Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Sean Ellis, CEO at GrowthHackers, about hacking customer acquisition. Sean defines his coined term “growth hacker” and talks about some topics in his upcoming book that draws from experiences from past products/companies he’s worked on including Dropbox, Eventbrite, Lookout, LogMeIn, and Uproar.
Items mentioned in this episode:
Transcript
Mike: In this episode of Startups for the Rest of Us I’m going to be talking to Sean Ellis about hacking customer acquisition, this is Startups for the Rest of Us episode 337. Welcome to Startups for The Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your 1st product or you’re just thinking about it, I’m Mike.
Sean: And I’m Sean.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made. How are you doing this week Sean?
Sean: I’m doing great Mike, how are you doing?
Mike: Good, I haven’t talked to you in a while.
Sean: Yeah, it has been a while.
Mike: I think the last time we were in a room in person it was back in MycroConf in 2001, is that correct?
Sean: Yeah, I think that’s correct and when in Vegas you don’t really remember too many conversations that you have because there’s so much stuff going on.
Mike: Do you remember the hot sauce incident?
Sean: I don’t.
Mike: Oh okay, Sean’s hot sauce flew from the stage, okay we’ll skip over that. So, I wanted to have you on the show to talk about a
[00:01:00]
Mike: new book that you’re coming out with and it’s called Hacking Growth, which I think it comes out pretty soon. This episode goes life on the 25th and it’s right about that time, right?
Sean: That is the day that it comes out, perfect.
Mike: Yes, so fortuitous Tuesday I guess we’ll call that. So, to give the listeners an intro to you though, you were the Growth Marketing executive at DropBox, Eventbrite, Lookout, LogMeIn, Uproar and you were like 1 of the 1st people hired in a marketing capacity each of those companies, is that correct if I remember correctly?
Sean: That is correct, Eventbrite would be the only 1 where there was actually somebody already going marketing when I got there but all of the others it was primarily engineers and I came in and started thinking about how to grow those businesses.
Mike: Got it and then you were also the founder of Qualaroo which you sold off last year, if I remember correctly, right?
Sean: That’s right. Yeah, we sold that February, March of last year and ha d a good run for a few years but really wanted to focus our efforts on Growth Hackers.
Mike: And that’s where you’re the CEO at today, it’s Growth Hackers dot com, there’s a fairly large community there and then you
[00:02:00]
Mike: also, coined the term Growth Hacker back in 2010.
Sean: Yeah, that was for better for worse, some people love it and some people hate it but I guess the good news there is that very few people ignore it, it’s evoking emotion.
Mike Yes, it does and I have heard mixed feelings on that, so I guess straight from the source, how do you find Growth Hacker, like what does it mean to you and how do you explain it to people?
Sean: Yes, so for me it’s about rapid experimentation across all of the growth levers. So, it’s really those growth levers sit across the customer journey where to contrast that against just marketing, marketing is generally externally focused. So, it’s looking only at acquisition and marketing is about just anything that’s important for driving growth in the business, you’re experimenting in those areas and the fact is that most of the really powerful levers actually sit in the product team’s area and so that’s what I think 1 of the big things that differentiates compared to marketing.
Mike: So, if I understand that correctly, you’re really
[00:03:00]
Mike: looking at Growth Hacking as a mechanism for taking all of the things that you’re currently doing and optimizing them or making them better, is that a fair assessment versus something like marketing where you’re doing content emails, searching engine optimization and that kind of stuff, is that correct?
Sean: Yeah, well there is optimization is definitely an important part of Growth Hacking but discovery is also important, so it’s taking everything from discovering new channels which would normally fit into marketing, so that part is still I believe really important for growth and a Growth Hacker should be doing those things but you should also be experimenting with what is that 1st user experience in the product, what should that look like, how do you get them to a really valuable experience with the product, how do you drive continued engagement, what are your different monetization levers for driving revenue growth. So, it’s really looking about what are all of the different levers that you can pull to drive growth of both customers and revenue in the business.
Mike: Okay, so with that in mind what are some of the most common misconceptions that people have about
[00:04:00]
Mike: Growth Hacking?
