Recently I had a chance to interview Sean Dolan, Chief Operating Officer at Pushfire, about how things are going at Pushfire as well as his history with us here at SEO Book.
We also included how we played matchmaker for him and Rae (sorta...in a really roundabout way) :)
In all seriousness though, this is a fantastic read. As Google continues to hammer away at SEO profit margins for smaller webmasters, mom and pop shops, smaller local businesses and so on (through unforgiving and somewhat chaotic, frequent, wide-ranging updates) it's good for newer industry folks, or seasoned webmasters considering a jump to agency services, to see the documented evolution of someone like Sean.
1. Tell us about how you got started in the industry and what led you to SeoBook?
In 2008, my uncle sent me a link to the latest of his out-of-the-box ideas, The Extreme Cubicle Makeover: Red Mahogany Luxury Paneled Cubicle with Dark Cherry Hardwood Floors. I was excited to hear his tales of traffic numbers and noise generated by the common cubicle, taken to an extreme every cubicle dweller dreamed of. It was different; it started conversations around the virtual water cooler. It was remarkable.
At the time, I was over a decade into running my DJ business, built around word-of-mouth advertising the first few years, and in the last few years business flooded in from successful Adwords campaigns. In my first month of Adwords, I spent $800 and booked over $8,000 in contracted gigs. My uncle’s success shifted my paradigm, and got me excited about the potential of SEO and Viral Marketing as an additional source of business. I was filling up my DJ schedule fast with Adwords, but I wanted more!
I went to the bookstore and grabbed the first book I saw: “SEO for Dummies” by Bruce Clay. The book was printed in 2004, and I was reading it in 2008. As I read more about search engine algorithm changes, I began to wonder how useful the information would be, but I soaked up every word regardless. After I finished the book, I jumped online to find more books to read, maybe something more current. I searched “seo books” on Google, and there ranking #1 was SeoBook.com. I began to scan the SERPs, reading descriptions of each result. Then I realized that if I was going to get information about how to rank in Google, I’d better choose the person that ranked #1 for what I instinctively searched. I immediately signed up as a paid member.
2. What were your first impressions of the paid SeoBook forums, training area, and tools?
I wanted the training material bad. My decision to purchase membership was based on the training material alone. Tools were nice, and community was great, but I didn’t see the use for them until after I read all of the training, which I did. I read everything. I couldn’t believe how much actionable information I had. I literally took notes as I read, organizing them into what I would implement immediately, and what I would implement later.
It wasn’t until I finished the training that I began to sneak around the member forums, saying nothing, but reading everything. Threads went back for years with hundreds of ideas I could still implement today. I realized that while the training got me up to speed, the forums dug very deep into theories and opinions with each person offering a unique perspective due to their industry and level of competition, openly providing real data from their experiments. And every day, there was something new, something I could implement. My plan to purchase a single month of Seobook.com, read all of the training material, and cancel my membership, had failed. I was hooked.
3. Can you talk about how SeoBook's community helped with the success of your site?
Using the member tools, implementing what I learned from the training materials, and the forums, I was soon ranking #2 for “Houston DJ” along with many other valuable terms. The organic leads came flooding in, and I paused my Adwords campaign. A few weeks later I was booked solid every Friday, Saturday, and Sunday for the next 4 months, and had contracts for dates up to a year in advance. I was passing leads to fellow DJs like candy. I was making about as much money as a one-man-show could make.
4. Privately, you mentioned to me that SeoBook changed your life. Can you expand on that a bit with respect to the initial success, followed by the launch of your own agency, and, of course, how your wife fits into the timeline?
I quickly realized that in hitting my capacity as far as how many DJ gigs I could handle by myself, the next step would be to hire DJs and manage them. This didn’t excite me. One of my DJs was arrested for a bench warrant on his way to a gig. I had to run out the door and perform, showing up late, and I hated that. I saw so much more potential online, and I wanted to help other local businesses do what I did with my company.
Late in 2008, my father was laid off from his job due to downsizing. Rather than run right back out to a job in the corporate sales industry he was familiar with, he was looking for something new—and I was just discovering something new. So we decided to join forces and create an agency called Ascendgence, LLC.
We both knew that we needed more than only my DJ Business as a case study. We needed something big. We needed our own “Extreme Cubicle”; something to get our name out there; proof that we could harness the power of the Internet to produce an intended outcome.
My father and I initially discussed offering pro bono services to a local business that was failing to help turn them around. Save them. Then, something struck me. On February 7, 2009, I started a thread in the members section, and posted this:
“Driving down the street last week I saw a very nicely dressed business woman on the corner holding a sign that said "I need a job". Having freshly logged off of SeoBook, seeing the world in terms of opportunity, I thought to myself, "Hell, change that poster to mysite.com and you're hired!" I told the members of the Seobook forums.
“Well, that grew into a very, very different sort of idea that I will be sharing with the community a few days before we launch this.”
The feedback I received from the members' forum, equally encouraging and critical, helped shape my project into the success it became.
www.PimpThisBum.com launched on February 17, 2009. Exhausted from days of implementing the strategies I learned from the Seobook forums in preparation for the launch, we had Tim, a homeless man dying of alcoholism on the street, at the end of his rope, and gave him a sign to hold that said “www.PimpThisBum.com All Major Credit Cards accepted”. As was carefully planned, all hell broke loose.
Tim, my Father, and I were interviewed by dozens of radio stations, local and nationally syndicated, interviewed on Fox & Friends morning show, featured on CNN, joked about by Jeff Foxworthy on the Rachael Ray Show, featured in 100s of national and international outlets—including The Sydney Morning Herald and Der Spiegel. In 4 very busy months, we raised $100,000 in personal donations and in-kind contributions, put Tim through rehab, and got him off the streets and reconnected with family he hadn’t seen in 35 years. Today, Tim is over 3 years sober and still off the streets.
Anyone interested in reading the entire thread from day one, can find it in here in the members forum.
As was intended, this helped our newly formed business. Fortune 500 companies didn’t come banging down our door, but we had a story to tell when we pitched prospects. For Ascendgence, PTB proved that we were loyal, and committed. Tim was our first client, and we followed through on what we promised him, and worked as hard as we could for him to help him achieve his goals. His goals happened to be sobriety and a normal life. The sobriety came, but it took a while for things to get ‘normal’. At one point, Larry King asked for an interview, and Tim decided it wasn’t a good idea because he’d already started rehab. Turning down Larry King for an interview was anything but normal.
The clients came. Some great partnerships were made. For that next year, I spent every bit of spare time reading the Seobook forums, and rereading the training materials. During this time, there was so much information; I rarely read anything outside of the forums... because the information I found in the forums worked.
After nearly 3 years as partners in Ascendgence, my father and I came to the decision that we were better as father and son than we were as business partners. As we grew, the business put a strain our personal relationship. We came to the decision that I would buy my father out of the company. Soon after, he took a VP position at Bank of America.
So, let’s back up to how my now wife, Rae Hoffman AKA Sugarrae, fits into this. I heard about Pubcon from the SeoBook forums, and I was debating on whether to go to Pubcon Dallas 2010 or not. Heather Reisig, known as grnidone in the forums, told me it was a good show, even though it was smaller, and specifically recommended that I spend time in the smoking section, in order to network. I did as I was told. At the first networking event, Rae came out and we chatted about business a bit. She mentioned she was going to the Fox and the Hound after (not to me, just in general). Uninvited, I went to the bar, pounded 3 Jack and Cokes to work up the courage to approach her and offered to buy her a beer. As it turns out, Rae rarely turns down beer. She challenged me to go drink-for-drink the next day. The rest was a blur.
Rae and I had an instant connection. By the end of PubCon we were making plans to visit each other (she was in Canada at the time; I was in Texas). It really was love at first sight. She was all I thought about—my world—and I love her more today than ever. We got married seven months to the day that we met in November of 2010 and we moved our (now) family to Texas in December of 2010.
After running Ascendgence by myself for a few months, Rae started having extra demand on the consulting side of Sugarrae. We saw that our two businesses: Ascendgence and the consulting aspect of Sugarrae, had a lot of overlap in services. Not wanting the business to cause tension in our relationship, we were slow to act. We tested it out for a few months and found that we worked very well together, not only personally, but professionally.
5. There's lots of negativity out and about this industry, but I see lots of opportunity. Granted, costs have risen and Google has trimmed the organic results in some pretty profitable areas, but SEO is still a major, major hub for getting in front of online prospects that are explicitly interested in your service or product?
