2/11/90: Investment banking firm Drexel Burnham Lambert, home of the junk bond phenomenon, informs its employees that it is filing for bankruptcy.
2/12/90: My cousin Corbett launches his program for software developers who can't afford the skyrocketing costs of software marketing: Junk Customers.
Corbett was concerned about the software developer who can't afford to run large ads in the major computer magazines and can't afford to rent lists of prospects. Some magazines and some lists will result in more responses and purchases than others, of course, and it was while trying to come up with a new measure of the value of these sources that Corbett hit on the secret, which he calls "Junk Customers."
He took his inspiration from Mike Milken, the Drexel Burnham Lambert employee who made such a splash with junk bonds. Milken noticed that there were a lot of companies that had to go to the bank when they wanted money. This was bad, he realized. The companies tried issuing bonds to get investors to put up money, but investment firms such as Drexel et al. steered investors away from these bonds, labeling them "low value." This meant that there was a higher probability that the companies would fail to pay up -- go out of business or whatever -- than was the case with so-called high-quality bonds. The companies tried to make their bonds appealing by increasing the yield -- what you get back for your investment -- and Mike Milken saw this as a good deal. He began helping his clients to buy a broad selection of these high-yield, low-value bonds, starting what became, at its peak, a $200 billion market.
Corbett has come up with a similar plan for software marketing. (The plan is completely general, but his loyalty is to the software development community. He wants you to have it.) He defines the yield of a source of prospects -- a list of names or a page of advertising -- as the inverse of the CPM (ad sales jargon for "cost per thousand"). Yield is how many names you get for a buck. He defines the value of a source as how well the source will pull -- how likely each name is to result in a sale. The trick, as with junk bonds, is to develop a varied portfolio of high-yield, low-value sources.
Identifying a truly low-value source is tricky. It can't just be a source that is ill-suited to your needs; such a source might be able to get a lot of money from someone else. To ensure that the yield can be made high enough, this must be a source ill-suited to anyone's needs, a publication or list poorly suited to any commercial advertising or name rental purpose. Then there is another problem in dealing with low-quality sources: You'll need a lot of them. The low quality translates into few responses from any one source, and the overhead of dealing with hundreds of such companies can easily eat up any gains.
Corbett thinks he has found the single correct answer to the Junk Customers challenge, and is generously allowing me to pass it on to you: Church newsletters. Every community has a church, every church has a newsletter, and every church belongs to some large national or international organization capable of serving as a central clearing house for ad sales or list rental. The nonprofit status of churches and their general, noncommercial slant makes a church newsletter an exceptionally low-value source, Corbett maintains.
He sees an intriguing wrinkle to the idea of church newsletter subscribers as prospects for software sales. Current wisdom says that you should look for software prospects among owners of computers. The church newsletter subscribers will include many who do not own a computer, apparently nonprospects almost by definition. But any good marketer knows to mistrust such self-fulfilling predictions, and to ask the positive question, why would this person want my product? In this case, the answer is surprisingly obvious. The industry has been doing it backwards!
Consider: It is much easier to ease a potential customer into a new product category with a small purchase than with a large one. One of the reasons many people cite for not buying a PC is that they don't know how to justify spending over a thousand dollars. So they buy a Nintendo instead. These people could be buying your CAD package.
Consider: Anyone who has ever thought about buying a PC has heard the advice, "Decide what software you want to run, and then buy the PC that runs that software." You've probably given that advice, but did you listen to what you were really saying?
Consider this pitch: For less than the cost of a Nintendo, you can own the most powerful CAD package in the known universe. Now you, too, can design microprocessor circuits, draft plans for a new house on the coast, develop a new art form, make your own clothes. Required Silicon Graphics IRIS workstation must be purchased separately.
Remember, you read it here first.