Sean: I think probably the biggest 1 is just that there’s these magic silver bullet kind of growth hacks that you just go and pick a silver bullet of growth hackers, so that would be 1 or another would be that you kind of, it’s about trickery, it’s about coming up with ways to trick users to find up for products and sometimes it’s just described as really clever marketing. I think all of those really miss the mark. What I was going for when I coined the terms was, I was looking at Dropbox where I was getting all of these resumes in with people having a kind of traditional marketing backgrounds or even online marketing backgrounds and they were so focused on everything a marketer could do or should do and I knew from my own experience that there was a smaller set of things that really impacted growth and then there were a lot of things that were just ignored by marketers or marketers didn’t have the access to them, they just didn’t have the right sort of influence in the organization that are also really important, so I was really trying to carve out a description
[00:05:00]
Sean: of what is really important for driving growth in business based on my own experience and when I looked at companies like Facebook and LinkedIn that were also growing quickly, what were they doing differently and how can we kind of make a description of a role that is more aligned with what really matters for driving growth in a company.
Mike: So, it’s really about for those high value multipliers so to speak, right?
Sean: Right and you can chaste that where I had a lot of startup CEOs at the time that were reaching out to me and saying hey can you maybe come and help us get some awareness in our company and you know I think that’s kind of the 1 big misconception of a lot of people in the startup world that’s like oh if people only knew if we could just some awareness we’d be killing it but the average person sees 3,000 advertisements a day. Nobody with a little start up salary is going to be able to get any meaningful awareness off of just running a few advertisements and having people see them, you build growth
[00:06:00]
Sean: through experiences and through a return on investment where you’re actually tracking your ability to convert, generate revenue and that was another big part of it, was marketers were kind of thinking like the CEOS and CEOs who were hiring marketers were looking for those types of marketers and you know in both cases they were really disappointed with the results most of the time, so you had this really high turnover with startups among marketers who were trying to take a traditional marketing play book to growing a business, a startup and just not very effective.
Mike: So, is that the core audience for this book, is it people who are coming in from a marketing position or would it be useful to developer slash CEO or just at like an engineer inside the company?
Sean: So, I think the reality of how growth works, whether people want it to kind of cohort it this way or not, it’s the collection of kind of all of the things that people are doing in product, which includes the engineers, which includes sales people,
[00:07:00]
Sean: which includes marketers and really they should be obsessed around that kind of journey that the customer takes to becoming a valuable customer of the business and so everybody who participates in that growth or in that value creation process should be interested in this book and CEOs in particular should be interested because how do you coordinate those efforts across a group and we’ve really distilled that down to a process where you can effectively manage growth across the really powerful growth levers to expand customers and revenue in a business.
Mike: I did notice when looking through the book that you did have sections in there where it was really aimed at people who were trying to implement it and some of your comments around that were specifically that you really need to have that executive level or management buy in order to make this stuff happen. Talk a little bit about that because I’ve seen things in larger companies where to get anything done almost requires CEO approval but is that the same thing in smaller companies as well??
Sean: Well so yeah, the bigger the company gets
[00:08:00]
Sean: or the older a company gets the more set in their ways they are and they’re not going to be able to kind of break down some of those functional silos that are just kind of historically how companies have been built without the CEO really playing a big role in that and so I think that’s what’s prevented a lot of bigger companies really embracing growth hacking as an effective way to growing their business. It’s really powerful so I think overtime they will make the transition to more of a cross functional full customer journey and work all of the levers of growth but in the short term it’s really what holds it back is basically a lack of kind of buy in necessarily from the CEO and then there’s a lot of things that you can do once you have that to make it effective and that’s a lot of what we cover in the book.
Mike: So, I guess to start with the outline of the book, you’ve got it broken down into 2 parts, the 1st part is the method of implementing it so it’s more or less a process and it talks about building the growth teams, determining what your type of product is, whether it’s a must have product
[00:09:00]
Mike: or something else and identifying the different growth levers in the business and then it talks about testing it and then in the 2nd half of the book you refer to it as the growth hacking play book where you talk about hacking customer acquisition, activation, retention, monetization and then bringing all of that collectively together to help create a cycle. Could you talk just briefly about what you mean about having that cycle in place and how that all ties itself together?
Sean: Yeah, so what you see in really effective growth organizations and growth companies is that they end up really building a rhythm around growth where they understand sort of how growth works within the business, what are the key drivers of growth within the business and they manage those and continue to optimize them but as a team they’re constantly figuring out new ways to enhance growth, so it’s basically analyzing the situation, prioritizing all of these ideas that they can generate to improve that situation and then running those tests and through the tests they learn and so continuing
[00:10:00]
Sean: to just run this process that helps them learn new, more effective ways to drive growth in the business is ultimately the outcome that everyone should be shooting for and what we’ve gone through in the book is how to really get all of the pieces in place to where you can get into that really high testing tempo rhythm as a team that’s a common element that you see across all of the really fast growing companies.
