Infectious

Dave McClure's Top Lesson on Startup Marketing Spends

Last week I had Dave McClure speak to an entrepreneur round table that's attended by several of the entrepreneurs I've worked with over the past year. I asked Dave to touch on his talk Startup Metrics for Pirates because it underscores my fundamental belief that product teams need to be data driven in their decision making. In other words, ‘Be an Astronomer and not an Astrologer’ when it comes to product and marketing decisions.

This talk led to a discussion on how Startups should spend their precious capital in acquiring traffic during the earliest stages. What was obvious was that entrepreneurs should exhaust all free forms of publicity (i.e. blogs, social media, PR, SEO). What should not be overlooked, though, are marketing spends for things like search engine marketing...if executed in the right way. Here were his basic thoughts on how startups should execute on their initial marketing spends:

Small Spends until the Product Doesn’t Suck

Don’t try to make a big marketing splash on day 1. Take a small amount of capital and acquire users to make sure your product doesn’t suck (>=6 out of 10). Continue the same process until users are happy with the experience (>=8 out of 10).  

Set Goals and Observe your Metrics

Every marketing spend should be benchmarked against a common set of metrics. Make sure your product is set up to measure your goals! Set goals before each spend and try to understand why the metrics were or were not achieved after each campaign.

Correct your Mistakes Before Additional Marketing Spends

If you don’t achieve your goals figure out why! Look at your data and see where users drop off. Hypothesize and change your product to test your hypothesis.

Don't Increase Spends until the Product is Good

Don't spend more on each iteration until the product is Good (>=8 out of 10). Once you get to that point you know users will will enjoy the experience and may recommend it to others.

*For as little as $1k per month you may be able to achieve meaningful results using this method.

Startup Metrics for Pirates: AARRR! (Startonomics SF 2008)

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The #1 Design Lesson in Building the Right Product

Define the problem then design the solution

Sounds simple but I've seen so many products go wrong because the problem hadn't really been defined and understood. I'll talk about my own failures in a later post;)

David Cortright, designer extraordinaire has elegantly pulled together his thoughts as a designer on this nugget in the following slides...read up!

3 Reasons to Start your Startup Now

Sequoia Capital on startups and the economic downturn

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 By now you have probably seen the startup survival lessons from various VCs like Sequoia and Benchmark. There are a lot of lessons on how to preserve your capital and hunker down. The short gist is save cash, slash costs and stay alive because it's going to be a difficult time raising capital for the next few years. In fact, Sequoia believes the current downturn will take years to recover and we're in a secular bear market that could be a 15-year problem. Even for the serial entrepreneur this is sobering news.

So why would anyone thinking about starting a business swim against the stream now?

Because it's the contrarian view

As an entrepreneur with a good idea it shouldn't really matter when you start your company. Starting your company in the midst of the current economic downturn will require you to jump over additional hoops but those hoops are probably great validation for your idea.

Fewer competitors

Targeting a new opportunity during an economic downturn probably means you'll have less competition. The entrepreneurs pool definitely shrinks during these periods, leaving market opportunities open for longer. So, you could end up owning a space for some time if you pick your space right. 

Timing is everything

A good idea will be executed by someone if you don't react. So, if you have your great idea you need to execute rather than sit on the sidelines. Do you want to be asking the question, 'what if'?

Six "Weapons of Influence" on the Web

Making the Sale on the Web

After creating any service on the web you need to sell it. So, once you've got a consumer at your front door how do you get them to take the key action on the front page (like sign up)? This has always been a difficult marketing task but it's nothing new. Just because someone is on the web doesn't mean they are not influenced by the same methods that have worked in the offline world. So, why not look at the tactics in the offline world? Enter Dr. Robert Cialdini who is best known for his popular book on persuasion and marketing, Influence: The Psychology of Persuasion. In writing the book, he spent three years going “undercover” applying for jobs and training at used car dealerships, fund-raising organizations, telemarketing firms and the like, observing real-life situations of persuasion. 

So I thought I'd take his 6 "Weapons of Influence" and identify some of the web services who are putting his tactics into action. So, here are 6 ways to influence your web customer into taking action!

Reciprocation

People tend to return a favor. Thus, the pervasiveness of free samples in marketing. Here is one example I pulled off the front page of Match.com. If you sign up they guarantee you a match within  6 months or you get 6 additional months for free. Tit for tat.

Commitment and Consistency

If people are already committed to an idea or goal, they are more likely to honor that commitment. Jenny Craig takes advantage of this technique by offering users a free 'weight loss profile' which is actually a survey. Taking the quiz gets users to explicitly identify their motivations and then invites them to join.

Social Proof

People will do things that they see other people are doing. To demonstrate this on a web page you can show how many others are already using the service. Check out the following example I pulled off of the Vox homepage. Why do they spend precious space on their front door showing lots of people already use the product. Because it works!

Authority

People will tend to obey authority figures. Check out Mint's shameless plug of the awards it has received from various authoritative publications (i.e. PC World, PC Magazine, Wall Street Journal).

Liking

People are easily persuaded by other people that they like. Why do you think products build invite tools into their products that will send out email invites. Because, if my friend invites me to the service then I'm much more likely to give it a look and join. Everyone has probably seen and accepted Facebook application invitations. I've been dragged in by friends many a times.

If you look back at the Jenny Craig example above they also do a good job of showing other people on the site 'Like Me'. Just showing like people may be compelling enough for some.

Scarcity

Perceived scarcity will generate demand. For example, saying offers are available for a "limited time only" encourages sales. Here's an example I pulled from the front page of Nombray which tells users to claim their name on the web before it's gone. Compelling!