I came into the game going up against a smarter Google than those who'd been in the game for decades. I had to start from the get-go with learning more about how to build web businesses with defensible SEO, than exploiting algorithmic loopholes. Long-term strategies, defensible links, caution over greed, the recipe for an agency guy.
It still amazes me how many large companies don’t know the basics. I’ve experienced billion dollar companies with no analytics, medium sized companies with broken contact forms, and manufacturing companies with nofollowed homepages. Entire websites disallowed by a developer who forgot to change it before launch, and these companies, for years, never knew any better. There’s a huge market for SEO Audits, including some of the largest companies, with not only enormous budgets, but huge gains to be had by fixing these problems. As an agency, you have flexibility. If the future of Google is favoring big brands, then that’s where you pitch your services.
At PushFire, on a regular basis, we turn down companies we don’t think are a good fit for us. We only work with those we think we can do great things for. This is why I chose the agency life. I get satisfaction out of watching my clients’ businesses grow. I love meeting with them and showing them reports of huge gains. Link Building is another service we provide. We promote the highest quality content, no short-cuts. I love motivating my staff with trips to Vegas or iPads for top performers. I enjoy doing team building events like bowling and laser tag to show them we appreciate their hard work. I enjoy running an agency.
Now, for those of you who hesitate going the agency route—there’s a lot of room for small, capable agencies. You don’t need to be a known “rockstar” in this industry to have a successful agency. Bottom line is that there are tons of industries where the competition is not ultra competitive, the clients and their competitors are simply uneducated. The client doesn’t care if you can rank for online gambling or which conference you’ve spoken at. They care if you can rank THEM for THEIR topic, in THEIR market, against THEIR competitors. Remember, there are far more companies that can’t afford a “rockstar” than those who can.
6. There's lots of interest, from folks I talk to, about running their own agency (to some degree). One big hurdle for webmasters who are not used to time structure/resource structure is company infrastructure. How does your company handle stuff like a CRM, project management system, email, document management, etc?
We use Highrise for CRM, Basecamp for project management, Outlook for email, and Dropbox for document management. Our developer churns out amazing tools for our team to use, as well as for management to keep track of performance and client reporting. Raven Tools has been a major help in organizing our link development. In fact our most used tools are built using the Raven Tools API.
Find a good partner. Rae and I complement each other. I enjoy client calls, she does not. She enjoys blogging and developing strategy, while I enjoy implementation of these strategies. Her forte is SEO, mine is PPC Management.
Hire an accountant… it will save you money in the long run. Always have your contracts looked over by an actual lawyer. Once you get bigger, you’ll need someone to manage HR, but you can easily outsource this.
We exhibited for the first time at Affiliate Summit East. By the conference, we were already booked out months in advance. Preparing for the conference slowed the speed at which we could hire, so at that moment, with 4,600 conference attendees, we couldn’t take on any new SEO clients. We spent those two days referring tons of business to other agencies, which specialized in what the prospect was looking for. There’s a ton of business out there. Many of our clients came to us by referral from other agencies. So, if you are starting out, I would recommend you get to know the community, meet people who do what you do, show them what you’re capable of, and let them know you’re taking clients (this includes us!)
I have no doubt that we will make more money by giving those clients away than we would have by taking them. Karma is king in this industry.
7. How did you come up with PushFire? Internally? Hire a branding firm?
After the final decision was made to join forces, Rae and I sat on our back porch, beers in hands, racking our brains for names. I wanted something to do with fire because that’s how I see ideas spreading on the internet, like a grass fire. GrassFire’s .com, Twitter, and Facebook were all taken. Then we thought about BrandFire–“brand” like in what they use to mark cattle, giving it a bit of Texas flavor, and “brand” as in your company brand. Our logo would look like a cattle brand burned into the header. Checking domain registrants, twitter handles, and facebook, it wasn’t doable.
We wanted something simple to remember, say, and easy to spell. Then, going through the dictionary and combining everything with “fire” we both loved PushFire—meaning that we not only start the fire, but we have to push it or fuel it as well. We slept on it for 24 hours and then negotiated the purchase from its owner the next day. Maybe that’s not the most romantic business story, but that’s how we got it done in less than 3 days and off of our Basecamp to-do list.
PushFire’s growth has exceeded our expectations. We are on track to be eligible for the Inc 500 revenue requirements by 2013, but will need to wait until 2017 to meet the time requirements. Everyone has a unique story about how they got into the internet marketing industry, but this is mine and I couldn't have done it without the help of the SeoBook community, Aaron Wall, and the great forum moderators.
Thanks for the time Sean!
Sean Dolan is the Chief Operating Officer at PushFire. When he's not managing operations, he's spending time with his wife and children or donating his time to causes such as The Periwinkle Foundation. You can connect with Sean on Twitter and Google+.
If there's one thing both business owners and SEO consultants can benefit enormously from, it's a strategy planning template. Everyone knows that a strategy-based approach to marketing will trounce a competing approach that is purely tactical. The difficulty lies in coming up with a winning strategy, especially when your organization hasn't formally devised one before.
Enter the SEO Strategy Template
It's a simple set of 'rules' (more like guidelines) that you can follow like a roadmap, adapt and tweak, modify and customize, until you have a unique strategy planning document for marketing your business.
This is such an easily repeatable and reproducible process that it is surprising that everyone within the SEO industry is not already exploring, using or implementing such an approach to evolving an SEO strategy.
So if you're interested in formulating your company's strategy using an easy-to-follow and powerful process, then read about this method to create a planning template based on the SOSTAC model.
Introducing The SOSTAC Planning Model
In the 1990s, PR Smith introduced the SOSTAC strategy framework to help plan a marketing system that is comprehensive, yet flexible enough to be adapted to fit the varying needs of a wide range of clients.
SOSTAC stands for:
Situation - where you are now
Objectives - where you are heading
Strategy - how to get there
Tactics - how to execute the plan
Actions - who is in charge, and when should it get done
Control - measure and monitor to see if you get there
This systematic approach to outlining a superior marketing strategy is both simple and elegant, while being powerful and effective. You can use it as the framework of a planning template for your SEO strategy.
Let's explore it in more detail.
1. Situation Analysis - Where Are You Now?
Before you begin any marketing effort, you must know where you stand at the moment. From an SEO standpoint, you'll look at
your site performance
the search engine traffic you're getting
your best keywords with highest conversion rates, and
comparison against your competition
Taking stock will make your future endeavors more productive. Asking the right questions, and coming up with the answers, is a good starting point.
a. Is business good? Management guru Peter Drucker would begin consultations with the question, "How's business?" Study your Web traffic, sales volume and profit, your assets and liabilities, your cash flow and expenses. Is business booming? If not, why not?
b. What are your strengths? What sets you apart from everyone else in your industry or market niche? Why do your customers seek you out? How are you insulated against competition?
c. Do you have a marketing strategy? Look at your current marketing campaigns and SEO efforts. Do they work well? Which activities are the most effective? What impact does each one have on your business?
d. Are your goals clear? Is your target audience clearly defined? Do you know your best keywords? Your most profitable clients (and top keywords) make up only a tiny fraction of the total. Are you aware of them? Are you focusing on serving them well?
e. What are you weak at? Are you employing the most cost-effective and high impact marketing channels and SEO efforts? How can they be made more efficient?
f. Is your business protected against adversity? Will technological innovations or disruption in the status quo harm or destroy your business? Or are you positioned to take advantage of seismic shifts in your industry? Are your competitors more powerful, versatile, creative than you are?
2. Setting Objectives - Where Are You Headed?
Once you know where you stand, you must define your goals and objectives for the future.
a. What are your biggest goals? Why does your business or website exist? Is your mission statement clearly defined, and can you state it in a concise "positioning declaration"? It will explain why you are in business, and whom you aim to serve.
b. What does your business set out to achieve? Is bottom-line profit your primary motive? Or do you want to achieve something else? How do you plan to serve your market?
c. What marketing methods will you focus on? Which elements of your SEO plan will bring you more clients, improve conversion to sales, and result in repeat business and/or referrals?
d. What does your marketing say? Are you trying to generate more leads, pre-qualify serious prospects, close more direct sales, encourage referrals or seek out business partners? Your message must be tailored specifically for each objective if you are to succeed massively.
When you have a set of well-defined objectives, run them through the SMART test to see if they are really your highest and best targets.
S - Specific. Are your goals clear and specific? M - Measured. Can your goals be measured? A - Actions. What actions will make them happen? R - Realistic. Are they achievable goals? T - Time. Will they meet your deadlines?
