Building a Startup Growth Engine

Building a Startup Growth Engine

 

When I first moved to San Francisco I spent the first year immersed in startup marketing. I believed that regardless of the company I eventually started, that as long as I understood marketing I would be widely successful.

Man was I wrong.

What I ended up learning the hard way – when building Flowtown – was that you couldn’t market your way out of a shitty product.

It turns out that THE MOST important aspect is the product – duh, right?

That being said, my year spent reading every book, attending all of the best events and meeting the world top marketers wasn’t wasted.

I ended up learning a lot about viral loops, marketing tactics and the psychology of a customer’s needs.

Back in the day we called it metrics based marketing.  It was a discipline of building out the instrumentation required to be able to accurately assess a customer’s experience and growth opportunities.

Today it’s called Growth Hacking, which I’ll admit has a better ring to it.

What I eventually learned is that when you put it all together, a great marketing strategy + product story + product marketing, you end up building a killer growth engine.

When it works, it’s a beautiful thing to watch.Screen Shot 2015-05-26 at 10.19.23 AM

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It actually reminds me of the power of compound interest. Once it “clicks” it just takes off like a fly wheel.

Finding your growth engine is f-ing HARD.

It’s hard because you have quite a few major areas to figure out. You have the product, the market and your marketing channels.

Some call it P/M (product / market) fit, but that’s just one part of it.

To really scale and build towards escape velocity, you need to build an engine that delivers on repeatable and scaleable growth… or what’s called a Growth Engine.

Here are my thoughts on the 3 major parts of a well tuned Growth Engine.

3 Parts To The Engine

When I’ve worked on building my own startup’s Growth Engine, or advised others to build theirs, I always go over these three major parts:

Each one of them are EXTREMELY difficult to perfect, but when you break them down and look at each holistically, you can start to understand how it all works together.

Marketing Channels: The Path Your Customer Follows To Discover Your Product

These are activities that generate awareness and visitors to your website. The spectrum of tactics you can use is pretty wide and it ranges from free (time invested) to paid (money invested).

At the top of free, there would be inbound marketing (a.k.a. content marketing) where you create content that your ideal customers would love.

The middle is a mix of free and paid, things like press and partnerships.

The bottom includes all your straight up paid channels like Facebook and radio (yep, radio – have you listened to Sirius lately? .com startups are 10% of the ads).

List of Marketing Channels (Sorted by free to paid)

  • Free: Blogging, Social Media
  • Mid: (Free + Paid): Press and Partnerships
  • Paid: Marketing Channels like Facebook, Radio and Print

Understanding how each one of these works, how others in your industry have successfully leveraged them or even being aware of their cost and reach in general is a great place to start.

You don’t need to be a master at any of them, but it’s good to be generally aware of what’s possible.

As I mentioned above, even if you’ve got all the money in the world to spend on marketing it won’t work if your product sucks, so let’s discuss that next.

Product Story: The Story Your Product Tells By How You Present It To Your Customers

The Product Story is the story your customer tells themselves about your solution after they’ve been to your site.

It’s their answer to: “Who is this for? How does it work? Why is it different?”, etc.

The story is made up of every interaction with the product, from the design, the copy, the way you sign a user up, to what you ask them to do in their first experience.

Another way to explain it: It’s the movie they create in their mind, for how your solution lives in their world.

Many founders never make a conscious decision as to how their Product Story is told, or what that story should be in the first place.

That’s a HUGE mistake.

To really dial it in, you need to consider these major components of your product:

  • Product promise: What problem you say you can solve and for who?
  • Onboarding: How you unfold your solution and what you ask your customer to do.
  • Core Value: What’s that one feature that if your customer uses it, they walk away truly understanding the power of your product?

The Product Story is the MOST important aspect to focus on for startups. It’s what you’re creating every time you add a new feature, redesign your homepage or change your pricing.

