How to set up your company to attract investors and outside sources of funding: VCs, angel investors, private equity funds

About seven or eight years ago, I had a client with such interesting patented technologies that I was willing to invest in the company, do away with my practice, and run the company through what I thought would be massive growth. Before I did that though, I decided to consult a private equity attorney to help me through the process, and what I learned during those discussions was invaluable for myself and for many of my future clients.

I’ve been talking to many companies lately who are looking for investments to grow their companies, and after attending (yet another) VC event yesterday, and talking to companies looking for money there, I thought an article about this topic was in order. 

As a backgrounder, it's important to know that angel investors typically spend around $1-3M on new ventures. VC investments typically range from low single digit millions to low double digit millions. Anything above that is typically private equity territory, where they look for much more established outfits, rolling up geographically diverse companies, etc., and they will invest up to billions. Most early stage investors look for 5-10X return over 3-5 years, equivalent to an internal annual rate of return of about 35%. And here’s what they look for in the companies they invest in:

A strong, experienced, energetic management team. I’ve never talked to a VC that didn’t have this as their top 3 criteria. They’re investing in the team as much as the technology. They need to know the team can execute otherwise they’ll just hold on to their money until they find the right company.

Game changing technologies, preferably with patents. Although some investors will invest in incremental improvements in existing technologies, they typically look for game changing technologies, locked up with patents, and with very high long-term returns. This is why green tech has been attracting so much money over the past few years. Not too many investors I know are actively looking for service oriented companies unless they show very strong financials, or rolling up geographically diverse companies.

Existing sales or contracts. If you can show your technology or product is already selling, you have a much higher chance of attracting investors. No brainer, but so many small companies just don’t get it when it comes to this. 

Strong market indicators or market research validating demand. At yesterday’s event, this guy from a startup was looking for investors for some patents they had developed without prototyping them. He was so adamant that somebody would invest in their company because he knew in his “gut” that this was going to change the way the world operated. Last time I checked investors didn’t invest in “gut” feelings of startup salesmen. This is why you need solid strategic understanding of your market before approaching investors (or show that the product sells).

Low capital, SAG, and structural expenses. If you need national advertising or expensive manufacturing plants, you’re less likely to attract investors. This is why I love licensing business models where the company focuses on R&D and leaves the product manufacturing and marketing to corporate licensees, an ideal setup for middle market companies.

Realistic financial models, projections, and contingency plans. This will show you know the size of your market, how it operates, and that you have the knowhow to sell the product, and have built in intelligence in case things don’t work out as expected. You will also need to show a detailed plan for the money you’ll ask for. It’s an inside joke that everyone is looking for $5-10M in investments. But why? What’s the plan for that money?

Lack of litigation threats or regulatory barriers. The last thing an investor wants to deal with.

Follow up financing plans. Particularly for early stage investments, you need to show a strategic view of where you’re taking the company and the plans for future financing to support that strategy.

It’s important to note that most investors no longer invest in patents alone. That part of the market has now moved over to patent portfolio managers where they actively purchase and group patents from various inventors for sale as a portfolio.

By the way, the company I wanted to invest in missed several of the above criteria (the best thing it had going for it was the technology), and I walked away without losing any money in the deal – and gaining a ton of understanding about private money.

If you have any stories or additional pointers about raising equity, I’d love to hear about it.

Competitors: Fuh’Get About ‘Em! How too much focus on your competition can throw your company off course

I was introduced to Seena Sharp over a year ago, though we didn’t meet until very recently – and we immediately hit it off. She runs a market intelligence practice helping companies focus and hone in on their customer needs. I asked her to write an article for The Directive this week, and I’m delighted that she accepted.

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Do you waste time comparing yourself to competitors?  Well, Fuh’Get About ‘Em. Now!

Companies with too much focus on competitors tend to offer more of the same, while fiercely defending the differences that customers either don’t notice or don’t care about. Then they end up with a product or service that’s faster/bigger/cheaper, when what the customer wants may be something else (easier to use, fewer features, return policy, etc). Think of the US car manufacturers that for decades were trying to beat their competition with faster/bigger cars, while Japanese auto manufacturers were responding to shifting market needs and eating their lunch.

