Without product/market fit, even the best marketing isn’t going to grow a successful business. But once you’ve found those first 10 unaffiliated customers, and established some initial traction, it’s time to rev the marketing engine.
Brian Balfour, the vice president of growth at HubSpot, recently participated in a GrowthHackers AMA, where he discussed valuable channel-selection lessons in relation to product/market fit. In today’s post, we’ll discuss those lessons learned, as well as time to value, customer success and long-term growth, so that once you’re ready to step on the marketing gas, you’re making the best decisions possible to grow your business.
Lessons in SaaS Startup Marketing
When it comes to channel selection, unfortunately, there is no silver bullet. Marketing a startup is difficult, and it begins with finding the channels and tactics that can become successful and predictable. What worked for Slack, Zenefits, Airbnb or Spotify might not work for you. Look at this response to a related question from Brian Balfour:
If Balfour doesn’t know, then I’m pretty sure nobody does.
However, what we have seen is that today—once you find those one or two channels that are going to drive your growth—those channels are more efficient than they have been before. That’s great news. So as a startup, this begs the question: Where do you begin?
The first step in finding the right channel for your business is thinking about what Balfour calls “product channel fit.” (We’ll address his point on retention momentarily.)
This means thinking about what channels are most likely to be successful with your business and your product. From there you can begin to compile a list of tactics within a channel and test them. Two great ways to approach this are through the Bullseye or ICE frameworks. In this exercise, the most important things to consider are:
One of the most important elements of a startup marketing plan is to build a model that has a low cost. Tomasz Tunguz has discussed the evolution of startup marketing tactics by looking at a simple framework that buckets any potential marketing channel into one of three categories—direct response, content marketing, and branding—with time to value in corresponding order.
The logic for this is simple. Tactics focused on direct response can help spark initial scale with profitable economics and as little an initial investment as possible. This is where fast testing using the frameworks we just discussed is so critical. However, these tactics have a tendency to fatigue over time. At that point, inbound marketing in combination with automation can become increasingly effective as leads at the top and middle of the funnel are generated and then nurtured down the funnel by additional content and email marketing efforts.
Another helpful way to think about this concept is through the two speeds of modern marketing, a concept first coined by Gartner’s Jake Sorofman. In this framework, we can think about speed-one marketing as the product/brand-focused, direct-response techniques that are targeted toward a shorter sales cycle. Speed-two marketing becomes most effective over longer sales cycles, where leads experience more nurturing before purchase.
This can be visualized by bucketing a B2B sale into three distinct groups: a short sales cycle, an extended sales cycle and a delayed sales cycle. We can see, direct-response/speed-one marketing tactics excel over the short cycle, while speed-two techniques become increasingly effective over extended and delayed cycles.
Moving beyond channel selection and tactics, there is the necessity of customer success and the amazing benefits of second-order revenue that can’t be forgotten.
Retention and customer success
To bring this full circle, you may have noticed in the screenshot earlier that Brian Balfour’s most important message for SaaS startups was to focus on retention:
All you have to do is to read this post, to see that customer success pays for itself. In fact, without it you’re never going to be able to build unit economics that allow you to recover your customer-acquisition cost and recognize the profits from a customer thereafter. It’s the foundation of SaaS success. Take this example from Tunguz, illustrating the difference in 5-percent churn and 5-percent negative churn: 74 percent more revenue!
Even better, with retention often come referrals and growth via word of mouth. This is one of the best ways to increase LTV, create second-order revenue, accelerate growth and lower customer-acquisition cost. Those are four huge wins. In fact, Jason Lemkin has argued that first-order LTV can underestimate true revenue generated by customers by 50-100 percent in most SaaS models.
So… what about my startup?
Throughout Balfour’s AMA we learned about:
- There is no silver bullet for growth. You will need to ideate and test the channels that appear most promising for your business
- Two great frameworks for helping you determine which channels you should test and invest in
- The importance of time to value, especially pertinent when facing the SaaS cash trough
- How important retention is and the dividends it can pay in second-order revenue
So, if you can keep these things in mind as you start to create your marketing strategy, you’re in good shape.
Feel free to reach out if you’re looking for support and want to toss around ideas.
by Matthew Buckley @mmbuckley