As Newton taught us: For every action, there is an equal and opposite reaction. A pendulum is a good way to illustrate this phenomenon. The higher you lift the pendulum in any one direction, the more powerful it will swing in the opposite direction. We can see this at play in many aspects of life. Human nature tends to look for ways to counter the past, often taking the form of a severe over-correction. Think about the cliche of choosing a new partner who is the opposite of your ex, or the voters that went from Obama to Trump in 2016.
I’ve also seen this play out in the world of marketing, particularly in early stage companies. In particular, I see the pendulum starting to swing from a maniacal focus on hyper-growth marketing back to a concentration on brand-centric marketing.
During the 2010-2017 (ish) time period, there was a pervasive growth-at-all-cost mindset for early stage start-ups. Grow, grow, grow. Spend, spend, spend. We’ll figure out the details - meaning how we get to profitability - after we scale. Where did this mindset come from? VCs pushing for hockey-stick growth? The Lean Startup mentality of scaling before profitability? The media’s breathless obsession with companies that achieved unprecedented growth? The answer: a smattering of all of the above. After much attention on the risks of a grow-at-all-costs approach, including a spotlight on the troubling unit economics of many businesses, brands have since shifted their attention to brand marketing tactics. My hope is that brands figure out how to approach brand marketing strategies without the maniacal focus they had on growth marketing.
Before we go much further, it’s probably helpful to define these two approaches - growth marketing and brand marketing.
Growth marketing: A data-driven and experimentation-oriented approach focused on driving customer acquisition and optimizing conversion. Growth marketing often leverages paid channels (i.e., Instagram, Facebook, Google, etc.) that are easily testable and measurable.
Brand marketing: A customer-centric and awareness-building approach focused on building a lasting relationship with the customer. Brand marketing tactics often leverage organic acquisition (i.e., press, community building, storytelling, owned content, etc.) and are typically difficult to measure and quantify impact.
In short, brand marketing prioritizes building the relationship between the customer and the brand, while growth marketing prioritizes increasing the number of customers.
The Perils of the Pendulum Swing
What’s become evident over the course of the past few years is that a balanced focus on both brand and growth marketing is necessary to ensure a company’s long-term success. There are real perils to dramatic swings between the two approaches or an exclusive focus on any one marketing approach.
The Peril: Growth before product-market fit
There is a risk when a company focuses on growth prior to finding product-market fit. In these instances, brands spend money to acquire customers that may trial the product but don’t stick around (because they aren’t finding lasting value in it). This often results in unsustainable unit economics and ultimately unsustainable business models.
The Fix:
Prior to achieving product-market fit, a more sustainable approach is to allocate a modest monthly budget (<$5k) to acquire customers if they are not yet coming organically. Paying to drive these customers to the website or app helps you test if there’s a need, demand, or desire for your product. A crisp definition of product-market fit is hard to come by, but there are indicators: Selling becomes easier, current customers become advocates, and customers find real value in your product. Once you reach product-market fit, it’s time to ramp marketing spend.
The Peril: Searching for an elusive magic bullet
With a singular growth marketing strategy, there is a real risk to being too myopic and focused on finding the “one thing” that will drive growth - a magic bullet of sorts. As discussed in our previous growth post, saturation tends to happen when brands take this approach. As brands find success in a given channel (i.e., Facebook), then other brands rush in. As a result, consumers are bombarded with more and more ads in their feeds. With this inundation, consumers became increasingly desensitized to this type of marketing. Click-through rates go down; cost-per-acquisition numbers go up. And it soon becomes evident that doing what every other brand is doing won’t necessarily be a successful strategy for all brands.
The Fix:
A more sustainable approach is to discover the marketing mix, leveraging various marketing channels, that is right for your company and its unique position, branding, customer base, and objectives. It’s important to consider potential barriers to adoption of your product as well. For example, at TaskRabbit, we knew that a lack of trust and credibility could be an issue when customers considered inviting a stranger into their homes. Given this, we focused our marketing mix on PR and word of mouth. We knew that having objective third parties reinforce that we conducted background checks and were safe would be more impactful than running Facebook ads touting the same thing.
The Peril: Ignoring the customer
With a singular growth marketing mindset, some companies miss the opportunity to truly understand and connect with their customer - what they need, where they are, and how best to engage with them. Brands in hyper-growth mode tend to view customers as data points, instead of humans. They’re focused on driving users, not engagement and loyalty. As a result, many of these users are one-time logins or purchases rather than loyal users who stick around.
The Fix:
A more sustainable approach is to stay super close to the early customers. Prioritizing candid, open conversations with target customers to fully understand their problems and needs, and how your product or service can solve them, will ensure that the team develops a real affinity, empathy, and understanding of the customer. Ingrain this into your culture - early and often - to ensure that your growth is sticky.
The Peril: Forsaking culture
In times of hyper-growth, it’s not uncommon to see companies lose sight of culture - both its definition and maturation. With hyper-growth, headcount often scales before a fully cemented and scalable culture exists. As a result, a lack of attention on culture can lead to employee churn, low morale, etc - factors that could ultimately break a company.
The Fix:
Establishing the company’s ethos - its vision and key values - early in a company’s lifecycle will ensure that there are guiding principles that serve to rally and inspire the team. Having these principles cemented will provide the guardrails as difficult decisions arise during periods of significant growth. Folding elements of the brand into company building can strengthen a culture. The stories you tell about what you’re building and why, the customers you're serving and the role you're playing in their lives, and the kind of company you are can become reality as a company grows.
The Peril: Hard to measure
While growth marketing tunnel vision can often lead us to only focus on what can be measured, brand marketing brings the opposite problem. Given that brand marketing tactics are often executed offline - think billboards, TV, subway ads, press, events, etc. - they are often more difficult to measure. Compared to the straight-forward methods available to measure the effectiveness of digital ads, brand campaigns don’t come with easy numbers to read. Resist the peril of not measuring anything at all.
The Fix:
Instead of eschewing tactics that can’t easily be measured, a more balanced approach is to measure what you can and accept that some tactics require more qualitative research. One recommendation (in addition to monitoring all the traffic to custom URLs associated with individual brand campaigns) is to measure the lift for a period prior to running the offline campaign compared to the period during which you ran the offline campaign. You can also conduct a “how did you hear about us” survey once the campaign is complete to measure the effectiveness of the various tactics.
The Peril: Building loyalty takes time
Brand marketing is often not the best strategy to achieve hockey-stick growth. On the whole, brand marketing tactics take longer to impact growth on customer acquisition or key conversion metrics (i.e., purchase). The idea is to nurture a relationship with the person, gain their trust and confidence, and then have them convert to customer or purchaser.
The Fix:
A balanced approach requires you to manage expectations with your board and management team. Growth won’t come overnight but the growth that does come will be from engaged and committed users. Promoting a culture that tolerates methodical, systematic growth as the key to long-term success (not the antithesis of it) will help as well.
Pendulums will swing - in politics, in personal relationships, and in marketing. We live in a culture of extremes but your marketing strategy doesn’t have to be that way. With history providing some perspective, finding a balance will prove to be a more sustainable approach. In the case of marketing, marrying the two approaches we discussed so that there is a focus on both data-driven growth as well as a focus on engaging and building loyalty with customers will prove to be a more viable approach for early stage companies.
As always, I'm available to chat about innovative approaches to growth or anything marketing related. I can be reached at jamie@fuelcapital.com.