Tag Archives: marketing

The Problems With Martech, and Why Martech is Actually for Engineers

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Since I spent some time in VC land and have a background in marketing, a lot of people ask me about martech, or technology built for the marketers. Are these good businesses? Which tools should they use/are on the rise?

In short, I hate martech, and think martech will decline as a category, and most martech businesses will not be very successful. I think there are a few reasons for this that are not well understood, but if you understand them, it can unlock some martech opportunities that are still quite large for entrepreneurs, and help marketers understand which technologies to bet on vs. bring in house. The main misunderstanding is that successful martech is actually for engineers, not marketers. Let’s talk about why that’s the case.

Martech is a Response to Engineering Constraints
A controversial opinion I have stated before is that the marketing function in technology companies is usually a response to engineering constraints. If you don’t have enough engineers to build a system to manage bidding for performance marketing, you hire a marketer. If you don’t have engineers that can work on SEO, you hire a marketer. If you can’t build a great email system, you hire a marketer. Most key marketing roles are manual tasks that can better be solved with engineering. The smartest marketers, realizing this, started automating a lot of their work through third party tools, and if they could, even better, first party tools. This is how martech exploded over the last decade. Marketers actually had important, if not critically under-weighted, responsibilities for the company. For example, I was in charge of getting new people to try ordering online at Grubhub, and to keep them coming back once they did. My team used a lot of martech tools to do that.

Engineering Constraints Are Being Laxed
While hiring engineers inside companies to solve these problems is still extremely competitive, engineering constraints are (slowly) being laxed across every technology company I meet. Startups and technology companies today have many more engineers working on more functions (due to improvements on engineering technology) than we had at Grubhub during similar stages of our company.

These engineering constraints being laxed means martech companies have to compete with the engineers at the company for the best way to solve a marketing problem. And besides there being more engineers in a company to work on these problems, engineers are now more likely to want to work on these problems or reject these tools as best practices. Growth teams have emerged to work on a lot of the traditional marketing problems marketing teams bought software for: email, SEO, landing page optimization, onboarding, etc.

Martech now finds itself in a more competitive environment since “build” in the “build or buy” equation is more likely than it used to be. Also, if engineers inside a company do decide to build instead of buy a solution, a lot of times what they build is more effective than what the martech provider can offer. This is not to say engineers inside tech companies are better than engineers inside martech companies; engineers inside tech companies simply have unfair advantages. Not only can engineers building the solution for their company build directly to the needs of their company instead of adapt some generic solution; they can also more easily integrate with the data needed for these tools to make the right decisions. It is notoriously difficult, for example, for many martech tools to integrate conversion data, and certainly much harder for lifetime value data. This is much more easily done with an in-house built tool.

Platforms Also Limit Martech’s Reach
Martech companies face the squeeze from the other side of the integration as well. Usually, martech companies integrate into some other system: advertising companies like Google and Facebook, adtech companies like exchanges and demand side platforms, email service providers and email clients, etc. What happened is these martech companies built value added features on top of a platform to deliver extra value to customers. What is happening now is those platforms are either integrating those best features themselves, so you don’t need the martech company for it anymore, or deleting the access that enables it, because the platform doesn’t actually want that level of transparency.

Where Can Martech Be Successful?
So these companies have the platforms stealing their features or cutting off the access that makes them possible on one side, and engineers at the companies of their clients building deeper integrations themselves. So, if most martech solutions have a disadvantage to competing with in-house engineering solutions, or the platforms starts competing with them, what type of martech tools have an advantage?

Option 1: Leverage Data Network Effects
One key example where martech thrives is when the external data becomes more important than the internal data. If a martech tool can be gathering data from multiple companies, and create a data network effect from this aggregation, thereby helping all companies improve in a way they could not on their own, they are very defensible. Sift Science is a great example of this. By being used as a fraud provider across thousands of companies, they have data any individual company won’t have in determining if a transaction is fraudulent or not.

Option 2: Manage Pain
Similarly, integrations with a bunch of key operators or vendors are very defensible in martech. Litmus is a classic example historically. Email providers have notoriously finicky rules around what renders in their systems and how, and they are not very transparent. Engineers and designers hate coding for email, and it’s hard for them to remember all the rules for all the different types of email clients. Litmus allowed you to preview what your emails looked like across all major clients to spot errors before you send the email, and generally became an all-encompassing email QA tool. No engineer internally wants to build that, and they will never be as good as Litmus at doing it because Litmus has been doing it for billions of emails, so it has seen many more cases, and has better integrations with email providers. Another example of removing engineering pain is Heap Analytics, which auto-tags events, removing one of the most painful parts of setting up a new analytics vendor.

Option 3: Leverage Cross Side Network Effects
A more modern example is the customer data platform companies Segment and mParticle. These companies integrate with hundreds of other companies marketers use for various purposes: web analytics, conversion tracking for performance marketing, crash reporting, et al. Integrating these companies saves engineers time because they integrate once, and any other solutions they need can now be enabled instantly. These integrations not only help marketing, but product, and engineering as well. These companies have created a cross side network effect between customers and other technology providers. Data platform companies are hard to rip out once you integrate because they are so integrated in all of your processes.

The Real Answer: Change the Target Customer
Okay, so all of these are great options, but they actually share one thing in common: they have really shifted the target customer to the engineer instead of the marketer. Sure, the marketer may be the person requesting the solution, but the solution is chosen because the engineers like it. Many things an engineer has to do are painful, and as much as engineers like to solve their own problems, if you show value to them, they will appreciate it. So I am very bullish on engtech companies masquerading as martech. Other examples of this besides the ones above are data visualization platforms like Mode and Periscope.

