Growth Hacking is for Smart Marketers – Not Just Startups

Startups live and die by their ability to drive customer acquisition growth.  Of course many startups are doomed to failure and can’t grow because they never reach product/market fit.  But even with product/market fit, traction is tough. Startups are under extreme resource constraints and need to figure out how to break through the noise to let their target customers know they have a superior solution for a critical problem.

Breaking through the noise is very difficult when well-entrenched companies have the resources to dominate traditional channels.  The best a startup can hope for in traditional channels is to siphon off a few early adopters that are always on the look out for the latest emerging solutions.

This resource-constrained desperation is exactly the scenario that Malcolm Gladwell suggests leads underdogs to extreme innovation.

Desperation Leads to Innovation

For meaningful growth, startups must completely change the rules of traditional channels or innovate outside of those growth channels.  They are too desperate and disadvantaged to adapt to the old rules of marketing. They have to dig deep creatively, and relentlessly test new ideas.  If they don’t figure it out quickly, they will go out of business.

Some people would just call this marketing.  I call it growth hacking.  And the best growth hacks take advantage of the unique opportunities available in a connected world where digital experiences can spread rapidly.  Since most growth ideas fail, it becomes critical to test a lot of them.  The faster you can hack together an idea, the sooner you can start testing it for some signs of life.

Growth hackers don’t have time to waste around a white board strategizing marketing plans.  They are desperately testing trying to find something that works.

It was in this face of desperation that I was part of the team that invented the first viral embeddable widget.  We were a lightly funded online game company in the mid 1990s competing against the number one advertiser on the entire Internet – Sony Online Games.  Not only did they spend more money on banners than anyone else, they blanketed their television assets with promotion.  You couldn’t watch Jeopardy or Wheel of Fortune on TV without knowing that they offered the game play experience online for cash prizes.  And those shows had massive audiences.

At Uproar, we tried to spend on banner advertising, but even with obsessive optimization it was clear we would never catch them playing by their rules.   That’s when we decided to widgetize parts of our game play experience and make them free for any website.  We even offered to pay an affiliate bounty to those websites where people started the game and eventually played on our site.  These games spread virally to 40,000 websites.  Within a couple of years we were beating the 800-pound gorilla and had become the worldwide leader in online games (we were acquired by Vivendi Universal in 2001 who quickly killed the viral widget program).

Stories like this have been replicated in every startup that I helped build, from LogMeIn to Dropbox and Lookout.  You can also see similar patterns in the early days of almost any massively successful company to emerge in recent years.

How Traditional Marketers Have Reacted To Growth Hacking

The majority of traditional marketers like to say “that’s exactly what I’ve been doing – that’s just marketing.”  But rarely do I see any of them having a track record of building truly innovative, rule changing programs for driving growth.  Most just don’t have the need or motivation to change the rules or innovate new channels.  Unlike startups, big companies are rarely a magnet for risk takers who like to innovate.

However, some marketers at traditional companies and agencies have looked at the unprecedented growth rates that come out of emerging startups and have said: “Awesome! How can I build an innovative growth team in my organization and achieve similar transformative growth results?”  I don’t know the answer, but I’m certain that it is the right question for any large marketing team or agency.  Large companies have always looked for ways to improve their ability to innovate like startups (recently many have embraced lean startup principles).  I’m not surprised that the smart ones are now looking to replicate the innovative growth discovery approaches of successful startups.

Growth hacking was born out of startups, but it is something that every smart marketer should embrace.

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My Future Marketing Blog Posts

Focus is the most precious asset for any startup CEO.  As much as I love blogging about startup marketing, it just isn’t a very good use of my time these days.   So for the foreseeable future, I’ll be taking a hiatus from blogging on Startup-Marketing.com.   The most important thing you should have taken away from Startup-Marketing.com is that startup marketers need to focus on doing what’s important at any given stage in a startup.  My short post on The Startup Pyramid gives a good breakdown of the marketing priorities that matter most for startups.  It’s worth re-reading if you’ve read it before.

Now Blogging at blog.qualaroo.com

If you do everything right in the early stages and you’re lucky, startup marketing eventually just becomes marketing.  Established companies have many of the same challenges as startups.  They still need to stay on top of who loves their product, why they love it and how to get many more of the right people into a must-have experience.  The effective emerging tactics for connecting with the right people and onramping them to your product experience are the same for startups and established companies.

