10 Things To Know Before Starting a Company – Marketing
Entrepreneurship is not for the faint of heart, nor is it for the people looking for an easy way out. It is often hours of unseen toiling against the odds — it is knowing that 70 percent of startups failing and still trying anyway. But many first-time or young entrepreneurs often don’t know where to start once they have an idea they’re passionate about, and while the internet can offer you lots of answers, I’m sure they are probably looking for all the information in one place. They could try to learn everything as they go, but that requires a lot of time and money, not to mention a lot of ego-bruising along the way.
A better pathway is to ask someone who has been there, done that, and keeps doing it, because they love the process, as gritty and unglamourous as it may be.
I’ve been toiling away at entrepreneurship for a number of years now, and not only have I learned along the way, but I’ve made plenty of mistakes. The majority of what I learned from my time at Princeton University, and at a traditional ad agency in New York City, was about the mechanics of being an adult: Show up every day, be reliable, send emails, know how to conduct myself in meetings. I learned the basics of marketing, which were certainly helpful — but I also developed a very healthy distaste for the inefficiencies of marketing and how broken the system was.
It was only when I joined a startup that was on its last legs that I was able to follow my instincts and try approaches that made sense to me. That's where my inner entrepreneur was born. But while I was able to combine my baseline education as well as the confidence I'd gotten to lead and follow my instincts, I’ve still spent the past five years making a load of mistakes, talking to thousands of people, and getting a lot of advice. I’ve been able to iterate my learnings, over and over again, to translate into something that looks like success.
Over the years, I’ve been able to pay this forward by sharing what I’ve learned with other people. I think it’s useful, not only because doing so helps the next generation of entrepreneurs, but because the best way to learn is through some sort of curation layer, which is almost always someone or something that you trust. For me, it's my, my board of advisors, while for others it's an incubator or a mentor. You need someone or something that can act as a filter for the plethora of information out there.
Recently, I sat down and thought through the most critical questions about marketing I receive from young entrepreneurs, or from clients of my consulting business. The answers to these 12 questions apply to a host of different different challenges, a variety of skill sets, and a number of commonalities in the e-commerce world as we know it today. You could Google the information below, but recommendation engines as we know them are imperfect platforms. And wouldn’t it just be easier and more efficient for me to tell you the main points of what you need to know about marketing your new product, right here and now?
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A note on this advice: It will only take you so far. You cannot understate the power of learning while doing. If I had a cheat sheet of everything I needed to know when I started The Hub, knowing the answers might have helped my journey a little bit, but you need to always be failing and succeeding in order to learn. If you are just always doing what works, you're not pushing the fringe or risking enough. You're leaving success on the table. It’s when you've gone over the cliff toward failure that you finally know where the edge of the cliff is. Google results can’t teach you that. You have to learn mistakes for yourself and you do it by fumbling around in the dark. You need to like orient and find and discover the limitations and parameters of your company for yourself.
I have an idea for a consumer business. Where should I start?
A lot of people want to launch their idea and go very big immediately. They want the gratification of getting it out there. But I always encourage people to slow down and start humbly.
First, focus on the minimum viable product. If you're a consumer packaged goods brand, make a very simple version of your product without fancy branding and all of the bells and whistles. Give it to friends and family, who can then give it to their friends, so you can gather feedback and iterate your product. If your idea is software, mock it up Google sheets or some no-code tool. The point is to test to see if your thesis holds any water and if you're really solving a problem. This way, you can make changes until you're getting pretty unanimously positive feedback — and the more unbiased feedback you can find, the better, so be sure to solicit it from people who don’t share your last name. Only then do you move to making the branding or launching the website or writing the first line of code.
I've sold to friends and family and they love it. Now what?
Friends and family can be a good, low-risk way to get your product out there and get some honest feedback. The next step is getting in front of people that are not your family so that you can get a little bit less biased feedback.
After that, you should think about starting to spend money on ads, but do so in fits and spurts. Spend $500 of Facebook ads so that you get 10 new customers — call them all up and talk to them. Improve around the feedback they give you, and then let 10 more customers in. Some people think that once they Facebook ads, they should run them every day, forever. Instead, I recommend you spend $500, turn the ads off, and focus on and learn from the cohort you attracted. Make the changes that you want to make, change the messaging, change the ads, even change the product itself — and then get the next cohort and keep iterating.
I am getting the best feedback. How do I tell the world?
Most entrepreneurs want to say, “I sold 2,000 cans. I have 10,000 visitors.” But you can sell 2,000 cans by running $10,000 worth of Facebook ads and if the product sucks or you're not nurturing those 10,000 visitors, at best, they will buy, churn, and never come back. Some will never even buy at all, and you'll never get that $10,000 back. Don't spend at the top of the funnel until you know that you have a product that people really like, and you have a sense of what type of person really likes it, and don’t spend at the top of the funnel until you have mechanisms to continue to take care of those customers.
