attention. I've known vendors who have walked on these deals because they see the problems down the road, but there is almost always someone willing to bid it exactly the way the district requested it. See my comment below on how the Council itself could play a positive role in these situations.

10. Provide software tools that help them use data more effectively. This includes longitudinal tracking systems, dashboards, and benchmarks. This is an area where lots of companies are doing important work. Student Information Systems, Data Warehouses, Assessment Reporting Systems, and Learning Management Systems are complex software systems that are evolving rapidly. This is also one of the areas where technology, used effectively, can provide real tools for change.***

On top of all this he added a bonus request. He asked that vendors resist selling products when the district wants to use them in an inappropriate way (wrong age level, insufficient infrastructure, etc.). This is related to item 9 above. If a vendor feels they are being pressured to do something like this it is hard to push back, particularly in a competitive situation. Responsible vendors will walk away - but there will always be someone who will make the promise to win the business. I think there is an opportunity for the Council to be of service in this area. If the responsible vendors felt they had place they could go before these deals were sealed it might make a difference. The Council could put a word in with the district that they were headed in a risky direction.

Large Districts (and States) need to resist the temptation to use their market power in ways that ultimately hurt their own interests. There are perfectly legitimate uses for that market power so I'm not advocating unilateral disarmament - just suggesting that some restraint is needed on both sides. Districts shouldn't make unreasonable demands and vendors shouldn't make unrealistic commitments.

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***I'm working on the Data Driven Decision Making Report that will be released in the next few weeks. It is an in-depth look at the SIS and Data Warehouse market and is a follow on to the 2003 report. If you would like more information please use the contact us link and reference the report.

Busking teaches fundamental business concepts. As a young man I saw the world by tossing open my banjo case and belting out a few tunes. I played in Boston, Montreal, Tokyo, New York, Paris, San Francisco, Seville, New Orleans, and Amsterdam to name just a few spots.

Along the way I absorbed some interesting lessons that have helped me be more effective in the business world.

1 - Make people feel something. People respond to musicians who make an emotional investment in their performance. Laugh, sigh, get that ache in your voice, and share your joy.

• Address your customer's unstated social needs. Will your product make them look better? Will they feel more professional using it? Is it cool?
• Build products and deliver services that go beyond the basic spec. Make your product something people are proud to have around.
• Never check your soul at the door of the workplace. If you have to - find another job

2 - Respect your audience by mastering your craft. The goal of practice is to work so hard that performance looks effortless. When you play well the audience will reward you, not the guy who knows three chords and two songs.

• If you can afford the time, get things right on a small scale before you try to master the universe. Build practice time into your business plans.
• Read, go back to school, fill the gaps in your knowledge in any way that you can. Make opportunities to practice your craft in service work.
• Learn the black art of setting and making a budget.
• Cross train - invest in your career by doing a variety of jobs.

3 - Play well with others. Street scenes are like market niches, you run into the same people every day. Most afternoons in Paris I would trade off sets with a Peruvian pipe flute band in an alcove down in the Metro. It had heavenly acoustics (that I still dream of) and we both made tons of money.

• Get involved with your industry associations. They tackle problems no individual business can.
• Never speak ill of your competition - just out-hustle them. Customers don't want to know about your rivalries - they want a solution.
• Network to find others with complimentary skills and bring them into deals. Most (not all) will do the same for you in return, expanding your deal flow.
• Be loyal to people. Look after each other because the company won't.

4 - No one wants to be the first customer. Buskers always start by throwing $3 their own change into the case.

• Give a new product away to the first two customers. Factor this in to your business model as an expense. If it makes you feel better make them pay for training.
• Donate your time to get started in something new. My first consulting client several years ago paid me a straight commission for business development work. I was able to show up at conferences legitimately representing a client which made it a lot easier to find other clients. That first deal was lousy for me, the other deals were the gravy.

5 - Don't rush to judgement, sometimes it is just a bad day. There are days when the weather is wrong, you are there at the wrong time, your fly is down, or people are just being ornery.

• Give ideas and people more than one chance to make an impression.
• Be leery of a single focus group - if you get the same result from several then you are on the right track.
• Bring job candidates back for multiple interviews and make sure they talk to a variety of people.