Bonus Option: Pick the Right Marketing Customer
One other strategy that is very successful for martech companies is to build targeted solutions for the types of companies where marketing is more central to the organization’s success. While marketing is ebbing in importance in most tech companies, one area it is thriving is in ecommerce companies, whose main playbooks are logistical on product delivery, and where brand + performance marketing drive all sales. The product is something delivered offline, so the product and engineering teams are more subservient to marketing than in other functions, and because the product is delivered offline, these teams usually have less engineers than other companies. Narvar is a great example for ecommerce tracking. Buffer is a great example for social media marketing. Canva is a great tool to help design creative for marketing campaigns and social media posts.

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Martech is a very challenging space for an entrepreneur. If you are going to tackle it, there are distinct strategies like data network effects, pain management and maintenance, and cross side network effects that make it more possible to build a sustainable business. Approaching the right customers, either in role (engineering) or space (ecommerce) also make the road easier.  If you have any other tips on building a great martech business, feel free to leave them in the comments.

Currently listening to Slide by George Clanton.

The Life and Death of Product Marketing

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This is part two in likely a three part series on career paths. You can read about the analyst career path here.

As someone who majored in marketing in undergrad and has an MBA with a concentration in marketing, I receive a lot of career advice requests from up and coming marketers. My feedback is usually a wake up call and not very pleasant. Marketing, especially in a technology company, has been suffering a death from a thousand cuts for years now. There are a few reasons for this. As I blogged about before, marketing’s definition grew too broad for one area to be an effective owner. An area I haven’t talked about before is how many roles in marketing are largely a response to engineering constraints. And with computer science grads multiplying like rabbits years after year, those engineering constraints are starting to relax a bit. I’ll analyze some roles in particular who I think are the most affected by this over the next five to ten years. I’ll start with product marketing.

Product marketing has suffered from an identity crisis as long as I have known the term. Product marketing, when done correctly (which rarely happens), is usually in charge of three things:

  • Deciding a soon to be released product’s positioning and messaging
  • Launching the product and making sure users (in B2C) or customers and salespeople (in B2B) understand its value
  • Drive demand and usage of the product

What that means in practice is that with well oiled product marketing teams, they owned the relationship with the consumer or customer and the outlets for how to reach them. This meant they talked to customers one on one and ran surveys. They managed email outreach, press strategy, potentially even an ad budget.

As you look at these responsibilities, it gets easy to see how this definition falls apart in many companies. For one, many companies don’t launch that many new products or features each year. Teams now have copywriters that integrate with product teams to test messaging iteratively.

Launching a feature is about that feature’s journey for feature/product fit, which means it rolls out in small experiments instead of a big press push. A press push would only be justified if the feature is successful in its experiments. A feature launch’s importance is inversely correlated to the number of users it is intended to reach and only weakly correlated to market power, which is why product marketing has always been more effective at B2B companies, and large ones at that.

Product teams now are more likely to be staffed with user researchers who specialize in gleaning insights from users and customers, and may even dedicated quantitative researchers as well for survey design. Pinterest had both, for example. Even if these are not staffed, as product managers have shifted from executional roles to strategic ones over time, they frequently see understanding the user or customer as their responsibility. Designers on product teams frequently feel the same.

Lastly, when thinking about driving demand and usage, that again is something product teams should only care about once they know the feature is driving value. At that point, ever more prevalent growth teams in charge of overall product growth decide how to use growth of that feature as tool to overall product growth. These are cross-functional teams between design, product, analytics, and engineering, and only sometimes include marketers.

The jack of all trades design of the product marketer role is being attacked on all sides as teams determine how to more effectively reach their users or customers and build things they will use. I don’t see these trends as a failure of the product marketing function. In many ways, it’s the opposite. You should always be trying to obsolete your role in a company. All of these responsibilities product marketing owned now being prioritized or specialized in by other functions shows that organizations now understand the marketing of their own products is important and can’t be outsourced at the end of development.

That said, this transition does leave current product marketers in an untenuous position, and many have been asking me what they should do. I see three opportunities that are available for product marketers.

Option 1: Migrate into Product Management
Product marketers build relationships with product teams already. They should start to leverage this for opportunities to work on product management projects, not just to launch them, but to actually work with engineers and designers to build them. These projects are fairly easy to find as product managers are always strapped for time. Once a product marketer does a few projects successfully, I have found their migration to full-time product manager happen pretty seamlessly at multiple companies. Anecdotally, product marketers tend to become very successful product managers because they focus on understanding users and are great at framing the products they build for user value and having users understand that value.

Option 2: Migrate into User Research
Companies are always looking for more user researchers, and they are product managers’ and designers’ best friends. Product marketers already excel at talking to users. The migration here is more about the in between of product marketers focused historically. Instead of soliciting ideas and selling solutions, user researchers receive feedback on potential solutions in process or problems with the current product by watching current product use. There are dedicated programs where you can learn the tools of the trade for user research, and some companies are training people in user research internally because they are so short-staffed. Even if the latter is not available, approaching user research leaders and asking about opportunities to break into their team are usually welcome, and can start, like with product management, on some distinct projects before migrating full time.

