Discovering Effective Marketing Tactics for Your Startup

Great startup marketers generally make excellent resource allocation decisions. We are all faced with the temptation to gravitate toward marketing tactics that have worked in previous companies. Unfortunately, an old marketing mix is almost never a perfect fit for a new marketing situation. For example, when I ran marketing at Uproar.com we relied heavily on banner advertising, even running the most viewed banner on the entire Internet for a period of time. We also had a large affiliate program with over 30,000 partners. Leveraging these key elements of the marketing mix we achieved the lowest registered user acquisition cost of any publicly traded company for a free online service.

Naturally I tried to replicate these marketing tactics at my next early stage company. Unfortunately they didn’t deliver the desired results. Though I still used a very online centric marketing approach, the marketing mix contained very different elements. For example, banners made up less than 10% of our marketing spend (compared to 90%+ at Uproar) and we didn’t even have an affiliate program.

So what is the key to discovering the right mix of marketing tactics for your particular situation? It helps to have a relentless drive to try lots of programs until you find some that are successful. But assembling an effective marketing mix goes beyond simply effort. Before even considering the marketing mix, you need to have a handle on some marketing basics like a proven value proposition. You also need the tools and processes in place to determine the effectiveness of each tested marketing program. The rest is really an art of knowing what to test and combining effective tactics in an optimal marketing mix. Like any other art form, creativity is a key advantage in building winning marketing programs.

Best Marketing Podcasts

Listening to marketing podcasts is a good way to make a long commute productive.  Occasionally they stimulate a great marketing idea, but at the very least they keep me informed about new marketing tools. I’ve only found one consistently good marketing podcast – Jenerous (formerly Marketing Monger).  Eric Mattson interviews several marketing leaders and entrepreneurs.  Many of his guests have a unique marketing focus (such as web analytics, branding, etc) so I learn something new from almost every podcast.  Unfortunately they don’t come out frequently enough to give me a good backlog of podcasts.  I’d love to get recommendations from anyone who has found other good marketing webcasts.  Please add suggestions to the comments.  

Beyond marketing podcasts, I also find a couple of tech podcasts to be informative.  I recommend TWIT (weekly) and CNet Buzz Outloud (daily).

What is Metrics Driven Marketing?

 

Metrics Driven Marketing drives strong overall marketing performance by improving predictability of returns on marketing investments.  With a metrics driven marketing approach the majority of marketing funds are invested into proven programs.  Still, 10-20% percent of the monthly marketing budget should be allocated to testing to stimulate progress. Tests should be large enough to give accurate performance insight, but small enough not to burn though a significant portion of the testing budget.  The majority of the marketing team’s time should be spent executing tests.  Proven marketing activities can largely run on autopilot with periodic reviews of the performance reporting.

In an early stage startup it is relatively easy to apply the principles of Metrics Driven Marketing.  That is because the purest form of Metrics Driven Marketing is direct response marketing – which should be a core part of every startups’ marketing arsenal.   Direct response marketing is a low risk approach.  It favors the small budgets available to most startups.  It also supports a startup’s discovery process of identifying the right target customers and developing a powerful value proposition.  Additionally, it allows a marketing team to focus on refining the brand experience and if applicable helps them optimize website conversion rates.  As customer acquisition conversion rates improve, the ROI from the direct response marketing initiatives also improves. 

Eventually a successful startups company will have to complement their direct marketing initiatives with more scalable branding campaigns.  That’s where Metrics Driven Marketing gets really tough.  Fortunately earlier efforts to refine the value proposition, brand experience and conversion metrics will pay dividends in broader reaching campaigns.  To track the effectiveness of these campaigns most savvy marketers use test markets and trend analysis.  Metrics Driven Marketing is not always about perfect ROI tracking – it’s about continuously pushing the tracking envelope and directing marketing funds to the most effective and accountable initiatives.  Rex Brigg’s book “What Sticks” provides excellent guidance for executing a Metrics Driven Marketing approach at scale. 

It is also challenging to analyze the marketing effectiveness of Blogs, viral marketing and word-of-mouth initiatives.  Fortunately most of these activities require relatively small financial investments, though the time investment can be quite large.  These activities require more creativity to determine appropriate measurable ROI targets than others.  For an example on tracking blogs see my post on measuring the loyalty impact of social media.  

