Though, I highly encourage startuppers as well to read through my instructive and educational post, at least that’s what I hope you’ll find so.
Lately, in the last couple of months, I’ve been deeply involved in the startup industry but not in the sense that I managed to launch a new startup and reached series A investments (though, with my hopes up 🙂 ).
Simply said, I learned loads of useful information by reading loads of articles and books of great authors and key figures within the startup ecosystem, such as Paul Graham, Ash Maurya, Eric Ries and Neil Davidson (author of Don’t Just Roll the Dice). One of the best resources I found though were Y Combinator’s “How to Start a Startup” free classes which I can only recommend to go through at least once.
Another really useful resource I found was The Startup Grind YouTube Channel on which I highly encourage you to subscribe.
I’ll never ever treat marketing as previously did so! Either you’re in SMB or in the startup industry, marketing is not and shouldn’t be your priority!
Why did I come to this conclusion?
Well, since I’ve myself been working in the digital marketing field, mostly as SEO and Google Analytics consultant for more than eight years now, I’m pretty aware of the misconceptions most marketers are being trapped in.
In most of the cases, a marketer never approaches a client’s product or service as a startupper would do so, unless the marketer is aware of at least the product-market fit and validation concept. This one I’ve obviously taken from Eric Ries, father of the lean startup movement and further on from Ash Maurya’s book on Running Lean.
The fast paced changing world we live
The industrialisation era has long gone and since the beginning of human evolution we have been most likely witnessing the fastest ever changing world we ever lived. This means, if we are not willing to change, we can easily get off track in today’s world of innovative technologies.
What really bothers me most, but probably shouldn’t, is the simple fact that we humans are too lazy for a change. And that’s what traditional marketers should aim for, a change which would allow them to compete with new generation of marketers so called “growth hackers”.
Time is crucial and the reason why most traditional marketers fail, is simply too much of their time being invested in working out robust strategies as against of actionable tactics and automations with quick results, focusing on customers’ needs and expectations.
Obviously, I wouldn’t say you don’t need a strategy but you’d better remember the following thought in your mind:
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.
— Sun Tzu
In other words, there is an ever-increasing need for a switch from traditional to agile approach by applying either SCRUM or Kanban methodologies to the overall marketing activities within an organisation. I’ll hopefully cover this topic in more details in another post of mine.
What both marketers and startuppers alike need to know and understand?
The product development methodology
We are all aware of the embarrassing fact that 1 out of 10 (my view: 1/100 or even worse 🙁 ) startups or any kind of business fail in their early ages of activity, surviving up to maximum three consecutive years.
Now, you might be wondering what makes a startup successful and why most of them are just wandering in the dark, seeking their way through to sell their products and services.
The product development methodology was the one which led to huge failures of reputable brands like Kodak, Apple, Jaguar, Sony, Motorola, Webvan and many more. As a result, billions of USD were literally allowed to run into the sand.
The core problem with the product development approach was that it could be successfully applied exceptionally in the case when the market segment was well defined, customers were well known and competitors well understood.
The sarcasm of this is that in case of a new product or service, the product development model would most certainly lead to another huge failure.
Here is an example to better illustrate the negative sides of this model:
Just imagine, you’ve been developing a new mobile application for months or even worse, for years. Then at the time of launching your brand new application, only then realise, your imaginary customers are either nowhere to be found or simply not interested in your new product. Needless to say, without a proven financial model, the whole business is doomed.
But now, let’s see how you as a marketer come into place. Take a look at the following diagram which is a representation of the product development model from the view of the marketer, marketing department or agency.
In the above diagram you can easily spot the active role of the marketer at a very early stage of the product development process. It’s not only BAD for you as a marketer but for the sales team alike, resulting in attracting negative feedbacks on both of you.
With this model, you are almost certain, the huge marketing and sales investments will never prove to offer any value for the money.
The saddest part of all this is that your reputation as a marketer or agency is at stake, despite all the qualities you might possess.
Your obligation as a marketer is to learn more about your client’s product or service and be aware of the business model they pursue or you’re simply dealing with the next huge failure of both you and your client.
And here are some of the unavoidable problems you’ll face by pursuing the product development model:
- Lack of customers – on the above diagram you can’t see any mention about customers, their needs, opinions or feedbacks as well as expectations
- Blindfold focus on quick build and shipping – the company thinks the product is ready for launch as against to what their hypothetical customers think of, a fatal error you should avoid by all means
- Forcing marketing and sales – you can be a superhero marketer, a growth hacker or sales guy, but selling the wrong product to a wrong audience at a wrong timing, will not only ruin the business but your reputation will be at stake
- Lack of learning cycles – in a product development model the focus is exclusively on the product, marketing and sales and ignores all the learning part from customers’ side
- Early acceleration burn rate – sales and marketing budget prematurely being burned prior even knowing there is a product market fit, this results in a quick negative cash flow
- Premature staffing – as if success would be already guaranteed
- The executive death spiral – the wrong strategy leads to conflicts, departments and people pointing and blaming on each other, the company goes bankrupt
The customer development methodology
So far, there have been so many failures we could leverage from but thanks to newly developed formulas or methodologies, we can now avoid all the pitfalls others had made.