Mike: So that’s really like a systemization of growth hacking, so that you put all of these different pieces in place and then you just repeat them as quickly as possible, right?
Sean: Exactly and you’re just accelerating that fly wheel of growth and that comes from a deep understating of how growth is working and through testing you’re just keep learning new, more effective way to drive growth and you also learn what doesn’t work through the testing because not everything is going to be successful when you’re testing it but every test that you run you get smarter about what it takes to grow your business.
Mike: Could you talk a little bit more about the types of things that fail and 1 of the things that I’ve heard from people or their criticizing of the whole
[00:11:00]
Mike: concept of growth hacking is that they’re like oh there is not silver bullet, you know you can’t just growth hack your way out of anything, it doesn’t work that way and I think to some extent the critics are right when you phrase it in that particular way but I also think it’s important to realize not everything is going to succeed or there’s going to be situations where you don’t have a clear understanding of whether something is even working, if it’s moving the needle for you. Can you talk briefly about those types of situations and how do you recognize those?
Sean: Well so the 1st part that we really cover in the book that’s a critical prerequisite for growth is making sure that you have value in the 1st place, so if growth hacking doesn’t work or if you get kind of fleeting spikes of growth and then it comes crashing down it’s usually because the finish line for the customer is not a worthy finish line and there’s no reason to sticking around and keep using the product and if you can’t retain users it’s very hard to grow a user base, you’re basically just replacing customers month after month and in a SaaS
[00:12:00]
Sean: business you really see the pain of that, other businesses it might be less clear. So that’s the starting point, it’s just making sure that you have a product that’s a must have for users and then once you understand that, it’s about breaking down that path that gets people to that spot of becoming a must have user and then figuring out ways to improve the journey from consideration all the way to saying gosh I can’t life without this product. So, when you talk about silver bullets and hacks along the way, we definitely are not recommending that, here’s 6 things to do that are going to work every single time. I think there are certain principles that help govern what’s going to work and what’s not going to work. So, like if you read [UNKNOWN] there is some really good kind of examples of just human behavior but the individual programs and experiments that you run, you don’t know if they’re going to work until you run them and so you need a really good process for prioritizing which ones you’re going to
[00:13:00]
Sean: run and be focused on the area of your growth engine that should have the most focus because you have the most opportunity for improvement.
Mike: That makes a lot of sense, so the thing that I really wanted to drill into with you on this episode was the idea of hacking customer acquisition and you and I talked before on the podcast about identifying something that our listeners are probably not going to hear in other places. So, in digging into the hacking customer acquisition, 1 of the examples you threw out was Dropbox, that was kind of the 1st example that I came across in that section and the commentary in there was that there were initial cost of acquisition was around 400 dollars but they were only making about 100 per user each year, so clearly, they need to find some other acquisition strategy to make that type of business work. Can you talk a little bit about that process of identifying what was going to work for them, because you were there very early on in the process for Dropbox, so it’s not as if you weren’t directly involved in this, it’s not as if it’s a historical look from an external source?
[00:14:00]
Mike: I mean you were right there.