At blog.qualaroo.com I’ll be exploring observations and lessons learned in a way that is hopefully useful to all marketers, not just startup marketers.  My most recent post explores why online marketing keeps getting harder every year and what you can do to keep up.  Below is a brief excerpt followed by a link to the full post.

The Online Marketing Arms Race

Online marketing was pretty easy when I first started doing it in 1996.  It wasn’t rocket science that you should test ads for response rates and measure conversions.  But surprisingly a lot of people weren’t following this process.  Considering that there was less than $20 per year competing for the attention of each US Internet user, this little edge made it easy to profitably acquire lots of customers online.

Dollars spent advertising to each USA web user

Marketing is Getting Harder

But in the last few years, online marketing has gotten much harder. Marketers now pile in more than $140 per user in advertising each year.  To compete, today’s online marketers must seek READ FULL ARTICLE 

 

Are Marketers Now Required to be Engineers Too?

As much as I hate to admit it, online marketers with engineering backgrounds often have a significant advantage over non-engineering marketers.  They are simply much more capable of “getting stuff done.” The rest of us waste a lot of time and creative energy figuring how to get the obvious stuff done.

Not only are engineering marketers more capable of getting the essentials done, they can use their reserve of time and creative energy to be scrappy about building marketing experiments.  And of course the experiments they build on their own can be much more interesting than us non-engineers.

One way I have worked around my engineering deficiencies has been to hire the skills onto the marketing team.  For example, in my last long-term VP Marketing role I hired a front-end designer/engineer to design and code landing pages and a dedicated DBA to build reports and run ad hoc queries.

Tools are Leveling the Playing Field

Fortunately the playing field has begun to level in recent years so that non-engineering marketers can be much less dependent on engineering help.  For example, I now use KISSmetrics to build my own reports and run ad hoc queries.  And because it is so easy, I spend a lot more time digging into things like event-to-goal correlations.  This helps me know the events I should be promoting to website visitors in a given lifecycle stage. In the past, I was just seeking visibility into the marketing campaigns and landing pages that were and weren’t working.  KISSmetrics allows me to get much deeper and identify additional levers to improve results.

I’m also no longer dependent on front-end design and development help.  Not only can I build extremely effective landing pages with Unbounce, I can also very easily set up and manage A/B tests. This takes me beyond the stuff I even bothered asking for in the past.  For A/B testing landing pages, I previously had to replicate every ad to point to different landing pages.  It doubled the amount of time it took to set up any new ad campaign.  Now with Unbounce it is all automatic.

Even more empowering, I can actually manage all the content and design updates for our entire website using Optimizely.  This proved to be very useful a few months ago when Qualaroo lacked a front-end developer.  Despite limited HTML skills and no design talent, I was able to make all the necessary changes and still keep the key design templates that were custom created by a talented designer.  Finally, Optimizely made it a no brainer to retain the old version and run it as an A/B test.

What’s Next?

I’m very excited about the range of tools that will emerge over the next few years to further empower marketers.  Eventually I see a time where an individual marketer will have the ability to identify and control all of the most powerful levers for driving growth, even from deep within their website.

An important step that is also taking place is automation of the marketing programs that work.  All of this will continue to free up more time for creative marketers to build marketing experiments that truly push the envelope on results.

The Risks of Growth Hacking and How to Build Authentic Sustainable Growth

It has been a couple years since I wrote the first post on growth hacking.  The term didn’t gain much popularity until Andrew Chen wrote this post back in April of this year.

Online Marketing Redefined

Some people love the term “growth hacker” and some hate it. The term is not important. What is important is that people are tuning into the fact that traditional marketing techniques are often not very effective for driving growth in online businesses.

When I first started advising startups on growth a few years ago, most startup founders asked for help with driving awareness.  I wrote this blog post in response: Awareness Building is a Waste of Startup Resources.

Occasionally I’d connect with the in-house marketing person at a startup and see a plan that looked like a template from a Marketing 101 text book.  That’s not surprising since most marketing job descriptions for startups also looked like they came out of a Marketing 101 text book.