Make sure you have good markers of unbiased feedback from people that don't have your last name or don't owe you something. What's your NPS score? How many people would be very disappointed if your product no longer exists? If it's more than 40 percent, then you can start working up the funnel.
The next thing I would do is make sure that the middle of your funnel is solid. Invest in your nurture sequence. When someone comes to your site and buys something, do you send them 10 emails over the next 20 weeks that are really thoughtful, informative, and additive to their experience? Set up retargeting ads on Facebook, whereby people that have shown interest in your product, but haven't bought yet are hit up again and again.
Only then do you move to the top of the funnel, where there are lots of tools like Facebook ads, Google ad words, and SEO targeting. But unless you have a product that the people you target are really going to love, and unless you have a middle of the funnel that's going to nurture them once they're in it, don't bother spending a single dollar at the top.
What is the bottom-up approach to e-commerce?
The bottom of your funnel is the checkout button. And the top of the funnel are things like a Facebook ad, a Google ad word, or doing SEO work. Below the checkout button is where your repeat customers live, and there are two tiers that you want to focus on. First are the passionate customers, who come back a few times. Then there’s what I call the weird customers, who are not related to you in any way and still bought a weird amount of product. Those are often the best and most informative stories, and the reason why your weird customers are buying your product might or might not align with the story you are telling as the founder of your company.
It’s the weird story that can best inform how you talk about your product and who you target with your ads. Start with your weird customers and passionate customers — learn from them. Who are they? What do they have in common? And what are they saying? All of this should inform who you target with your ads.
Start from the bottom of your funnel and work your way up. It’s only after you tend to the bottom of your funnel that you should move up and optimize your website so that it converts properly for e-commerce. You can use tools like Hotjar to look at heat maps of how people are or are not using your site and take out elements that are distracting. Make sure you have retargeting in place, such that you're sending emails to people and building that relationship. Make sure that you have retargeting Facebook ads. Only then you spend all your money at the top of the funnel.
Why is the bottom of the funnel most important?
The bottom of the funnel is all about building lifetime value. If you have a site that converts very well, that will make your customer acquisition costs go down, and better ads and an optimized site will mean you can sell your product to someone that much more easily and efficiently. But a good product means that people will come back again and again, with little to no extra work on your part.
That's the equivalent of the water staying in the bathtub. You've turned on the water and spent money to acquire a customer — if you turn the faucet off, does that water stick around, or does it just go right down the drain?
The lifeblood of any company is lifetime value, and if that value is one purchase, on average, then you're clearly not selling the product to the right people. You're tricking people into buying your product once with a good ad and they're never coming back, which either means your product sucks or you're not retargeting them. You have to start with your product — make it really good and something people really want again and again. You have to retarget them to remind them that you exist to build that lifetime value.
How are lifetime value and customer acquisition cost related?
Customer acquisition cost is the cost to get a customer in the door the first time and lifetime value is how many times they'll come back afterwards. And the single most important formula for a young entrepreneur to understand is lifetime value divided by customer acquisition cost, and ideally that number is greater than three. What that means is, if someone buys $90 worth of product over their lifetime, and you spent $30 on the initial ad to get them to buy, then your lifetime value is triple the amount that it cost to acquire them.
There’s a delicate balance at play here: You want to get your customer acquisition costs lower, but you also want to get your lifetime value up higher. If you can do both of those things at once, your LTV to CAC ratio will grow exponentially. If you just do one, that ratio grows linearly. If you don't move either, you're just going to die as a company.
The ideal scenario is that you're working on keeping customers around longer and working on getting that first purchase to happen for cheaper. But if I had to choose one to focus on first, it would be getting people to stay around longer. Then and only then do you spend money, time, and energy on optimizing your customer acquisition costs.
Which is more important, lifetime value or customer acquisition cost?
Definitely lifetime value. I'm sure different people would say different things, but I believe repeat business is the lifeblood of any company. There are only so many people in the world that are going to like your product, and if you burn 20,000 of those people with an early version of your product, you might never get them back. At a certain point, you run out of the total addressable market. Know how big the market that might have interest in your product is, and focus on not burning your opportunities with that market. You don't want to introduce yourself to people before you're ready. So focusing on lifetime value and making sure that when someone does come through your system, they happen to stick around, is the key.
Why is the middle of the funnel important? And can you give me some examples about what it looks like?
The middle of the funnel should be a warm reminder that you exist. It is a place where you build relationships with customers. You want to build pressure behind the dam for lifetime value. If customers really start to like you, trust you, and feel that you're a part of their life, they will be more likely to come back and buy again and again — particularly when you ask, but sometimes simply just after you remind them you exist.