Option 3: Move into Dedicated Brand Role
As companies grow larger, they build dedicated brand teams that tackle perception problems, spend ad dollars to use brand marketing to drive long term growth, and adjust company level positioning over time. Product marketers are used to driving positioning of individual features of products, and with that already have a good understanding of overall company positioning. This may or may not be an option depending on the specific needs of the company at the time. Usually, the larger the company, the more likely this opportunity exists.

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The future of the product marketing role is fraught with uncertainty. In B2B companies, the role is definitely better established and positioned for success, but I think it’s only a matter of time before those roles face the same challenges consumer product marketers face today around specialization and new team structures that gradually phase this role out. If you are in product marketing, don’t panic. Just think strategically about how to position yourself for one of the three above options to maintain career growth.

The Three Personas: How Marketing, Product, and Analytics Attempt to Define The Customer

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In my career, I’ve worked in marketing, product, and analytics. While the American Marketing Association defines all of that as marketing, the reality is those are rarely under the scope of one functional team, and the people in those groups see things very differently much of the time. One of the key ways this manifests that creates confusion for the organization is in the creation of personas. All three groups have their own ways to define personas that don’t tell the same story. And in many cases, these are called marketing personas even though they are very different. I’ll walk through each of them to try to define them separately, and talk about how to use each of them best and avoid common pitfalls.

The Analytics Persona
The analytics persona is the most straightforward of the group. The analytics persona is created by looking at clusters of users based on their usage and defining them based on that usage. At Pinterest, these were defined as core, casual, marginal, and dormant users. Core people came every day, casual people came every week, marginal people came every month, and dormant users had stopped coming to Pinterest altogether. This segmentation can be useful to see if your product is becoming more or less engaging over time. Key projects can include migrating people from, say, marginal to casual, by understanding the statistical differences between the two groups. Then, a product team might take something the casual group does that the marginal group does not and try to make the marginal group try to do that thing as well. Some of these differences are just correlation (or represent the people more so than the action itself being important), but some may be causal, and experiments like incentives or education to marginal users may help them become casual users.

The Product Persona
The product persona, just like the analytics persona, focuses on understanding existing users. In contrast to the the analytics persona, it relies on qualitative research to define who these people are, not just what actions they take. Someone that uses the product monthly can be the same persona as someone who uses it every day. When we built our personas at Grubhub, we had to use a mix of qualitative and quantitative research to define them. After a back of forth of customer calls and surveys, we were able to define four personas that used Grubhub based on two specific criteria: whether they ordered spontaneously or planned ahead of time, and whether they ordered for themselves or with others. When we mapped these personas back to our data, we were able to find that one segment was detrimental to serve because of high customer service costs, and that one segment was high potential, but low value currently because we had not built the right product for them yet. This helped inform our product strategy for the future.

The Marketing Persona
The marketing persona, unlike the first two personas, is usually a forward-looking persona: about who the company is going to try to reach. These are customers you want rather than customers you have. Marketing personas are common for product launches and market expansions since there are no existing users or data to build analytics or product personas.

The marketing persona exists to define a target market to go after. Marketers rarely try to target all people. They attempt to define a niche with specific needs (physical and emotional) and make their product attractive to that group. Marketers have many tools to define this persona. They pore over demographic and psychographic data and map competitive landscapes to spot opportunities for new markets. Since this persona is about targeting people outside the product, one common tool created during this process is a mapping of the target customer’s typical day. What they listen to on the radio on the trip to work, where they get their morning coffee, what they watch on TV during dinner, etc. From that, marketers identify opportunities to advertise to the target during one of those times to introduce them to the product.

Issues with Different Personas
All of these personas have pros and cons, and I recommend using them in tandem rather than a one size fits all approach. The danger with the analytics persona is it looks at people solely based on their activity and not also their motivations, their personalities, etc. There are key insights you will never find out from data that you can learn within ten minutes by talking to a customer. The product and the analytics personas also assume the current customers are the most important customers to understand. This is not always the case. Many times, you need to expand your market. Other times, focusing on existing users makes the product worse for incoming users.

Marketing personas also have their flaws. Since they are based on secondary data, marketers can sometimes invent personas that don’t exist or are too small to be important. This is why so many marketing teams create personas that are just cooler versions of themselves. It’s why whenever a fashion designer is asked who they design for, they say something like “a gallery owner in New York City.” They are maybe 500 of those people in the world. Now, I should be clear in that last scenario there is a blurred line between the marketing persona and the aspirations of the true persona, but you get the idea.

Marketing personas also can be unhelpful to some organic growth strategies or for products that have infinitely large markets since they are based on niches and targeting. When we tried to build marketing personas to target at Pinterest at around 50 million users, I asked, “What exactly are we going to do with this? We don’t spend money on advertising. Our targeting is defined by whoever searches for something on the internet that Pinterest is relevant for.” Similarly, does Google search have a target market? Sure, if you can call every single person with an internet connection a target. I bet you the Google Home team had a very specific target in mind for its launch though.

Personas of all types are also mistakenly used in lieu of personalization for many internet products. Email is a common example. Many companies still spend a lot of time creating dedicated emails for specific personas, segmenting lists, writing custom copy, and adding custom content. This frequently doesn’t makes sense in a world of personalization and one to one messaging. Pinterest has automated, personalized one to one messaging across email and push to over 200 million users. It doesn’t need to know what analytics, product, or marketing persona you are to be effective. This is not proprietary tech either. Many third party companies can help build this same type of system for smaller companies with less data.

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Personas are very useful tools to help you identify opportunities to grow your business and better serve your customers. You should be using them in almost all phases of a company. Understanding the different types of personas, how you could use them, and how to prevent making mistakes with them is key to making sure they are worth the effort to define them.