Apple is a great example of a company that ignores the competition and focuses on their customers. If they focused on their competition, they would not have created the iPod to compete against Sony; they would not have created the App Store to get into the music business; they would not have entered the phone business; and they would not have created the iPad to start competing against that other digital behemoth Amazon.

There are several reasons not to focus or dwell on competitors:

-         The competitor’s focus may not be the same as yours. For example, a major product line for you might be a side offering for your competition.

-         You’re indirectly ascribing a certain business or market acumen they may not deserve. Are you sure they know more about the market than you do?

-         Competitors can make mistakes. Do you want to follow in their footsteps?

-         Following competitors is a weakened position. Your employees and customers will not view your company in a leadership position. This may impact innovation, sales, press coverage etc.

Having said this, there are situations where attention to competitors must be paid:

-         A distracted competitor offers a huge opportunity.  For instance, if they’re dealing with a possible merger, acquisition, or facing a legal problem, they may not be paying attention to their customers – thus offering an opportunity for you.

-         Competitors define the overall market landscape.  And therefore are necessary for understanding the shifts in a constantly changing business environment or identifying new offerings within the market.

-         Some competitors may have figured out better ways to engage customers. When you have not done your job and competitors have done it for you – by satisfying the market needs.

So how do you uncover those gaps and opportunities that elude your competitors? There are at least two ways – formal competitive intelligence for strategic, insightful, due diligence, and informal observation, as an indicator to monitor or further research.

An example of an informal observation is McDonald’s. The company never set out to compete with Starbucks, but when they noticed that a sizeable number of customers were coming into McD’s carrying cups of Starbucks, they conducted formal market intelligence to determine if offering coffee would be a good move. Now the company offers better quality coffee leading to higher sales and saving their customer base an additional trip to Starbucks.

The clear objective in business is to satisfy customers – and do it over and over and over again. Many companies believe that once they offer customers what they want, the customer will stay with them and be satisfied. There’s just one problem with this thinking. Products and services are constantly being improved.  So, what you did yesterday may be no big deal today. And if your competitors copy you, then the differentiating factor no longer exists.

As if that’s not enough, it’s a big investment (and a pain) for companies to constantly make changes to suit their customers, but if they don’t, they should not be surprised or angry when another company comes in and does.

This is where competitive intelligence pays off. It focuses on the entire marketplace, of which customers and competitors are segments – among many - and it seeks to uncover what’s changing and emerging, to give your firm the competitive advantage.

Take a leaf from Steve Jobs’ book. Customers will buy your product if they want it. Even in a recession. Even if it’s expensive. Even if they don’t “need” it.  

Sam Walton stated “You guys (manufacturers) are always trying to sell me more Tide.  I really don’t care if I sell Tide or Fab.  I just want to sell what the consumer wants.” It worked out pretty well for him.

Seena Sharp is a pioneer, founding the first market intelligence firm in the US, Sharp Market Intelligence, following a successful corporate career in New York City. Read her new book, Competitive Intelligence Advantage for pragmatic insights and actions to reduce risk, avoid being blindsided, and make smarter strategic decisions the first time. Seena is a popular speaker globally, and has written dozens of business articles.

Your pricing strategy can make or break your company

I’ve been very busy recently working with several clients, one of which needed strategic assessments of entering the Smart Grid market. And a big part of the assessment had to do with the pricing model for this new vertical.

As you can imagine, pricing model has a direct impact on the top-line, the bottom-line, and sales volume, and can effectively make or break a company – or make it float around in mediocrity, as is sometimes the case.

Before I get into details, I should say that I have no background in consumer goods where pricing is a whole different beast to tackle. I have no idea how the following applies to consumer goods, though I suspect the general principles apply to business uniformly.

Market-based vs. cost-based pricing. Amazingly, some companies still base their pricing model on their cost. Here’s my comeback to this concept: whether a product costs you $100 or $1,000, if the market pays $800 for it, that’s where you should price it. Otherwise you’re either leaving money on the table or pricing yourself out.  If you can’t make the desired margins, you need to create value, change your target market, or change your offering.

