Consumer Research: Making Money Your

Values, Value and Valuation — The money is all relative

Oh how timing sometimes works out to be funny. I was driving home tonight and started thinking about the value of products, the valuation of companies and how the values that a company portrays can change the rest. No sooner had I sat down to write this piece than the news of Goldman Sachs investing $500 million into Facebook broke and refreshed the entire thing in my mind. So let’s look at these three things, and try to see if one manages to sway the rest.

Values

Do you, like me, find yourself more inclined to use or purchase something that comes from a company that you can believe in? The ethos of a company can — for me at least — completely break me away from the product. That very fact, because I feel that I’m likely not alone in my actions (or lack thereof) can have a serious impact on the bottom line of a company.

Look at Facebook, for instance. When the Social Graph was announced and the new privacy changes went into effect, many people threw up their hands in disgust. But many others continued with life as usual, even if a bit annoyed. Why? Because Facebook has this outward appearance of a company that’s simply trying to do cool things, and it needs information in order to do them. The company’s values seem, for the most part, to be in line with the things that we Internet users want. As such, there was a lot more wagging and a lot less barking from the angry dogs crowd.

You’re starting a company? There’s likely something to be said for developing an ethos ahead of time, making it known and then sticking to it. Would Google be where it is today if not for the “don’t be evil” tag line? Even if you don’t fully believe that the company runs that way, you still remember it. Point made.

Value

When value exceeds cost, even by a single cent, the purchase will be made – Grant Cardone

That quote is one that has stuck with me for some time now. A few years ago I was making my living selling cars and it is sometimes exceedingly difficult to overcome the objection of price. In the technology world, we’re constantly being offered products for “free”. The only cost? A bit of information, a slice of our privacy or somethings similar. But then, after using those “free” products, we start to build our own value for them.

Don’t believe me? Just look at some of the things that you likely use every day. Gmail? You’d pay for that. Twitter? You don’t want to admit it, but it’s likely become a valuable asset to your daily Internet life. The same can be said for so many things and yet we get them for “free”. But there’s a down side to this issue as well — it becomes very difficult for a maker to charge for a product when there are free alternatives. Don’t believe that? When was the last time that a box office movie didn’t get a torrent version?

And yet, even as companies try to build value in their products, still others think that the economy allows for them to set their own values and tell us what something is worth. TV networks are probably the most well-known perpetrators of this heresy. Apple TV launched, ABC and Fox decided to jump on board and see what would happen. Some of the rest? They decided that $.99 was devaluing the product and yet as the provider of the product, there is no one entity that is more unqualified to name the value.

Consider it a lesson in business, I suppose. The potential buyer will determine the value of your product. Always.

Valuation

Now here’s a sticky one. Valuation is one of those strange things because it means so many different things to different people. To the potential investors, it’s a measure of how much money can be made. To the business owner it’s a gauge of how well the business has done. To the end user? It’s…honestly not much.

As a case in point, around TNW we love Twitter. We want to see it succeed and we are sure that it will. The valuation continues to climb prior to any IPO and yet, as users of the service, it really doesn’t matter much to us. Sure, it would matter if the site closed its doors, but beyond that there simply isn’t anything about the valuation number that matters.

And so, as an entrepreneur you have to ask yourself where the balance lies. Do your company values allow you to build value in your product? If so, then the chances are that your valuation will end up right where it needs to be. There’s a fair amount of truth in the thought that, if you handle the small stuff, the big stuff will fall into place.

So with that, I offer you a thought going into the new year — start with your values. The rest will fall into place.

What made this project so successful? After all, there are other iPod Nano projects. And it's a wristwatch, which even with the addition of a Nano, might not be the coolest or most necessary of accessories.

Bryce Roberts, the Managing Director of O'Reilly AlphaTech Ventures, points to some reasons he's identified that contributed to the success of the Lunatik/TikTok fundraising endeavor. These lessons that can be seen in other successful Kickstarter projects (such as Diaspora), but they're also applicable in many ways to more "traditional" funding efforts.

Tell a personal story

The Lunatik/TikTok "pitch" wasn't a bulleted list of qualifications or clients. Rather, the members of the team "told personal stories that created a connection to the project that had nothing to do with their professional pedigree." While this sort of storytelling doesn't boost their professional credentials, Roberts argues, it does give the entrepreneurs a certain personal authority and helps to connect them to funders and potential funders in a different way.

Roberts argues that the best fundraising pitches always emphasize this personal aspect. "It's a given," he writes, "that if I chose to invest in you I believe I can make money, but there are the intangibles around personality, perspectives, and life experiences that will make a potential funder more likely to want to believe you."

Tell the product's story

If you watch the TikTok video (below), you'll see the product is featured throughout. This demonstrates what the product can do - and that it can do what the startup promises. The video also demonstrates the larger potential of the product. These might be "small, nice little features" that some investors would dismiss. But with the crowdfunding model, the right storytelling around this seems crucial. "The difference between a nano strapped to a wristband and a premium quality, highly designed, customizable piece of wearable technology is simply a matter of how you tell the story."

But even when you aren't using a site like Kickstarter to raise money, it's crucial that your product be front-and-center in your presentations.

Give rewards and issue progress reports

Investors, by definition, invest in order to make a financial return. Nonetheless, argues Roberts, you should offer more than simply the promise of "making money." These sorts of non-financial rewards can be personal and personalized. By design, Kickstarter tells its users, "the best way to inspire support is to offer people great rewards. Everyone loves limited editions, one-of-a-kinds, and fun experiences (parties, screenings, balloon rides!). Spend some time brainstorming your rewards and people will respond. No one needs another coffee mug."

And as your project and your company are constantly evolving, it's good to keep investors and potential investors up-to-date on your progress. In the case of TikTok, the creators even filmed themselves in China when they traveled to the factory where the watch kits were being made. But the same could be said for all funding relationships; keep your investors apprised of "how you're making progress and how your story is continuing to unfold in a big and important way."

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Thursday, January 6, 2011

Making Money Your

Values, Value and Valuation — The money is all relative

Values

Value

Valuation

Tell a personal story

Tell the product's story

Give rewards and issue progress reports

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