Today people are realizing that the best startups have approached growth in a very different way.  There are now over 450 active openings for growth hackers listed on SimplyHired.com alone. Two years ago, most of these job descriptions would have been for traditional marketers. It’s very exciting to see this revolutionary change in the way online startups think about growth.  And it’s not surprising that more established online businesses are beginning to adopt these approaches as well.

Evolving Definition of Growth Hacker

I recommend that people don’t get caught up on the term “growth hacker” or even a specific definition for it.  Focus instead on the concepts behind it. The fastest growing companies on the Internet have a growth focus rather than a marketing focus.  Try to understand how businesses like Facebook, Twitter, Dropbox, Linkedin, Eventbrite and Groupon are driving growth and you’ll begin to understand the meaning of “growth hacker.”

I also recommend that you Google the term “growth hacker” and read the articles. Not everybody agrees on the exact definition, but most of the articles contain gold. The alternative is to read 1000s of pages in marketing text books, which will give you very few insights about how to drive growth in an online business.

Stay Authentic to Value Delivered

The best growth hackers are constantly testing and tweaking new growth hacks.  During this process it is easy to lose sight of the big picture.  When this happens, growth eventually falls off a cliff.

Sustainable growth programs are built on a core understanding of the value of your solution in the minds of your most passionate customers.  Your drive to develop growth hacks should be based on a burning desire to get this “must have” experience into the hands of more and more of the right customers.  Growth hacks built from this frame of mind are the ones that build large sustainable businesses.

Fully grasping your must have experience isn’t easy.  The presentation below is a step-by-step guide for uncovering your must have experience and calibrating your messaging and flows to that experience.  The process should put you in the right frame of mind to build sustainable growth programs.

Update Oct 2013 – If you want inspiration for developing effective growth hacks and would like to engage with other growth hackers, check out our new project at GrowthHackers.com.

Find a Growth Hacker for Your Startup

Once startups are ready to scale, their biggest challenge is often hiring someone capable of leading the growth charge.   A marketer with the right talents and approach can kick some serious ass once product-market fit and an efficient conversion/monetization process have been proven.

But the problem is that most startups try to hire for skills and experience that are irrelevant, while failing to focus on the essential few skills.  Typical job descriptions are often laden with generic but seemingly necessary requirements like an ability to establish a strategic marketing plan to achieve corporate objectives, build and manage the marketing team, manage outside vendors, etc.

Generally speaking, the job requirements/skills mentioned above are not paramount for startups in or before the early growth phase.

After product-market fit and an efficient conversion process, the next critical step is finding scalable, repeatable and sustainable ways to grow the business.  If you can’t do this, nothing else really matters. So rather than hiring a VP Marketing with all of the previously mentioned prerequisites, I recommend hiring or appointing a growth hacker.

What is a Growth Hacker?

A growth hacker is a person whose true north is growth.  Everything they do is scrutinized by its potential impact on scalable growth.  Is positioning important?  Only if a case can be made that it is important for driving sustainable growth (FWIW, a case can generally be made).

The good news is that when you strip away everything that doesn’t have a direct impact on growth, a growth hacker should be easier to hire than a VP Marketing (or maybe an insider already has the needed skills).  I’ve met great growth hackers with engineering backgrounds and others with sales backgrounds.

The common characteristic seems to be an ability to take responsibility for growth and an entrepreneurial drive (it’s risky taking that responsibility).  The right growth hacker will have a burning desire to connect your target market with your must have solution.  They must have the creativity to figure out unique ways of driving growth in addition to testing/evolving the techniques proven by other companies.

An effective growth hacker also needs to be disciplined to follow a process of prioritizing ideas (their own and others in the company), testing the ideas, and being analytical enough to know which tested growth drivers to keep and which ones to cut.  The faster this process can be repeated, the more likely they’ll find scalable, repeatable ways to grow the business.

When VP Marketing?

Not all growth hackers can or should evolve into VPs of marketing.  A VP marketing needs to be able to help shape the overall company strategy, build and manage a marketing team and coordinate outside vendors among many other responsibilities.  Some growth hackers will be great at this, while others will be bored out of their minds.  The important thing to note is that without some proven scalable, sustainable ways of growing the business, these things will not matter.