Creating value. The market pays for value, and you can’t expect it to extract the value from your offering without your help. Every target demographic needs to be considered in creating the value. Whether it’s the ‘cool’ factor, functionality, reliability, time-savings, cost-savings, or otherwise, clearly communicate the value to each set of your demographics. Products don’t sell themselves, people sell them – and they do it by creating value. Tactful positioning comes in handy for creating value. Apple is a company that consistently does a great job at creating real value (great products) plus perceived value (cool factor).

Competition. It shouldn’t be a surprise that if there’s little competition in your market, you can charge higher for your products and services. Needless to say, you need to continually monitor your market for competition. And if your market finally does get targeted by competition, value creation will help you edge ahead of them.

Price wars. Alternatively, in markets with a lot of competition, it’s easy to fall into the “price war” trap. This is typical in commoditized markets, or those in which innovation has worn off (like the PC market). The best way to avoid price wars is to add value, reposition, or accelerate innovation. Without continued innovation, value eventually wears off. Sometimes it’s not worth staying in a market with continual price wars, and it’s best to get out. IBM got out of the PC business mostly for this reason.

Growth markets vs. established markets. The general rule is that growth markets afford higher prices. Market excitement, lack of competition, and the general “first to anything” mentality with growth markets allows for higher prices. Don’t be afraid to use this to your advantage. Eventually, with additional players and sizzle fatigue, prices will go lower.

If in doubt, start high. If you’ve been in the business long enough, you probably have a pretty good idea of the price the market will bear, but in new verticals, this can get tricky, and sometimes it becomes difficult to figure out a good pricing model. When in doubt, start high. The market will quickly let you know if you’re overpriced and you can always lower your prices, but increasing your prices will be much more difficult.

The market talks back – only if your price is too high. As I mentioned, the market will quickly let you know if you’re overpriced. Here’s the trick, it will hardly ever tell you if you’re under-priced. You could be happy selling high volumes of your products not realizing that you’re leaving 20% on the table. How about implementing a better pricing model that will increase your top-line by 20%, or add 50% to your net margin?

Life-cycle pricing. This topic deserves its own article, but it’s important to keep an eye on the market as the product or service grows, picks up momentum, and nears its “end of life”. The product or service needs to be actively re-priced throughout its life-cycle from launch, mid-life, to end-life. For example, production costs or support/maintenance costs could be much higher for older products or services, causing the margins to deteriorate with lowered pricing. Continual business analysis can bring this to light in order to shelf older products and services, and charge more for newer ones.

Lastly, don't be afraid to charge higher for your products and services. Create value and don’t leave money on the table. Remember, you can always lower your prices, but increasing them is much more difficult.

I’d love to hear your stories of pricing genius or mishaps.

HP’s board, CEO Mark Hurd’s resignation, and the morality police circus in Corporate America

Corporate America has done it again. They pulled out their “morality” card and managed to topple one of the most powerful tech executives in the country. If you don’t know about HP CEO Mark Hurd’s resignation by now, I won’t get into details, just google “Mark Hurd resignation” and you’ll get thousands of links to the story. In short, Mark Hurd resigned abruptly late last week after investigations into a sexual harassment suit revealed that he had tweaked his expense accounts to hide the woman’s name.

I’m no big fan of Mark Hurd’s. I’ve been on the record criticizing him when it came to light that he was severely cutting back on HP’s R&D activities, and later again when he mocked cloud computing. But this?!

Granted, whenever you find sex, money, and power mingled together, you’re bound to have a good story. I intentionally waited a few days for more news to come down the pipelines before writing about this, but nothing new is coming out on the story.

From all the articles I’ve read, it’s clear Hurd did nothing illegal. HP is in no way compromised legally or monetarily. Hurd didn’t spend lavishly on this woman (he offered to pay any money owed HP, which was a few thousand dollars). They both deny any physical relationship. And he personally settled the case with the woman in question prior to his forced resignation.

So why was the HP board so adamant to let him go? It’s the case of morality policing that’s all too present within Corporate America. They didn’t like the fact that he hid the name of this woman he hung out with, and possibly had a crush on. Here’s the question: if he tweaked other information that had nothing to do with a male/female relationship, would they have forced him to resign? Highly unlikely, they'd probably give him a wrist slap, rightfully so. But, oh, there was a woman involved and he had to resign.

This is nothing new.