Knowing where you stand, and armed with your major objectives, it's time to proceed to the next stage - and iron out your strategy.
3. Formulating Strategy - How To Get There?
Strategy is the high level blueprint for your SEO efforts. It may involve a focus on local SEO, or brand building, or something else. This is the 'big picture' phase, and you don't have to get into too many details. But you do need to capture the soul of your SEO strategy in a clear and solid way.
The first step is to narrow down your focus to appeal to a specific section of your audience that you can serve better than anyone else. Depending upon the size and scope of your business, this segment may be large or small. But by defining your target market clearly, you'll avoid the major pitfall that defeats all non-strategic marketers - the mistaken belief that your ideal prospect is... everyone!
Once you know, in general terms, who your prospects are, you can proceed to learn more about them. Getting into the mind of your buyers, and correctly figuring out what they want, and when, can be your biggest competitive edge and the driver of mind-blowing profits. Targeting your marketing to appeal to this audience can skyrocket conversions effortlessly.
Based on this knowledge, you can refine your positioning and control how you will be perceived by your market.
4. Tactics - How To Execute Your Plan?
A chain is only as strong as its weakest link. And your strategy is only as powerful as the actions that you will take to execute it.
This phase is about outlining the steps to take, and their desired end-result. It's hard to predict SEO outcomes accurately, but you'll be able to make reasonable estimations, which will then serve as a roadmap for your SEO campaign.
a. Which tools will you use? Every kind of marketing (including SEO) has an array of tools to deploy at will. It's tempting to try them all. But it's better to use just a few, using them effectively and well.
b. Plan your assault. The same tools can be put to use with widely varying results. Picking the right one for the right reasons can have a synergistic effect on your results.
c. Telegraph your message. Target it at your ideal prospect. Refine it to cut through the clutter and speak directly to your audience's biggest wants or needs. Remember, confused prospects don't buy!
d. Be consistent. Branding and direct selling both work better with repetition.
e. Get a budget. Marketing strategically can be expensive, at first. Assign the resources and funds necessary to your marketing plan before you begin implementing it. Otherwise you'll run out of steam, losing momentum and money.
5. Actions - Who Is In Charge?
With your strategy and tactics planned out, your template then points you towards the next step... assigning roles and setting deadlines.
Without clearly defined responsibilities, and a time frame within which to complete tasks, your marketing will stagnate and lose speed. This phase is about the nitty-gritty daily actions - what to do, who will do it, and when it should get done. Whether you chart it out on a week-by-week basis, or choose a different time frame, what matters is having an outline that everyone can access and follow.
a. Pick a leader. Put individuals in charge of specific components of your SEO activities.
b. Set a time frame. Draw up a marketing calendar and set deadlines for completion of each action step.
c. Can they do it? Assigning tasks to someone based on a job description rather than their ability, skill or capacity to get it done can be a critical mistake.
d. Measure progress. Decide upon the metrics to monitor. Will they show if a job is getting done? Can they be easily measured? How often will you keep track?
e. Document results. Sharing visual feedback and results of your campaign's progress can help get a team energized, and working better together. In today's complex SEO universe, having a synergistic team effort can compound your chances of success.
6. Control - Monitor & Measure
The Web analytics portion of any SEO project is where you'll look at progress, and review it in the context of the initial situation analysis. The feedback serves to redefine and tweak your strategy, closing the loop, and making the system more powerful as it grows and evolves over time.
a. Keep measurements relevant. Higher search rankings matter. But it's more important to measure bottom-line impact on business profitability.
b. Who will measure metrics? Scripts and software record data, but someone must compile and present it to team members. If trends can be spotted early, you can modify actions to get higher results.
c. How often to measure data? Collecting and analyzing information shouldn't
become an end in itself. Choose an optimal schedule, and stick to it.
d. What tools and resources do you need? How complex and costly your monitoring systems must be depend on the scope and scale of your business and the diversity of your SEO efforts.
e. How will the data be interpreted? What will be the impact of this analysis on your SEO strategy? Your planning template must explain this clearly upfront.
f. What's your back up plan? If things don't go right, how will you bail out? Who decides when to switch plans? When will it happen? While you can't factor in all eventualities, having a set of options is helpful. Remember, when everything else is equal, the one with the most options wins!
So, there you are! A planning template for your SEO strategy that can be reliably constructed through following a step by step plan modeled on the powerful SOSTAC framework.
Keep in mind that increased revenues and profit, achieving major business goals, getting to them faster, and lowering costs are the biggest advantages of having a planning template. It beats blindly using SEO tools or following standardized SEO checklists, and hoping for stellar results.
A strategic effort is slightly more effort-intensive. It will initially cost more to implement. It may even take longer to fructify. But when it does, the results will blow your competition out of the water - and skyrocket your results!
That's what makes an SEO strategy desirable, and a planning template worth developing.
All roads lead to Rome. There are many ways to arrive at a winning SEO strategy based on a planning template. In more than a decade spent working in the SEO and digital marketing industry, this approach detailed above has been what worked effectively for me. That's the reason I want to share this to help and motivate other business owners and SEO consultants who understand the importance of having an SEO strategy, but are not sure how to go about crafting one.
If you know of a better (or different) way to apply the SOSTAC model to evolve an SEO strategy and create a planning template, do let us know. I'll do my best to answer questions and help in any way I can. Please share your comments, questions or suggestions in a comment below, or write to me using the contact form. I'd love to get a vibrant discussion going on this all-important topic of SEO strategy.
A common new years resolution is “quit the rat race and be your own boss”. In this article we’ll take a look at what is involved in starting up your own search marketing business, the opportunities you could grab, and the pitfalls you should avoid.
But first , why are people leaving SEO?
Is SEO Dead?
There’s no question Google makes life difficult for SEOs. Between rolling Pandas, Top Heavies, Penquins, Pirates, EMDs and whatever updates and filters they come up with next, the job of the SEO isn’t easy. SEO is a fast moving, challenging environment.
It’s true that SEO isn’t as easy as it once was. You used to be able to follow a script: incorporate this title tag, put this keyword on your page, repeat it a few times, get links with the keyword in the link text, get even more links with keywords in the link text, and when you’ve finished doing that - get a lot more links with keywords in the link text.
A top ten position was likely yours!
Try that script in 2013, and.....your mileage may vary.
There are plenty of examples of sites that follow Google’s exhaustive rules and get absolutely nowhere.
But let’s say you’ve figured out how to rank well. Your skills are valuable, because top ten rankings are valuable. Another bonus, given Google is making life more difficult, is that it creates a barrier to entry. There will be less threat from newcomers who have just bought a book on How To SEO.
For those with the skills, the outlook remains positive.
We do struggle to fill some of our positions, with SEO being a particularly tough one to find good people that have relevant experience,” said Chris Johnson, CEO of Terralever in Tempe.
Consultants in SEO and marketing in general have seen a huge uptick in job openings in the past few years. An October study by CNNMoney and PayScale.com place marketing consultants, which include SEO specialists, as the second-best positions in the U.S. based on pay and industry growth. According to the survey, they comprise more than 282,000 jobs with a 41.2 percent growth rate over the past 10 years.
SEMPOs 2012 report projects the search industry to grow to 26.8 billion in 2013, up from 22.9 billion in 2011.
So, the demand is escalating, SEO/SEM is getting more challenging, yet more people than ever seem to be throwing in the towel.
The nature of SEO is changing. Trends for 2013 - which are also highlighted in the SEMPO report - show that whilst lead generation and traffic acquisition are still favoured, areas such as brand awareness and reputation management are on the rise:
Survey responses show a drop in the blunt objective of driving traffic, but it remains a key goal for search engine optimization (SEO). Perhaps more interesting is the doubled number of agencies citing brand/reputation as a goal, up from 5% in 2011 to over 11% in this year's survey
SEO for the larger businesses appears to be where the game is moving. The advantages of business scale and brand reputation in the search engine results pages are not to be underestimated.
The SEO approach for smaller businesses needs to be about a lot more than just SEO, it needs to be more about SEM - with strong emphasis on the “M” (arketing) in order to avoid the fate outlined in the link above. Google looks deficient if people can’t find the big brand names, but few will notice if a small, generic operator falls out of the index as another relative unknown will take their place.
Of course, gaps in the algorithms will always exist, and this is the territory of aggressive SEO, but this is getting increasingly difficult to apply to legitimate sites that can’t afford to burn and replace sites.
The SEO these days needs to think about the fundamental value that SEO has always delivered - qualified prospects, leads, and positioning in the buyers minds. That might mean approaching what was once a technical exercise from a more holistic marketing angle.