Sean: Right and that’s one of the great things about the book is we do bring in a lot of examples from other companies and you know talking with other growth leaders but a lot of it is based on my own experience and what I’ve done specifically in these companies to drive growth and Dropbox in particular, what we wanted to do with Dropbox was kind of explore the edges of possibilities around different channels and so we did do some exploration in basically the Google ad words, kind of paid search marketing just to see what the economics look like there and we quickly saw that the economics were not good in that area but at the same time we saw that there were all of these other great opportunities for growing the business and the 1 that was working literally, so I started the week that Dropbox launched at Tech Crunch, kind of the equivalent of Tech Crunch Disrupt, I think it was Tech Crunch 50th at that time but they launched the product, they got some good momentum, they had a pretty good user base during the beta but this was when it 1st became available to
[00:15:00]
Sean: the public and what I saw was there was a lot of passion for the product in that early user base and so that was 1 of the 1st things we did, was how can we tap into that passion to grow the customers and really trying to just break down how is growth happening already and what 1 of the thing we did was we found that growth was coming through a number of channels, so like if somebody wanted to share a file inside Dropbox, that was pretty effective. Somebody would share a file, the person on the receiving end would click on a link to get the file and they would be able to lightly experience Dropbox, so there was a small flow of people coming in from there, there were people coming in from shared folders and then there was just a lot of natural word of mouth was well and so it really started with trying to understand what the motivations were behind those people, ultimately people who love the product and were sharing just through word of mouth about the product, trying to understand those people and then kind of connecting the dots. How do we
[00:16:00]
Sean: get someone who discovers through a file share to actually, eventually understand the 360 view of what Dropbox could do for them and then end up loving Dropbox. So a lot of it was documenting initially and then really capturing what was our data around each of those on boarding flows and then a lot of surveying I think I probably had feedback from you know hundreds of people every single day through different surveys I was running, just to figure out what were the motivations and ultimately perceptions that people had throughout their journey, depending on each of these paths and then that informed our ability to prioritize where should we experiment 1st to try and increase those flows. So not just increase people coming in through those flows but how those people actually convert and become those active users on the product.
Mike: So, what were some of the leading indicators that you used to determine that you wanted to hack the acquisition process versus like activation or
[00:17:00]
Mike: retention or monetization, because I mean you said you experimented with the acquisition through paid ads and clearly it wasn’t going to work but what was it that pointed you in the direction of acquisition versus those other channels?
Sean: So we really didn’t just focus on 1, we were optimizing across the full path but the starting point was just figuring out how are they discovering this product and depending on the path that they came in, understanding what were their motivations on that path and it just seemed like the good opportunity initially was what could we do to, so in a sense you actually could say that we were more focused on activation for those channels initially and then as we improved that activation, then we started to think how can we get people to share more files, how can we get people to do more folder sharing and ultimately we built in a incentivized referral program so that people even started to just do natural word of mouth more often but we built
[00:18:00]
Sean: kind of incentives across each of these paths that were already happening and that really helped to accelerate them.
Mike: So, you just talked about how you had done like a lot of surveys and you had hundreds of them coming in everyday that you were looking at and trying to parse through. What was it that you were trying to find with those surveys?
Sean: So 1st thing I’m generally trying to figure out is intent, so like intent is this really powerful force for a marketer to work with and marketers have their own agenda. They’re like love me for this, but the other person is like in strong momentum looking for something specifically and so it became really important to understand what that intent was and then we were also trying to figure out at which point did they realize that they wanted the product more, it was more than just wanting the file that somebody had shared with them, but they wanted the product for sharing files and so really trying to understand what that transition point was and kind of crowd sourcing it with people who were making that
[00:19:00]
Sean: discovery on their own and the more that we understood those people, that gave us a clear picture of what was happening. So, 1 of the things that we kind of experimented with early on was very quickly, depending on whatever their intent was, telling them about all of the benefits that they could get from Dropbox and when you think about it, like probably the biggest barrier to the adoptions of a technical product is complexity. That’s probably more of a barrier than even price and so just like giving them a list of all the things they could do with it was actually causing a lower conversion rate than when we really kept it focused around what their intent was and trying to convert their intent 1st and then ultimately give them more of a 360 degree view of the product once they were more locked on than what their initial intent was.
Mike: Is it something that you would generally recommend for most business, especially when they’re starting out because it seems like to me the place most people start out when they’re launching a new product is there focused on the features page
[00:20:00]
Mike: and everyone is like no, no, no you don’t want to do that, you want to pitch the benefits and of course from there’s it’s like okay well now instead of the benefits what is it that the people are actually trying to accomplish.