What about marketing activities that provide important benefits that can’t be tracked?  I discuss this in another recent article.

Metrics Driven Marketing is surprisingly underused by many experienced marketers.  The marketing leaders who do use it (and succeed with it) generally have a good balance of analytical skills, discipline and a deep reservoir of creativity.  Not just the kind of creativity needed to come up with clever slogans, but rather business creativity to invent new marketing methods and tweak existing methods for cost-effectively reaching their target customers.  If this creativity runs dry, the testing halts and marketing results stop improving (and often start declining).

Of course, Metrics Driven Marketing is just the foundation of a strong integrated marketing approach.  Market research, particularly in depth customer research, is essential.  As is customer segmentation strategies, enhancing the brand experience, PR, mapping marketing objectives/strategies to overall company objectives/strategies…  But, these can all be strengthened by a foundation in Metrics Driven Marketing.

Metrics Driven Marketing can trace it roots to Claude C. Hopkins (1866-1932).   His book, Scientific Advertising, was published in 1923 and was a major breakthrough in testing the effectiveness of advertising (Read it free at http://www.scientific-advertising.co.uk/ ).  Lester Wunderman was also a key driver of Metrics Driven Marketing, primarily through his advancement of direct marketing (a phrase he was believed to have coined in the early 1960s).  More recently Rex Briggs has carried the torch of better marketing accountability to broader reaching brand advertising.  His book “What Sticks” is a must read. 

The uniting goal of all these pioneers is a desire to push the tracking envelope in all marketing activities and drive better, more predictable results.

I am a big believer in the power of Metrics Driven Marketing.  At my most recent venture, my first marketing hire was trained as an actuary (actuaries are the math wizards at insurance companies who calculate premiums based on risks).  This helped create a highly analytical marketing culture from the outset.

 

Effective Marketing in the Earliest Stage Startups

A few weeks ago Prism Ventures, one of my current VC investors, asked me to present to some of the newest startups in their investment portfolio.  The presentation was on how a new company should try to gain market traction.
Here is a quick overview of what I presented.  Initial success requires combining an urgent quest to discover profitable customer acquisition methods with a fear of wasting marketing dollars.  Ensuring that every dollar counts requires a very disciplined approach to testing.  It is essential that the right measurement and reporting systems are in place before testing begins.  In the earliest stages of a company, you don’t have the luxury to try to develop much brand equity – it’s all about identifying a sustainable high growth business model.  Once you’ve found profitable customer acquisition sources, building brand equity is a critical next step for building momentum.
This is the process that I used to kickstart my current venture.   In my earlier startup, Uproar Inc., we really hadn’t refined the process yet.

Pushing the Marketing Metrics Envelope

This time of year everyone is busy planning for 2007 so the Blog entries are few and far between.

A couple weeks ago I spoke at the emetrics conference in Washington DC. It was definitely interesting to interact with data driven marketers from arround the world.  Companies like Dell and AOL have some very smart people using data to make decisions that can instantly increase sales by millions of dollars in a single day.  I found that most of the data driven marketers were using similar marketing processes to the one we’ve implemented at my current venture.

I also met Rex Briggs at the conference.  He’s just completed an interesting research study where he worked with many forture 500 companies over the last five years and used cutting edge methods to track the effectiveness of their advertising across all media.  He then identified those marketing teams that had the most efficient advertising spend and looked at what they were doing differently.  All of his findings are published in a book called What Sticks.  I highly recommend it.  Again his ultimate findings are that the most effective marketers use a similar approach to us.

All of my research has been in an attempt to discover ways to improve our marketing process.  While I have discovered a few useful minor elements, I’ve also been able to validate that our highly effective marketing approach works for companies of all sizes.  It’s also great to interact with other marketers that are working to push the envelop of effective marketing by using detailed analysis and an continuous improvement testing approach.

Laura Reis (Marketing Guru) Responds to Brand Extension Question

Below Laura Reis responds to my question – “Is brand extension is ever a good idea?”

Thanks for your email Sean. The laws of branding are simple, but applying them is not always easy. There are times when line extension is the best way to go. But you need to remember that it does dilute the brand in the mind.

Some companies focus on a customer and then sell them a wide variety of services. USAA is a good example, selling all types of insurance to Army officers. The line is extended but the customer is focused.