Currently listening to Big Loada by Squarepusher.

The Death Spiral of Startup CMOs

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I’ve met with a lot of CMO/VP Marketing types at startups. Generally speaking, they do not have a long shelf life. I was curious why so many startup CMOs leave the company after a short period of time, so I dug in a bit to figure out why. I found that it’s partially due to bad hiring practices for startup executives (which I have previously blogged about), but even more common was that big brand traditional marketers have a tough time “scaling down” into the scrappy, digital-first world of startups tactically.

The traditional marketing executive is more likely to be a brand marketer from a large company than an online marketing or growth person from a startup. These marketers have built careers deploying big budgets and leveraging a few channels that really matter to tell the brand story. The main one of course is still TV. TV is great for brand building, but startups cannot wait for multiple years of investment in brand advertising to start to pay off. They typically will run out of cash before they start seeing a return on the investment in TV. (This problem is particularly acute if you’re a startup that is live only in a few cities and gradually expanding across the country — i.e. most marketplaces.)

How does a marketing executive get a quicker read on effectiveness, especially if their startup doesn’t cover the entire country? One way I’ve seen marketers try to solve this problem quickly is to buy local TV brand advertising in a test market and compare to a control test market where they have not bought TV advertising. They measure if brand metrics improve in the paid market during a three month test. If brand metrics improve, it should be leading indicators for sales to improve.

On paper, this makes sense, but in practice, it is the first trigger of the CMO death spiral. The problem is twofold. First, the cost of local TV is 10x more expensive than national advertising. That premium is hard to make up. Second, TV brand advertising is generally not very effective and even harder to drive quick results. With a typical brand-based buy, ads will run at many different times during many different, popular shows. So even though many people will be watching and thus exposed to the brand, the viewers’ focus is on the show and not on a call to action.

In short, big brand marketing executives have used large budgets for a test and gained small bits of exposure for the company. That exposure usually doesn’t transit into brand lift or sales, and the founders quickly lose confidence in the CMO. From there, I’ve seen it is a matter of months before they either get fired or lose their budget, which will make them leave.

But its not all fire and brimstone! There are savvy ways for marketers with big brand backgrounds to be successful at startups. For one thing, start by testing national, direct response TV. This type of ad buy targets people who are watching TV because they are bored — not because they are super engaged with the show. In this scenario, ads run at off-peak times or on less popular networks and only cover a small percentage of the country. You get the data on the exact times and areas where the ads run. Then, you can watch for an immediate response in website/app traffic right after the ad, and track those users to see what they end up doing. Agencies that sell direct response typically offer data science services to measure the impact, and you can augment their reports with tools like Convertro or C3 Metrics that do it.

Grubhub and Seamless are both good on-demand startup case studies before they merged: Seamless bought national, direct response TV ads while the service only covered 20% of the U.S. population. Grubhub did it with only 40% coverage. Seamless then used all the website traffic data outside their coverage areas to determine where to launch next. At Grubhub, we saw a response immediately during some of these ads airing, and could actually calculate not just brand lift surveys, but CPAs due to transactions.

A broader lesson here is that traditional target marketing can be expensive as the people selling advertising have learned that traditional marketers will pay a premium for it. And while that math still works for a CMO of a CPG brand, it won’t typically work for a startup.

What is the the best way for a CMO to be successful and stick with your company for the long term? First, they need to find ways to reach the target market they want to reach in a cost effective way. (I go deeper into this topic on my post on remnant inventory.) Seamless reached an insane amount of people in New York with DRTV ads, so it didn’t matter that some people in Boise saw them, too. Secondly, CMOs need to work on other ways to add value to the business besides telling big brand stories. Depending on the business, that can include understanding customers better, building communities, performance marketing, or product driven growth.

Currently listening to Children of Alice by Children of Alice.

The Real Value of PR for Startups

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Many startups get obsessed with press. Not just CEOs, but also employees, friends of employees, and investors. Press, like paid acquisition, can be a drug though. I’ll talk about some of the ways the startup ecosystem perceives press is bad, what it is actually good for, and some outliers.

Press Abuse
First, let’s talk about some of the abuse of press by startups in the past. Business insider has a great recap of some of the issues Evernote faced in the couple years before their CEO stepped down. I’ll highlight this quote in particular.

“There was a feeling that we were working on the wrong priorities,” a former employee said. “It was clear the motive was to just continually drum up press. They had no idea how to optimize and improve growth.”

From The inside story of how $1 billion Evernote went from Silicon Valley darling to deep trouble

Startups frequently correlate press with growth, and think that they need to create new stories to drive growth. Then they start changing their entire product roadmap to drive press instead of value to customers. Startups should not look for PR to drive growth. PR doesn’t usually drive growth. And when it does, it’s a bump, not an engine. In startups, you want to build growth engines.

This is arguably a better problem than the second way PR drives bad acting in the ecosystem: founders getting addicted to the attention of press. It feels great when there’s a picture of you in the Wall Street Journal and your mom sees it and your dad’s friends. And founders frequently want to create that feeling. It’s as if appearing successful is more important than being successful. This can be a dangerous pattern.

Another problem with press is that it helps competitors understand exactly what you’re doing. I’ve talked in the past of the advantage of being a silent killer and why seeking press attracts unneeded competitor attention. I won’t repeat that here.