Sean: Yeah, so again it’s this idea of test, test, test, experiment, experiment, experiment. That’s what you see kind of through this whole process, so initially what I’m trying to do in a company is like kind of get out of my own head and just get enough people coming through the funnel so that I can try to figure out who is going to stumble in to what the product does that’s really valuable to them and get outside of those assumptions because I think it’s really hard to guess that ahead of time. You can have a bit of a vision as you build the product but a lot of the most successful products end up being valuable for unintended reasons, we definitely saw that at LogMeIn for example. So, the best benefit that I had with DropBox was through the beta, the team had done such a good job to build the flow of traffic coming in there that I didn’t have to focus on building the initial flow, I could right out of the gate
[00:21:00]
Sean: focus on understanding the flow. So the place where I actually start, like at the heart of things is I find that people who absolutely love the product, and I’m able to uncover that by just asking existing users on the product that are using it pretty regularly how they would feel if they couldn’t use the product anymore and I’m trying to hone in on the ones that they would say they would be very disappointed without the product and when they say that, that tells me like they’ve discovered something so valuable that they’re not going to churn and they’re telling me that they consider this a must have, if they would be very disappointed without it and so understanding that, that’s going to be the key to basically being able to build an overall benefit or promise of what the product will do for people that sets the expectation on what the product is truly great for and I think that’s 1 of the mistakes that a lot of marketers make, is that they initially kind of build that promise just on their own guy or own the founders vision
[00:22:00]
Sean: or whatever it might be but if it’s a promise that’s not aligned with what the product is truly great at delving it’s going to attract the wrong type of people who aren’t viscerally passionate about the product. So, start with understanding what that must have experience is, figure out the benefit that reflects that experience and then working externally to get hat into the message to set the right expectations goes a long way in just building a more passionate customer base and it starts to inform those customer acquisitions efforts as well.
Mike: So, when you’re trying to I guess hone in on what that compelling message is, is that the place where most people should be focusing their efforts early on?
Sean: So, it really depends, like I said I had the luxury at Dropbox of already having a decent flow of customers, so early on for most companies it’s that the initial efforts are how do I actually get any kind of flow of customers into the product and so that can be a really manual process. I wouldn’t obsess over ROI at that point, I think that’s another mistake that
[00:23:00]
Sean: people make in the very early days is they’re trying to tweak the economics of that customer acquisition, I would essentially say this is my learning budget originally and sometimes you don’t even have to spend anything at all, you can get more through just manually going out and recruiting users but it’s not about trying to find that big scalable challenge that’s going to pay, you know give you a great return on investment. Early on you’re just trying to convince some people to come in and experience the product or you can figure out if you have something that’s worth them sticking around on and then if you don’t you have to hit the reset button in the business and kind of go back to square 1 where you’re working on product market fit, but assuming that you do have that. Then what I would do from there is then to start to optimize that 1st user experience just enough so that by the time that you’re focused in trying to get the economics right in some channels that you don’t have something that it’s like it’s just
[00:24:00]
Sean: so, convoluted to get started with a product that you’re going in and you’re trying to do those ting with both hands tied behind your back and your odds are stacked against you. So, you want to get the basic kind of low handing fruit out of your on boarding funnel so that by the time you’re starting to do some channel testing where you’re actually trying to find that scalable way of trying to find customers it has a fighting chance of working.
Mike: Yeah and I think that’s sometimes pretty difficult to go through that process and realize how I spent all of this time building this product and working on it and it’s really not making any money and I would like to get to that point quickly and the solution is not necessarily a ton of traffic at it because if it’s not, when it converts everybody’s going to fall out and you’re just kind of spending a lot of money and a lot of effort for not good reason.
Sean: Right, so you go from this kind of period of when you’re trying to get product market fit, that’s a super patient process, so until you’ve created something that people care about, that’s where you just kind of blasting a little bit of traffic at it and those people don’t seem to care and
[00:25:00]
Sean: and then you’re sending more, you make some iterations, you send more but once you get that signal that it works, you do start to get some more urgency once you get the signal that somebody considers this product a must have, then you do have some urgency about pretty quickly trying to run some experiments through your funnel to figure out where it’s broken and so things like user testing dot com can be super valuable at this time of just giving someone a task of trying to come in and sign up and use your product for the 1st time and being able to watch videos of them coming in, super insightful. You can make a lot of really easy usability fixes there and then over time you want to start to AB test kind of different paths to go in there, but that requires a lot more traffic so some of it’s going to be more the usability testing to get those initial lists and then once you go out and you start to build traffic and you actually have volume coming into the funnel, that’s where it’s a little bit of a back and forth between the acquisition and activation, so if you’re really having a hard time with your acquisition
[00:26:00]
Sean: channels, maybe you need to work a bit more on the efficiency of your conversion and your funnel and then go back and then work the challenges again but it’s a little bit of back and forth but you usually at that point you’re back and forth between activation and acquisition.