How narrow the gate and constricted the road that leads to life. And those who find it are few.
— Matthew 7:14
As against with the product development model, the customer development process strongly focuses on discovering and learning as much about early adopter customers as possible. On the other hand, there are several back and forth cycles in a customer development model in a sharp contrast with the linear flow the product development model pursues.
Marketing and sales has no any major or significant role in the learning phase at least until the right market and a working financial model has been validated.
As a marketer, what I strongly suggest for you, if possible, always assure yourself about the stage the product or service of your potential clients is at, unless you want to build a bad reputation for your unavoidable failures.
Without proven customer interest, money alone won’t help. However, thanks to today’s technological innovations in terms of measuring customers’ behaviours, we can reach to conclusions at a much earlier stage.
The Customer Development model strongly focuses on understanding the problem hypothetical customers are facing with the aim of finding the right fit in satisfying their needs and expectations.
Control is for beginners. Iteration is truly the mother of invention.
If I had to differentiate the two models, I’d let you choose between being the founder who screws up several times till he finds the right match with relatively low cash burn rate, or be the founder who screws up only once but at the time when huge resources both financial and manpower had been consumed with irreversible consequences.
From product market fit to scale
In this section I’d like to emphasise the importance of distinguishing the validated learning stage from the growth stage. As long as there is no product-market fit and a workable plan, there is no place for accelerated marketing or growth hacking tactics.
As Paul Graham said, a startupper should do whatever it takes but scaling, at least prior finding the right product-market fit. In brief, he strongly emphasises the necessity of learning through pivoting till you find the way which makes the business scale.
After running several pivots, you might end up in finding the right product market fit which is the ultimate milestone for a startup.
As a marketer, you can easily determine if there is a product market fit by simply measuring key metrics of which the most obvious ones would be the NPS (Net Promoter Score), CHI (Customer Happiness Index) and Retention rate.
The use of a simplified business model
Just below, I’ve attached the Lean Canvas, a simplified version of documenting your business model. It offers you the opportunity to communicate, learn and measure progress more effectively. Mostly known for as the hypotheses and validation tool for new business owners or startup founders.
#9 – Your turn as a marketer
I did not highlight by coincidence the #9 stage of the lean business model approach. This is supposed to be the stage when your business scales and your role as a marketer (growth hacker) would be to make it grow faster and faster.
In other terms, by this time the business should have passed over the chasm as seen on the attached diagram below. The organisation (startup) found a way to solve a problem their hypothetical customers faced and they also found the right product market fit leading them to the mainstream market.
If you are an outsourced marketer, agency or an internal member of organisation’s marketing department and you happen to fail at this stage, you should expect a huge setback in pursuing your career as a marketer. I know, it might sound ugly and discouraging but that’s the crude and harsh reality.
Here, once again, I wanted to emphasise the importance of when a marketer’s role should be aggressively involved in the life of a business both strategically and financially.
Growth Teams expand the value of, and customer base for a product that is already working through rapid, data-informed experimentation.
#8 – Metrics which really matter – The end of “bullshit” metrics
Here, by metrics I more or less mean “performance metrics” which show strong evidence if the business’ progress is satisfactory, good or critical.
In God we trust. All others must bring data.
— W. Edwards Demming
There are naturally hundreds if not thousands of metrics to monitor and keep close eyes on. Metrics such as CTR, CPC, sessions, conversion rate, time on page, pages visited per session, mobile vs desktop traffic statistics and so forth.
Defining the proper metrics for your online presence, much depends on the type of website you have, be it a community site, an ecommerce platform, SaaS, personal or informational site; metrics can vary from site to site.
I know, for some of you might sound harsh, but whenever it comes to measure performance, try to approach it from an entrepreneurial perspective, as if you were the owner of the company.
Frankly, let’s assume the hypothesis that you are the entrepreneur, the business owner. What would you mostly be interested in? 🙂 I bet, it wasn’t CTR or organic exposure in Google’s SERPs.
I don’t think you should dig deep into your inner thoughts, but here are few of my recommendations you as a marketer should pay close attention to, with an entrepreneurial thought in your mind:
- OKM (One Key Metric) – the only single metric which most correlates with the success of the business (ex: Instagram: number of photos uploaded, AirBnB: nights booked, LinkedIn: profile views)
- ROI (Return On Investment) – follow this link for a general overview
- CHI (Customer Happiness Index) – determine the happiness index of your customers (delighted, neutral, disgruntled), usually customers with highest Net Promoter scores and retention/renewal rate. Ash Maurya from Leanstack formulated the following formula which I find more than appropriate, all you need is to customise for your needs and calculate it on different time intervals (30, 60, 90 days).
With the CHI you should aim to reach over 80%, that would mean, those customers are most active and engaging ones ie most valuable.