Back in 2005, Boeing forced its new (and very promising) CEO to resign after the board was tipped off about an affair he was having with a company employee who didn’t directly report to him. No joke. They didn’t want the CEO to have a consensual affair.

A few years back I worked with a small public company struggling to increase sales. The company’s top sales executive was costing the company about 2-3 pennies a share every quarter from his total compensation and travel expenses. If you follow stocks and earnings reports, you know that’s huge. They didn’t fire him for his lackluster performance or his ridiculously lavish travel expenses. They fired him because they didn’t like that he was having an affair.

So back to Hurd.

The board didn’t mind that he practically decimated the R&D organization at HP (he was even on record making fun of the R&D folks).

The board didn’t mind that he acquired Palm, the bottom-of-the-totem-pole mobile player on the brink of bancruptcy, for a staggering $1.2 billion in cash.

No that was OK. But they didn’t like that he had a crush on this woman and wanted to hide it.

Here’s what I have to say to these boards. How about you focus on the CEO’s strategies, leadership qualities, and overall performance and let the wives slap them across the face for cheating on them? It’s much more their business than yours.

The first trading day after Hurd's resignation, HP's stock dropped 10% on almost 10 times the average volume. The board is lucky the damages weren't worse.

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And now that we’re moving on from Hurd, I think it’s high time HP promotes Anne Livermore to the CEO post. She’s a long time insider who was passed up in favor of Carly Fiorina back when the company was focused on hiring an outsider. She’s responsible for almost half the company’s revenues, and the most strategic businesses within HP (storage, servers, software, and services), and she’s probably the only person who has enough internal insight and operational capability to continue with the integration of the slew of HP’s recent acquisitions. Go Anne!

Eight mistakes to avoid on LinkedIn

It’s been a while since I wrote about LinkedIn, and the more I use the platform, the more I realize its powerful potential. But also, I get exposed to so many poor practices sometimes I LOL (only if no one is around… OK, I threw in the acronym to see if you were paying attention).

So I thought it was high time for another LinkedIn blog, this time on practices to avoid.

Incomplete information. Regardless of what kind of work you do or what type of career you have, LinkedIn is offering you a free search engine friendly web portal, a resume, a place to show the world what you do and what you’re capable of doing. So why not use it to its fullest capability? The fields that get the most attention are:

- Headline: fill it in as much as you can – the field is much longer than you’d expect.

- Summary and specialties: why do so many people have short summaries? Fill up the area as much as you can with an easily readable format (nobody wants to read a long paragraph – use spaces and bullets).

- Links: not just your company link, but also if you’ve been mentioned in an article, if you have written white papers, or if you have a profile on a company website. Make sure to name them properly by using the “other” option.

- Experience: highlight accomplishments as you would in a resume.

You can always check my profile for some guidelines, although I’d be the first to admit it’s not 100% perfect. And don’t forget about good formatting and especially keywords.

Hiding your profile. I don’t get why people do this. I guess if you’re the CEO of GM, you don’t want your info exposed, but if you’re the CEO of GM you’re probably not reading this blog, so for the rest of you, expose the profile as much as you can. If there’s info you don’t want exposed, just remove it from the profile.

Poor grammar & typos. This is so easy to fix and so many people still have problems with it. Drop all the content into a Microsoft Word to catch the spelling and grammar errors. If you're really bad at writing, there are now professional LinkedIn profile writers who can do this for a fee.

Impersonal connection requests. This is like walking into a bar and immediately asking for people’s phone numbers. If you’re interested in a connection, you should start it with a conversation, even a short one. There’s a “note” section in the connection request. Use it.

Recommendations. There are so many wrong ways to get recommendations it deserves its own blog, but I’ll make it short. Recommendations should come from people who know you or have worked with you AND have something nice to say. Not brain surgery, right? So why is it so many people get it wrong? Here is a list of the wrong ways to get them:

- Recommendations from strangers: this is not a joke, I recently saw a recommendation that said something like “I don’t know Mr. xxx but I’m sure he’d be good at whatever he does.” Oh, that’s really impressive.

- Recommendations from people who either don’t know you well or haven’t worked with you: I talk to a guy once, and the next thing you know I’m getting a recommendation request. Really? Needless to say I ignored it, but if this guy had waited a few weeks, he might have received a good recommendation from me.

