Using "Proof of Concept" Experiments to Scale Your Business
Business 1st Principles.
In our business, we talk a lot about understanding the customer, unique value propositions, product-market fit, and scalable unit economics.
While the fundamental principles and equations listed above generally apply across categories and industry - the path to get there can look different for each client we work with.
As a result, we require potential new clients at Hot Sauce to commit to our "Strategic Approach Project" (SAP). The SAP is a 2 week deep dive into our potential client's business. We choose to invest our multi-disciplinary team's time into this process at no cost because of the value it drives in our long term partnerships. The SAP is initiated with a "Discovery Call" where we seek to understand the business from our key stakeholder(s) perspective. What do they know about their customer, the unique value proposition of their product or service, validation of product-market fit and the overarching business model. With all of this information we dive into the various channels, exploring and modelling the various opportunities both for sheer growth potential and bottom line profitability.
One Size Does Not Fit All
What do we learn from our SAP? In some cases, we validate the customer, product-market fit, profitable business model, and build out a plan to test & incrementally scale traffic and conversion growth. In other cases, we come to learn there is still work to be done on establishing a foundation upon which our scientific approach to growth can be applied. It may be further research into understanding the customer, fleshing out what makes the product or service valuable to the end user or perhaps beginning to test who will open up their wallets and become paying customers.
The SAP ensures we don't skip over these critical building blocks. It requires a significant investment from our team and our clients - but we continue to affirm it's long term value.
The SAP: A Case Study
Recently, we had the opportunity to work with a world class Adventure Expedition Outfitter. Through the initial SAP we confirmed that both the business owner's brand and the product were epic - but the business was too young to confirm whether there was enough of a market for make it viable.
As an initial approach we recommended implementing a Proof of Concept (POC) campaign that would provide an initial dataset to validate potential audiences, their level of curiosity in the product (will they stop, be curious, engage and act?) and product-market fit (will some of those people begin sales conversion and consider opening their wallets to experience the product). We collaboratively built out the Proof of Concept test with the client. Overall the approach resonated as it did not require an initial $10,000s in startup capital and would move the right components of the business forward.
The elements of our proof of concept were:
- A very small POC ad budget.
- Targeting 2 different potential customer audiences across 2 platforms.
- Building an automated performance & lead tracking dashboard that would be shared with the client.
- A commitment from the client to proactively engage and nurture all leads as soon as they were received (we set up automated email notification so both teams knew when a new lead had landed).
- An attribution dashboard that showed us the cost of actions achieved throughout the entire funnel: impression > click > lead > marketing qualified lead > sales qualified lead > sale.
- A 10 day test window.
Above All. Never Lose Sight of Your Customer.
There is additional value to running small scale tests like this if you're a business establishing it's foundation - every conversation is an opportunity to better understand what's important to the target customer (or if your targeting is off altogether). In the case of our POC, we asked our clients to probe potential customers not only for their interest in joining an expedition, but additionally around the following questions:
- what questions did they have given what they knew so far?
- what compelled them to learn more?
- What type of experience were they looking for, what excited them?
- What were their major concerns or objections?
This feedback is critical early and often when building a business. Our client documented all of these notes directly within our shared dashboard. Making it both a qualitative and quantitative single source of truth.
Incremental Learning, Proof and Growth
The campaign was a success. How did we know? Because the goal we set out to achieve 10 days earlier was to begin validating the target customer, the unique value proposition, and a bonus outcome would the initial indicators of product market fit through sales conversations. Even within the 10 day test period we made several iterations to audience targeting and creative positioning based on the early indicators we were seeing in the data - this is part of our scientific approach.
We were able to drive leads at between a 6-14% conversion rate, 40% of these leads resulted in sales conversation where the client could capture meaningful insights and learnings as well as nurture a couple of those conversations into Sales Qualified leads. Our dashboard was now telling us a data story that would now help initiate the next incremental step in growing this business.
Investment versus Performance
What you'll notice in the metrics above is that we weren't measuring sales conversions or revenue. If viewed through this lens the above campaign could be considered a failure. When communicating the initial approach to our client we defined this test as an Investment in the foundation of the business. In other SAPs, where a strong foundation has been established, we communicate our intention to drive Performance where dashboards measure hard top and bottom line business KPIs.
Both lenses are important, but what is critical is being clear about which lens you are looking through for any given campaign or strategy.
We Believe in Iterative Strategy
Access to clear data paired with a commitment to getting it right alongside our client means we are able to go back to the strategy drawing board more informed and better positioned than the previous iteration. We are able to consider a whole new spectrum of questions based on what we have collectively learnt.
Finally, it's worth noting these iterative strategy conversations happen both within our internal teams (daily) and with our clients (daily, weekly, monthly, quarterly). Whether it's business-agency relationships or internal cross-functional teams, I believe healthy partnerships are rooted in the right level of collaboration, transparency, a focus on the same set of right metrics, and an alignment on the outcomes the team is collectively signed up to drive.
As you look at your business, I hope some of the concepts, processes and lenses described above provide perspective and potentially inspiration to explore new opportunities.
- If you want to learn more about our Strategic Approach Project, shoot me a message.
- If you are a leader or manager interested in enhancing your impact, leadership presence and overall performance - I would love to hear about your story as well!
image: Photo by Paul Hanaoka on Unsplash