Mike: So, if I were to ask you what sorts of examples of acquisition hacks that you’ve seen or that you’ve used before or that you found to be extremely helpful in the early stages of the business, like what sorts of things would fall into that category and I realize that these things are probably not going to be able to apply across the board to every type if business but I think there are probably some common ones that I think most people could start out with. So, let’s kind of break it down and say look okay if you’re just starting out what sorts of things would you try 1st?
Sean: So, the 1st question I would ask in any business is there active intent for this product? Do people know this category exists and they’re looking for solutions or am I doing something that’s really innovative that kind of nobody knows it exists? In that case, you’re not going to get any benefit from like going to
[00:27:00]
Sean: Google and starting to buy some search keywords for example just because no one even knows to search for it. So that would be the highest level, is just are there people looking for this type of solution or are they’re not? If there are, usually a good place to start is trying to kind of tap into that existing intent, if there’s not then you need to get into demand generation mode and it gets a little harder on the demand generation mode what’s, again, very category dependent as you were saying. It’s going to be different for companies but like in the marking technology space a lot of times a good place to start in that case, if a demand generation of people aren’t looking for it would be with constant marketing where you’re really writing your vision about how this enhances the life of a marketer or whatever it might be, but if there’s kind of some education where you have to set the context for your product then content marketing can be pretty effective but you can’t expect that you
[00:28:00]
Sean: can just write that content and people are going to stumble upon it so then you still need to market that content, so it’s this idea of you ultimately need to start to stack some of these things on top of each other, so probably the staying with the kind of frame work part that I was talking about initially. Initially you’re really trying to get that birds eye view on what types of channels might be useful for this business and there are so many choices that you need a pretty good process for figuring out where am I even going to start with this. 1 mistake that I do see with a lot of people is that they kind of try to test all of them and most of these channels are too hard to figure out if you’re just testing it like, oh I’m going to spend 15 minutes to try and figure out this channel and oh I’m going to run 1 ad in there but that didn’t work, I’ll move on. You really want to narrow it down to 1 or 2 that you really think will be effective, work that for a while, if it’s not then you have your back up channel and then your back up channel after that
[00:29:00]
Sean: you are kind of working across to, just ultimately your goal is to find 1 single source of customer acquisition that’s going to work for you and ultimately scale.
Mike: So, when you say work that for a while, kind of what is your mental benchmark for how long you should be spending on that or how much effort you should put in, because I think most of the people listening to this are probably not in a position where they can spend 40 hours a week on something. So, let’s say you’re spending 10 hours a week on it, like how long should you be running some of these experiments?
Sean: So, if it’s search, you can generally figure out if it’s going to work for you pretty quickly, if you feel like you’ve got a better mouse trap in a category where people are already searching or maybe not even a better mouse trap but just an additional mouse trap, if they’re searching for it then that means that they don’t necessarily a great solution and so like for example at LogMeIn, search was a great lever for us. So, we had a competitor go to my PC at the time that was spending hundreds of millions of dollars essentially promoting
[00:30:00]
Sean: their solution that was a pretty expensive solution and so we were able to basically draft off of that, spend that they had and we had a premium solution that was half of the price and then we actually even had a free version that could soak up some of that demand that they were creating that their high price wasn’t able to absorb. So, let’s say they had a 10 percent conversion rate to a purchase on their sign ups, that meant 90 percent of the people were interested in the category, they just the value proposition wasn’t strong enough and so there was a lot of search volume around remote access to your computer, you can control your computer from anywhere, so just being able to buy those keywords, we were able to get some good initial traction doing that. At Dropbox, it was a lot harder, like we did try to test some of the keywords as we talked about, like maybe well Dropbox is kind of like Backup but when we went and tried to buy the Backup keywords you’ve got these big enterprise backup solutions that we’re paying
[00:31:00]
Mike: a lot of money to generate a click and they had a high enough price point on their product where they could actually do that in a cost effective way. So, a premium Dropbox product just really couldn’t compete on those keywords. So that’s kind of that initial part is you just, I think in the case of search you can generally figure it out pretty quickly. Facebook is a channel that tends to work for a lot of companies, mostly because if you think of Facebook there’s like 1,000 or more targeting combinations that might work for your business. So, people in this city that are this age, that are this gender, that like this product, that generally if you test enough combinations you’re going to find something that works but even knowing how to test those combinations requires some familiarly with the platform itself, there’s a lot of kind of complexities and tricks within Facebook to really kind of make things work for you. So, your question
[00:32:00]
Sean: of they don’t have 40 hours to invest in figuring it out, then they’re going to be competing against people who do have 40 hours a week to figure it out, so that’s going to kind of be the trade off there.
