Monthly Archives: February 2010

Unskilled and unaware of it

Unskilled and unaware of itHave you ever noticed that you rarely (if ever) meet someone who admits to having below average driving skills? My Grandfather started driving a car before UK driving tests became compulsory in 1935. So he never had to take a driving test. This was lucky for him, because he was a terrible driver. He would get distracted and cross the line into oncoming traffic, veering back at the last second when his passenger started shouting. He claimed he had never been in accident, but I expect he would have seen quite a few if he had ever thought to look in his mirrors. Few people would accept a lift from him a second time. Even as a young boy, I realised that I was in mortal danger getting into his car. I would make an excuse and make my own way by bicycle. And yet, he considered himself a good driver. After having read the excellent book Bad science by Doctor, journalist and blogger Ben Goldacre, I think I know why.

The book contains this startling graph from the paper ‘Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments’ by Kruger and Dunning :

Dunning-KrugerGraphics courtesy of explorativeapproach.com (click to enlarge)

The graph shows how good subjects were at logical reasoning as measured by a test (blue), how good they thought they were  (green) and how well they thought they did at the test (red). Apart from the top quartile, there was actually an inverse relationship between how skilled people thought they were and how skilled they actually were. The study also showed that the least competent individuals were also the least capable at recognizing the skill levels of others. This is the abstract from the paper:

People tend to hold overly favorable views of their abilities in many social and intellectual domains. The authors suggest that this overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it. Across 4 studies, the authors found that participants scoring in the bottom quartile on tests of humor, grammar, and logic grossly overestimated their test performance and ability. Although their test scores put them in the 12th percentile, they estimated themselves to be in the 62nd. Several analyses linked this miscalibration to deficits in metacognitive skill, or the capacity to distinguish accuracy from error. Paradoxically, improving the skills of participants, and thus increasing their metacognitive competence, helped them recognize the limitations of their abilities.

Or, more succinctly:

Ignorance more frequently begets confidence than does knowledge. Charles Darwin

The findings fit in with the concept of ‘unconsciously incompetent’ in Maslow’s four stages of learning:

  1. Unconscious Incompetence:  The individual neither understands nor knows how to do something, nor recognizes the deficit, nor has a desire to address it.
  2. Conscious Incompetence:  Though the individual does not understand or know how to do something, he or she does recognize the deficit, without yet addressing it.
  3. Conscious Competence: The individual understands or knows how to do something. However, demonstrating the skill or knowledge requires a great deal of consciousness or concentration.
  4. Unconscious Competence: The individual has had so much practice with a skill that it becomes “second nature” and can be performed easily (often without concentrating too deeply). He or she may or may not be able to teach it to others, depending upon how and when it was learned.

The Dunning-Kruger effect might explain why every crank and barstool scientist appears to think they understand global warming better than the world’s top climate scientists. I am also reminded of my own experiences learning ju-jitsu. After a year or two of training, having reached the exalted rank of green belt, I thought I was pretty good. It was only some years later, as a black belt, that I realised how much I still had to learn.

What has this got to do with software? Well, it might explain some of the very poor website design, GUI design, graphics and copywriting I see from time to time. The perpetrators may be sufficiently unskilled, that they don’t even realise how unskilled they really are. It is a thorny problem. Firstly you don’t realise you have the problem. Secondly, even if someone convinces you to delegate or outsource that type of work, you are unable to accurately assess the work of others. It is particularly worrying for one man software companies (such as myself) who have to perform or oversee a very wide range of  skills including: website design, user interface design, programming, testing, copyrighting, marketing, PR, documentation, support and systems admin.

By the same token,  many customers with poor IT skills might not have any insight into the extent of their deficit. Below are the results of a survey I did with some of my own customers a couple of years ago:

skill survey

Note how skewed the results are and bear in mind that relatively few of my customers are IT professionals. Similarly skewed results were reported recently by Patrick McKenzie in his blog:

Surprisingly many of my customers self-evaluate as comfortable with computers.  50% were “very comfortable”, and 30% were “mostly comfortable”.  These numbers are, candidly speaking, not what I would have assigned on the basis of reading support requests for three years.

