Check out The Beginner’s Guide to Conversion Rate Optimization

FACT: Conversion Rate Optimization tops the Digital Marketing Priorities for 2013 according to the Econsultancy Report: “Quarterly Digital Intelligence Briefing: Digital Trends for 2013″

Looks like the big guys are finally getting it!  I’ve been highlighting the benefits of conversion rate optimization to startups for years.  It’s nearly impossible to grow any startup without at least some systematic effort to improve your conversion rates.

The challenge with conversion rate optimization is that many people go through the motions, but fail to get close to their optimal conversion rates. People forget that conversion rate optimization is more than just random tests and numbers.  It’s about understanding the needs of visitors to your website and where your website falls short in delivering on those needs.  And a real conversion is more than simply a click to the next step in the funnel.  To effectively convert someone you need to get them to a must-have experience with your product.  If you don’t have a must-have experience, then conversion rate optimization doesn’t really matter anyway.  Read this post for more information about creating a must-have experience.

So assuming you have a product that hits the mark, how do you effectively execute a conversion rate optimization program?  One choice is to hire an expensive conversion rate optimization agency.  While they are expensive, the good ones (such as Conversion Rate Experts) are well worth the money. But startups can rarely afford a world class conversion rate optimization agency.

Fortunately my team and I at Qualaroo have just completed the most comprehensive guide to conversion rate optimization that I have ever seen.  It contains twelve chapters of conversion rate optimization best practices.  It draws on inspiration from several of the best articles written about conversion rate optimization and links back to those articles.

The guide includes the following topics:

  • Chapter 1: What is Conversion Rate Optimization?
  • Chapter 2: Why Conversion Rate Optimization is Important
  • Chapter 3: The Basics of Conversion Rate Optimization
  • Chapter 4: Building a Testing and Optimization Plan
  • Chapter 5: User Experience and Funnel Optimization
  • Chapter 6: Landing Page Optimization
  • Chapter 7: Reducing Bounce and Exit Rates
  • Chapter 8: Myths About Conversion Rate Optimization
  • Chapter 9: Tools to Test and Optimize Conversion
  • Chapter 10: Measuring Conversion Rate Efforts and Calling Winners
  • Chapter 11: Bonus Advanced Tips and Hacks for CRO

The magic of conversion rate optimization is that it makes all of your marketing work better.  Getting users to your site is expensive, whether you pay real dollars or it’s just effort and creativity.  If you don’t make the most of their attention, they are unlikely to ever give you a second chance.

Even if you already consider yourself a pro at conversion rate optimization, the guide includes plenty of nuggets to make you even more effective.  Of course if we missed anything, please share some suggestions in the comments of this blog post.  I don’t even mind if you are a consultant and include your contact information to attract prospective clients.  And if you have any questions, please post those as well.  I’ll check back frequently to try to answer them.

Click here to read The Beginner’s Guide to Conversion Rate Optimization for FREE

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 

 

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.

Chasing Problems?

The best startups generally begin by trying to address a really important problem worth solving. If they can nail the solution to this important problem, they have a great chance of building a successful startup.

How Solving Problems Can Lead to Failure

Surprisingly, founders’ instincts to solve problems can also cause us to fail. Many startups miss success signals because they are too busy solving problems. Our instincts tell us to be responsive to customer feedback – especially negative feedback. These problems are so actionable that we feel good solving them. But over time a startup that chases problem after problem creates a bloated, fragmented solution that isn’t really needed by anyone.

Find the “Must Have” Use Cases – Ignore Most Problems

Ultimately the goal of any startup should be to create a “must have” product experience. The signal that tells you that you have created a “must have” product is your true north to build a successful business. You should understand everything you can about the “must have” experience so you can cultivate and protect it. Who considers it a must have, how are they using it, why do they love it, why did they need it, where do they come from…?

It feels totally counterintuitive to pursue these positive signals while ignoring most of the feedback about problems. But in my experience, this is the right thing to do. In fact, this is the most important thing that I learned in the years that I focused on helping to take startups to market such as Dropbox, Lookout and Xobni. To reiterate, the positive signal is much more important than the ongoing flow of new problems.

Problems Worth Solving

So which problems are worth solving? Essentially any problem that stands in the way of delivering the “must have” experience once it has been identified.

Problems worth solving include:

  • Usability issues that prevent reaching the must have experience
  • Confusing value proposition about the must have experience
  • Targeting the wrong users (AKA users who don’t need the must have experience)

But start by focusing the majority of your energy trying to create at least one must have use case. If you can’t find any positive signal about someone considering it a must have, then go back and revisit the original problem you were trying to solve. You might need to find one that is even more important to solve.

I recognize that my recommendation to ignore most problems is controversial.  Please comment whether you agree or disagree.  Hopefully we can get some good debate in the comments.

Update: Just to clarify, I’m referring to the data that deserves your focus.  I don’t mean to imply that you should be unresponsive to the customers that make suggestions.  It is very important to give great customer support.  Just don’t promise to change your product/business based on every reported problem.

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.