- Not checking the recommendation for accuracy: LinkedIn allows you to ask for revisions before you accept the recommendation. Just about all of my recommendations either had typos, grammatical errors, or factual errors in them. Make sure it’s clean and crisp, otherwise it reflects negatively on you too.

Not building a network. Having a good profile is kind of useless on its own. The point is to build a network you can regularly tap into. I wish LinkedIn was around back 20 years ago – I’ve lost so many good college and business contacts along the way. Build the network and stay in touch.

Over-promotion. I cut people a lot of slack but some people overdo the self promotion, the service promotion, etc. Remember there’s a “hide” button on the feeds, and if people get sick of your promotions, they’ll hide all your actions from their feed, or worse yet, they’ll remove you from their connection list.

Unprofessional behavior. Does this need any explanations? With new LinkedIn features, even people beyond your network can see your comments on status updates, groups, etc. Keep it professional.


I can already think of 10-12 other things I can add to the list, but this should do it. Make sure to use all the features LinkedIn offers including the great applications and the groups.

If you have any funny (or not so funny) stories about mistakes people make on LinkedIn, I’d love to hear from you. Put them in the comment section.

Smart Grid Dynamic Pricing: Behavior Change Easier Said than Done

You might be wondering why you’re hearing so much about smart grids and smart metering lately, and what the big deal is. The big deal is that the ramifications of “smarting” US’ electric grid systems will touch upon multiple aspects of business and policy from consumer protection, to federal budget allocations, and most relevant to the readers of this blog, the opportunities it will provide for high tech companies providing services and technologies. And the show has just begun.

I was asked again by TMCnet.com to write another article about Smart Grids. It’s sure to ruffle some feathers, particularly for the players in the smart grid markets, but that should be expected about opinions about any new market with new technologies.

I’d be interested to see what everyone thinks. Here’s the link to the article.

8 clues to your company's health: detected in your org chart

I posted this article some time last year, and it is still one of my most popular blogs, regularly getting hits through search engines. I thought I'd update it and give it another life.

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Org charts are fascinating (living, breathing, pulsating) organisms. I didn’t always see things this way. I remember being a number in an org chart and hating it. I was one of 100,000 employees working for Corporation X many years ago, and whenever I looked at an org chart, all I saw was hierarchy. Who reported to whom? Who moved to the side? Who moved up? And why didn’t anyone ever move down? Some people sucked at what they did, and they kept getting “demoted up” – a promotion to get them out of the way.

It took me a few years to understand the true meaning conveyed by org charts: power plays, strengths, and management mistakes. I’ve now seen more org charts than I can count, and I routinely review them as a visual representation of the company’s strengths and weaknesses, and misplaced focus.

A few on my laundry list.

Ownership. I look for “ownership” of every important function on the org chart. If no one “owns” a specific function, who is in charge of it? One of my recent clients had no single person in charge of sales. Why? Because the CEO, the president, the director of sales, and the sales staff were all "in charge" of sales. Once we reorganized and put the director of sales in charge, he cleaned up the organization and focused the team, resulting in significant sales improvements within just a few months.

Organizational depth. Do you really need all those mid-level managers at the company? As is the case with many large corporations, the unhealthy "fat in the middle" takes up a lot of resources and spews out bureaucracy. Legal issues aside, it makes sense to clean out the middle layer every 3-4 years, especially those who have very few staff reporting to them (you know what they look like on the org chart, elongated org shapes with few direct reports). Because of their experience, they can always be reassigned as line managers, special projects, etc., but I say the ones who have been demoted up take a hike.

Marketing. One of the most misunderstood functions in most companies. I personally view it as a more strategic function, but it does span a wide range of strategic and tactical activities. How a company treats marketing says much about their focus. Having a “sales and marketing” department forces the marketing function to become more tactical. “Marketing and advertising” suites brand conscious companies and is tactical by nature. For high tech companies I prefer to see marketing as a stand-alone function and much more strategy focused. For non-manufacturing SMBs, I’d like to see a minimum of one marketing staff for every 15-20 employees. Anything less than that and your sales will suffer.

