I just read this blog post referring to a recent study by Microsoft about small businesses using hosted IT services. The study contains a few interesting statistics:

• 40% of companies that used cloud computing services saw a 30% increase in revenue.
• 90% of companies that didn’t use hosted services saw a decrease in revenues.

Those are pretty dramatic numbers. But drawing the conclusion that using hosted IT services or cloud computing makes you profitable would be incorrect. It isn’t the act of using hosted services that makes you more profitable. It is the thinking behind the decision to use hosted services that really makes the difference.

Companies that use hosted services understand two important concepts:

1. Running lean is not the same as being cheap.
2. Any tool that helps you spend more time focusing on your core competency is a good thing to have.

Lean is Not the Same as Cheap

All small businesses should run as lean as possible. You shouldn’t have an office until you need an office. You shouldn’t have a PR firm until you need a PR firm. You shouldn’t have a $10,000 office chair ever.

But running lean isn’t the same as being cheap. Being cheap is stupid and can kill your business.

A cheap organization doesn’t want to pay for anything. They would rather do everything themselves for free. In essence, their time is worth less than their money.

On the other hand, lean and smart organizations understand that time can be just as, or even more valuable, than money. With this in mind they carefully evaluate each new expense based on the following criteria:

• Will this service make us money?
• Will this service save us money?
• Will this service save us enough time that we can better focus on our core competencies?

If the answer is yes to any of the questions above then they purchase the service.

Hosted Services Let You Hire “Specialists” At a Very Affordable Price

The best thing about hosted services is that you get to hire a specialist for each aspect of your business. For example, we currently use Zendesk, Basecamp, Mailchimp and Batchbook among other hosted services.

Now, we like to think that we are a pretty smart group of people here. Could we build our own help desk solution? Probably. Would it be as good as Zendesk? No. Not because we can’t but because we don’t live and breathe “help desk”. We live and breathe “documentation“. That is what we think about all day. How to make it easier to create and distribute software documentation. We’re never going to give “help desk” software the same level of attention that Zendesk does. I know Zendesk is thinking every day about how to make a better help desk. And I get all of the benefits from that which gives me more time to think about how to improve software documentation.

The same applies to project management with Basecamp, email marketing with Mailchimp and CRM solutions with Batchbook.

Another huge plus is that if these services ever go down it is their job to fix it, not mine.

It’s All About the Mindset

Will using hosted services make you more profitable? Maybe. But being lean instead of cheap and focusing on your core strengths will definitely help make you more profitable. For many small businesses, hosted solutions can help in both areas.

Is your marketing a bait and switch? When customers purchase your product or service are they receiving what thought they were buying? If they can’t implement the vision that you have been selling them then they are going to feel cheated.

I am always amazed when companies will invest significant marketing dollars to get users to try or buy a product, but then scrimp on the amount of money, time or effort they allocate for helping that user be successful in implementing the product. Once the sale is complete, the company’s investment is done. Training and support are cost centers that are viewed as burdens instead of opportunities.

This view is short sighted and demonstrates a complete lack of understanding of what the customer was buying when they purchased your product.

You may have been selling them a website authoring tool. They were buying the ability to create web sites.

You may have been selling them a marketing analytics program. They were buying a method for driving more traffic to their site.

You may have been selling application development tools. They were buying the ability to create applications.

You may have been selling a CRM. They were buying a way to improve their customer communications.

If your company doesn’t get this then you are leaving a lot of money on the table.

The most expensive marketing is marketing targeted at users who know nothing about you. The most effective marketing is the word of mouth you get from customers who are able to accomplish great things with your product.

Once a customer purchases your product your main goal needs to be this: help them be as successful as possible in their implementation of your product. If you don’t talk about this in your company or you don’t have a concrete strategy for addressing this issue you will have disappointed customers. You will have customers who feel like they have been “duped”. They thought they were buying an outcome and weren’t able to realize it. And your marketing costs will go up. Those customers who were never able to realize their goals will actually create a negative effect on your marketing efforts as they tell others of their lack of success.

Take a hard look at what you are selling. Is it what your customers think they are buying? Are you helping them achieve their goals through the use of your product? Are you providing your customers with materials that will help them realize those goals? If not, get started. Write a blog post, record a screencast, do a webinar or write some ScreenSteps lessons. Just do a little each week. You will be amazed at the results.

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I read a blog post this morning by Rebecca Corliss at Hubspot talking about how they are no longer going to be exhibiting at events. If you are planning on exhibiting at an upcoming event you might want to take a glance at it. They point out some very good reasons for not spending your marketing dollars on a booth.

We don’t exhibit at many events, mainly because of the high cost in dollars and time. And as Rebecca says in her post, “Event marketing yields the the highest cost per lead of all of our marketing.”

