Marketing Strategies – Federated Marketing Partnerships

In this post I’d like to introduce my ideas around federated marketing partnerships.  But before I get started, let’s set the stage.

The Setting

We’ve all seen it – you’ve just launched your new product, and the response is overwhelmingly positive.  Let’s say it is a new download-able mobile application.  Within weeks you get all the right reviews and have thousands of downloads.  You spend your marketing budget making sure you rank at the top of Google’s sponsored links, to draw in more users, and your click-through rates are excellent.

And then something happens.  Soon, much sooner than expected, growth grounds to a halt.  Your user growth dwindles and then stops.  You’re “stuck” with a couple of tens of thousands of users, out of a population of tens of millions of phones capable of running your application.

What Happened?

Classical marketing theory says that you’re having trouble transitioning from the early-adoption stage to the mass market.  But that does not capture the situation adequately.  The early adoption/mass market approach assumes that the mass market is waiting for the right conditions in order to adopt the product.  A lower price point, less bugs, more tangible value, etc.

But it is very likely that you had just ran across what I like to call the needs/awareness gap for your product, which is mostly apparent with small companies trying to operate in large markets.  Let me explain.

For each product and for each market we can draw two circles.  The outer one includes all those customers whose needs we know we can satisfy with our product.  The inner circle includes all those customers who are aware of their need, aware of your product (or product category) and know how to look for it.  The wider the gap between the two circles, the higher the chance for your adoption rate to plummet when you hit the gap.

Take your well targeted Google ad campaign.  You’re serving highly relevant, targeted (and successful) ads, but only to people who are already in context – they have executed a Google search for your product or product category.  But what about all those silent masses out there who simply have no idea that they could be running such a search, and that this would solve a problem for them (which they may not even be aware of)?

In short, unless the need/awareness gap is breached, mass market will never follow the early adopters, simply because they will be oblivious to your entire value proposition.  I’ll never search for your download-able application if I have no idea that one can download applications to the phone.

The Classic Solution – Market Education

So you go on the campaign trail.  You no longer spend marketing money on reactive measures (such as search based ads) but rather go for proactive ones.  You deliver seminars, print advertising, conferences, banner ads.  You engage PR firms, you try to leap the gap by generating more buzz.  You’re explaining the most basic elements of your offering, at a considerable cost.

Educating the Market is a long, painful, expensive process.  It cannot be measured properly, and rarely yields the expected results.  Many companies, especially smaller ones, stop here.  They try to farm their existing user base while trying to grow it at the fringes.

A New Approach – Federated Marketing Partnerships

Ultimately, this is a challenge in “spreading the word” across diverse audiences.  Going beyond the techies or the enthusiasts.

One way we are doing it here is by establishing a federation of marketing partners.  By this I do not mean your typical “partnership” website section, where we list our closest industry friends and peers.  The federated marketing partnership model is about bringing together companies which roughly operate within the same industry, but which still have distinct user bases from one another.  Each customer base is somewhat likely to be more receptive to my offering than the general mass market.  And the same holds true for my customer base and the offerings of the other partners.

Let me illustrate.  Suppose I want to increase the reach of my download-able application.  Why not strike a marketing partnership with a company which is, say, in the mobile messaging space?  I can safely assume that their users are somewhat more informed than the general population about mobile technologies, even if they have never downloaded an application to their phone.

A real-life example exists in the browser toolbar industry.  You download a piece of software, and as you install it, it will ask you if you’d like to install somebody else’s browser toolbar or search engine.  You may not even be aware that this toolbar exists, you would certainly have not looked for it yourself.  But you are just a bit more receptive now, when you are installing new software, to this kind of suggestion.

What you end up with is a mesh of partners, each bringing its customer base to the table.  It is almost like a peering arrangement between bandwidth providers.  The goal is to stimulate user “traffic” inside the federated network, exposing your customers to my services, and the other way around.  Customers learn of new offerings from a trusted source, making them even more receptive.

But wait, isn’t this just what affiliate marketing is all about?  Well, almost, but no.  The power relations inside the federated marketing partnership network are much more balanced than in the case of marketing affiliates.  If I am promoting Amazon.com books on my website, I am powerless in my relationship with Amazon.  Traffic flows one-way, my benefit being a revenue-share cut.  Also, the federated model is not performance or transaction based, it is based on the shared understanding that pooling our user bases provides us all with more value.

The federated marketing partnership model allows small companies, with distinct products and customer bases, to come together in a loosely-coupled marketing mesh.  Network effects make the mesh more and more valuable, as more members join.  Market education happens by osmosis, as users on the edge are gradually exposed to products and ideas which exist elsewhere on the network.

More to follow in weeks to come.

— Oren