I don’t have any easy solutions for this problem. All you can do is:

  • accept that you might not be the best judge of your own competence in all areas
  • actively solicit feedback from your customers and your peers and listen carefully
  • be a bit more tolerant of newb@aol.com when they blame your software for problems arising from their lack of basic IT knowledge
  • console yourself that, whatever your IT shortcomings, at least you are a good driver

5 great ways to waste money in Google Adwords

google adwordsI have looked at quite a few Google Adwords accounts as part of a  1-day consulting package I do for other microISVs and small software vendors. I have also talked to a lot of people at conferences and on forums about Adwords. It clear that a lot of people are wasting a lot of money on Google Adwords, sometimes with really basic mistakes.

For example:

  • paying $1.50 per click to advertise a $20 utility
  • paying $1 per click for an expensive, English language only development tool in some of the poorest, non-English speaking countries in the world.

Ouch.

Below I list 5 great ways to waste money in Adwords. I have seen them far too often. I have considerable admiration for what Google has achieved. But I think Larry and Sergey are probably rich enough already. I would like to see a lot less people throwing money at them and getting nothing useful in return.

1. Don’t use conversion tracking

conversion tracking adwords

With conversion tracking you decide a goal to track (typically a customer buys your software) and put a small script provided by Google on the appropriate page (e.g. the ‘thank you for buying’ page). Google will then use cookie tracking to calculate the cost per conversion for your ads and keywords. It is that simple and you can set it up in a few minutes. I can’t understand why anyone wouldn’t use conversion tracking. With conversion tracking you will soon notice that some ads and keywords convert consistently better than others, often much better. Armed with this information you can optimise Adwords by changing bid prices and deleting under performing ads. Without conversion tracking it is pure guess work.

Conversion tracking isn’t perfect:

  • Adwords cookies time out after 30 days. If someone buys 31 days after they click your ad it won’t be tracked. And the cookie may be pushed out of the cache before 30 days.
  • If someone clicks your ad on one computer and then buys it on another computer (or even using a different browser on the same computer) the conversion won’t be tracked.
  • Some customers may have cookies disabled.

But imperfect data has to be better than no data. Obviously the 30 day limit on cookies is problematic if you are selling software with a sales cycle that is typically 30 days or longer (e.g. software with a 30 day trial). In that case you are probably better off tracking downloads, rather than sales. The fact that someone takes time to download your software, rather than bouncing straight out of your site, at least shows some interest. If you have stats which show your typical download to sale ratio (and you should) you can use this to work out what a download is worth, and set your bid price accordingly.

2. Don’t use negative keywords

adwords negative keywords

My own experiences with Adwords quickly showed me that people will click an ad, even if it isn’t at all relevant to what they are searching for. For example people searching for “747 seating plan” will click on an ad with the title “wedding seating plan”. It is the nature of the web that people are surfing rather than reading, and clicking on an irrelevant ad doesn’t cost them anything. You can avoid a lot of wasted clicks with carefully set-up negative keywords. For example, you can be sure that I have “747” set up as a negative keyword.

Ways to find negative keywords include:

  • Generating ‘Search Query Performance’ reports from Google Adwords reporting
  • looking through your web logs/analytics for the sort of terms people are typing into search engines to find your site
  • using Google’s keyword suggestion tool
  • using Google suggest

There is also a useful list of negative keyword suggestions on Alwin Hoogerdijk’s blog.

3. Advertise in developing countries

adwords country selection
Over a billion people have access to the Internet. Many of them are in developing countries and aren’t realistically going to buy your software due to a combination of: cost (even $20 is a lot of money to people in many developing countries), payment issues (they may not have access to credit cards), language issues (your software isn’t localised for them) and cultural issues (there just isn’t much respect for intellectual property and copyright in many parts of the developing world). But that certainly won’t stop them clicking on your ads and you still have to pay for the clicks.

Start with wealthy countries where plenty of people speak a language your software has been localised into. If you really think you might be able to make a return in developing countries, then test it by creating a separate campaign that only runs in these countries and set your bids much lower (it is very easy to duplicate a campaign with Adwords Editor).

4. Bid too much

adwords bids

Lets use an example:

  • Your software sells for $30, of which you get $20 after subtracting ecommerce fees and average support costs.
  • Your typical visit to sale conversion ratio is about 1%.