Once you’ve refined your product to a point that you’ve got your customers excited about the product, then you need to start thinking about how your product will grow on its own, or what I call “Product Marketing.”

Product Marketing: Optimizing The Way Your Product Grows As It Delivers Value For Your Customers

Once you have an idea of the Marketing Channels you can leverage to get consistent traffic to your product – and you’ve built a product that creates the right Product Story for your ideal customer – then you need to think of ways you can have your product market itself.

This is a HUGE area of growth for your company.

It’s about thinking through the interactions a customer has with your product and figuring out where it would make sense to ask them to take an action that would cause your product to be presented to a new group of potential customers.

If you think about it, every great product has these interactions – if not dozens. Here’s just a small list to give you a sense of what I mean:

  • Slack.com: Allows you to invite others to collaborate and chat.
  • Facebook.com: Allows you to tag users in a photo and if they’re not on FB, to invite them.
  • Freshbooks.com: Send an invoice to someone.
  • YouTube.com: Embed a video on another site.
  • Quora.com: Share your question/answer on social media.
  • Airbnb.com: Post your listing to Craigslist
  • AngelList.com: Invite someone to confirm an element of your profile.

Asking the user to take an action that makes total sense (ex: Airbnb prompting to post a newly created listing to Craigslist) is the only way to build a sustainable product marketing feature.

Many startups fail at growth because they ask their users to do something at the wrong time, or position it in a way that doesn’t make sense (ex: asking to refer a friend before they’ve experienced your products core value).

On top of all of those challenges, each feature that helps your product grow also tells a story – and if you do it wrong – it can position you in the wrong light.

An example would be asking a user to upload their address book of friends during a sign-up process for a Business to Business (B2B) solution.

It just tells a different story, almost like your app is a social network because that’s what they expect.

Mapping Out Your Engine

The key take away from this post is that you should be thinking about your growth strategy as an engine and ensuring each piece is working properly before moving on to the next one.

Most startups die because they try to do too many things at once. When things don’t work out, they can’t figure out what strategy failed, even when one might have shown promise.

So for now, just map out the different aspects of your product’s engine and any of the strategies you’ve implemented so far.

Are you doing any marketing? Cool … write that down.

Do you have an on-boarding flow for your product? … if not, quickly wireframe what you think it should look like.

Have you built any features that you hoped would help your product grow? …write those down as well. If you’ve got some data on how they did, that would be a plus to capture as well.

Step one is to do an inventory of your product so you know what you’re working with… then from there you can refine, remove or create something that delivers real and sustainable growth!

If you have any questions be sure to post a comment below… it’ll help guide my future posts on this topic and I promise to respond to each one.

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  • Amrita Chandra

    Hey Dan – I like the way you group things here, it makes it less overwhelming and helps shape the focus of different components to a growth engine.

    The only thing I’d add is that the tactics you choose in terms of channels should really map back to how your customers are influenced and purchase. Many people start with tactics first without knowing if any of their ideal customers can be found and sold to using that tactic. Having a deep understanding of your *real* target customer is a must.

    Also (oops that’s 2 things) be prepared for the time/money tradeoff with paid/owned/earned.

    • http://twitter.com/danmartell Dan Martell

      Amrita, totally agree.

      Honestly, I usually suggest that people do enough marketing to get 50 signups a day (for most SaaS solutions) and really dial in the product + product marketing aspects.

      The more you understand your best customers, the less time you’ll waste on the wrong channel / message or even feature.

      http://jobstobedone.org/ FTW!

      Appreciate the comment.

      DM

  • http://hatchery.io Yannick Frank

    Hey Dan Martell, thanks for that awesome sum-up. Especially the balance and combination of all three parts is what I experienced really important. By the way – I postet your article on http://foundernews.io

    • http://twitter.com/danmartell Dan Martell

      Yannick, more than appreciated – thanks!