Ideally your product is the thing that brings people back. When I run out of cold-brew coffee, I remember to reorder it because I drink it every day. But there are certainly other products I use where I run out and don’t reorder, and I might get an email for them or see an ad and remember that I like the product and I should order more.
Gary Vaynerchuk has a book called Jab, Jab, Jab, Right Hook. And when I asked him about it, he said his only regret is that it wasn't Jab, Jab, Jab, Jab, Jab, Jab, Jab, Jab, Jab, Right Hook. In his definition, jabs are just little bits of value.
No matter what your product is, you want to send emails that aren’t so product-focused. Most people in the middle of the funnel make the mistake of trying to convert, convert, convert. But if every time a customer opens an email from you and sees either a sale or you trying to sell them something, they'll stop opening your emails. If you're building a warm, friendly relationship where you're slowly adding value to your customer’s life in small ways, they'll continue to open your emails. Every fifth or 10th email can be something about a limited SKU or a 10 percent discount.
People inherently don't trust brands. Why is it important to get customers to trust mine?
I was there at the dawn of the influencer: The reason that worked for a hot second is because an influencer was a friend and a trusted voice. It wasn't Rice Krispies selling you the cereal, it was a food blogger that you trust talking about how Rice Krispies is kind of an unrated cereal. You think, “Well, I trust this person. So I guess I'll give it a shot again.” Just as quickly as it was a useful marketing tactic, it became an unuseful one years ago.
But I think this notion of being a friend, being a trusted voice, and being a value add still holds water. I encourage marketers to look around themselves. You're also a human — how many brands do you follow on Instagram? How thrilled are you when you get an email from a watch company trying to convince you to buy a watch? Is that ever something that is like exciting to you? How can you make it seem like it's an email from a friend or a trusted voice? How can you make your brand’s Instagram presence something to look forward to seeing, because it's clever or witty or funny or sad or poignant or topical?
If your Instagram is just photos of your products, the only people that really care are the people that work at the company and maybe your five most passionate customers. Marketing as we know it right now starts with people, not an ad agency or a brand. If you're going to try to participate, you have to be a person, not a brand.
What are the best top-of-funnel tactics to get traction once my site is converting well?
You want to focus on top-of-funnel tactics that are highly measurable. Someone called me the other day and tried to have me buy into a direct mail campaign through all of Canada that would cost my client $5,000 to participate. That’s a big risk for a small brand because flyers are not very trackable. On Facebook, however, you can run $500 worth of ads and see exactly what's happening.
How many people hit my site? How many people looked at a product page for one of our flavors? How many people added the product to their cart? How many people went to their cart? How many people initiated checkout? How many people completed checkout?
I can see that whole funnel using tools like Facebook and Google ad words. But if someone comes to you selling you a silver bullet of how they're going to get you in front of 40,000 people with their newsletter, don’t do it unless it's highly measurable and you can spend a little bit of money to test if it's going to work. Never spend money out of the gate without having some understanding of how it's going to perform.
Why is it taking much longer than I thought to get traction?
The world is noisier than it's ever been, and we're all inundated with memes and posts and things from our friends, not to mention a million ads a day. Breaking through that noise is incredibly hard. But it’s also important to hold space for the fact that your product isn't as good as you think it is, almost definitionally. Founders are cocky and egotistical because they have to be, but other people might not agree with them on their product.
As always, my refrain is, start at the bottom of the funnel. What do your passionate customers have to say? How can you figure out who they are? What do they have in common? Take your ego out of it. Maybe you want to tell a very specific story about your product, but if that’s not taking root with the right people, then you're barking up the wrong tree. Don't have an idea of what your story is and force it on people. Let people tell you what they find compelling and let that inform your story.
Why is restraint more important than enthusiasm?
I am an entrepreneur's entrepreneur. I'm the most neurotic, high-energy, passionate person, and many founders skew in that direction. Because I know I am over-passionate, overeager, and overenthusiastic, I have to fight against that with restraint, with poise. Now I focus on finding the elegance in simplicity, finding the power in saying no, and crossing three-quarters of the things that I want to do off my list so I can do the one-quarter that I need to do really well. That kind of focus is healthy for the founder, and it’s helpful for the team because they understand the purpose, the mission, and the vision much more clearly. It's helpful for investors because they know what they're investing in.
To be able to wake up every day and chase something, you have to have a lot of passion, a lot of energy, and a lot of, a lot of vibrancy. But many young founders have small teams, which means very few man hours, and they have small amounts of money. If you chase every rabbit hole, every opportunity, and every idea, you burn those man hours and your money and you lose. If you spread energy across a multitude of different executions, you will confuse yourself, confuse your team, turn off investors, blow through all your money and fail.