Yesterday Epicenter, in conjunction with Fenwick and West, hosted an all day marathon for startups looking for funding.  This was the 3rd round and so those companies presenting, by and large, had interesting products and services, robust business models, and an average founder age of at least 10 or 15 years older than most of the Web 2.0 conferences I attend.  Draw your own conclusions, but remember correlation is the tool of the devil.

I was asked to serve on the "Getting Market Traction" panel; I am replaying some of my thoughts here. The important thing in my mind is to be clear as to what has changed and what has not.  More important is to pay attention to both, which I think often gets lost as markets heat up.

What Has Changed: Viral marketing is a must with I think two primary drivers.  The first is ad saturation.  Most of us are up to you-know-where with traditional ads (except for a few very clever exceptions) and will do our best to bypass them - think Tivo fastforward and popup blockers.  So "word-of-mouth" is more effective as it at least appears to come from a trusted source.

The second is the fact that network effects have become greatly amplified and you can therefore reach a greater number of people in a much shorter time frame.  Back in the olden days (2000) I was on the board of a startup.  Our marketing strategy was primarily viral, but back then it was slow and limited.  Today the number of people regularly participating on the net, not just observing the net, has changed those dynamics.  Web sites launched on Monday can have 200,000 unique visitors by Wednesday.

What Hasn't Changed: Understanding and paying attention to the real fundamentals of market behavior (people and how they behave) is critical.  And that hasn't changed nor do I expect it ever will. In other words, how do you keep the 200,000 visitors you received after 2 days?  At the end of the day people buy or use products and services that help them get something important done.  All the whizbang features in the world pale next to that important concept.  And if you can find a task that currently is not easily achieved, for example people cobbling together two or three disparate solutions to achieve one task of importance (landlines, cell lines, internet and VOIP to stay connected), and can replace them with one easy-to-use solution, you can create the holy grail of hypergrowth for your company.

Understanding and paying attention to how and why people are actually using what you offer can be a real eye opener - one to which technology companies often give short shrift.  One of my favorite stories is that of a clever fast food franchisee.  Answer this question: if I am selling milkshakes, against what am I competing?  Most people answer desserts, sweets, ice cream, snacks.  I have yet to hear the correct answer in this case which is breakfast foods - breakfast burritos, mcmuffins, and even our beloved latte and muffin.  Usually the reaction is one of surprise or disbelief.

 So listen to this.  A very clever owner of a fast food restaurant noticed that his sales of milkshakes were not limited to between the hours of  lunch to closing, but that in fact a significant number were sold between 7 -10 a.m.  Being somewhat bemused he decided to undertake finding out why; this is what he discovered.

Commuters have a need for something that will provide them a few things in one package: they can consume it with one hand without making a mess, they can get it without spending too much time, it will be filling enough to last them until their next food break, and it will provide something to do while they drive to help break the boredom.  Milkshakes provide all four with the added benefit of feeling like a treat. 

But knowing isn't the same as addressing or gaining leverage from the information, so this clever man took action.  He changed the product and the way he distributed it to maximize the experience his customers were attempting to fulfill.  First he made the shakes thicker so they would last longer, providing longer distraction during the commute and longer time until the next belly growl.  Next he pulled the milkshake machine out in front of the counter, enabling customers to avoid standing in line behind burrito lovers (both in the store and the drive through lane).  Further, he let customers buy prepaid shake swipe cards so they could self-serve and be in and out of the store as quickly as possible.

What's the lesson here?  Never assume you understand how people will use your product or service, and make sure you do take time to find out what job it is they are really trying to accomplish.  Milkshake: dessert or the perfect breakfast for commuters?