Sales. It’s amazing how many companies have the wrong sales functions to match their product or service offering. A vertical market focus in the sales department is suitable for sophisticated product lines, and a geographical focus is more suitable for commoditized products. Mixing the two will create havoc. The titles alone portray much about the company’s focus. Have you hired sales, business development, or account managers? Does this match the product line? I recently talked to a CEO who had mistakenly hired account management types to generate new sales. Over a year later, he was still wondering why he was having sales problems. Also, is channel sales separated from direct sales? If not, the channel partnerships will suffer.

R&D. For high-tech companies, I’d like to see a stand-alone R&D organization. Mixing R&D with Engineering dilutes the strategic focus of the company. The engineering team takes the product to launch which is tactical by default. R&D needs to focus on future product lines and shouldn’t get bogged down by day-to-day tactics.

Quality & Assurance (QA). Again, for high tech companies, QA should be separated from engineering, otherwise, product quality is compromised. You need the negotiation between the two groups, and having one function report to the other doesn’t work well.

Human Resources. I’d like to see this as a straight line to the top management (president, COO, or CEO). Most companies organically leave the human resources function under the CFO or VP of Finance. This shows cost consciousness and lack of focus on human resource development.

Operations. Another area that routinely falls under finance to keep the costs down. This should also be a straight line to the top (or in smaller companies, handled by the top position in the company), as it spans the entire company. Operations and finance should be in position of negotiating together and one reporting to the other compromises operational efficiency.


I’d love to hear your stories. What do you see on your company’s org chart? Does it match your company’s mission and corporate values? If not, it might be time for change management (let's talk!).

And let’s hope “demoting up” is eliminated for good. Please tell me it is.

Smart grids: electric utilities’ challenges and opportunities (thoughts on the UCLA WINMEC Smart Grid Forum)

If you haven’t already, you will hear more and more about smart grids, as the nation’s electric utilities plan to overhaul and modernize their existing grid system in order to better monitor their ageing infrastructure, and also to plan ahead for integration of new sources of energy (solar and wind) as well as disruptive new sources of consumption (electric vehicles).

On Monday May 17^th, I attended a smart grid forum at UCLA, and the editors of TMCnet.com, a major online information and news portal on various sectors, asked me to guest-write an article for them.

Enjoy! I’ll write more about smart grids in the future, so if you're interested in this topic, feel free to subscribe here.

Twitter bows to corporate advertisers, shuns average users: good bye social media, hello corporate advertising

Last summer Twitter made a lot of headline news for its explosive growth without a clear plan for a business model. I blogged about the company twice during that time, once to discuss their lack of revenue model, and another time when the company was being publicly dissed by VCs for… their lack of revenue model.

On Tuesday Twitter announced their long awaited revenue model.

The ad based program called “Promoted Tweets” allows companies to purchase “ads” for the search keywords so that their tweets show up higher in the list. Now businesses will be able to push their Tweets up higher in the feed, blocking out discussions by, say, dissatisfied customers, or during a major public relations fiasco. Toyota would have loved this feature during their recent recall.

In the next phase, Twitter will allow “ads” to randomly show up in the feeds for people it deems interested. So if I’ve Tweeted about my blog on Starbucks’ debranding, Twitter will decide I’m interested in Starbucks’ products and will randomly push the company’s promotional ads down my throat.

Good grief! This effectively wipes out the level playing field all accounts, whether individual or corporate accounts, had in the past. Good bye social networking, hello corporate advertising.

Since Twitter started in 2007, it’s shown phenomenal growth, with over 22 million unique visitors in March 2010, up from just over half a million a year ago. That’s an envious position for a startup, and of course there was a need for a solid revenue plan for the company. But this will change the face of Twitter as we know it, and I’m not sure for the better (I’m willing to be convinced otherwise).

The New York Times quoted Dick Costolo, Twitter’s COO as saying: “The ability of companies to engage with customers around this interest graph is more compelling than trying to wedge yourself into these social interactions.”

Really? “These social interactions” were what Twitter was supposed to be all about.

Before you know it, Twitter will be taken over by ads by corporate big-wigs essentially drowning out the collective voices of average users, and bloggers like me. Hey, maybe that’s what my beef is all about!