But I think that at a certain stage in the growth of your company an event can be very valuable, not for the leads you generate, but for the real-time market research you can perform. It becomes even more valuable if you then apply what you learn to your web presence.

Your booth at an exhibit functions much like your website should. You want passers by to not only glance at your booth, but to step in and engage with you. Let’s look at the stages of interaction an attendee goes through in relation to your booth:

1. They Decide Wether or Not To Approach the Booth
2. The Commit to a Short Engagement
3. They Commit to a Demo
4. They Want to Know Everything

1. The Event Attendee Decides Whether or Not to Engage You

Attendees will wander by your booth and decide if they want to learn more. Here is where you find out how effective your initial messaging is. When we attended our first conference our message for ScreenSteps was “Snap, Snap, Type, Type, Lesson Done!” That proved to be somewhat ineffective as it made people think we were just selling a tool for teachers. (We were fortunate that we have a great company name. I would say well over half of the people who approached our booth wanted to know about the name of our company, Blue Mango Learning Systems.)

Lesson learned: Company name is great. Product tag line stinks.

This is equivalent to someone who lands on a page at your website. As a marketer you want them to engage you rather than instantly moving on. You want them to get to the next stage. On the web you can’t really tell why a user arrives at your site and then almost instantly leaves. At a conference you can see it in people’s eyes. You can tell how close you are to getting it right. If they pause and look at your booth for a second and then move on you are close. If they don’t even give you a second glance then you have a long way to go.

2. The Attendee Engages You

At this point the attendee has decided that they want to get more information, but they aren’t sure how much. They are still deciding how long they want to stay. It is important to layer the information you are giving to the attendee. You want to give them, in less than 20 seconds, an overview that covers everything important about your product – what it is and what it can help them do. The sole purpose of this engagement is to get them to want to view a demo. Think of this as the first paragraph or two of text or the bullet points a user sees when they first come to your site.

This is an area where you can do a lot of experimentation. Throughout the day Trevor and I would discuss what phrases people were responding to. By interacting with one person after another and trying out small changes in our messaging, we began to figure out what descriptions helped people “get” what we were doing with ScreenSteps and ScreenSteps Live as well as which ones made them want to learn more.

3. The Attendee Watches a Demo

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I was just listening to a Podcast from 37signals on product pricing. It reminded me of some the issues we went through when launching ScreenSteps Live. The podcast gives a great overview on pricing principles but they left out one aspect that I feel is really important: charging for your product helps you find out who your customers are.

Discovering who your customers are is crucial and it isn’t as easy as it would seem. When a product first launches it can be picked up by a wide variety of groups. But a product can’t effectively target all types of users so decisions have to be made pretty early on about what type of customer you are targeting. Not charging for your product can push you towards making the wrong decision.

Our launch and continued development of ScreenSteps Live is a great example of this principle.

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At Blue Mango Learning Systems we primarily develop two applications:

• ScreenSteps Desktop Software: This is developed for Mac and PC. Trevor handles all of this and uses Runtime Revolution as his development environment.
• ScreenSteps Live: This is our hosted compliment to ScreenSteps Desktop. It is all coded in Ruby on Rails and I handle all of the work on that side.

Distributing a product for Mac, PC and running a hosted web service is a lot of work, especially when there are only two people in your company. Therefore we have had to choose our development tools very carefully. For us, the most important aspect of any development tool is our ability to quickly iterate over a product until we feel that we have it “right”. Really, for us, all other considerations fall way behind. If we can’t iterate efficiently then we are going to move on to another tool.

Ruby on Rails has proven to be a great tool for this type of development. There are a lot of people getting into Ruby on Rails so I thought some of you might be interested in my experience. I think that ScreenSteps Live is an interesting case study in the benefits and drawbacks of Rails, so over the next couple of months I will be posting some of the things that I have learned as I have dived into the Rails world.

First, a little background on myself as a programmer and ScreenSteps Live as a web app.

ScreenSteps Live Struggles to Come To Life

I have no background as a programmer. Well, almost none. We first got the idea for ScreenSteps Live back in late 2006 or early 2007. At that time I had never even attempted to program a web application. I knew some basic html, enough to throw up a web page, and enough php to do some basic includes. But nothing beyond that. I also had programmed some smaller desktop apps with Revolution but only after extensive help from Trevor.

But we needed a web app. Trevor wasn’t going to have time to do it so we decided to outsource. I won’t go into all of the details on this but our first attempt didn’t work out so well. Suffice it to say that after 2 months we had nothing and were out a few thousand dollars. All I can say is be very meticulous in checking out the people you are hiring to develop your stuff. We weren’t and it came back to bite us in the form of lost time and lost money.

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