Are You A Growth Hacker?

Some of my favorite conversations are those I have with fellow growth hackers.  Last week in San Francisco, I had breakfast with three fantastic growth hackers and we traded insights that benefited each of us (don’t bother asking me for names to try to recruit them, two are CEOs and the other is VP User Growth at a very hot company).

I’m a big proponent of establishing and building a broader community of growth hackers.  The problem is that not all people are cut out to be growth hackers.   If you think you are a growth hacker, please post a link to your LinkedIn profile below so other growth hackers in your area can connect.

Update Oct 2013 – If you want to get inspired to develop effective growth hacks and engage with other growth hackers, check out our new project at GrowthHackers.com.

Deconstructing Startup Growth

Elements of a startup growth curve

After product/market fit, driving sustainable growth is probably the most important/difficult part of creating value in a startup.

For most of the last 15 years of my startup experience, I’ve been the point person responsible for primarily one thing: driving growth.  Even after two IPOs, I didn’t really have a firm grasp of the essential elements of driving growth.  My view has evolved from externally focused metrics-driven marketing, to a more holistic approach built on a solid foundation of product/market fit.

Growth Foundation

Even the greatest marketers can’t sustain growth on a weak foundation.  Eventually, their growth curves crater.

So what is required for a strong foundation?

Must Have Product

The most important element is having a large percentage of users who consider your product a “must have” (over 40% is a good benchmark).  This gives you two key benefits:

  1. The first is that your churn will be relatively low (if it’s a “must have” why would users leave?), so you won’t be wasting resources filling a leaky bucket.
  2. The second is that “must have” products generally maintain strong word of mouth.

Together, these two elements give you a steady upward trajectory of your growth curve until you reach market saturation (hopefully you are in a big market!).

Must Have is Perishable

An important caveat is that your product will stop being a “must have” if a competitor offering a viable substitute enters your space. If they are really a good alternative to your product, then you’ve been downgraded to a “nice to have” and your foundation starts getting shaky.  Therefore, once you become a “must have” it is critical to get to the growth phase of your business as quickly as possible.

Check out my earlier post to determine if your product is a “must have.”

Conversion Optimization

Your ability to accelerate growth will be greatly enhanced if you optimize conversions.  There are many ways to define a “conversion” but for me, it’s a person who reaches the “must have” experience.  If 1000 new visitors come to your website and only 50 experience the “must have” benefit, it’s very difficult to efficiently grow your business.   However, with focused attention on fine-tuning the first user experience, startups often see a 2x – 10x improvement in conversions.

This immediately enhances your growth curve since word-of-mouth referrals begin “sticking.”  It also greatly enhances your ability to find viable, scalable ways to grow your user base (especially when combined with a good monetization approach).

Driving Growth

Most startups entering the growth stage obsess too much on finding a VP marketing capable of building and managing a large marketing organization.  At this stage your more immediate challenge is finding sustainable, scalable growth drivers to augment the organic growth achieved through solid product/market fit and conversion optimization.  If you are compelled to bring in a VP Marketing at this stage, make sure he/she has a track record of developing scalable growth drivers and is willing to make this their core focus until it is figured out.  Otherwise, I recommend instead bringing in a scrappy growth hacker to generate a strong flow of ideas for experiments that will scale if successful.

The faster you run high quality experiments, the more likely you’ll find scalable, effective growth tactics. Determining the success of a customer acquisition idea is dependent on an effective tracking and reporting system, so don’t start testing until your tracking/reporting system has been implemented. Once scalable growth tactics are developed, then a VP Marketing may be important for building and managing the marketing team that will execute these tactics.

One benefit that is emerging from advising multiple startups is that our rate of collective discoveries is accelerating across the non-competitive network of startups. With sharp, creative growth hackers in each startup we are able to brainstorm and test many more tactics.  The best ones are exchanged across the network for everyone’s benefit.

Growth

As the preceding paragraphs hopefully demonstrate, growth is a function of multiple factors.  Focusing on the right factors at any given time offers the best chance of ultimately becoming a high growth startup.  One exception to this rule are startups like eBay, Facebook, and Twitter, where “must have” status could only be achieved after critical mass.  In these startups, they did not have the luxury to focus on one element at a time – instead they had to work on the full growth ecosystem at one time.  But for most startups, you will approach your full growth potential by obsessively focusing on the most important goal for your particular stage.