      DM

  • http://plum.io Caitlin Henry MacGregor

    Hi Dan – Great article, I’m a big fan & I would love your advice!!

    http://plum.io is a SaaS hiring solution that matches job applicants to a company’s unique role and company culture using cutting edge behavior science. In addition to offering Plum for employers, we are branching out more B2C to help job seekers get hired for who they really are.

    We were strictly focused on B2B, but we’ve had such an incredibly positive response from Job Seekers who are hungry to learn more about themselves and really differentiate beyond a resume that we can’t ignore this massive opportunity. Our plan and current operations are to partner with job seeker boards and talent communities in order to get mass job seekers on board. These platforms are incredibly eager to add value to their user base.

    However, the ultimate goal is to derive revenue from the employers. Some of our best inbound marketing has come from job seekers sharing their profiles with employers and then those employers come to Plum to learn more about our solution. We want to 1) optimize the job seekers sharing their profiles with employers and 2) get the employer to sign up and pay for Plum based on learning about us from the job seeker.

    The big question is – what would cause engagement of the employer upon reading a candidate’s resume and seeing their Plum scores AND what would make them remember to reflect later, after the hire, that this person turned out to be exactly who Plum said they would be – and therefore be interested in using us company-wide?

    We would love your thoughts. Thank you very much in advance!

    • http://twitter.com/danmartell Dan Martell

      Caitlin, that’s a big question… and I may answer some of these in future post, but for now I would suggest a few things.

      Focus on one core offering and nail it for growth.

      It seems you’re core customer is the employer… I would focus on building a growth engine around that customer first before creating to much value for the job seeker.

      Doing both is extremely hard.

      It reminds me of Ev’s recent blog post about creating “tool value” vs. “network value”. You need to understand the core metric that drives it, nail it then reprioritize. https://medium.com/the-story/medium-is-not-a-publishing-tool-4c3c63fa41d2

      That being said, if you want to improve conversion of an employer landing on a job seekers profile and learning more than you need to have a CTA (Call to Action) that resonates with them.

      You can do that via a full banner pop-up, header drop down or optin box offering some kind of relevant value.

      Getting them to realize your tool delivered on it’s promise, thats super complicated and requires a series of surveys and interviews with customers who have experienced this.

      You can start by using http://www.survey.io and look into http://jobstobedone.org/ – their a good place to start.

      Hope that helps.

      DM

      • http://plum.io Caitlin Henry MacGregor

        Thank you Dan!

  • Matthew Buckley

    Hey Dan, just wanted to say this was a great post. Enjoyed your discussion that illustrated both the complexity, as well as the different pieces of the puzzle, that go into making a growth engine tick.

    • http://twitter.com/danmartell Dan Martell

      Thanks… definitely gonna break down each point in their own blog posts as there’s so much to discuss.

  • http://www.markevans.ca/ Mark Evans

    Dan : You’re right about the importance of a product that delivers value and/or delights. You can have great marketing but if the product isn’t good, it is only a matter of time before it’s uncovered. That said, I do believe many startups either under-appreciate or simply don’t understand the importance and benefits of marketing. They believe in the “If we build it, they will buy” approach. In other words, a good product is enough. Sadly, this is often a recipe for failure.

    • http://twitter.com/danmartell Dan Martell

      There is no engine without marketing… it’s the gas.

      It’s like when founders say to me … “We got 3000 emails subscribes to be notified when we launch with NO MARKETING”. I actually don’t like that.

      If you don’t know where to spend the $/time to get more $ then it’s not a business.

      my2cents.

      DM

  • http://www.welcomepickups.com Alex Trimis

    Dan,

    Thanks for the breakdown. I am a big fan of “engine” thinking and another post I found very good from that perspective is Sean Ellis’ (http://www.startup-marketing.com/key-elements-of-a-massively-scalable-startup/).