The software industry does have some differences. Microsoft can get away with rampant line extension because they have a monopoly on the operating system. But in areas where they face strong competition this strategy has not worked, MSN, Money are far behind.

Good luck.

– Laura

Jack Trout Challenges "The Long Tail" Author Chris Anderson

I’ve long since finished reading both Marketing Warfare and The Long Tail and had plenty of time to reflect on both books.  I’ve even reached out to both Jack Trout and Al Reis (the authors of Marketing Warfare) for their perspective on The Long Tail.  They both had differing views.  Al Reis called The Long Tail an important book. He suggested that “while Marketing Warfare deals primarily with strategic issues, there are many new tactical ideas that emerge from time to time. And the long tail is one of those important tactical ideas.” On the other hand, Jack Trout had doubts about the numbers used to support The Long Tail, citing a recent article in the Wall Street journal.
Yesterday Errol Smith (who produces Jack Trout Radio) posted a comment on the Metrics Driven Marketing Blog about Jack Trout’s radio interview of Chris Anderson (the author of The Long Tail).  Talk about a fascinating interview!  In the interview Jack Trout seems to be a bit more accepting of The Long Tail than he was in my original correspondence with him.  Of course he may have just wanted to be cordial to his guest.   Still, by listening to the two authors discussing their views I have crystallized many of my conclusions.  To me, it’s not really a question of The Long Tail being right or wrong. It’s more a question of how important the emergence of a “long tail” sector is to the overall economic landscape.  While in some industries it has very little impact, in my industry – software – it is extremely important.
As Jack Trout points out in many of his books on strategy: proper marketing situation analysis is an important part of shaping marketing strategy.  Because of the Internet, consumers have more choices than ever.  This is starting to shape their expectations. For example, I can rarely buy a marketing book in Barnes and Noble anymore, since most of the books are too main stream.  However, at Amazon there are hundreds of marketing books that I would like to buy.  In software, buyers no longer want mega-products that can do everything.  If they have a problem, they Google for a solution and download a couple free trials of “perfect fit solutions.”  Research indicates that this is the case for buyers ranging from an individual consumer up to a large enterprise buyer.  For a marketer, this offers an opportunity for a very fast conversion from trial-to-purchase and also a clean digital trail for tracking ROI.  Contrast this against the major challenge facing all marketers – getting attention in a world of extreme advertising clutter.  A good software strategy in a long tail world suggests breaking mega products into many micro products and finding all opportunities to market these micro products to active seekers.  Each product is an onramp to acquire new customers and an up sell for existing customers.
I completely agree with Jack Trout’s insight in the interview that “the long tail” can be an important place for market research.  By using Google Adwords to reach all active seekers of a specific product, marketers can identify vertical segments where a product is getting the most traction.  With this research, a company can define a relevant value proposition for the product in that segment and concentrate advertising funds to build awareness and demand within that segment.  Obviously it is important for the segment to offer enough headroom for growth and for the company to have a competitive advantage within the segment.
Overall both books are extremely important for shaping marketing strategy.  If you haven’t read them yet, I highly suggest doing so.

Two Great Books for Driving Today’s Marketing Strategy

I am currently in the middle of two fantastic marketing books (one an audio book for my commute and the other a printed book for home).   They often seem contradictory – but both have my mind racing 1000 mile per hour.

The first book is Marketing Warfare, by Jack Trout and Al Reis.  It is a classic marketing book from the 80s that is extremely relevant today.  I really consider it light reading, since it is as much about history as marketing.  I’ll write a full review when I’m done with it, but I can already highly recommend the book (especially for someone who likes history).  The most relevant “lesson” the book has taught me (or at least reminded me) is that you shouldn’t spread yourself too thin – it is essential to concentrate your marketing resources on the best opportunities.  Fighting a multi front war is dangerous.  It’s always tempting to want to place a chip on every good segment or product idea, but history teaches us that this is a mistake that often drives companies out of business.

The other book that I just started today is The Long Tail, by Chris Anderson (I’m about 1/3 of way done with the audio version).  Talk about a book that has just reached the tipping point!  I had never heard of it, then within a week heard the book referenced by several different people.  It provides some cutting edge marketing data that supports almost the opposite view of Marketing Warfare.  According to the book, many successful companies are generating a substantial amount of their profits from niche products.  This is particularly true for internet retailers that aren’t constrained by shelf space.  By having thousands of products available, online retailers can have a very “long tail” of profitable products.  From just listening to the first CD on my way into work this morning – the book triggered some really great ideas for altering the marketing strategy for one of our products.  I’ve bounced the new ideas off a few colleagues and they are as equally excited about them as I am.   