- DAU & MAU – in case of social media platforms, daily or monthly active users (obviously, active meaning more than logging in)
- NPS (Net Promoter Score) – resides from the fact that customers can be divided into three major categories: those who promote your brand (loyal enthusiasts), those who are passive (might leave at any time) and detractors, those who can do more harm than good – in order to evaluate your site (product or service) NPS, you should run a survey (my choice would be Qualaroo) asking something similar to this: What is the likelihood on a scale from 0-10 that you would recommend us to others (friend or colleague)?
- Retention – do your customers keep coming back or leave after a while?
Build something people want
— Paul Graham, Y Combinator
- CR – Conversion Rate – let’s suppose you had 60 conversions (sales or orders) out of 1,000 clicks, that results in a 6% conversion rate
- LTV – Lifetime value – also known as CLTV (Customer Lifetime Value), the predictive or historical lifetime value of a customer for the next/previous 6, 12 or 24 months. It is often approached with the Pareto principle, which in our case would sound like this: around 80% of revenue is generated by 20% of our customers. For a more indepth view into how CLTV is being calculated, have a look on this case study created and supported by KISSmetrics and digital marketing evangelist Avinash Kaushik.
- Heavy contributors vs lurkers – you might be familiar with the 90-9-1 rule, if not, just follow this link
- Comments added – usually to a blog post but on major social media platforms as well, from an user engagement perspective
- Newsletter signups vs Unsubscribers – what is your churn rate and most important, why? There are cases when an unsubscriber is not necessarily unsubscribing he might better prefer accessing your news through an RSS reader
- Activation rate – you must define yours, but here they are, few examples: product delivered to a first time user, connect with friends (Facebook), upload your first video (YouTube, Vimeo) – activation rate can be further segmented down to the individual channels for better identifying strength and weaknesses
Activation is: The first point where you deliver the value that you promised
What about the AARRR approach?
If that not sounds familiar to you, here is a short summary for each one of the letters:
- Acquisition – identify most valuable channel your customers find you (SEO, PPC, SEM, PR, Affiliates, Social, Email, Blog …)
- Activation – if your users like your product enough at first visit so that they get engaged into becoming active users (ex.: subscription, registration, >1 pages per session, time on site …)
- Retention – the higher, the better, that’s what you should aim at
- Referral – thanks to WOM more and more users are coming to your site and get engaged
- Revenue – monetization behavior
AARRR is great, I personally highly value, though you should aim for reaching the OKM that really matters to your or your client’s business.
Now, I highly encourage each one of you, especially those working in the marketing field, to stand up and join the “bullshit metrics” movement initiated by Mixpanel founder Suhail Doshi and its investor Andreesen Horowitz. Many others like Josh Elman and myself joined this movement and hope many will come.
One of the most valued takeaways from my side, was Twitter’s case, when they figured out that anyone visiting their site 7 times in a month, they were most likely to visit the site the following months and become loyal users.
Now you might be wondering what timing has to do with marketing or the startup business.
In order to make you fully understand what I’d like to emphasise, I’ll cover it from two different angles, one from a marketer’s perspective and the other from a startup perspective.
Right action, right time
— Bijoy Goswami – Founder, Bootstrap Austin
The startup perspective
Just like many others, including myself, Bill wanted to get an answer for the simple question “Why so many startups fail despite the right equity incentives and brilliant minds behind a new innovative product or service?”.
Here is how I would define this one:
Why only few startups succeed? What is the single biggest reason behind?
Gross came up with five major factors behind the success or failure of any new business. His research was based on his own portfolio of companies he managed throughout his last 20 years of career.
In the illustration below you can see the five major factors which are accountable for either success or failure of a new startup initiative. Across all the companies Bill scientifically analysed, among which Instagram, AirBnB, LinkedIn, Uber and YouTube, timing proved to be accountable with 42% of the difference between success or failure.
This result took Bill by surprise and if my words are not strong enough proof, then all I can recommend is to watch through his seven minute TED talk presentation.
And now, since my post targets mostly marketers, why I included timing as one of the crucial roles it takes whenever you embark on a new client’s journey, just go ahead and read through the marketer’s perspective section.
The marketer perspective
Similarly to the simplified business model and lean approach, with the #9 step, for you as a marketer, timing is extremely crucial, especially in the case when you are being outsourced with the your responsibility to deliver growth for your client.
In the illustration above, I highlighted the part when both marketers and growth hackers should be involved in a more aggressive way and backed up with significant budget.
To make it crystal clear for your client, prior committing yourself into any sort of marketing agreement, I would strongly advise you to get a concise answer for the following question:
Are your new customers coming back or leave?
If the answer is ‘Yes’ with an undeniable and strong evidence (look for data insights) then hypothetically there is no longer any reason why not building up a win-win mutual agreement for the long run, at least till IPO comes 🙂 .
I hope my message went through and will reconsider your marketing initiatives whether you are a marketer or a startup founder.
Most of the times we are chasing after numbers and always leave behind what really matters for a business thus what customers really want or what are their expectations.
If only one third of all marketers and startuppers understood the above described scenarios, we would witness a healthier business environment for the benefit of all.
If you really found my post informative enough to share, I would more than appreciate.
I’m also expecting you to leave any feedback which would make this topic even more conducive.