Mike: Right but it sounds to me like your general strategy in those cases is just to drive enough traffic and enough eyeballs so that you can get the conversations going so that you can ask people questions and start honing in on that message and then from there, that’s like your optimization strategy is figuring out what the message to those people is, what will actually resonate and then that allows you to drive your cost of acquisition costs lower because you’re able to be more targeted.
Sean: Exactly, so you’re just looking for signals early on, my gosh for every dollar we spend on this channel in this pretty narrow targeting we’re generating 90 cents back on that dollar, like that’s pretty close. We haven’t done a lot of optimization of the landing page or maybe even the ad in there and you know if you see that kind of signal
[00:33:00]
Sean: that might be a channel to keep working, where gosh I’ve invested 150 dollars into this channel over here and we don’t have a single person who’s signed up for our product or even visited our website, like you could have such low signal at that point it doesn’t make sense to keep investing but that’s part of the balancing act that you’re playing is that if you don’t figure this out you’re going to fail. If you don’t figure out how to acquire, convert and monetize customers you’re going to fail and so it is a high stakes game that you’re playing in figuring these things out but you have to be pretty driven and experimental in getting the formula right.
Mike: So, when you’re experimenting the different things to try, how do you decide which ones to go after 1st, like what’s a prioritization strategy that people can use?
Sean: I think 1st thing you want to do is list out all the channels that you think could be potentially useful for you and we have a couple of good templates in the in the book for helping you
[00:34:00]
Sean: pick channels and prioritize them but basically the main thing that’s in the template that we have in there for this is essentially look at the channel across a number of criteria, so cost, targeting, control, so like is it something that you have to do weeks of advance, like looking at the control did you kind of weeks of advance and planning and once it started you can’t stop it or tweak it, that would be a low control channel. A high control channel would be something like Facebook or AdWords where you can hit the pause button, make a change, restart it, hit the pause button, you can do that over time. Similar to the control would be your input time, so if you wanted to test television it could take months to produce a television ad that you would have to put on the television, so that would be a really high input time where even if you were going to test a banner somewhere it’s still is a pretty high input time to design a banner that kind of that looks good enough that somebody might click on it versus if you’re going to do a Google ad, you can literally
[00:35:00]
Sean: write a Google ad in 5 minutes or even a Facebook ad that’s pretty easy to pick an image and build a Facebook ad in just a few minutes, so that would be a really low input time and that’s important. Then output time would be how long until I know that, that channel shows some promise. So how long does it take to start to read the potential of that channel and then the final criteria would be scale, so if this thing works is it something I can continue to invest in and scale a lot, like radio would be an example that if you can get radio working in 1 market, there’s a gazillion radio markets and there’s a gazillion radio stations and so you could really make that work effectively if you could get it working but you’re going to miss some of the control and maybe the targeting pieces that we talk about on these other criteria.
Mike: Won’t using these types of prioritizations kind of drive most people who are in similar places in their business into the same areas?
Sean: IF there’s an opportunity in those areas to generate a positive
[00:36:00]
Sean: return on investment, they’ll be fine. What I would weigh it towards is whether it’s a new emerging platform, what you’re not going to have in those platforms like say Snap Chat been around for a while now but the early days of Snap Chat, you’re not going to be able to just go download 6 articles on great ways to make Snap Chat an effective customer acquisition channel, you’ve got to literally go in there and kind of invent it. So, in that case it’s going to be hard but if you can invent it then you’re going to have a bit of a much less competitive environment in there because other people haven’t figured it out where if you compare that to Facebook, yeah you have massive scale on Facebook, it scores well across each of these but the down side of this is that there are super sophisticated marketers in there that are going to be hard to beat and so that’s again, part of the trade off that you’re making.
Mike: Yeah, I think the 2 things that kind of stand out for me from all of these things that you’ve just kind of touched on is the fact that iteration time alone is almost worth its weight in
[00:37:00]
Mike: gold when you’re trying to figure out what your marketing message is and you’re trying to drive eyeballs to figure out what’s going on and why people are using your product and why they would and what resonates with them and then the 2nd thing is that those emerging platforms, partly because they’re so low cost at that point, people aren’t really tapping into them and I can think of a specific example of somebody who literally doubled their revenue from 1 to 2 or 2 and half million dollars basically overnight on Instagram marketing, it was just insane looking at the graphs, it was just crazy how much.