What Press Is Good For
A common refrain I tell startups is that press is good for three things: investor interest, employee interest, and links for SEO. I’ll break those down a bit, and talk about why they matter. First, let’s talk about investors. Very few businesses make sense for venture capital, but when they do, they increasingly need larger amounts of it. The venture business has extreme cases of FOMO. One deal can make all the difference. So investors rely on a lot of signals, and the tech press is one important one they look at not only to find new business to research, but to also get comfort in their interest in certain businesses. When Grubhub was raising its Series C from Benchmark, we got written up about our iPhone app on Techcrunch. For Grubhub’s growth, it didn’t matter at all. But it looked great for our fundraising.

Likewise with investors, potential employees rely on press to hear about potential new places of employment and to feel comfortable they are making a good move. Recruiting outreach will have a lower conversion rate if the person has never heard of your company, or if the person’s network hasn’t heard of you when they ask around. This can be overcome, especially if you’re well connected or can tout amazing metrics privately (like WhatsApp), but my guess is WhatsApp always had a harder time recruiting than Snapchat.

Lastly, press is very helpful for SEO. SEO is about relevance and authority, and links from press are a great way to increase authority in the eyes of search engines. Not only can press drive a quantity of links, but the quality of links are probably the highest most startups will receive. So many people link to news publications that they have among the highest domain authority on the internet. Now, getting one of these links won’t make you rank #1, but it’s part of a healthy SEO strategy.

When Can Press Be an Engine of Growth?
Now that I’ve set an argument that press doesn’t usually drive growth directly, I want to talk about some outliers of when it does. Press can drive growth if a certain story about your startup is self-perpetuating. Then, the volume of articles written about you happens in such a regular cadence that readers eventually act on it. I have seen this happen in two major startups over the last ten years in Twitter and Uber. With Twitter, it received such a tremendous uptake from journalists that they kept writing stories about it. This drove their readers to try it, and it became a sustained vehicle for organic acquisition (unfortunately with a low activation rate, but that isn’t press’s fault, but the product). Uber’s growth via press was a little more sculpted. They were able to create a story about the business of Uber fighting against corrupt incumbents and governments that were preventing a better product from succeeding. It was almost a movement. For years this created a headline about Uber almost every week as they faced this resistance in almost every city in which they launched.

I want to highlight that these are anomalies, and it’s unlikely you will be able to create sustained growth directly from press in your company. But that doesn’t mean press is worthless. Just remember what it’s good for, and make it work for you for those interests.

Entering Marketing at a Startup

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With software eating the world, many marketers are deciding to enter startup organizations for the first time. CEOs, being told they need a brand, or to spend on paid acquisition or insert X marketing activity here, are trying to find marketing talent in a industry that has a dearth of it, so they’re happy to accept people from other industries or larger technology companies. Sounds like a win-win, right? Not exactly. The culture shock as a marketer from switching to a startup from almost any other type of company is hard to over-estimate. The switch chews up and spits out as many, if not more, people than it accepts. I’ll talk a bit why that happens and what marketers can do about it to be more successful.

The first thing you need to accept is that marketing is not understood as a function at most startups, and therefore it is not respected. These are organizations that have gotten to where they are without marketing, have probably never read a definition of marketing, and whose connotation of marketing is the seediest of snake oil sellers you can imagine. Starting from a position of distrust in a new position in a new company is never a fantastic option, but it’s where almost all startup marketers start. And they are not prepared for it. I remember a meeting my first week at GrubHub where one of the co-founders suggested firing me (referring to me in the third person even though I was there) to the other co-founder and just growing organically. The following week, I proposed doing email marketing to retain users after their first purchase and was met with a flat out “no, that’s not a good use of time.”

No one tells you to expect these types of barriers before you join, and many marketers never get past it. Marketer’s first instinct typically is to rely on the best practices argument. “But, every other company does this.” I can say from myself and watching several other marketers try it that it’s pretty much a worthless argument. If it’s a best practice in marketing, but your company thinks marketing is bullshit, then your argument doesn’t hold water. So, if best practices won’t work, you need to find arguments that will.

In the past, I’ve recommended AB testing with people, and I still do. In this scenario, there is one strategy that is almost guaranteed to work, and that is relying on data. Entrepreneurs live and die by metrics, and with most startups being founded by engineers, they trust data above all else. So, marketers first need to think about how they can generate data on their activities. AB testing is generally the best way, even if it’s pretty crude. The other is to write out a clear strategy. If something is a best practice, it’s because it’s logical. Breaking down the logic in detail can be the right way to help those not familiar with your craft why something is the right course of action. I prefer to write clear “because A causes B, and B causes C, and we want C, we should do A” type papers, but feel free to adopt your own style. In the email marketing example, I started sending emails manually and built the campaign up to drive thousands of orders before I proposed a technical solution again. It was much clearer the value then, and the project was accepted. In the Pinterest case, one of our marketers just started sending emails without telling people, and it’s now a significant re-engagement channel for us.

One caveat: don’t manipulate data for your own gain. This is a mistake I see many marketers make. In the absence of data, you need to work to generate reliable data, not appropriate available data to try to explain your impact in a way that is forced. For example, when you see a lift in metrics, I’ve seen many marketers jump in to grab credit e.g. “That’s because of our Mother’s Day campaign on Facebook!” when the campaign was only seen by a couple hundred people and only had a dozen likes. This further deteriorates credibility, as startup employees see through it. Only claim credit when you’re confident and have the data to back up your claim.

Currently listening to 6613 by DJ Rashad.