6 - Have fun. The purpose of busking is to pay for your adventures. Go see the ruins, sleep in, enjoy a long coffee, stay out late, and enjoy your trip. In the business world this means:

• Take risks that move you towards your personal goals.
• Remember that you work to support your life, not the other way around.
• Have a laugh or two in meetings.
• Take your dog and your office down to the coffee shop by the lake.

Marketing and selling in the era of infinite input feels like howling into a gale. The average urban dweller is subject to 4,000 ads a day, 1 every 14 seconds. The only sane defense is to tune it all out, to turn it into wallpaper for your world.

Earlier in this series on Information Overload we looked at our broken paradigms of information management, a new personal productivity paradigm, and 10 ways to build instructional products for today's learners. Today we look at what this means for those of us in the persuasive professions. The suggestions here are not just for education publishers - they are what I consider best practices for all marketers.

The fundamental problem is that the signal to noise ratio has gotten completely out of whack. I have an email account that I've been using for several years. Spammers have gotten their grubby little mitts on it and I now get over 3,000 spam emails a week at this address. I have great filtering - less than 100 make through so that isn't the problem. The issue is that I no longer bother looking for false positives - I just delete it all and hope/pray that if it is important the person will find another way to reach me.

So what is a legitimate marketeer to do? Here are some suggestions for how to rethink your marketing and sales mix so that you can stop shouting and start conversing with your customers. Fundamentally it is about what I call Socratic Marketing.

I'm assuming you have read at least the first installment in the series, what is below will make more sense if you have.

Marketing & Sales Concepts For The Conversation Economy

1 - Be remarkable - You should have a winning promise and make sure that everyone in your company understands their role in making it real. Do something worthy of sharing with other people and customers will find you. Seth Godin writes consistently and persuasively on this topic. This is the bedrock of the new approach.

2 - Stop shouting. You can't have a conversation when you are screaming. Beyond the obvious (opt-in lists) you need to look at every communication and ask whether it is relevant, important, and actionable for the target audience. Make sure you hit all three. With the time you save from implementing the ideas in Part 2 listen more. With social media, blogs, and wikis It is so much easier to do today that you have no excuse.

3- Respect people's time. Less is more. Here is a great example.

4 - Be there when the customer is ready. Post information on your web site that maps to different stages of the sales cycle. Initially have general comparison charts that help prospects form a mental map of the market. As they get closer to buying have the detailed specs on hand. After they have purchased send at least one message with tips on how to get the most out of the product.

5 - Relax Grasshopper - This new information economy is not kind to control freaks. The goal is to help your passionate users find ways of communicating with their peers - what they have to say is going carry a lot more water than anything you say. That said, if you open up communications with customers you lose control of some of the content and some bad stuff is going to crop up. This is really an opportunity to engage in conversation. Would you rather they complained behind your back where you can't respond? In the end the benefits of openness far outweigh the negatives.

6 - Make it personal - In a sea of corporate dreck people respond to the genuine and personal. Boeing's Chief Marketing Officer has a blog, Randy's Journal. This forces a more honest interchange - he is speaking from his own perspective. It allows him to talk about issues that he has expertise on (e.g. the fabled 7 extra inches of cabin width on the Airbus translates into a pencil width for each seat). People expect you to have a perspective but they also respect the expertise you bring to their information gathering.

7 - Stir up some channel conflict. In an era when all the rules are changing and no one knows for sure what is going to work you had better get comfortable with channel conflict - you have to try a lot of new things to find what breaks through. Put a few products in on-line teacher communities like We Are Teachers [client], allow customers to build custom bundles on your website, or publish something just for the on-line world.

8 - Don't hide information with the hope that you are going to "force" the start of a sales conversation. You will just frustrate customers who are used to instantly finding what they need. In fact - go the opposite direction and constantly fine tune your site to increase your pageviews and make sure that the navigation is as intuitive as possible for the largest number of users. Don't manage your website as a job protection scheme for your sales reps - you don't do them any favors by pissing prospects off early in the process. If it is a complicated sale the customer will want to talk to a Rep.

9 - Worry more about communicating with your customers than about your competitors. Don't kid yourselves that the competition won't get access to information if you hide it - after all you get your hands on all the competitor's info - don't you? In a world where information flows so easily it will find its way out whether you want it to or not. The only person you will really inconvenience is a prospect.