Optimization Mistakes that Kill Startups

I once believed optimization was the secret weapon that could make almost any startup successful. It was certainly a critical part of reaching millions of users in each of my first five startup marketing roles. At a couple of startups we saw a tripling of conversion rates from a single experiment. When we tripled conversion rates, we tripled the effectiveness of every future marketing dollar.

I first became a fan of funnel optimization at one of my early startups where we had hit a wall trying to develop scalable customer acquisition channels.  We decided to temporarily stop trying to find new customer acquisition channels and focus instead on improving conversion rates.  A few months later we resumed channel building and were able to scale the same previously tested channels to support 100X the marketing spend with the same target ROI per dollar spent.  Beyond the clear benefit of enabling scalable marketing campaigns, the improved user experience also resulted in a multifold increase in free organic growth.  User growth immediately hockey-sticked and years later still  hasn’t diminished.  All the while, the company maintained cashflow positive results.

These benefits probably have you chomping at the bit to start your own optimization program. But be careful, optimization can easily kill a startup when not done right (or at the right time).

Here are the three most common optimization mistakes startups make:

1) Premature optimization – Optimization is about improving the path that users take to reach a certain destination within your website. For most sites it’s ultimately about getting people to experience and buy your product. While this seems like an important goal from the beginning, it’s not. If the value of your core product is weak, doubling the percentage of users that get there won’t help much. And it will actually hurt you because every unit of effort put into optimization is one less unit that you can put into improving your core product. Products that don’t become a “must have” almost always fail.

My recommendation for startups is not to begin optimizing until at least 40% of your randomly surveyed users say they would be “very disappointed” without your product. That doesn’t mean you shouldn’t try to have a great first user experience, rather it means you shouldn’t start iterating flows until the core product meets this threshold.  The only exception to this is if your value proposition will increase because of a network effect (like eBay). I’ll try to write a post on this scenario soon.

2) Not being deliberate –To execute full funnel optimization you test multiple changes at every step in the acquisition process. Since every change is also an opportunity to screw things up it’s extremely important to measure the actual results of a change. Unfortunately traditional analytics programs aren’t helpful here since they don’t track specific user cohorts moving through the funnel (AKA groups of users). In the early startups I worked with we spent months building systems internally to track conversions at the user level. Fortunately “off the shelf” systems are now cropping up that make user level funnel tracking much easier (I’ve been advising KISSmetrics on such a system for over a year and I’m now using it in a couple projects). With the right system you can track your “measures of success” and roll back any changes that havea negative effect on these metrics.

This presents a new problem. Anyone with a basic understanding of statistics will realize that optimization is a numbers game. If you test enough things you will definitely find something that improves your key measures. That’s the theory, but the reality is that you’ll never get past the first few tests if the early ones don’t yield improvements. People quickly lose faith in the process. Therefore it is essential to vet every test idea before asking the development team implement it. Prioritize test ideas so that the easiest and/or most likely to improve results are implemented first.

3) Killing the love – One thing that is rarely measured in an optimization project is a reduction in the core value perceived by your most passionate users. Your ability to deliver an experience that creates passionate users is your most important asset as a business and must be protected. It can be improved, but it must be done very carefully. The first step in protecting it is to understand it. I never attempt an optimization project without first doing a project that helps me understand the use cases of the most passionate users. After this initial project, which I combine with messaging optimization, I am in a much better position to safely optimize the full conversion funnel.

Effective optimization requires the right tools, qualitative research/understanding and a systematic approach to testing. When executed properly it can easily result in 2X – 10X improvements in conversion rates. No business will come close to its potential without a concerted optimization effort, but be careful to avoid the mistakes listed above.

For more context on where optimization fits into the overall startup marketing priorities, see this post on The Startup Pyramid.

Milestones to Startup Success

Update added to end of post

When your startup accepts outside money (such as venture capital), you are obligated to focus on maximizing long-term shareholder value.  For most startups this is directly based on your ability to grow (customers, revenue and eventually profit).  Most entrepreneurs understand the importance of growth; the common mistake is trying to force growth prematurely.  This is frustrating, expensive and unsustainable – killing many startups with otherwise strong potential.

