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In November 2007 an awesome new vector tool (Vector Magic) came to light from a Stanford University Artificial Intelligence laboratory project by James Diebel and Jacob Norda. It bowled me over. My article VectorMagic Beta Online Vectorization written at the time gives a very quick look at this tool which converts raster images to vector images in a far superior way than has previously been achieved by Adobe or Corel. So don’t get me wrong with this post - its a strong product. But as it stands I won’t be using it.

Web 2.0 to Marketing Success

What happened, as far as I can see, was their breakthrough algorithm, which provides Vector Magic’s efficiency, was lauded widely across the web. By myself and a hundred other bloggers. It gained attention and I’d be surprised if it didn’t get Slashdotted and Dugg and probably crapped on by a low flying tooth fairy. Seriously, the first problem happens when you read about your application on the web and believe that a good product in itself is a ticket to the big money. Web popularity is fickle at best. New is only an hour or a day and then you’re old news. So I think they did it badly. I think, and I don’t mean to sound too critical, that they were academics who saw a potential dollar and jumped.

UnMarketing Web 2.0 Style

So marketing mistake one - they put up a free online tool and when we saw it and smiled they placed a greedy little price tag on it at $3.00 per token or $103.20 per 50 tokens! Of course they offer 2 free tokens ($6 worth) for initial sign up but that’s not exactly high rolling generosity. Rather, to me it smacks of fear that they know the price is high but also that any more than 2 free tokens and people will use dodgey emails to continuously get free service. Am I close? If I were a busy bee I could potentially spend thousands of dollars on what is essentially a high quality (shareware?) application with a low quality interface.

In my opinion this pricing was short sighted. If I owned the application I’d wonder - couldn’t 20 cents from 100 times (or 1000 times) more people make me more money? Have they ever heard the saying if I could only get 1 cent from every person in China? What about the power of free being discovered by musicians and writers? If you give a little, if you work on community and build trust then people will love you. Or, if you’re into repeating history, you can see yourself as the next Microsoft. Greed will be recognised very quickly by potential customers. This smacks of the “if I make it they will come” marketing paradigm.

Greed Followed by Justification

I make that assumption because on their blog James Diebel and Jacob Norda have a post titled What’s a Token Worth? that tells me these academics might not be as smart at business marketing as they are at computer science. Their pricing works on the assumption that an hour’s work for the user (the client or the customer) is broken down by Vector Magic to 15 minutes work. Therefore the benefite to the customer is broken down statistically to equal $20 in saved time. And it means they don’t want a relationship with the customer - its all about the money when they should be relationship marketing! That they felt a need to post a justification for the pricing shows the problem is already biting them.

The Flaw in their Pricing Paradigm

I’d like to point out in reply to their pricing justification that while the tool is in itself brilliant the other applications from Adobe and Corel do a lot more. So by pricing 50 tokens up to $103.20 they are getting into serious money for what is on offer. I’d take a guess they expect their upcoming desktop application to market from $500 upwards (and probably stab towards $1000)? Do they seriously think that apart from a niche with spare cash and a direct need there will be many customers? Also, think about it, their paper will eventually be published and they won’t have that edge forever. Where will their company be in 3 or 5 years time? Even in 8 months time? I am sure Adobe and Corel will be right on top of them in the vector game the moment they publish.

The reality is many of the potential clients of Vector Magic will not be professionally successful designers - many will be struggling small businesses. Many would be students or hobbyists. The saving of $20 in those cases doesn’t necessarily maintain itself outside the Vector Magic assumption of the “general user”. Their assumption is that “our user is making money and we deserve a share”. Translated from the customers end I hear them asking how deep are my pockets? I ask how much do you want my money and are you willing to work for it? Earn it like other businesses! Build that relationship.

What Would I Do Differently

So what would I do if I owned Vector Magic? How would I make money?

First I’d value community and build it - loyalty should equal happy customers and transpose eventually to money. Don’t go for the big dollar today but for the sustainable long tail dollar across a broad range of people. So what if businesses are getting a cheap service as long as its a good one. To that end I’d look at creating a Ruby on Rails application for user generated content - share and show Vector Magic images, discuss everything from the science to the wider world of design and illustration.

Second I’d make the basic application as it now stands for free. Then I’d build onto it extra features such as storage, file sharing and a whole swagger of useful features which only members can access. I’d probably even resist charging for those features because the real payoff is these people are potentially buying into a relationship. They would be giving me their details and I could market to them directly. Does that make sense?

Third I’d develop the desktop application and would not overprice it - how about $50? I know that sounds cheap but you won’t find Adobe knocking you out of business too quickly if you can provide a wide market with a superior tool at an affordable price. Exceed that $50 - and try to justify it with a rant about everyone having money but you - and you’re out of the game whether your product is great or not.

Fourth I’d get involved in talking and writing about the experience, the tool, the algorithm and the way I’m succeeding. Vector Magic isn’t going to be a cash cow forever. James and Jacob can ride it until its worth moving onto other applications or leapfrog into another career direction. I’d suggest to them they should never be shy to share. Spread the wealth. While they are closely hiding secrets they can’t expect me to trust them as a customer. The customer has one choice today but may have 4 choices within a year. Take $3 from them today and lose them to the first competitor just doesn’t make sense.

Best Products Often Lose and Die

Look at all the great products out there that lost the race to inferior competitors. What happened to Betamax video? And who really cares anymore? Get wise guys and value your community. At the moment it looks like a couple of academics saw a lot of positive feedback and sat down at a table over Mountain Dew and Doritos with a single question - What Do You Think We Can Get Someone to Pay for This? Greedy won’t build your business. Greedy won’t make you friends. Greedy will be obvious to the market.

In a limited time Vector Magic will have lost that new product advantage and the next guy is going to be slick and nice and build that community. Their new product will be cheaper and not make rants about how much they need the money today. Vector Magic needs to make the interface slicker and stop seeing potential customers as someone to pay the gatekeeper. If they want me for a customer I’ll be waiting for a relationship. A real one. Where I get more from them than a picture for that $3 token.

This entry was posted on Tuesday, March 18th, 2008 at 9:16 am and is filed under business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.