Sean: That’s awesome, yeah because there’s not that many people that can effectively grow off of Instagram so that it makes sense that if you figure it out you’re going to have a pretty unique opportunity there.
Mike: Right and this was about a year before Instagram had any sort of paid advertising, they’d like figured out their own system and they had all of these spreadsheets. It was really quite interesting.
Sean: I have 1 quick example that really highlights the importance that you just touched on why you need to get your activation right in some of the lower funnel things to make your channel work,
[00:38:00]
Sean: we touch on it in the book but when we 1st were investing in search for log in it worked pretty well, like I mentioned there was a lot of intent for that type of solution and we were able to scale to about 10,000 dollars a month with a positive return on investment but I couldn’t scale beyond that and when I looked at what was outside of my control as a marketer I could see that 90 plus percent of the people who were signing up through my marketing campaigns were never using the product, so if they didn’t use the product they weren’t going to pay us any money was so I wasn’t going to get that return on investment. They’re not going to tell their friends so we’re not going to get any of the organic growth that is really important in companies, so just basically everything that is based on them using the product so I presented that data to my CEO, my CEO said oh my gosh you’re right, we’re going to have a really hard time growing the business if we don’t get this 1st user experience figured out and he put the overall product road map out on pause, put every product person, every engineer
[00:39:00]
Sean: on that 1st user experience to get it right and then within a few months we were able to 10X the number of people who signed up and actually used the product and what that meant from that channel in Google that had scaled to 10,000 dollars to a month now scaled to a million dollars a month, so if you think for like every dollar I was investing on some key words if I’m only getting 90 cents back I would cut them, now I’m getting 9 dollars back on that key word if you just take that increase in conversion rate to usage and assume that follows through to revenue and across all of these channels suddenly search became this massive channel for us and again now that I had people using the product they were going to talk about it, refer the product and because we have a freemium model that’s 1 of the big factors in a freemium model is that people should be spreading the word about this great deal on this free version and so by the time I left LogMeIn a few years later we had about 80 percent of our new
[00:40:00]
Sean: customers were coming in through word of mouth and so you take this million dollar plus a month being spent and that’s only account for a small fraction of the users and everybody else is coming through this word of mouth, so that’s really what we kind of talk about in the end of the book where it’s this fly wheel of a bunch of stuff really going well and that’s the goal that you need to get too but it’s the interdependency of these different growth levers and how they work together to ultimately build a really powerful growth engine.
Mike: Yeah, and I will say like I’ve looked through, I haven’t read the entire book but I’ve looked through a large amount of it and it’s extremely dense, there is a lot of information in here.
Sean: Yeah, my recommendation is somebody not try to read it cover to cover but instead really kind of try to get the big picture of the book, the beginning really kind of gives you a pretty good big picture and then just do deep dives on a few of the chapters, like just really try to like now I’m going to be all about acquisition and then really like absorbs and read that chapter 2 or 3
[00:41:00]
Sean: times and study the graphs and study the other parts and then after that, and put it into practice as you’re reading it, like use it as a kind of study guide as you’re working that part of the business and do the same thing for activation but like the more that you can kind of repeat this, repeat and really drill down into the chapters you’ll actually get a lot of value from the book. Just cover to cover it is so dense that it might be actually hard for a lot of people to read it that way.
Mike: So, I think that’s probably a good place to leave off. Do you have any other closing thoughts for the audience?
Sean: No, probably the biggest 1 that I would just say is again, this is super experimental just be prepared to test a lot and focus on learning from every test whether it works or it doesn’t work in the way that you intended, get smarter about every part of the growth kind of function in the business and if you do that you will figure it out if you’re like dedicated to it and you absorb what you’re learning through each test and just keep working to increase that cycle of testing, then that’s really critical for growing a business.
Mike: Awesome.
[00:42:00]
Mike: Well thank you very much Sean, I really appreciate you coming on today. In the show notes we’ll have a link to the book over on Amazon and it’s called Hacking Growth. If you have a question for us you can call it in on our voice mail number at 1 888 801 9690 or you can email it to us at questions at startups for the rest of us dot com. Our theme music is an exert from We’re Out of Control by Moot and it’s used under creative comments. Subscribe to us in iTunes by searching for Startups and visit Startups for The Rest of Us dot com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
[00:42:28]