Why Work In Search?
Search remains a very interesting business.
John Wanamaker, a merchant in the 1860’s was quoted as saying “Half the money I spend on advertising is wasted; the trouble is I don't know which half!”. I think he would have liked the search marketing business, as it allows you to do three very important things: get inside the mind of the customer, only talk to the people who are interested in what you offer and track what they do next.
Using search, you know where 100% of your budget is going. It won’t be wasted so long as you target correctly. Targeting is what search marketing does so well. If you enjoy figuring out what people want, matching them up with a page that allows them to do that thing, and beat your competition at doing so, then search marketing is a good game to be in. Whether you do that using SEO, PPC, social media, or likely a mix of all three, the demand for qualified visitors will always exist.
The next question is whether you want to do it for someone else, or do it for yourself. There are obviously pluses and minuses for both options, so let’s compare them.
Work For Someone Else Or Work For yourself?
Some people feel frustrated working for someone else and not being the master of your own destiny, especially if the boss is an idiot. Then again, some people like the routine and predictability of working for others, and they might be lucky enough to have a great boss who nurtures and respects them.
So, what type of person are you?
If you like a regular routine, regular hours, and task specialization, then looking for a SEM job within an established search marketing firm might be the way to go. If you prefer a high degree of control, variety and the knowledge that all the rewards will flow to you for the successful work you undertake, then starting your own business might be a good way forward.
Only you know for sure, but it pays to spend a bit of time taking a good look at yourself, your existing skills and what you really like doing before you decide if “working for someone else” or “working for yourself” is the right answer.
You should also establish your goals.
Be specific. If your reward is monetary, set a measurable goal i.e. I want to make $X per month in the first year, $X per month in the second, and $X per month in the third. Being specific about measurable goals will help you construct a viable business plan, which I’ll cover shortly.
Your goals need not be monetary. It could be argued the greatest rewards from a job or business aren't monetary reward, but the satisfaction you derive from the work.
When it comes to working for yourself, it’s hard to underestimate the freedom of picking your own areas of working to your own timetable. These are real benefits. If your goals align more closely with a job i.e. a regular income and a regular time schedule, then you might decide that getting a job with an employer will suit you best. If you value autonomy, then running your own business might suit you better.
Split your goals into short term, medium term and long term. Where do you see yourself in five years time? How about this time next year? In the case of search marketing, who knows if it will be around in five years time, and if so, in what form?
Your one year plan might be focused on SEO, but your five year plan might be to provide the very same things SEO provides today - qualified visitor traffic - no matter what form the source of that traffic will take in five years time. The value proposition to the client, will be much the same. So, your five year plan might include learning about general marketing concepts and studying new digital marketing channels as they arise.
Being clear about what you like doing and your objectives will make your decision about whether to get a job or strike out on your own much easier.
Another way to think about it is to consider doing search marketing part time, at first. It may prove to be a lucrative second income if you already have a job. One of the biggest factors in running your own business is the risk, and having a steady income reduces this risk significantly. It also means you can start slow and build up without the pressure of having to hit regular targets. The disadvantage is that you don’t have as much time to devote to it, and working two jobs might tire you out to the point you’re not doing both well. You’re also unlikely to be available to clients during business hours when they need you.
Of course, be careful not to compete with your existing employer and check out the non-compete clauses in your contract.
Another thing to think about if you're cash rich but time poor, especially with many people leaving the SEO game, is to buy an existing SEO business. You’re buying existing contracts and/or a client list, and you may be able to pick up some skilled employees, too. Buying a business is a topic in itself and outside the scope of this article, however it’s an avenue to think about especially if you are capital rich and time poor. You may be able to manage such a business part time, as you have less pressure to develop new business from scratch and the existing employees can handle the work at the coal face and deal with clients during the day.
Few business plans ever survive contact with the real world as the real world is constantly moving.
But this doesn't mean you shouldn't write one.
It’s essential to have a plan, just as you need directions to get to a travel destination. You could wing it without a map, and you might arrive in your destination, but chances are you won’t. You’ll most likely get lost. A business plan helps you assess where you are, and remind you where you’re going.
Having said that, a business plan is always subject to change, because as you encounter the real world - the rapidly fluctuating market - you will start to see opportunities and pitfalls you could never see whilst you were creating an abstract plan in your head. The plan needs to change with you, not lock you into a rigid framework. Treat it as a living document subject to change.
Entire books have been written about business plans, but unless you’re chasing bank financing and/or need to present formally to an external agency, it pays to keep business plans brief, clear and simple.
Crafting a business plan also enforces an intellectual rigour that will help test and challenge your ideas. In crafting your business plan, various questions will occur to you. How many clients do you need to get in order to meet your financial goals? How many staff members can you afford based on those goals? If you allocate all your time to existing clients, how will have time to acquire new clients? Do you have a marketing budget to get new clients?
These type of questions are addressed by the business plan.
A typical business plan covers the following:
Business Concept - describes what the business will do, discusses the search marketing industry in general, and shows how you’ll make the business work.
The Market - identifies your likely customers, and your competitors. Explains how you’ll get these customers, and how you’ll beat the existing competition.
Finances - shows how much it will cost to do what you plan to do, and how much money you plan to make from doing it.
Break these sections down as follows:
What is your current position? What is your background? What is the purpose of your business? What is your competitive advantage? Who are your competitors? How will you exploit their weaknesses, and counter their strengths? How will you increase capability and capacity? How do you plan to grow?
Describe the search marketing industry. If you’re unaware of the trends, refer to industry reports from the likes of SEMPO, Market Research.com and Nielsen.
Identify your target market and show how you will reach them. Describe what your search marketing service will do and highlight any areas where you have a clear advantage over competitors.
2. Business Strategy
Define the market you’re targeting. How big is it? What are the growth prospects? What is the market potential? How does your business fit into this market? What are your sales goals? What is your unique selling proposition?
Be specific about your objectives and goals i.e. make $x profit in the first year, as opposed to “be profitable”. They must be measurable, so you can see exactly how you’re doing.
Outline your pricing strategy. Here are a few ideas on how to price without engaging in a race to the bottom. Outline how you’re going to sell. What sort of advertising and marketing will you do? Outline your core values. What do you believe? What are your principles? Outline the factors most critical to your success. What are the things you must do in order to succeed?
Prepare a brief SWOT analysis. It sounds convoluted, but SWOT simply means strengths, Weaknesses,Opportunities, and Threats in terms of marketing.
Include any Market research you have done. Outline your distribution channels. Outline any strategic alliances you have. Outline your promotion plan. Prepare a Marketing budget. How will you appear credible in the eyes of your target market?
4. Management Structure
Who is involved and what are their skills? Do you plan to hire more staff? At what milestones? What plans do you have for training and retention? You need not solve this problem in house, of course. Your plan could involve using contractors as and when required.
Who are your advisors? i.e. your accountant, lawyer, mentor and financial planner, if applicable. This section is especially important if you’re seeking financing as banks will want to see that you’re operating with professional guidance.
Describe any staff management systems you plan to implement.
These can be hard to estimate, so calculate a best case scenario, a worst case scenario, and something in the middle. This gives you a range to think about, and how you might deal with various outcomes should they arise.
Cashflow is by far the most important consideration. You can have customers lined up, they are buying what you have, they are placing more orders, but if you can’t meet your bills, then your business will crash. Consider what line of credit you may need in order to maintain cashflow.
Restate the main aspects of your plan, highlighting where you are now and where you’re going to take the business. As business plans are always up for review, make a note of when you’ll review it next.
You might think a business plan is tedious and not worth the effort. However, it can save you a lot of time, effort and money if it shows you that your business won’t fly. It’s great to model a business on paper before you sink real money into it as there is no risk at this point, yet it will be clear from the business plan if the business has a chance of making money and growing. If the numbers don’t add up on the plan, they won’t do so in real life, either.
What do you want people to think of when they think of your company? Your name must create an immediate impression.
One of the problems with a crowded industry, like search marketing, is that generic, descriptive names won’t stand out. “Search Marketing Agency” may describe what you do, but such a name makes it difficult to differentiate yourself. A quirky name, like “RedFrog”, make be memorable, but may do little to convey what you’re about.
You'll also need a name that doesn't stomp on anyone else's registered trademark, else you’ll likely get into legal trouble. It also helps if the exact match domain name is available. If you get stuck, there are plenty of branding experts who can help you out, although they do tend to be expensive.