I’ve been quiet recently since I’m wrapping up major projects for two clients this month, and also tending to my mother who has been ill (we’re hoping she’ll be fine, thank you). But I’m already working on some interesting blogs coming up soon, so stay tuned and come back!

Branding in a green world: how to target a wide audience with green products

I asked Leon Kaye from www.GreenGoPost.com to guest blog for me this week. Leon is one of the few voices that hold the fine line between “green” progressiveness and business pragmatics.

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Despite the economic downturn, companies and consumers continue to demonstrate an interest in green products and sustainable business practices due to concerns about energy independence, the world we will leave for future generations, waste management, environmental pollution, and the general desire for a healthier lifestyle.

Unfortunately, many companies offering “green” products have difficulty in communicating their message properly. Some simply fall into the trap of slapping such labels as “natural,” “green,” and “eco-friendly” like logos on their products. Others determine that the “green” consumer segment is too narrow to pursue. And meanwhile, the pitfall of screeching “WE’RE GREEN!” to the market may turn away shoppers who are averse to sanctimonious preaching.

Companies often become frustrated in identifying a strong green brand because of their failure in two areas:

- Brand attachment: developing a strong emotional attachment between their brand and their customer base.

- Target audience: conveying a broad solution for the general market without zeroing in on a specific consumer behavior or trait.

Brand attachment involves four stages of consumer behavior. Let’s use the supermarket chain, Trader Joe’s, as an example:

Brand consciousness. The customer hears a TJ’s ad, starts shopping there, enjoys the consumer experience, and appreciates the fact that they offer organic or vegetarian products.

Brand preference. Over time, the customer determines that shopping at Trader Joe’s makes him/her a healthier person, and feels their products are reliable and well-priced.

Brand dedication. The customer internalizes the TJ brand’s core values and messages, and believes he/she is in the demographics to which TJ markets: single person or young couple who live the bourgeois bohemian (bobo) lifestyle.

Brand affection. Even if the competitor has better prices (Fresh & Easy) or superior quality (Whole Foods), the customer’s commitment to TJ’s is such that he/she becomes a proud alpha-consumer, and will happily pay a premium for their goods.

The goal of attaining a strong brand attachment is reaching the last stage. Many companies in the green space try to skip from steps 1 to 4 by slapping on a few trendy words or a tagline in their marketing efforts. But in order to forge a brand identity that will strongly resonate with their customers, they need consistent branding practices that gradually drive the customer from the “brand consciousness” stage to the “brand affection” stage.

The second point of branding, target audience, is a bit more difficult. The idea is to become indispensible to a wide spectrum of consumers. Without appealing to a wide audience, the company and its products become marginalized within a narrow market segment, and fail to generate optimum revenues.

San Francisco-based Method tackles this issue brilliantly. Method’s products are 100% plant based and are offered in recycled plastic bottles. Their product line is about as green/eco-friendly/sustainable/natural as you can get. Nevertheless, you do not find these overused terms in their literature. Note their tag lines: “people against dirty” and “a cleaner clean.” Method’s management has found that consumers will pay a premium for quality, and their products convey technology, cleanliness, intelligence, and innovation – appealing to a wide audience.

Their strategy has worked. Who buys from Method? Parents who want a clean environment for their children, young professionals who want their space to smell good, real estate agents who want to buy nice housewarming gifts for their clients. And they buy Method’s products through Target, Lowe’s, Costco, and Bed Bath & Beyond: stores that appeal to a wide audience, and are known for their competitive pricing while selling environmentally friendly products without bombarding consumers with bland “green” messages.

These points are just the beginning in building a strong green brand. The main idea is that being green is more than putting a leaf on the bottle and saying you are saving the planet: your company’s brand needs to demonstrate inclusiveness while making customers feel that you are making their life easier. It’s great to recycle, but companies need to stop recycling the same old tired words.

If you or your clients have asked you to work on a green branding or marketing campaign, we would like to hear your experiences!

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With 15 years in sales training and international business development, Leon Kaye has most recently developed corporate sustainability strategies and training programs. Earlier in his career, he lived in South Korea in the mid-90s. Mr. Kaye then moved back to the US to lead IT and sales training projects, and later, he sold business services to large corporations. A Silicon Valley native, he currently lives in Los Angeles, where he is editor of www.GreenGoPost.com and leads GGP Media.