How can startups succeed with innovative marketing? Now there’s a good catchy title for a blog post. There are probably 10 million articles on this one subject alone. I’ve seen what many great startups can do up close and learned a great deal (some cool Montreal examples here and here). Investing in a few others has also provided me with some great first hand experience. Disclaimer: there are many smarter people than me on this subject, I highly recommend that follow Avinash, Dan and Tomasz for some mind blowing stuff.
Paralysis by analysis
The problem with marketing for startups is that you can find advice that can conceivably justify almost any course of action. Overload of information is not what time-strapped founders really need. I will try to break it down to only the bare essentials. Having a YouTube, Facebook or Snapchat strategy are all probably pretty cool but these are simply tactics. Let’s look at the foundations a little bit to understand the mechanics.
Metrics to obsess over
First, let’s start with good old fashioned with metrics. You need to know the following numbers cold.
- What is a customer worth to you: this is probably the most important metric you need to know. How much is a customer worth to your business? It will dictate how much you can spend to acquire them. Customer lifetime value (CLV) will also vary by channel and over time. Knowing what channels are driving the best customers is super important.
- Payback period: How much time does it take for a customer to be profitable? This will vary by marketing channel thus its importance to be measured. If you are target is large customers in B2B sales, you still need to do this math. Return vs. time will help you understand where to spend your money.
- Churn: You are gaining customers every day but also how many are you losing? What channels suck at generating long lasting customers. This will dictate your media spend decision.
- Trackable vs. non-trackable signups: This one is tricky. Your business will generate customers via known channels (search, social, email, etc.). You will also obtain customers in a catch all bucket usually direct or organic search. Keep an eye on this and try to find correlations with other marketing activities. Web tracking is still far from perfect and this is one way to to understand your media mix.
I love this KPI dashboard from Christoph Janz, it’s supposed to be for SAAS startups but it can apply to almost any business. There are many different tools out there, spending time learning excel is time well spent in my book.
High level strategy
Here is an overview of some of the ways to approach your strategy. This is not an exhaustive list of all the guiding principles and some may not apply to your business. I’ve tried to select the most important imho.
Don’t try to go after the entire world please. VCs definitely love large markets but you will never grow your company if you don’t focus on a core group of customers. Facebook started only on college campuses at first. Uber catered to the elite in SF. You have to start with a small group of brand ambassadors and expand outwards using concentric circles – not the other way around.
If your investment is profitable, never stop
Easier said than done! If you’ve identified a channel that generates customers with a high CLV within your target payback period, don’t stop. Keep investing in that channel until you see a significant point of diminishing returns. Zappos used this approach with paid search. AirBnb hacked it with Craigslist.
Profits are better than CPA
Cost per acquisition i.e. CPA is probably the most misunderstood metric of all time. I’ve seen many companies arbitrarily set CPA targets without understanding the impact on their business. Look at profits per customer instead of only the cost. If you are focusing on growth rather than profits, that’s fine (read this). Approach this methodically please.
Post-click is more than important than pre-click
You are focused on driving traffic & eyeballs but what happens once they land on your site? Optimizing the funnel and landing pages is a quick way to increase the conversion rate. Driving your conversion rate up has the happy benefit of also decreasing your cost to acquire customer. Win-win!
Attribution is not a scary buzzword
You don’t walk into a bar and come out married (usually). You need a few dates before you are able to convince a customer to buy from you. You need to know the the sales cycle of your site / app, how many visits it takes to convert. Also, what channels are good at driving sales and which ones are good at assisting sales.
The mix between performance and brand
Not everything that counts can be counted, and not everything that can be counted counts. I tend to focus on performance marketing because that’s been my passion but don’t discount the other side. You need to have the right mix of both, don’t focus solely on one or the other. As a starting point, invest as much as you can profitably. Once you hit a point of diminishing returns, experiment on channels where your customers are spending time and try to influence them. Yes, branding can be cool too.
Channels, Resources and all that jazz
Now the hard part, execution. Your team needs to deliver on the growth targets that you’ve set. Here’s a quick run down of the areas you need to get world class at:
- Web analytics/ops
- Paid media
- Product marketing
- Lifecycle nurturing
- Public relations
- Customer happiness
There is no bullet proof approach unfortunately but getting some of the basics down can help you gear up for success. Startups are known for dislodging huge incumbents. Having an agile marketing approach is a sure fire way to knock some of those big guys off their throne.