How to Build a Marketing Team at a Consumer Technology Company

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I receive many questions about how to build marketing at technology organizations. New entrepreneurs hear terms like growth, user acquisition, and positioning, and don’t know where to start. This should be a handy guide on how marketing looks for a healthy technology organization and why. To start, I’ll re-iterate the definition and explanation of the definition of marketing from my The Incredible Unbundling of Marketing post to understand how we cover everything that is traditionally considered a marketing activity.

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
Source.

Since that’s a mouthful, marketers tend to shorthand with a series of P’s (four to seven depending on who you ask). For products, those are product (the creating part of the definition), price (the exchanging part of the definition), promotion (the communicating part of the definition), place (the delivering part of the definition), positioning (the value part of the definition), people (the people who do the activity), and packaging (another part of the communicating piece of the definition). For services, those are product, price, promotion, place, people, process, and physical evidence.

At technology companies, the product piece is typically carved out as a separate team, and various approaches exist for carving up the rest of the P’s. The most typical is to have a CMO in charge of marketing, and two VP’s that split two types of marketing that tend to require different skills (change that to VP’s and directors if you like).

Brand Marketing
Brand marketing typically includes the strategic and soft skills of marketing. These include the positioning, the target market, packaging, and physical evidence. Positioning primarily transitions to what the brand represents for its target, which is why the group is traditionally called Brand Marketing. They also tend to include the promotional elements that are less quantifiable: PR, content, social, community management, events, campaign building, etc. To be successful in positioning and identifying target markets, market research tends to be in this group.

Growth Marketing
Also known as performance, internet, digital, or online marketing due to its heavy reliance on those areas (sometimes also acquisition and retention marketing), growth marketing typically includes price, process and the parts of promotion that are quantifiable. These include SEO, email marketing, loyalty programs, landing pages, paid acquisition in almost all forms (not just online), referral programs, direct mail, and analytics about marketing and product performance.

How does Growth Marketing work with Brand Marketing?
These two organizations need to work hand in hand, Brand marketing determines who the product is for, and Growth Marketing is primarily responsible for getting people to start and to continue using the product. Growth Marketing determines the best ways to find the target market and reach them, and they work with Brand Marketing to receive appropriate creative that reflects the positioning. Growth Marketing should see branding as increasing the conversion rate on all of their activities. Brand Marketing should see Growth Marketing as the distribution engine for their message.

What about the product?
As we saw in the marketing definition above, product is one of the key P’s that does not seem to be owned by marketing. Also, what is typical in many technology companies is that some of the best opportunities to get people to start using the product come from the product itself (SEO, virality, and landing pages are the main ones), and marketers typically lack the authority as well as the technical skills to make these changes. Product and engineering organizations own these areas. So, what has become common is creating cross-functional teams where growth marketers, engineers, and product managers work together to help growth the product. Depending on which distribution methods work best for the product, the product manager and growth marketer can be indistinguishable or the same role.

Early on in a technology company, there is so much opportunity with product driven growth, that just product managers and engineers work on growth marketing. Growth Marketing tends to emerge as product managers become too busy with core product features, when expertise becomes more of a necessity, and when channels that are less product driven (paid acquisition, email,etc.) become more important. Paid acquisition is usually only tried once a lifetime value can be established, so that growth marketers can be sure to spend significantly less than that to acquire a customer.

How should the Growth cross-functional team work with Growth Marketing?
Growth Marketing needs to become a key stakeholder in the cross-functional growth team in key areas. I have spoken of cross-functional teams before, and the key elements. As we grow, we need to expand a three to four person group to include a growth marketing lead. Not every sub team needs a lead to start. You should never hire to fill org charts, only to add additional value. It should only be where they add value, and the cross-functional team adds value to them. In many of these areas, the product manager is also the growth marketing expert in the area, so the position would be redundant. The first area where Growth Marketing should fit typically would be on paid acquisition or email marketing, depending on the company. This person would get support from the team on the infrastructure to make paid acquisition or email successful (tracking, landing pages, etc.), and this person would bring in knowledge on success from these channels that can be applied to organic channels.

How does Brand Marketing work with a Core Product team?
Brand Marketing should be an early voice in the core product development process helping to mold who the new products is for and how it is positioned. Once development is kicked off, typically the Product Marketer becomes a project manager designed to maximize launch impact of the feature and ongoing adoption, coordinating between the rest of the Brand Marketing team (PR, social, content, events, campaigns,etc.) and the Core Product team. It’s important a Product Marketer has short and long term metrics for adoption.

What does the org chart look like typically?

The Startup Marketing Funnel

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Quite a few startups have asked me how to approach their marketing plan. They hear that it’s important to do specific things, but that list eventually grows long, and they don’t have a plan of attack or a prioritization. While my post on three phases of startup marketing helps, it doesn’t go into enough detail on the framework behind that prioritization, and what to do with a new idea not represented there. Well, the good news is there is a framework you can apply to evaluate a list of ideas and prioritize them, and it’s not too different from the traditional marketing world. It just may be a bit inverted.

You may have seen a marketing funnel like this before (everyone calls the stages different things, but it’s generally something like this):

Startup marketing is a bit different. Instead of products being driven top down as in the above diagram, startups have to work bottom up due to budgets and what will be effective. Also, startups need to focus more on the inverted funnel post-use not seen in the above. So, your startup marketing funnel looks like this:

Now, instead of working top down here, startups need to work inside out. You work on the on site experience to make sure the few users who come convert and have a great experience. Then, you get them to come back and have another great experience. Once they are hooked, you ask them to invite friends. At this time, you also target those who came and didn’t convert. Then, you target those with a need for your product that haven’t tried. Then, you can define your core audience well from those using the product and do core audience targeting to find more like them. After saturating all of those methods, you finally work on general awareness.