Most successful entrepreneurs have a good balance of execution intuition and luck.  This was definitely the case at the two startups where I ran marketing from launch through NASDAQ IPO filings.  While we didn’t follow a specific methodology, our CEO was intuitive enough to know the right time to “hit the gas pedal.”  We didn’t accelerate until verifying that the team had created a great product that met real customer needs and we could generate sufficient user revenue to support sustainable customer acquisition programs.  It’s taken years for me to realize that our growth was less a function of clever marketing tactics than beginning with something that customers truly needed.  Some growth would have been automatic; the marketing team simply accelerated this growth.

Several startups later I have a much better understanding of the key milestones needed for a startup to reach its full growth potential.  These are based more on observing universal truths than inventing some type of methodology.  Reaching the full growth potential of your startup requires focus, specifically focusing on what matters when it matters.  In my post on the startup growth pyramid I talk about the high level milestones you must achieve in order to unlock sustainable growth.  This post looks at it on a more granular level with links to several of my previous blog posts and other resources that provide additional details.

Day 1: Validate Need for Minimum Viable Product (MVP)

Before any coding begins it is important to validate that the problem/need you are trying to solve actually exists, is worth solving, and the proposed minimum feature set solves it.  This can best be achieved by meeting with the prospects most likely to need your solution.  Steve Blank published a great post on this today.

Eric Ries offers more details on the minimum viable product concept in this post/video.

Where’s the Love?

Vinod Khosla, one of the most successful Silicon Valley VCs in history, once suggested to me that startups should think of their early users as a flock of sheep.  He explained “the flock always finds the best grass.”

For you this means you should start looking for a signal about who loves your product and why as soon as you release your MVP.  Most products have at least a few people that truly consider it a must have.  These people hold the keys to the kingdom.  Learn everything you can about them including their specific use cases and demographic characteristics.  Try to get more of these types of people.

A good place to start collecting this information is the survey I’ve made freely available on Survey.io (a KISSmetrics product).    You can read more about this product/market fit survey in this blog post.

If you’re lucky you’ll be able to use this early signal to find the product/market fit.

Expose the Core Gratifying Experience

The majority of our project focus at 12in6 recently has been helping startups find their core user perceived value and exposing it in messaging optimized for response.  Your objective should be to remove complexity from the initial user experience and messaging in order to highlight this core user perceived value.  Often this means burying or even completely eliminating features that don’t relate to this gratifying experience.

Metrics

Metrics don’t matter until you achieve product/market fit – then they are critical to your success.  Dave McClure has a great video on startup metrics that matter (relevant part is at about minute 2:20).

Most of the tools out there provide way too many irrelevant metrics and miss the essential few.  Both Dave McClure and I are advising KISSmetrics on a solution to this problem.

Start Charging

Another key step before growing your business is to implement a business model.  The ideal timing for implementing your business model is discussed in this blog post .

I’ve often heard the argument that startups are focused on user growth and prefer to delay revenue in the short term.  I believe the fastest way to grow is with a business model and explain why in this blog post.

Extreme Customer Support

Now that you have a business model in place, your first marketing expense should be to expand the customer support team.  Anyone that cares enough about your solution to contact customer support is a great source of insight about your target market.  Also, customer support will uncover issues that will help you grow faster without spending.  And fixing these issues will make it much easier to grow when you do start spending.

If your customer support team is overwhelmed now, I don’t recommend trying to grow until you address the issues driving most support calls. Once you’ve addressed these issues you’ll have fewer barriers to adoption and will be able to grow without overwhelming customer support.

This will enable customer support to go above and beyond expectations, which is an important way to drive customer loyalty and enhance word of mouth.  This approach pays more dividends today than ever before – as I explain in this post on Social Media.

Update: See comments for additional thoughts on extreme customer support.

Brand Experience Over Brand Awareness

Back in the “Dotcom Bubble” days billions were wasted on brand awareness campaigns for startups.  Today most entrepreneurs understand that brand awareness campaigns are a waste of money for startups.