Keep in mind that is easy to rank for a unique brand name. If it’s unique, it tends to be memorable. So my two cents for anyone in a crowded industry is to go for the unique over the generic and descriptive. You can also tack on a byline to the end of your name to remove any uncertainty.
And get a great logo! Check out 99designs. Keep in mind that a logo should work for both on-screen color display and print, which might be in black and white.
Search Business Models
There are a few different search marketing models on which to base a business.
Perhaps the most obvious search marketing model is that of the consultant whereby you help other businesses with their search marketing efforts. Think about the demand for external consultants and where that demand may come from.
Large companies tend to want to deal with large agencies. Large companies may have their own internal search team. There comes a point where it is cheaper to hire someone full time that hire an external consultant, and that point is the average full time salary plus employment costs.
Larger companies will hire one-man bands or small consultancies if they need what you have and what you have is difficult for them to get elsewhere. A lot of search marketing consultants won’t fill this brief, although some are brought in to help train and mentor their internal search teams.
A lot of the demand for external consultants comes from smaller businesses who don’t have the expertise in house and their low level usage of search marketing wouldn't make it financially viable.
One of the great upsides of the consultancy model is you get to see how other people run their businesses.
The affiliate positions a site in the top ten results, gathers leads and traffic, and then sells them to someone else. The display advertiser publishes content in order to provide space for advertising, and typically makes money on the click-thrus.
Keep in mind that the competition can be fierce as any lucrative niche will likely already have many competitors. Also keep in mind that Google is likely gunning for you, as there have been clampdowns on thin-affiliates in recent years i.e. affiliates who don’t provide a great deal of unique and useful content.
The downside is that unless you’re diversified, your income could dry up overnight if Google decides to flick their tail in your direction. And to be truly diversified, you need diversification across markets AND strategies. Without that, there is a good chance you’ll then have to start from scratch at some point. Algorithm shifts tend to be great for consultants with deeper levels of client engagement, as the change can create new demand for their consultancy services. For consultants who sell low margin consulting across a large number of clients, the algorithmic updates can actually be worse than they are for affiliates, because you may suddenly have a lot of angry customers all at once & unlike an affiliate who prioritizes a couple key projects while ignoring many others, it is not practical to ignore most clients when things go astray. To each & every client their project is the most important thing you are working on, & rightfully so.
Some search marketers mix up their affiliate with consulting to even out the risk, provide greater variety, and deal with the inevitable slack that comes with many consulting-based business models.
There is a huge community of search professionals. They need software tools, data, advice and other services. Obviously, SEOBook follows a hybrid of this model. We provide premium tools, while also engaging in consulting through our community forums. Those who don't value their time are not a good fit. But those who do value their time can get a lot out of the community in short order, without the noise that dominates so many other forums. The barrier to entry is a feature which guarantees that the members are either a) already successful, or b) deeply understand the value of SEO, which in turn increases the level of discourse.
Think about areas that are a pain for you in your current search marketing work. These areas are likely a pain for other people, too. If you can make these pain points easier, then that is worth money. The search community tends to be generous about getting the word out when truly useful tools and services spring up. The hard part is when more service providers enter a niche it becomes harder to maintain a sustained advantage in your feature set. As that happens, you need to focus on points of differentiation in your marketing strategy.
A lot of SEOs/SEMs do a mix of work.
PPC and SEO fit quite nicely together. It’s all search traffic. The skills are pretty similar in terms of choosing keywords and tracking performance. They differ in terms of technical execution.
Affiliate and display advertising can balance out client work, providing income from a variety of different sources, which lowers risk.
The main benefit of an integrated model is you get to see a lot of different areas. Many people in the search industry talk the talk, but if their primary purpose is to sell, they're less likely to have the chops. If you’ve got your own sites, and you win/lose based on how well they do, then you’ll likely have an understanding of algorithms that a lot of sales-oriented talking heads will never have. The downside is that you might spread yourself too thin over a number of projects, and thus become a master of none.
Clearly Defined Niche
The trick with any of these approaches is to find a niche, preferably one that is growing quickly. Okay, the SEO consultant market is swamped due to low barriers to entry, but perhaps the SEO provider market in your home town isn't.
Perhaps there are web design companies who can’t afford a full time SEO, but would like to offer the service to their clients. Get three or four of these agencies as “clients” and you’ll likely create one full time job for yourself. This is a particularly good model if you don’t like sales, or don’t have time to do a lot of sales work. The design agency will do the selling for you, and they already have a customer base to whom they can sell.
Design agencies often like such arrangements because they get to add an additional service without having the overhead of another staff member. They also get to click the ticket on your services. Your billing is also more streamlined, as you’re likely be billing the agency itself.
Be very specific when choosing a niche. Who would you really like to work for? What, specifically, would you really like to do? “Search marketing” is perhaps a too wide of a niche these days, but how about exclusive search marketing for tourism businesses?
It doesn't pay to try and be all things to all people, especially when you’re a small operation. In fact, the advantage of being small is that you can target very specific areas that aren't viable for bigger marketing companies who run high overheads. Consider your own interests and hobbies and see if there’s a fit. Do companies in your area of interest do their search marketing well? If not, you've got a huge advantage pitching to them as you already speak their language.
Keep the customer firmly in mind. What problem do they have that they desperately need solving? Perhaps the restaurant doesn't really need their website ranking well, but they do need more people phoning up and making a reservation. So how about running a restaurant reservation site in your town, using SEO and PPC to drive leads, providing customers copies of each restaurant's menu? Charge the restaurant for placement and/or on leads delivered basis.
Trip Advisor started with a similar idea.
Doing The Deals
One of the biggest transitions from a regular job to running your own business, if you’re not used to working in sales, is that you will need to negotiate deals. Those working 9-5, especially in technical roles, don’t tend to negotiate directly, at least not with prospective clients and suppliers.
Negotiation is a game. The buyer is trying to get the best price out of you, and you’re trying to land more business.
Possibly the single most important thing to understand about negotiating is that negotiations should be win-win ie. both sides need to get something out of it and not feel cheated. This is especially important in search marketing consulting as you’ll be working with your clients over a period of time and you need them on your side in order to make the changes necessary.
It’s easy to assume the buyer has all the power, but this isn’t true. If they’re talking to you, they have already indicated they want what you have. You are offering something that grows their business.
However, you need to understand your relative positions in order to negotiate well. If you’re offering a generic search marketing service and there are ten other similar providers bidding for the job, then your position is likely very weak unless you’re the preferred supplier. Personally, I’d avoid any bidding situation where I’m not the preferred supplier.
This is where niche identification is important. If you have clearly identified a niche in which there isn’t a great deal of competition, you have a clearly articulated unique selling point and you know what buyers want, then your position in negotiation is stronger. This is why it’s important to have addressed these aspects in your business plan. Failure to do so means you’re very vulnerable on price, because if you’re up against very similar competitors, then your last resort is to undercut them.
Price cutting is not the way to run a sustainable business, unless you’re operating a WalMart style model at scale.
You need to set a clear bottom line and walk away if you don’t get it. This can be very difficult to do, especially if you’re just starting out. The exception is if you’re simply trying to get a few names and references on your books, and don’t care so much about the price at this point. In this case, you should always price high but say you’re offering a special discount at this point in time. Failure to do so means they’ll just perceive you as being cheap all the time.
Start any negotiation by letting the customer state what they want. then you state what you want. If you both agree, great! Win-win. Chances are, however, you’ll agree on some points, and disagree on others. Fine. Those points you agree on are put off to one side, and you’re focus on trying to find win-win positions on the points you disagree with. Keep going until you find a package that both meets you needs.
Starting your own business is a thrill. It’s liberating. However, in order for it to work, you must approach it with the same rigor and planning you do with your search marketing campaigns. Keep in mind you’re swapping one boss for many bosses.
Perhaps the best piece of advice is to dive in. A lot about running your own business isn’t knowable until you do it. so if one of your new years resolutions was to quit the day job and strike out on your own, then go for it!
Best of luck, and I hope this article has given you a few useful ideas:)
Mr. Page, the CEO, about a year ago pushed the idea of requiring Google users to sign on to their Google+ accounts simply to view reviews of businesses, the people say. Google executives persuaded him not to pursue that strategy, fearing it would irritate Google search users, the people say.
Links to Google+ also appear in Google search-engine results involving people and brands that have set up a Google+ account.
Other websites can't hardcode their own listings into the search results. But anyone who widely attempted showing things to Googlebot while cloaking them to users would stand a good chance of being penalized for their spam. They would risk both a manual intervention & being hit by Panda based on poor engagement metrics.