    His breakdown breaking down a product in 3 engines:

    a. Gratification engine: This is the Product Story or Product/Market fit part. Do people get value out of your product and what do they enjoy the most. Before thinking this through there is no point investing into any other engine.

    b. Economic engine: Does your product make sense from a unit economics perspective? You maybe making something awesome but the economics don’t work.

    c. Growth engine: That is the Marketing Channels part. Which channels are you going to use and when. There I believe there is not a one off answer. Channels might work in the beginning when you are getting your first traction and they can saturate in the long run or be exploited by others minimizing their effectiveness. I found the Traction book (http://tractionbook.com/) to do a good job on laying down your available options where you can pick from and customize for your product and market. They also have a nice framework to write down, test and choose the winners ( bullseye explanation – http://www.coelevate.com/essays/traction-the-bullseye-framework) (gdoc – https://docs.google.com/spreadsheets/d/1uHy3cPWaJsq_4z28tPWYJxVSuAi77n9Xg5juodcXOd4/edit#gid=526423665)

    I find the Economic Engine to be as important as the other two. With Dopios (http://www.dopios.com/community) although people really liked the product and we could see how it would grow, the Economics just didn’t make sense. When we pivoted to Welcome (http://www.welcomepickups.com/) not only did we built an awesome gratification engine (our NPS is at 94), but we found a way for now to make growth and economics work as well (by working through partnerships with hotels and bnbs and a b2b2c model lowering our CPA while keeping the LTV high).

    So just to sum it up I totally agree with the engine perspective. Be diligent, break down the growth (channels / product marketing), gratification (product/ market fit, product story), and economic (unit level) engine, start with gratification that can be achieved with constant iteration, user feedback, and an open mind to accept the changes, work on the channels that will work for you (not generally hyped buzz tactics) measuring and testing through the bullseye framework and keeping mind that your growth would always be a work in progress, and make sure that your economic engine in a unit level makes (or will make) sense.

    • http://twitter.com/danmartell Dan Martell

      Alex,

      Totally agree… my approach tries to abstract at a different level. Maybe it should be called product growth engine as it doesn’t take into consideration the economic monetization aspect.

      I actually just posted about the Product Story and give recognition to Sean’s help in teaching me a lot around the messaging component (Promise)

      https://www.danmartell.com/productstory/

      Appreciate the thoughtful comment.

  • Srikrishna Srinagadatta

    Hey Dan, totally loved your post and discussions. You wouldn’t believe, a startup that i worked with had built an awesome educational product but sat on it for 7 long years without a single sale !!! I was shocked ! I can totally relate to what you say.

    • http://twitter.com/danmartell Dan Martell

      That’s nuts? Why would they build/keep something around for 7 years with no sales?

      I remove code in an app that doesn’t get used to keep things clean!

      That being said I’ve head worse.

      Thanks for the comment

      DM

      • Srikrishna Srinagadatta

        Agree with you. They got too obsessed (read got emotional ) about their product that the product dev team that they hired was used as outsourcing service providers to do web dev or promotional videos for clients. This “they claim” they did to retain the team and run the startup with a “hope” that “someday” they could sell the product and become what they first set out to be. I found this a classic example of what happens when you blindly fall in love with your product that you fail to recognize the key indicators.

  • Arjun Menon

    What about hardware startups? These points, as I feel, seem to be heavily tilted towards companies offering software solutions.

    In terms of hardware, most of the core value is always providing the best possible customer experience.
    Take Nest for eg, the product promise was making your house more comfortable but the core value was always ensuring the owner/family (and their visitors) get the best possible customer experience.

    Even in case of Tesla, where the product promise is cleaner, safer transport but the core value is still, the best possible customer experience.

    And thats always the case for every consumer electronics companies.

    So how do you differentiate and market the core value when they are always the same with every company. Because only the product promise wont get any customer excited. Many companies have that in common. Its always the core value, which is again same but executed differently, that makes a company stand apart.
    I believe, there may be another factor, when talking about hardware startups.