Instead, it’s much cheaper and more effective for startups to focus on creating a fantastic brand experience.  While startups often realize the importance of brand experience, they focus on it too early, fine tuning things that customers don’t care about.  Instead, wait until you understand why certain customers love your product; then obsess over every element of this customer experience.

Apple is probably the best tech company out there on coordinating a perfect brand experience for its target users. I cover more on brand experience in this blog post.

Driving Growth

Once you’ve achieved all of the previous milestones, then you can focus on driving growth.  CEOs must take an active role in driving customer growth whether or not they have an interest in marketing. Nearly all of the risk and upside in a startup is in your ability to gain customer traction and then drive scalable customer growth. The CEO should not abdicate this responsibility to the marketer.

It’s important to stay aggressive and take all slack out of the market (make it completely uninteresting to pursue the market for any other competitor).  Your early advantage is the ability to iterate on the customer feedback loop and leverage strong customer loyalty to drive word of mouth.

While ROI lets you know if a user acquisition channel is sustainable, the key focus should be on exposing lots of the right people to your fantastic product experience.  It’s much easier to get passionate and creative about this than purely thinking about things from an ROI perspective. Of course positive ROI is essential for any customer acquisition program to remain in the mix.

When it’s time to hire a marketing leader to partner with the CEO, this post explains my recommendations for an ideal startup marketing leader.  The most effective startup marketers are relentless about experimenting with channels until finding things that work.

Start by building out free channels such as listing in directories and basic SEO.   When you begin building paid channels, extra effort should be put into channels that show strong potential for scale.

Unfortunately you can’t count on effective online tactics working forever.  I’ve seen many hot online marketing tactics lose their effectiveness over time.  This is because online tracking makes it easier for marketers to quickly figure out what actually works.  As a result we start piling into the most effective tactics.   Eventually online tactics get saturated, as explained in this post.

Business building

Fast growing businesses are difficult to manage.  This is the point where you should bring in some experienced operations people if they aren’t already on the team.

It Won’t be Easy

Finally, the top three risks to growing via these milestones are:

  1. You lose patience and decide that one or more of the milestones really aren’t that important.
  2. VCs and/or board of directors lose patience because you did not achieve conceptual agreement on this approach from beginning.
  3. You delude yourself into believing that for “our type of business” customers really don’t need to consider our product a “must have”.  For us, “nice to have” is good enough.

Building a successful business is hard.  Hopefully this milestone driven approach to growing your startup will make it a bit easier.

Update: It’s hard to write a blog post on “milestones to startup success” that covers every type of startup.  Some startup types may need to reverse the order of some of these milestones.  For example, with marketplaces (EBay, social networks, eduFire, dating sites, etc.) user gratification increases with more users so there is a bit of chicken and egg here…  Ad supported sites also benefit from early scale. Many of the articles linked to from this blog post also cover exceptions such as when a startup should start charging (it’s different for enterprise targeted startups).

Founders Make the Best Startup Marketing Leaders

CEOs often ask for my advice on the ideal candidate profile to lead their ongoing customer growth efforts once we’ve completed the key steps to unlocking growth. You would think that after running marketing at two startups through IPO filings that I could easily answer that question. But I’ve struggled to define the ideal profile of a successful startup marketing leader. After many course corrections, I finally believe I have it figured out. But to really understand the ideal profile, it is important to comprehend why the role is so challenging.

Based on anecdotal evidence, I’d guess that 90% of startup marketing leaders don’t work out. This corresponds to the overwhelming majority of startups falling short of expectations of founders and early investors. When a startup falls short of expectations, the startup marketing leader is the first to go. Even those fortunate enough to gain early user traction still face the uphill battle of finding cost effective ways to acquire users at scale. And if they do succeed, then startups are often tempted to hire a “next level marketer” to replace them.

A successful startup marketing leader must be undaunted by these risks and believe they uniquely have what it takes to succeed. That sounds a lot like the profile of most startup founders. So it’s not surprising that the best startup marketers are entrepreneurs at the core. Entrepreneurs are willing to take the risk and are generally tenacious enough to uncover the channels necessary to drive long-term growth.