While I’m sure my conclusions will evolve as I get further into the books, both books definitely have merit.  The web (particularly Google Adwords) makes it easy to harvest demand from multiple segments.  But effective demand creation requires a tight concentration of funds into a specific target customer segment.  Good marketing strategy finds an optimal balance between both demand creation and demand harvesting. 

Many Roads To Success – But Few Safer than Metrics Driven Marketing

A comment I received on my recent article on measuring the benefits of social media got me thinking.  If I can’t track a positive ROI from the time investment in Social Media, is it still worth doing?  After all, many of the potential benefits, such as word-of-mouth, would be so indirect they would be nearly impossible to tie back to the social media investment.  But clearly they would be valuable even if I can’t measure them.

Since much of my marketing experience has been in venture funded tech companies, I’m very cognizant of where I allocate my team’s time and financial resources.  A few bad decisions can easily cause a company to fold (most startups eventually do fail).  Luckily there is more than one path that leads to success.  Generally I try to stick to a path that consists of activities with very measurable benefits.   Of course many of these activities have additional benefits that can’t be measured, but if I can track a positive ROI then the less tangible benefits are gravy.  If an activity requires little investment risk, then gut feel is enough to keep doing it.  But if there is risk, I want to measure the results.

An investment in social media can be very time consuming.  Can we succeed without a large time investment in social media?  Absolutely.  Can social media be an important tool to help drive success?  Probably.  The only way to know for sure is to test it.  If I can measure a good return from the time investment in social media, then it will definitely be a part of our marketing mix.  If I can’t – it will have a minor role at best.

Software Marketing – The Channel Has Changed

Until recently software was primarily sold through resellers and retail.  Tradeshows were essential for promoting enterprise software.  Established players had the mindshare to be contacted when someone needed their software, and new companies had a hard time breaking into existing categories.

But software marketing is changing quickly.  Retail software companies like Egghead and Software Etc are gone.  Even the software sections at CompUSA and Staples are a fraction of what they used to be.  Comdex and other key tradeshows are history.  And value added resellers are scrambling to come up with more value added services to replace their dwindling software sales.

Why? Customers are now much more empowered then they used to be.  Who needs retail or a reseller when a free software trial is only a few clicks away?  Looking for an FTP program?  Google it and you will find several free, secure, and easy programs – whatever your needs, you are only a few minutes from finding the right solution.  Not sure if you trust the brand, Google the specific brand.  Generally you will find at least one review from a reputable publication.

And it’s not only consumers and small businesses using the web to find software.  Enterprises are also empowered to research and buy solutions online.  For example, at the very early stages of my current company (only a couple years ago) one of the world’s largest technology firms began assessing our solution.  Before the sales team even had a chance to speak with someone from the company, dozens of people were deep in evaluation.  How did they find us?  Google Adwords, of course. We’ve now completed several six figure transactions with this company on a trial that cost only a few dollars to generate.

Smart software marketers are enthusiastically following their customers onto the web.  It is a perfect medium for promoting and distributing software.  The web provides much better measurement than traditional marketing mediums.  Each campaign can be tracked by the cost of generating a trial and a purchase and comparing that to the projected lifetime value of each customer.  Campaigns that don’t yield a positive return on investment can be cut, allowing the marketer to concentrate funds in the most effective marketing campaigns.  Also, VARs no longer stand in between the publisher and customer.  Since the software publisher now fully owns the customer information, they can make a much more effective investment in CRM.  And brands can be built over time through branded customer interaction rather than through risky, less accountable print and trade show investments.   Finally, since packaging and distribution costs have been eliminated, software now really does have virtually zero marginal cost.

Online marketing, particularly search marketing is great for harvesting existing demand, but creating demand for a new category of software can be a bit trickier.  I’ll cover that in a future post.  Also, the software marketing landscape continues to change with the increasing popularity of software as a service (SaaS).  This brings additional challenges, but is even more suited to the web than traditional licensed software.  Again, I’ll cover SaaS in a future article.