Now, how does that translate to tactics. Well, let’s have a look:

Making sure people convert is all about conversion rate optimization. Email and push can help trials turn into repeat purchases, but the big winner there is an engaging product experience or a community. To get those who checked the product out but didn’t convert, you use use retargeting. To find others in need of the product, you focus on search (paid or organic). To find more people like your current audience, you can use Facebook lookalike targeting or interest targeting (thousands of other options here as well, of course). to pursue general awareness, that’s typically when you work on larger spend initiatives like TV, radio, outdoor, and sometimes PR.

Follow this funnel, focusing on each step until it saturates, and you can be sure you’re always working on the most effective and impactful projects to grow your business. Conversion, product, and community never tend to saturate, so you’ll almost always have dedicated people working on that even as you move further up the funnel.

Currently listening to Sonnet by Benoît Pioulard.

Loyalty Marketing Part II: Making a Program and Keeping It Successful

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Read part 1 of of my series on loyalty marketing.

In my previous post on loyalty marketing, I talked about the different types of loyalty programs, and how to identify which type of program your company should pursue. Once that happens, do you slap up generic version of a program that tackles your needs and call it a day? Absolutely not. Now that you’ve identified a program type to target, you need to determine a version that your users will respond, that will fit your brand, is profitable over the long term, and is future proof. Let’s tackle user response first.

Understand Reasons Why
Your can’t expect your users to change their behavior until you understand why their behavior is the way it is. Let’s say most of your users use your product regularly, but not every time they have the problem you solve. In order to create a successful program, you need to figure out why they don’t use you the times they don’t. The only way to do that is to talk to them. Take random people in the segment you’re trying to change and arrange a phone call. Reward them for it. In 20 minutes, with targeted questions, you can learn all you need to know about the time they’re not using you. A standard question to learn this is “Tell me about the last time you did X and didn’t use us.” Keep doing these calls until you start hearing the same types of responses over and over. In my experience, things settle around four or five reasons. For loyal, but infrequent users, it works very much the same. Talk to users, but this time ask “Why don’t you use X for [new use case]?”

Understand the People Behind the Reasons, and Pick a Reason
These phone calls don’t give you any statistical representation around how popular these reasons are for the broader audience that isn’t using you every time. So, now that you have your reasons, you can survey the broader group, asking them, “When you do X and don’t use Y, which reason best describes why?” and make the answer multiple choice with the responses you received over the phone. With a good enough response, you can now stack rank the reasons why people aren’t loyal to you. Some may be product changes you need to make. Some may not be helped. But, more than likely, you can address most of them with an incentive. You can go further down the phone calls + survey rabbit hole until you have full personas of users. Knowing the reasons why users aren’t loyal and what types of users you have can make you say, “I want to target this reason for this persona.” The same philosophy applies to incentivizing use cases. Our survey question is the same question you ask over the phone, except now it’s multiple choice. The goal again is to be able to say “I want to target this use case for this persona.”

Testing the Program
Now, you’re ready to build a program. At this point, it’s mostly a creative exercise leveraging psychology. Invent a bunch of a programs that might incentive these users, narrow down the ones that are most likely to incentivize users and be profitable, and test. Email is a great way to test different programs because you don’t have to build much and can book keep manually to get enough data without users knowing it’s not a real thing. It is also not a bad idea to run your users through these program ideas over the phone or in person, but remember that what they say and what they’ll do may be very different. Still, talking to them can prevent some gotchas.

Once you have a program, you need to test in a live way. Depending on what type of program you build, you may be constricted. For example, Yummy Rummy at GrubHub was considered a sweepstakes, so we could not legally have a control group. A control group is always the best way to test. Sweepstakes laws are at the state level in the U.S., so if you have two states that perform very similarly, that may work. If you don’t, you need to measure pre and post data. Pre and post data is not ideal for a few reasons. The main one is that loyalty programs typically take time to change behavior, and if you turn them off, it will take time for behavior to change in reaction to that as well. You don’t want to be running the program for a over a year, and not be sure if your pre data is still relevant. What typically happens in these scenarios is that programs are pulsed, like the McDonald’s Monopoly game being available for a limited time yearly. There is too much money being spent on a loyalty program typically to not know for sure if it is working or not.

Long Term Success
One other dirty little secret about loyalty programs is that they tend to ebb in effectiveness over time. Humans are motivated by variable rewards, and if your program is static, your users may become used to it, and it may not create long-term behavior change. That is why I recommend creating a variable program. At GrubHub, we made Yummy Rummy available every three orders instead of every order, and the reward could be anything from a free drink to free food for a year. Furthermore, if you lost, you got a consolation prize that was something random from the internet. But, I don’t think that is even enough. You should strive to think of your program as constantly evolving to stay interesting to your users. This will make your program stay effective for longer as well as give you the flexibility to tweak elements to make it more interesting to you as the business. I have seen many companies stuck with a program they no longer think is effective, but too afraid to shelve it because of potential user backlash.

