Is Everything We Know About Startup Marketing About To Change?

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At the celebratory cocktail party immediately following our end-of-cohort demo night for the accelerator BoomboxFM completed last summer, I found myself chatting with Henry Copeland, the founder of Blogads, amongst other ventures. We had spoken a few times throughout my time in Durham and he always pushed us to think a little differently about varying aspects of our business, particularly how we approach startup marketing. On this night, mere minutes after we razzled and dazzled the crowd with our impressive (or so I thought) growth engine that was acquiring 2,000+ new users every single week, Henry posed a question that quite frankly scared the ever loving shit out of me: “What would happen if you turned off all marketing for the next 6 months?”

Yeesh, thanks for the buzzkill, guy. We just got finished wowing the masses with our sub-$0.35 customer acquisition cost and this dude is prodding me about dropping that number all the way down to zilch?! But this concept nagged at me, especially since I didn’t grow my early career on things like performance marketing, direct response, and CPC ads. I consider myself a mixed marketing artist, which means I’ll employ whatever tactics needed to get the job done, but I was always a little uncomfortable seeing the growth of so many startups held up primarily by paid marketing.

The NEW GROWTH ORDER

In the last few months the conversation has turned to the tech bubble, whether you believe that’s the right definition or not. Valuations are dropping, down rounds are being announced, and stock prices are tanking. When that happens, everyone immediately starts picking apart the companies with bloated investments and little (or no) revenue. But that’s not all, as the ethos of hyper growth at all costs is being put under the microscope as well.

Over the last few months, the venture world has shifted focus from growth-at-all-costs to unit economics. Blame oil or China or Unicorn Valuations or the IPO market or some complex interactions of all four…not all firms are going to receive (or heed) the important guidance on rapidly shedding expense when VC sentiment shifts and growth funding is limited to the least- speculative growth strategies. [source]

Fast growth and high burn rates today put startups in a precarious position. [source]

The startup industry may be “resetting,” which doesn’t mean a “crash” but rather just a resetting of valuations, timescales, winners/losers, capital sources and the relative emphasis of growth rates vs. burn rates. [source]

More from that last source: “And when prices are dropping on a VC’s existing companies in market, there is a substantial reduction in FOMO (fear of missing out) for new deals, which means that investors take their time in making investment decisions. Investors are rewarding cautious growth more than high-burn-rate growth at all except the most successful of companies (and even there it may eventually change).”

The New Growth Order: Investors are rewarding cautious growth more than high-burn-rate growth Click To Tweet

Unit Economics > Cost Per Clicks

It feels good to hear people in the startup marketing world questioning the absurdity of some business practices we’ve all watched in amazement lately. The current way of doing things may finally be taking a tumble; “Throw a ton of money at growth and worry about revenue later” is simply not sustainable for most of us. I’m no expert, but me thinks the silver lining of a bubble like this is it forces us marketing folks to batten down the hatches.

Burn rates and cost cutting are now at the forefront of growth analysis, and trimming the fat will be the modus operandi. Startup marketing plans will be introduced with a review of a business’s unit economics, as revenue- and cost-per-customer (or user) will be priority numero uno.

What does this mean for startup marketing? It’s MoFu / BoFu time, yo.

Startup marketing funnel

Watch out #startup marketers, it's MoFu + BoFu focus time! Click To Tweet

I think – nay, hope – we’re going to see more growth managers focus on the middle and bottom of their funnels to squeeze every ounce of value out of their systems and their customers. That may put some of you in a precarious position, as the de-emphasis on aggressively firehose-ing the top of the funnel requires a different set of skills.

ACQUISITION TO RETENTION: STARTUP MARKETING REFOCUSED

Let me preempt this by saying the entirety of your funnel is still important, so I’m not advocating you turn a blind eye to awareness and acquisition. Without the right traffic, your conversions and retention will suck. But what I am calling out is the need to put a little more focus on customer retention than you may have in the past.

In the new unit economics based world, things like win-back campaigns, customer service, word of mouth, and repurchase rate will be paramount to a startup’s ability to survive.

Listen to Wade Foster, Zapier CEO, talk about a startup marketing game changer:

Kevin Hale who’s the founder of Wufoo, told me that there are three types of businesses you can build.

You can build a business that sells the highest quality product. Companies like Apple that build things that are best in class and have the price tag to match.

You can build a business that offers the cheapest deals like Walmart or Amazon.

The thing about the best and cheapest is that it’s hard to be either one of those for a new company. You’re probably not going to be the best, because your product is brand new. And being cheap is really hard because you can’t take advantage of economies of scale.

The third type of business you can build too is the one with the best customer service.

I really took that to heart, because we can’t be the best and we can’t be the cheapest, but we can definitely care the most, and so from day one, we thought “let’s get on Skype calls, let’s do things that might not scale right now, just so that we can make people really happy and really want to work with us.

 

Know what keeps many CMOs up at night? It might surprise you:

Startup marketing CMO concerns

 

Some of these things can be difficult to measure – customer experience?! – but impactful in the ways that are going to matter more and more in the very near term. It’s time to get on the new startup marketing path and make those unit economics work in your favor. Play time is over.

 

 

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