Recall that a big portion of the complaint about Google's business practices was their scrape-n-displace modus operandi. As part of the FTC agreement, companies are able to opt out of being scraped into some of Google's vertical offerings, but that still doesn't prevent their content from making its way into the knowledge graph.
Now that Google is no longer free to scrape-n-displace competitors, apparently the parallel Google version of that type of content that should be "free and open to all to improve user experience" (when owned by a 3rd party) is a premium feature locked behind a registration wall (when owned by Google). There is a teaser for the cloaked information in the SERPs, & you are officially invited to sign into Google & join Google+ if you would like to view more.
Information wants to be free.
Unless it is Google's.
Then users want to be tracked and monetized.
Trademark Violations & Copyright Spam
A few years back Google gave themselves a pat on the back for ending relationships with "approximately 50,000 AdWords accounts for attempting to advertise counterfeit goods."
How the problem grew to that scale before being addressed went unasked.
Last year Google announced a relevancy signal based on DMCA complaints (while exempting YouTube) & even nuked an AdSense publisher for linking to a torrent of his own ebook. Google sees a stray link, makes a presumption. If they are wrong and you have access to media channels then the issue might get fixed. But if you lack the ability to get coverage, you're toast.
"To the extent [the study] suggests that Google ads are a major source of funds for major pirate sites, we believe it is mistaken," a Google spokesperson said. "Over the past several years, we've taken a leadership role in this fight. The complexity of online advertising has led some to conclude, incorrectly, that the mere presence of any Google code on a site means financial support from Google."
So Google intentionally avails their infrastructure to people they believe are engaged in criminal conduct (based on their own 50,000,000+ "valid" DMCA findings) and yet Google claims to have zero responsibility for those actions because Google may, in some cases, not get a direct taste in the revenues (only benefiting indirectly through increasing the operating costs of running a publishing business that is not partnered with Google).
The above linked LA Times article also had the following quote in it:
"When our ads were running unbeknownst to us on these pirate sites, we had a serious problem with that," said Gareth Hornberger, senior manager of global digital marketing for Levi's. "We reached out to our global ad agency of record, OMD, and immediately had them remove them.... We made a point, moving forward, that we really need to take steps to avoid having these problems again."
Through Google's reality warping efforts the ad network, the ad agency, the publisher, and the advertiser are all entirely unaccountable for their own efforts & revenue streams. And it is not like Google or the large ad agencies lack the resources to deal with these issues, as there is some serious cash in these types of deals: "WPP, Google's largest customer, increased its spending on Google by 25% in 2012, to about $2 billion."
These multi-billion Dollar budgets are insufficient funds to police the associated activities. Whenever anything is mentioned in the media, mention system complexity & other forms of plausible deniability. When that falls short, outsource the blame onto a contractor, service provider, or rogue partner. Contrasting that behavior, the common peasant webmaster must proactively monitor the rest of the web to ensure he stays in the graces of his Lord Google.
You have to police your user generated content, or you risk your site being scored as spam. With that in mind, many big companies are now filing false DMCA takedown requests. Sites that receive DMCA complaints need to address them or risk being penalized. Businesses that send out bogus DMCA requests have no repercussions (until they are eventually hit with a class action lawsuit).
Remember how a while back Google mentioned their sophisticated duplication detection technology in YouTube?
There are over a million full movies on YouTube, according to YouTube!
The other thing that is outrageous is that if someone takes a video that is already on YouTube & re-uploads it again, Google will sometimes outrank the original video with the spam shag-n-republish.
In the below search result you can see that our video (the one with the Excel spreadsheet open) is listed in the SERPs 3 times.
The version we uploaded has over a quarter million views, but ranks below the spam syndication version with under 100 views.
There are only 3 ways to describe how the above can happen:
a negative ranking factor against our account
horrible relevancy algorithms
I realize I could DMCA them, but why should I have to bear that additional cost when Google allegedly automatically solved this problem years ago?
Unlike sacrosanct ad code, if someone points spam links at your site, you are responsible for cleaning it up. The absurdity of this contrast is only further highlighted by the post Google did about cleaning up spam links, where one of the examples they highlighted publicly as link spam was not a person's spam efforts, but rather a competitor's sabotage efforts that worked so well that they were even publicly cited as being outrageous link spam.
Well Mr Cutts, you have created a monster in Google now im afraid. Your video here http://www.youtube.com/watch?v=HWJUU-g5U_I says that with the new disavow tool makes negative SEO a mere nuisance.
Yet in your previous video about the diavow tool you say it can take months for links to be disavowed as google waits to crawl them???
In the meantime, the time lag makes it a little more than a "nuisance" don't you think?
Where Does This Leave Us?
As Google keeps adding more advanced filters to their search engines & folding more usage data into their relevancy algorithms, they are essentially gutting small online businesses. As Google guts them, it was important to offer a counter message of inclusion. A WSJ articles mentioned that Google's "get your business online" initiative was more effective at manipulating governmental officials than their other lobbying efforts. And that opinion was sourced from Google's lobbyists:
Some Washington lobbyists, including those who have done work for Google, said that the Get Your Business Online effort has perhaps had more impact on federal lawmakers than any lobbying done on Capitol Hill.
Each of the additional junk time wasting tasks (eg: monitoring backlinks and proactively filtering them, managing inventory & cashflow while waiting for penalties tied to competitive sabotage to clear, filing DMCAs against Google properties when Google claims to have fixed the issue years ago, merging Google Places listings into Google+, etc.) Google foists onto webmasters who run small operations guarantees that a greater share of them will eventually get tripped up.
That algorithmic approach will also only feed into further "market for lemons" aspects as consultants skip the low margin, small budget, heavy lifting jobs and focus exclusively on servicing the companies which Google is biasing their "relevancy" algorithms to promote in order to taste a larger share of their ad budgets.
While chatting with a friend earlier today he had this to say:
Business is arbitrage. Any exchange not based in fraud is legitimate regardless of volume or medium. The mediums choose to delegitimize smaller players as a way to consolidate power.
Sadly most journalists are willfully ignorant of the above biases & literally nobody is comparing the above sorts of behaviors against each other. Most people inside the SEO industry also avoid the topic, because it is easier (& more profitable) to work with the elephants & attribute their success to your own efforts than it is highlight the holes in the official propaganda.
I mean, just look at all the great work David Naylor did for a smaller client here & Google still gave him the ole "screw you" in spite of doing just about everything possible within his control.
The linkbuilding tactics used by the SEO company on datalabel.co.uk were low quality, but the links were completely removed before a Reconsideration Request was filed. The MD’s commenting and directory submissions were done in good faith as ways to spread the word about his business. Despite a lengthy explanation to Google, a well-documented clean-up process, and eventually disavowing every link to the site, the domain has never recovered and still violates Google’s guidelines.
If you’ve removed or disavowed every link, and even rebuilt the site itself, where do you go from there?
How do you best determine the price to charge customers?
Do you look at the competition and price the same as they do? Undercut them a little? What happens if you do undercut them, then the customer still demands further discounts?
Pricing can be difficult to get right. We don’t know exactly how much the other party is prepared to pay, but we need customers in order to sustain and grow our businesses. So how do we ensure money is not left on the table, yet we still make the sale?
This guide looks at a few fundamental pricing techniques, ideas and strategies. We'll look at how to avoid getting caught in the “race to the bottom” scenario of endless price cutting.
Many people believe that when the buyer and seller agree on a price, then the market has arrived at the optimal price.
This is not strictly true.
What it means is the buyer and seller agreed on a price at a point in time. The seller might be desperate to land the next deal simply to make payroll for one more month. He almost feels sick when he accepted such a low offer, but he’ll worry about the fact he’s running into the red next month. Things will be better by then. Hopefully.
Meanwhile, the buyer now has an expectation she can always get discounts if she pushes hard enough. She makes a note to go even harder on price next month. After all, she got the distinct impression the seller had even more room to move.
Getting pricing right is about more than two parties agreeing on a price at a point in time. Pricing is also strategic. Pricing is about the long-term sustainability of a company.
But ultimately, pricing is about value.
What Do Your Customers Value?
Business is about providing and creating value.
You provide a valuable service or product the buyer can’t provide themselves. They then use your product or service, from which they derive, or add, value, and on-sell that value to their customers.
In order to set appropriate prices, you need to understand what your customers value.
How does one restaurant charge more than another in the same area? Why is that one restaurant always packed? It’s probably because they understand what people value. It might be the type of food they serve, or how they serve it, or they have a great view of the sea. Perhaps they do all three well. Their competitors do not.