I came to this conclusion after finding the common thread between myself and the two most effective people I’ve met at uncovering growth channels. One is still CEO of his company but has done more to drive customer adoption with a fraction of his time than most startup marketers do with undivided attention. The other highly effective startup marketer is a founder that transitioned to leading marketing. They share a persistent desire to connect their innovative solutions with the people that really need them. After implementing critical tracking systems and an efficient customer acquisition process, they are now relentless about experimenting with channels until they find things that work.

Contrast this to a typical marketer, who is generally more focused on marketing activities than marketing results. Most of these activities do nothing to move the needle on the business, but make the marketer feel good because they are working hard.

It may be tempting for a startup CEO to read this and think that aggressive targets can steer the marketer in the right direction. I don’t think that will work. Effective marketing leaders will challenge themselves by pushing the boundaries of the startup’s growth potential. The CEO should be a partner in this process rather than setting arbitrary unrealistic goals. If you don’t have confidence in your marketing leader, the founding CEO should micromanage the process by being an active participant in channel brainstorming sessions and challenging the marketer to ensure tests have been implmented to perfection. Once you have created a product that people really want, most of the remaining company risk and upside lies in your ability to aggressively drive customer adoption. This is not something a CEO should abdicate to the marketer until they’ve demonstrated a relentless drive to uncover profitable customer acquisition channels.

The CEO can also facilitate channel discovery by ensuring that the marketing leader gets the tracking systems they need to execute marketing efficiently. Of course the marketer should be able to make a case for why these resources are important.

What about successful startups that had an initial marketing leader with a more traditional background? First, there is nothing wrong with a traditional marketing background if at the core the marketer is entrepreneurial. Second, the marketer does not always deserve credit for strong user growth. Sometimes great products really do market themselves. My experience with Dropbox certainly supports this assertion. Also, I recently spoke to the former VP Marketing at a company that sold for billions and he agreed that his most important growth contribution was not getting in the way of the viral growth engine.

Of course the risk in hiring an entrepreneur to lead your marketing is that they’ll eventually leave to start their own company. Agree that this is an acceptable outcome if they are willing to give you at least a couple years.

Finally, only the marketing leader needs to be entrepreneurial. In my experience, it is not an essential characteristic for the rest of the marketing team.

Big Picture Customer Development Revisited

Working with four startups at the same time has steepened my customer development learning curve (and also explains why it has been a month since my last update).   To help balance the load, I’ve brought on a conversion designer and a researcher; we’re finally firing on all cylinders. 

Our customer development goal with every startup essentially boils down to a race to be able to focus on growing the business.  But in order to avoid wasting effort and money on tactical growth drivers, the following steps need to be completed first:

  • Validate the product/service is gratifying a reasonable percentage of users.
  • Create a value proposition that will attract the right type of users and pull them through the conversion funnel to gratification (and ultimately a transaction). 
  • Eliminate friction from the conversion funnel. 
  • Fine tune a business model that supports scalable customer acquisition channels. 

If these steps have been executed well it is relatively easy to grow a sustainable business.  But many startups skip these steps and jump right into trying to grow the business – making their job much harder or even impossible.  Some will get lucky, but most will fail.  

Given the importance of getting customer development right, I’m certain that eventually most startups will contract a specialist to help them navigate the challenges of this pre-scale phase.  I’m often asked how I plan to expand 12in6 to help more startups.  Most people are surprised when I tell them I don’t have a desire to expand the business.  I really enjoy being able to work hands on with two new startups per quarter.  If I built a large team to fill the current void of specialists, I’d be too busy managing the team.  This would mean less time learning how to improve my customer development approach. 

As I explained in my last post, I’m now validating that a startup’s product is gratifying users before I commit to working with them.  While I love to hear from as many funded startups as possible, I can barely scratch the surface of the number of startups that need help.  If I don’t have the capacity to help you, here are a few others that specialize in customer development:  (I haven’t dug into their approach enough to be able to endorse them, but I encourage you to check them out)

If you are specializing in customer development or know someone else that you can recommend, please add names/recommendations in the comments. The main things to consider when evaluating a specialist is their track record building successful companies.  And be sure to check references (especially around chemistry with the team).

I have been sharing discoveries on Twitter (follow me @ http://twitter.com/seanellis) and hopefully  I’ll resume regular blog posts next week (after I get back from a short vacation in Hawaii).