    So the question is, how can a startup, in the consumer electronics industry, position itself differently before, investors, clients, customers, distributors, etc before it launches, because for such startups they always have an idea, a clear vision, how they want to serve after they begin but to be honest never can really have a good answer when asked, “How they are different?”, before launching.

    Even in case of Nest or Tesla or even Jawbone, you can see that AFTER they launched it did seem they were doing something differently and better but the truth was their product design set them apart, in essence they were all giving the best customer experience for their category. But ask yourself, if you heard about them BEFORE they launched, would it create such excitement as it created only AFTER they launched.

    Thanks.

    PS –
    Yup, I am starting a hardware company!

    • http://twitter.com/danmartell Dan Martell

      My experience and focus is very much towards software companies.

      That being said, the only part that’s different is the Product Marketing step.

      Specifically on finding ways to encourage your customers to share the product with their communities.

      An example I can think of is Apples iPhone… all emails sent from their device says “Sent from my iPhone”.

      There’s probably a bunch of others but that’s the one that comes to mind.

      Other than that, I think the great design helps because it’s beauty creates a sense of appreciate and want to tell their friends.

      With the Nest, it’s so beautiful and different that when people walk buy they might stop and ask what it is.

      That’s all part of the product story.

      Design definitely matters.

      my2cents.

      DM

  • http://www.Spidvid.com/ Jeremy Campbell

    Amazing read Dan, loved the part on when to ask users to do something, or ask for referrals and shares, they have to get lots of product value before they will be motivated to take action or share your site or app! I got value from this article so I will be sharing it via my social channels, thanks Dan!

    • http://twitter.com/danmartell Dan Martell

      Jeremy, glad you enjoyed.

      I actually think the new marketing is an effort for loyalty.

      Deliver on the promise, nail the core and you have loyalty.

      Then they will share.

      It’s almost like optimizing word of mouth marketing! 🙂

      May write more about this in the near future.

      DM

      • http://www.Spidvid.com/ Jeremy Campbell

        I completely agree Dan, and yes please write more on this topic and on viral loops too as I’m trying to figure out a good organic/native solution for a new product my team is building now. Of course the product has to be amazing first and foremost, but to be able to facilitate more word of mouth/mouse is always a good thing. Thanks again Dan, bravo!

  • kevin brophy

    Hey Dan: Awesome post. I’m struggling to nail the product story for our new product (SpaceTime3000.com).
    It’s intended to be a way to create records, that will serve as ‘micro-sites’
    Snap a pic in the forthcoming app, choose a category, optional description, click Done -> instantly have a beautiful ‘card’ style record with it’s own URL. The card can be used for links in blog posts, etc.
    Say I’ve been writing a blog post, and I want to refer to a person, or event, now I have an instantly shareable record that I can use over and over instead of having to repeat myself.
    Records for artwork, cars, beer, short stories, etc.
    Would love your thoughts on A. the idea and B. how to nail the Product Story!

    • http://twitter.com/danmartell Dan Martell

      Kevin,

      re: Idea – I don’t comment much on startups because it’s not about the idea and more about the process / approach you follow to iterate and test. Most companies that win are way different at the end than the beginning and that’s expected. Follow the learn startup approach to validating if you’re idea is any good – only the market decides.

      re: Product Story – I believe it’s extracted from the customer using surveys and interviews. http://survey.io and the Jobs To Be Done framework will help you with this.

      The key is to put something in front of customers (people who spend time or money) and then extract the product story from the words they use.

      Hope that helps clarify things.

      DM

  • http://blog.opportunitycloud.com/ Erik Starck

    Excellent post. We’re using the Lean Growth Canvas to help frame the challenge of growth for a team and think in terms of building a growth engine from a product. Check it out here: http://leangrowthcanvas.com

    • http://twitter.com/danmartell Dan Martell

      Cool!

      DM

  • Sandeep Sitoke

    Hey, Great post !!! But i should you suggest to look out https://betapage.co/ once whenever you have time.

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