They probably couldn’t charge what they do if they were two blocks back and overlooked a parking lot. The restaurant that is two blocks back with a view of the parking lot better figure out something else customers will value, or they are out of business.
The first step in determining pricing is to find out what your customers value, then adjust your service, where necessary, to provide that value. In this way, pricing can be seen as intrinsically linked to your positioning strategy. Perhaps customers value a free and easy returns policy (convenience) over price. Perhaps they want individual items packaged together (individual commodity tools packaged together in a stylish box becomes a toolbox gift idea). Perhaps they didn’t want to buy a handbag at all, they just wanted to rent one (bagborroworsteal.com).
The aim of value based pricing is to shift the focus from price to questions of value.
Move To Value Based Pricing
Value based pricing means pricing based on the value you deliver to a customer.
You figure out the value of your product to to the customer, then take a slice of that value to arrive at your price. Your production cost might be $10 per unit, but if each unit provides $1000 worth of value to your customer, then $500 might be a fair price to charge.
In order to price based on value, you need to understand exactly what your customer values and your point of differentiation to your competitors. Your value proposition combined with your price point must be differentiated. After all, it would be difficult to price at $500 if your competitors were pricing at $300, and both provide the same value to the customer.
The Problem With Cost-Plus Pricing
Cost-plus pricing is when you figure out your total costs, then add a percentage, which is your profit.
It may cost you $X to produce and sell a service and make a profit, but if buyers don’t value what you offer, then your price will always be too high. Also, if you use cost-plus pricing and your customer derives considerable value from what you offer, then the customer may love you, but you’re leaving a lot of money on the table. You could be making more profit and using that to invest in your business.
But what if you’re selling the same stuff as everyone else?
The internet can be a hostile place for commodity sellers as price comparisons are only a click away. This type of environment works well for big players who can compete on price when selling commodity items, yet still make money off thin margins and fat volume.
Low-volume competitors would be wise to consider a shift of focus to value-added services, such as higher service levels, if they can’t compete on price.
Best Interests Of The Customer
It might be in the best interests of your customer to pay higher prices if this means the value they seek can be reliably delivered on an on-going basis. If an industry is run into the ground due to price cutting, then where will the customers get the services they really do value in future?
Part of the process of getting pricing right is customer education i.e. ensure they can see the value. Demonstrate what is involved in arriving at your price points. For example, who pays $70 for an ipad cover when you can get them for $10?
DODOcase demonstrate what goes into producing their cases. They’re selling the experience and craft values as much as they are selling the product itself, so this is also a way to differentiate the product. Their customers value the idea of supporting artisan crafts, which is part of the value they’re paying for, but this wouldn’t be obvious if their customers were comparing one case against another on price alone. DodoCase have shifted the debate away from price and made it about value. Well, values.
So, customers like to see what goes into the product. It helps them determine value. Transparency is a big part of pricing, particularly high-end pricing. To be credible and survive scrutiny, high end pricing has to to be accountable and make sense.
Knowing what price to set is knowing what the customer values, or can be made to see value where previously they saw none. Always ask questions and refine your offer based on the answers. Do you need to change how you present your existing offers in order to demonstrate value? Do you need to change your offerings to meet the market?
Skim pricing is when you set a higher price than your competitors.
In order to set pricing in this way, your customers need to perceive that your offer provides them with greater benefits than they will find elsewhere. Apple use skim pricing.
Customers perceive that Apple products are superior to the competitors, so it is therefore worth paying a premium. Whether this is objectively true or not is irrelevant - so long as the customers perceive that value, then it exists. This justifies the higher price. It could be argued the customer also gains social value by paying a high price, as they have something exclusive.
In order to skim price, you need to offer something the customer can’t easily get elsewhere. The customer must place a high value upon your service.
Consultants with proven reputations can use skim pricing, although maintaining a reputation over and above everyone else in crowded, maturing markets can be difficult. Where there are high margins, competitors will soon enter the space offering similar value.
The benefit of skim pricing is that you get to pick off the price-insensitive top-of-the-market clients. Who wouldn’t want this situation?
The downside is that other competitors can move into the price gap, slightly beneath the skim level, then bump up the value they offer in order to challenge the skim price competitor. They may create greater efficiencies, which means their profit margins are the same, if not higher. The value proposition to the customer remains strong, yet they undercut the leader on price.
It is only so long before the leader is forced to drop prices, refine their value proposition, or collapse. Skim market pricing can lead to a rapid erosion of market share if the leader does not stay well ahead of the market in terms of providing value. This happened to Apple in the 1980’s, and we might be seeing this again on tablet devices.
Analysts expressed concerns that Apple risked losing ground to Nokia smartphones in China, while failing to keep pace with Google in the tablets market.....Traders were also spooked by a report from research firm IDC forecasting that Apple’s share of the tablet market will slip to 53.8pc this year from 56.3pc in 2011, while Google’s share will increase to 42.7pc from 39.8pc.
It added that Apple’s tablet share will slip below 50pc by 2016, as total global tablet sales more than double to nearly 283m units in four years as consumers increasingly opt for them rather than personal computers
Apple could skim price when they were early to market with a product no one else had i.e. iphones and iPads. However, as competitors catch up, and make similar products at lower prices, then Apple’s current pricing strategy may hit problems. Apple get around this, to some extent, by using versioning.
Neutral pricing is when you set your pricing at a comparable level to your competitors.
You’d use this pricing method if you want customers to consider other aspects, besides price, when they contemplate a purchase i.e. they can get SEO software tools from company X, but compay Y offers the same tools but with extra support. Neither company wants to engage in a price war, so they will keep layering on more value in order to make their offer more compelling.
If these companies started cutting prices in order to compete, then they’ve got a “race to the bottom” problem. If customers don’t want to pay for the services they provide, that’s fine, but the customer is unlikely to get them somewhere else, so long as these services cost a certain amount to provide. In so doing, this market sector retains value for all players, so long as they deliver genuine value to customers.
This is an especially good pricing model to use if you want your customers to focus on the features of the offer. If you offer more features for the same price, you will likely win.
Penetration pricing is when you set a relatively low initial entry price, hoping people will switch from a higher priced vendor.
Companies looking to gain market share tend to use penetration pricing. Penetration pricing has been a popular pricing model for internet companies, reasoning if they build the audience, they’ll figure out how to make money later. So long as customers place some value on the service, then the company should build their customer base quickly.
There are obvious problems with acquiring customers on a low-price basis. The customers you land are price-sensitive and will likely become non-customers the minute someone else lowers their price, or you increase your price.
You’re still vulnerable to competitors who offer something better, who are more efficient, or have more venture capital to blow through. Even if you set a low price, they can still undercut you.
There’s More To Price Than Price
Some buyers accept that buying on price alone may be a poor strategy.
In the example I gave earlier, the buyer is screwing down the vulnerable vendor to the point where he may go out of business. Let’s say she derives significant value from his company that she can’t readily get somewhere else. Perhaps he’s been a supplier to the firm at which she works for a few years and he really knows their systems. Any new supplier will have to spend time coming up to speed, and this could affect the productivity of our buyer.
The buyer likely has a switching cost.
As a seller, he should have made more effort to understand his value to the buyer, and be able to articulate it in such a way that she saw it, too. A buyer who understands long-term value is less likely to focus exclusively on price. It is to their advantage to nurture the relationship for mutual benefit.
Many buyers crave highly functional partnerships with vendors. If a search marketing vendor invests significant effort to add value to the company to which they supply services, then it is less likely they’ll be replaced on price alone. The longer the vendor works with the company, and the more success they bring to that company, the less likely they are to be replaced.
Sometimes, these customers will still try to play you. They will try to get a lower price. They know they need what you’ve got, they’re happy with the relationship, but they still want to see if they can get you to move on price. They may say they are reviewing arrangements. They may put you up against other suppliers in the form of a, RFP. Some of those suppliers will bid low amounts, which the buyer will then put pressure on you to match.
The way to counter this is to know your value relative to the competition. You can always match with a lower price, just so long as the customer accepts that you will be reducing your features to match those on offer from your competitors. The buyer will either go for it it, meaning price really was an issue, or accept your higher price, meaning value was the main issue. More on this shortly.
You must also understand your bottom line and stick to it. Some customers simply aren’t worth having. If you land them, and make little money or even a loss, with hopes you’ll raise prices later - what happens? The minute you raise prices they go back out to tender again. They’ll just find another low-priced bid.
This is what happens to vendors who can’t differentiate on value.