That means you will only break even if you pay $0.20 per click through Adwords. Personally I find it hard to justify paying more than 50% of my profit to Google. So I wouldn’t bid more than $0.10 per click. If I couldn”t get any impressions at $0.10 per click I would try to either improve my quality score (e.g. improve my ads or delete keywords with low clickthrough rates) or find cheaper ‘long tail’ keywords to bid on. Paying $0.20 or more just to ‘get on the first page’ of Google is crazy (unless perhaps, it is a loss leader for market research purposes). You can’t make up on volume what you lose on each sale!

5. Don’t monitor your results

adwords reporting

Leaving your adwords campaign running for months on ‘auto pilot’ is ill-advised. Adwords is a constantly changing landscape. Google is continually changing the system and your competitors are coming and going and changing their Adwords campaigns and their products. So you need to continuously monitor how you are doing.  Google makes this very easy. For example, you can just set up Adwords reporting to email you a weekly summary of the number of conversions and the cost per conversion for each adgroup. A quick glance through this will let you know if things are going awry.

Conclusion

Adwords can be a very responsive, cost effective and well targeted form of advertising, if you take the time to learn the ropes and experiment. Below is a graph of my return on investment from Adwords for my table planning software over 5 years (almost certainly an underestimate due to the short-comings of conversion tracking, as discussed above). You can see that, after a few months finding my way, I was able to get a consistent ROI of around 4 or 5 to 1 and maintain this in the face of increasing competition.

adwords ROI graph

ROI = number of dollars in sales for each dollar spent on Adwords (1=break even).

Adwords is a complex system and the defaults are weighted in the house’s favour. In this article I have only touched on a few of the biggest mistakes I see. Google will give you plenty of rope to hang yourself and there are lots of other, less obvious ways to lose money. You really need to take the time to learn the system and experiment if you are going to have any chance of getting a decent return.

When I started with Adwords 5 years ago I read the Perry Marshall e-book on Adwords (beware – long copy!). I found it quite helpful. I assume they have kept it up to date. If nothing else, you will learn what it is like to be relentlessly marketed and upsold to. Google also has lots of free Adwords documentation and videos. If you go to conferences such as SIC or ESWC it well worth listening to Adwords specialists such as Dave Collins of softwarepromotions.com (formerly sharewarepromotions.com) talk about Adwords. There is also lots of useful information in the blogosphere. Start with a small daily budget and gradually increase it as you learn what works for you.

If you haven’t got the time or inclination to learn the system and experiment, pay someone who knows what they are doing to do it for you or stay well away from Adwords. Also bear in mind that Adwords works better for some products than others. If I was selling a $20 Mac-only product in a market with lots of more expensive competitors, I probably wouldn’t even bother trying Adwords.

** Update **

I used a deliberately provocative headline for this post, because I wanted to emphasize the fact that a lot of people are wasting a lot of money on Adwords. It seems to have worked in terms of traffic. But, judging by comments here and on Hacker News it has also confused some people. Sorry about that. To clarify, the sections heading are telling you how to waste money. To maximize your ROI you should do the opposite:

  • use conversion tracking
  • use negative keywords
  • only advertise in richer countries
  • not bid too much
  • monitor your results

Mailplane

I recently did a day of consulting for Ruben Bakker of  Mailplane. I looked in depth at his marketing and did a screencast of myself downloading, using and buying Mailplane. We also discussed some ideas for a new product. At the end of the process he was kind enough to write me this testimonial:

How can I improve my sales? How can I make my application more profitable? Which of my ideas could be the next software product? With these questions in mind I hired Andy. He evaluated my small business, tested the product, checked the product website/store, and we discussed my strategy. Andy knows the Micro-ISV life and business with all its specialities and constraints. As a result of his work, I’ve now a clear plan and even tools on how to improve my sales. I was already able to put some ideas to work, and they already yielded measurable improvements. And Andy helped me choose my next project, I am now very much looking forward to it.

Ruben Bakker, www.mailplaneapp.com

Mailplane is a Mac desktop app that embeds and extends Gmail. For example, Mailplane allows you to drag and drop attachments, something that isn’t possible with Gmail running in a standard browser. This web/desktop hybrid approach potentially gives the best of both world – the richness of a desktop client, with the ability to fall back on the bare web app if required (e.g. from an Internet cafe). I expect to see more web/desktop hybrids in future.

Mailplane is a very polished app and I recommend downloading the free trial if you use Gmail on Mac OS X.