The other advantage of creating a living, evolving program is that, if the original incarnation is effective, you can change it to move users further up your user lifecycle. For example, let’s say you’re trying to incentivize platform use in your original incarnation of your program. You might be very successful at that, and then find an opportunity to take those same users and get them to use the platform more by incentivizing use cases. Now, you can do that by evolving the same program instead of starting from scratch. Or, you might have taken loyal users and gotten them to use you for more use cases. Now, you can adapt that same program to build a moat around them. This all boils down to what a holistic loyalty program should look like in three steps for most internet businesses:
1) Build loyal users in one use case
2) Increase frequency by incentivizing use cases
3) Build moat around those users

This happens to be how most marketplaces or social networks grow into behemoths. They nail an initial use case, build a loyal user base for that, gradually expand use cases, and then work to keep those users locked into their platform.

Loyalty Marketing Part I: Strategies and Segments

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There seems to be a lot of confusion about loyalty marketing and how loyalty programs work. To an outside consumer, I guess the confusion is understandable. Most loyalty programs are branded as a value to the customer, a reward for their dedication. Most loyalty programs’ primary goals are not to add more value to consumers (though when they’re done well they do that too); their goal is to create more value for the company. I’ll break down how to think about loyalty if you are a business that is wondering if a loyalty program makes sense for you.

The first thing to understand is that every business has a loyalty problem; it just might not be the loyalty problem they’re expecting. To make this clearer, I’ll split consumers into four areas. Depending on where most of your company’s consumers fit is where you’ll spend your effort in thinking of a loyalty programs. The first thing to do is split all of your consumers into loyal and non-loyal and frequent and non-frequent. Loyal is defined by doesn’t use a close competitor as well as you for what your product/service does. Frequency is a bit more nuanced. Your product/service should have a target frequency you’re setting. For Pinterest, that might be daily. For GrubHub, that might be once or twice a week. You then can build a 2×2 matrix like the one below.

Each of these four buckets requires a loyalty program targeting different actions by consumers. Just to be absolutely clear, let’s go through that exercise for each segment.

Frequent, Loyal
Action: Keep consumers doing what they’re currently doing

Frequent, Non-Loyal
Action: Get consumers to migrate usage of competitors to you

Infrequent, Loyal
Action: Get consumers to use product/service more

Infrequent, Non-Loyal
Action: Determine if product issue can increase frequency. If not, ignore.

Now, we should talk about these strategies in a bit more detail. I’ll skip infrequent, non-loyal since it’s a combination of two other strategies, and probably implies a product or market problem.

Infrequent, Loyal Strategy: Incentivize Use Cases
In this segment, consumers use your product loyally, but not enough to your liking. This implies that there are not enough use cases for your product in the eyes of the consumer. That could be because these use cases do not exist, or because the consumer doesn’t perceive them to be relevant. If the use cases do not exist in your product/service, you need to build them into your product. Take, for example, Homejoy expanding into all sorts of home services after starting with house cleaning. If the use cases do exist in your product/service, but consumers aren’t using them, you need to invest in awareness or incentivizing a trial of them. For Pinterest, this might be upselling someone who uses the service for recipes to try planning a vacation with the service, or a web Pinner to try the mobile app. For GrubHub, this might be giving a discount for a pizza orderer to order sushi, or a web orderer to try their first mobile order, or a delivery user to try their first pickup order.

These opportunities might not exist or be worth the effort. When I worked at Apartments.com, we knew people would only look for apartments once a year or less. There was not much we could do influence that. What we could do was stretch our product to be useful for not just the apartment search, but also services you need once you find an apartment e.g. moving. Beyond that, there wasn’t much opportunity we could tackle, meaning we’d probably have to spend money to acquire those same users whenever they looked for an apartment again.

Frequent, Non-Loyal Strategy: Incentivize Platform Use
In this segment, consumers are very active, but don’t always use your product/service over a competitor. This is the most common type of loyalty segment because it’s easy to understand the upside. You can typically measure how much activity occurs off your platform. Here, you need to invest in an incentive to move those uses onto your platform. This typically takes the form or rewards points or punch cards.

Frequent, Loyal Strategy: Build Moat
In this segment, consumer are very active and don’t use anyone else for your product/service. These are your best customers. So, a loyalty strategy shifts from trying to increase how often someone use the platform to doing all you can to make sure these consumers don’t decrease their use of your platform or are wooed away by a competitor. This is by definition a money losing strategy to decrease risk instead of a money making strategy in the first two segments. Moat strategies can take many different forms and are frequently misunderstood. Some start out looking like the same strategy as frequent, non-loyal. One common one is to increase switching costs. One example of that is Facebook shutting off friend access to competing apps.

Many other moat building strategies get much more creative. They rely on looking at every possible risk to your consumers doing less of what they’re doing today and trying to address it. One of the most ambitious is Google’s launch of Android. Google makes most of its money from web advertising. They saw consumer attention shifting from an open, web platform they increasingly controlled via their browser Chrome to closed platforms on mobile owned by competitors Microsoft and Apple. So, they acquired and put hundreds of millions of dollars behind their own, open operating system in Android, which they charge no money for, but powers most smartphones all over the world. This is all so they could continue to control how people searched and saw ads in a mobile world.

So, we can go back to that 2×2 with our strategies now.

Now that you understand the segments and their corresponding strategies, you need to identify where the opportunity is for your product or service. The easiest way to do that is to run a survey to determine loyalty, and mine your user data for frequency. Then, see where the highest percentage of your users are.

This post covered how to identify which segment to focus on and the appropriate strategy to pursue. My next post will talk about making that strategy and implementation successful.

Read part 2 of of my series on loyalty marketing.