Make Your Offering More Flexible
If we don’t offer what the market values, then pricing strategies won’t help much.
Businesses must innovate in order to capture new markets and meet demand. Create new products and services. Relying on price increases alone to drive growth is unlikely to work unless people can’t get what you offer anywhere else, and what you’re offering remains in high demand.
One solution is to provide multiple products or service levels. If some buyers are genuinely price oriented, that’s fine, but they get the lower service level. Contrary to popular opinion, most buyers are actually value oriented, and will choose higher value services, so long as they perceive genuine value, or can be shown that by using you then profitability will be increased.
The "Choice Of Three" Strategy
One price methodology involves creating three levels. One low priced offer, one mid priced offer, and one high priced offer. Many buyers, when faced with the “choice of three” will pick the middle offer.
Appliance stores often price this way. They’ll stock two or three very high end, expensive refrigerators. They’ll also stock some basic, cheap refrigerators. Most customers will use those two points as price guides, and buy somewhere in the middle. If the store didn’t carry the high end refrigerators for the purposes of comparison, then the mid-range refrigerators become the highest price offering, and people’s price expectations will adjust - downwards - accordingly. The middle is seen as the “sensible” choice.
So, try pricing your top level offering at skim pricing levels. Include all the bells-and-whistles. Most people won’t pay this price, but between this and the lowest price offer, it helps set buyer expectations. The middle bundle is actually your full price offering, possibly neutrally priced vs competitors, but buyers may see it as the sensible middle ground compromise. Funnily enough, you’ll be surprised at how many people still go for the bells-and-whistle option!
Getting Differentiation Right
Differentiation between bundles (product or service levels) also helps you identify price buyers and value buyers. For this to work, you need to create clear and logical demarcation between offerings, otherwise customers may try to pay the low price, but get you to include high price features.
In service businesses, one way of preventing a customer from trying to get the expensive bundle for the low-cost price is to be transparent about your pricing. Yes, they can have the extras, but they involve X more hours. How many of those hours do they wish to purchase? This is transparent. It makes logical sense. There is no arguing with this position, as everyone understands that time is money.
However you do it, ensure that the transition between price points makes sense. The transition can’t appear arbitrary. The more expensive bundle is more expensive because it has more input costs, demonstrably delivers more value, or both.
Companies who get this wrong typically create arbitrary price settings between bundles. There isn’t a lot of distinction in terms of value between the jumps, or the core offering is not included at the low level.
Companies typically put their core offerings in every package, and add “nice-to-have” features at higher price levels. All customers will want the core offering. Price sensitive customers will settle for the core offering and nothing else. Value customers will likely add the nice-to-haves so long as these extras provide the value they seek.
Once a customer is on board at the low-value level, then they may wish to add extras later, once value has been demonstrated. Many software-as-a-service companies use this pricing strategy. The core product, if it is commodity, is often free. This hooks you into using it, but doesn’t cost the company much to deliver. It’s a loss leader sales-tool.
If you want to use it more - say, add more people or use advanced features - then you move up the scale to higher price points. It’s very difficult for competitors to compete with this strategy, because the core offering is free and the switching cost, whilst possibly not high, still exists. In order to compete, competitors must offer better services or more features, and probably lower prices. This is also the reason the first-mover needs to constantly innovate i.e. add and enhance services in order to stay ahead of the game.
One way to make the middle tier offering even more compelling is to load it with features vs the entry-price option.
The low price offering provides the core product and nothing else. The mid-priced offering, however, is packed full of features. The buyer may not even use many of the features, but they reason that there appears to be a lot more value at that level than the entry level, so opt for the higher price. This is most effective when the low-price option and mid-price option are reasonably close. You often see this approach used with “but wait, there’s more!” offers. They keep loading on the features, so the buyer perceives more and more value.
Pricing Strategies For Software & Information Products
The very first copy of a Windows release costs billions. The customer pays around $40 for that first copy.
Most of the costs in software development and information products are upfront, but the advantage of these types of businesses is that the cost of producing each additional copy is marginal. Microsoft can produce many millions of copies for a few cents each. How does a software business, or information product, go about pricing a product?
Typically, these companies set a low price in order to build momentum, thus adopting a penetration approach. Once the user is hooked in, they then add additional higher value services on top. A good example of this type of strategy is used by the likes of WordPress and Silverstripe. The core product is free, but if customers want enterprise hosting, support of custom development, then they pay a fee.
It can be pretty difficult to stick to your guns, especially if you really need the business.
However, pricing is really a question of value. So long as you’re certain you provide the customer with value they can’t get elsewhere, then you’re in a strong negotiating position.
Know what the customer values. If the customer values the same things from another competitor, and you can provide no added value, then you are vulnerable on price. However, if you can identify something you have the buyer values over the others, then that is your trump card.
You demonstrate your value to the customer. If the customer still refuses to see it, and still screws you down on price, then you can play your trump card. Sure, they can have the lower price, but they can’t have the high value aspects of your service. They can have the basic core service. You could still make the sale, but you should remove valuable features.
For example, service level agreements tend to be structured at various levels and price points. If the customer wants immediate attention 24/7, then they pay top dollar. If they don’t care about receiving immediate attention, that’s fine - they pay the lower price. Give the customer options, demarcated by obvious value, and they can decide for themselves. If you know they really need high value service X, and can’t get it from somewhere else, then you’ll force them to buy on value and drop their low price demand.
As customers, we value sellers differently, unless we’re buying pure commodity. Yet your customers might try to convey the idea that sellers are all the same to them, it’s only about price.
It seldom is. Find out what they value most.
If your primary purpose is to gain exposure in a market, it will be useful to acquire customers who can help spread your message. I know of one SEO service provider who started out by providing five large companies free search marketing services for a year simply so the SEO service provider could be associated with those companies, thereby gaining credibility in the market as a “leading supplier”. They then skim priced for 2-nd tier companies, which were their real targets. The twist here is that the seller places a value on the buyer.
Pricing changes can depend on where in the product life-cycle you are, and what your competitors are doing. If you are the market leader, and using skim pricing, but you competitors overtake you, and offer more value, then it might be time to rethink your pricing. A shift to neutral pricing might be in order, as well as a revision of the offer to match competitors.
If new entrants move into the market and offer low prices, then adopting a penetration strategy might be useful in order to get rid of them i.e. make part of your offering low cost or free. This is a strategy that has been used by airlines facing threats from low-cost competitors. They start up their own subsidiaries and use these to starve the competitors out of the market as a rear-guard pricing strategy.
Know Your Relative Value
Ensure you’re differentiated. List all the products, services and activities you offer. Make a note of what your value is to the customer next to each product or service.
Next, identify your competitors. Identify those who are similar, those who are better and those who are worse. Evaluate their offerings. What are their value propositions? If you can, find out their price points. Where would a customer see value in their offering?
List your offerings in terms of value i.e. High value, medium, and low value. Then grade the level of differentiation when compared with your competitors. i.e. high differentiated, similar, or weaker. Anything high value and differentiated can likely be skim priced, anything similar can be neutrally priced, and anything low consider penetration pricing, or dropping.
Review your margins. Is it even worth offering low priced services? Should you be focusing on delivering more features at a higher pricing level? Should you be moving to a highly differentiated offering? Only you know the answer to these questions, but it's a quick strategic pricing assessment well worth doing.
But what, after all is said and done, the customer still wants a lower price?
But what if the customer still wants to pay the lowest price, even after you’ve made certain they value what you provide?
Some customers simply aren’t profitable. What is worse, they take up your time, meaning you’ve got less time to dedicate to your profitable customers.
So cut them loose.
There is a rule called the 20-255 rule. It’s a revision of the 80-20 rule, and it goes like this:
In an article published in the Harvard Business Review, Cooper and Kaplan reported the astonishing case of a heating wire company which analyzed its customer profitability and discovered that the famous 20 - 80 rule, which would suggest that 80% of profits came from 20% of customers, had to be revised: "A 20 - 225 rule was actually operating: 20% of customers were generating 225% of profits. The middle 70% of customers were hovering around the break-even point, and 10% of customers were losing 125% of profits
Make a list of your customers from most profitable to least. Contact the least profitable clients and try to renegotiate terms. Some will agree to this, others won’t.
Cut those who don’t. This instantly increases your profits and serves as a reminder not to sell to people in future who don’t adequately value what you do.
I hope this article has provided some food for thought on pricing strategy. Pricing is a huge topic, so can't be covered in one article, so if you've got some pricing strategies and philosophies you've found useful, please add them to the comments!