10 - Its the Web Baby - Optimize. Take a hard look at your web site and the various search strategies customers use to find you. Are you at the top of the search results every time? Do your writers know how to load up searchable text in your titles, tags, and the first paragraph on each page? Is your copy tight, punchy, and hyperlinked where needed? When a customer gets to a product page is there more there than a part number and a price? Measure your results on everything and move resources towards what is most effective, even if it seems counterintuitive.

We hope these ideas help you get started on the road to building a robust conversation with your customers. To find the budget I suggest you downgrade trade shows and invest the savings in on-line presence. Most organizations continue to invest far too much in trade shows out of inertia. Think of the new stuff as building a 24/7/365 trade show booth if that makes you feel better.

If you have tried some of these ideas or have additional tips to pass along comment away!

Information Overload Series

Part 1 - It’s all in your head - really
Part 2 - A cure for “a poverty of attention”
Part 3 - 10 Ways to Build Instructional Products For 21st Century Skills
Part 4 - 10 Ideas to For Marketing & Selling In An Age of Infinite Input
Summary - Closing Thoughts and Resources

Picking a target market is one of the most fundamental decisions a sales and marketing team makes. Your target market determines what products you build, where you promote them, and how you talk about them. Socratic Marketing in the budding conversation economy demands a rigorous approach to this question as part of your Big M Marketing approach..

Picking a good target market is a balancing act. The smaller your market the higher your odds of success in targeting specific needs. However, that has to be weighed against the financial objectives of the business. You can’t get so small that you define yourself out of a job! Think of this as two forces that are inversely proportionate. Your goal is to find the right balance point.

So why do so many companies get this wrong? They define markets based on granfalloons, a concept coined by Kurt Vonnegut which means "a proud and meaningless association of human beings." For example, have you seen segmentation schemes based on geography, district size, or % of free and reduced lunch students? If you are engaging in data driven selling and/or socratic marketing these are good starting points, but they are not the most powerful way to define a market.

A far more effective approach is to define your market based on how customers think about their problems. After all, in a conversation economy their problems are the topic you will discuss with them. “Fine,” you say, “but I can’t look inside their head to see how they think, I can’t measure that to determine if the market is big enough.” Fair enough, but if they really believe something their actions will speak louder than words. You can observe where they spend money and time to tease out what their priorities are.

On a sail there are dozens of tiny strings, tell-tales, woven into the fabric that show how the wind is moving across the face of the sail. This allows the sailors to trim the sail for optimum performance. As a metaphor this works perfectly for the concept we are after here. We can’t see how our customers think, but we can observe decisions they have already made to get a sense of it.

For example, at Chancery when we released Open District in the mid 90s we decided that only large districts would be open to purchasing the product so we didn’t even bother setting up pricing for districts with fewer than 10,000 students. Almost immediately however our Sales team was telling us that smaller customers were interested. When we dug a little deeper we found that it was far more important how customers saw the role of data in decision making than how big they were. The tell-tale we used to determine this was whether or not they had hired a Database Administrator (DBA) to manage their IT systems. This allowed us to be far more precise about our targeting while expanding our footprint at the same time.

On the curriculum side you might have products that appeal to constructivists or to advocates of guided reading. For the former you might look to see if they are using any products from members of the Constructivist Consortium. For the latter it might be relevant if they have maintained a librarian on staff or if they have a bookroom. Your products might require a fair amount of teacher training - look to see how they are allocating their budgets in this area. If you are selling technology you might key in on whether or not they have installed electronic whiteboards.

The goal is to find a handful of tell-tales that marketing and sales can use to focus their efforts. Marketing can use it for list selection (only give us Districts with a DBA) and Sales can use it to qualify prospects (check - they have whiteboards).

In the end the way you define your target market should be unique to your business but it should go much deeper than superficial indicators. Your goal is find a group of customers who are thinking about their challenges in ways that make them particularly open to the solution that you are offering.

It is easy for a sales force to fall into a comfort zone. Data-driven decision making techniques can help insure that Reps are reaching beyond their current contacts.

In many companies there is a great deal of data about the market. The challenge is to drive this into your field organization so that the Reps and their Managers are probing for untapped market potential on a regular basis.

There are some simple and quick ways to start using data in selling to schools and school districts. This post outlines some ideas for how to encourage your sales force to adopt a more data driven approach.

More below the fold…

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