What we cover in Episode 7
What do all marketers have in common? At some point in their career, they've had to deal with flattening growth.
Near all customer acquisition channels have a ceiling, yes, even virality has limits. Companies who fail to properly plan for these ceilings or are unable to deal with them when they appear usually crash and burn.
So, how can you be one of the lucky few who is able to grow through them?
We take you on a journey through some of the best content on how to deal with acquisition ceilings, including content from Brian Balfour, Andrew Chen, Noah Kagan and Rand Fishkin.
We discuss:
- Why Product-Channel fit is imperative to plan for before your product is launched.
- Why virality is a lot more difficult to engineer than most people think, and why we could already have saturated a lot of viral tactics.
- Where Andrew Chen see's the next big opportunities for companies to build viral products.
- How Noah Kagen avoids customer acquisition ceilings by using a proactive dashboard.
- Rand Fishkin's tip to find new untapped sources for customer acquisition.
Podcast Transcript
Kieran: Welcome to The Growth TL;DR, it's another episode with the content, the interviews, the case studies to help your business grow.
Scott: That's right, and on this podcast, Kieran and I are going to cover one of our favorite topics, and that's what is an acquisition ceiling, and how can you break through it?
Kieran: Yeah those darn acquisition ceilings. There was recently a great article over on The Reforge brief blog. It's a great blog. You should check it out. And it's about how Amazon broke through their invisible, and I cannot pronounce this word, but I'm going to try asymptote. And you can find the article in the show notes, but in it, Amazon described this as a ceiling our growth curve would bump its head against if we continued down our current path.
And what they were talking about was the issue of shipping fees for Amazon. People hated paying for shipping fees. It put them off ordering for Amazon, and there was a year-long project to figure out how to solve that. That's eventually what led them to Amazon Prime.
Scott: And it's interesting to think about this problem as it relates to acquisition channels because that's what we're all relying on to pull people in the top of the funnel. Andrew Chen had a famous article called The Law of Shitty Clickthroughs (https://andrewchen.co/the-law-of-shitty-clickthroughs/). If you have not read it, I highly suggest going through and reading it and, again, that will be in the show notes. And it summaries this problem well, that most marketing tactics and channels eventually generate diminishing returns.
So he gave a great example of clickthrough rates with banner ads, in 1994, being 78%, and a Facebook ad today is 0.05%.
Kieran: Yes. That's a startling stat.
Scott: It's somewhat terrifying. But it makes sense. 1994, I think I was four years old at that time. A lot has changed in life since then.
Kieran: You weren't one of the people clicking on those display ads, then?
Scott: No, I was playing Super Nintendo Mario Brothers with my sisters, and hanging out on bean bags, in Michigan. That's what I was doing in 1994.
Cool. And to bring it back to what I've personally experienced at HubSpot, is we have various in-app upgrade points, which we call PQLs. That stands for product-qualified leads. And a very interesting thing we learned is the longer we keep one in the same spot, the more likely it's going to be ignored. Think of that as banner blindness.
Kieran: Yeah, and you bump into these acquisition ceilings all throughout your marketing. That's why we wanted to do this episode. You bump into them when you are scaling tactics, scaling channels. So we're going to get into content that deals with acquisition ceilings.
And we're going to get into our very first topic of product channel fit, by Brian Balfour. Cue DJ Scratch.
1. Product Channel Fit Will Make or Break Your Growth Strategy
Kieran: So, this is an excellent article by Brian, who has many excellent articles. And he introduces the topic of product channel fit. So you go through, in high growth companies, you go through market channel fit, and you should also think about your product channel fit. And he defines it as the channels that best suit your product that you can acquire net new users from, you can scale from.
And the important thing he has in that article is product fit with channels because channels define your rules, and I think that's important for us to consider. Think about Facebook defines what content appears in your feed. Think about Google defines what results appear in your top ten. Think about email clients like Gmail determine what is and what isn't spam.
Scott: And you also need to think about how your product will fit certain channels. So, let's take virality for example. We are guilty of this, at HubSpot. We've gone through this trials and tribulations many different times. We think virality is going to be our ticket to the big time, but the fact is it only works in certain cases, to get virality as a viable channel to click. And there are a few instances that make it be that way.
One is it needs to be broadly applicable. So your product has to be relevant to a large percentage of the user's network. For example, Dropbox worked well, because their users would share files with other people, those people who received those files, also needed to share files with other people. So it was a product that had a broad reach.
The second component of virality to get it to work is there's a short time to value. And another way to think about that is short viral cycles. So when someone refers the next person, and that person signs up, from the moment that they sign up to the moment that they quote-unquote "receive value," that needs to be a pretty short window, for your viral coefficient to be healthy.
A third point, which is a bonus, is if the product has network effects. And what that means is the more people use the product, the more the product grows in value, for example with Facebook or Instagram. The more friends you have, the more accounts there are to follow, the more you're going to remain on that platform.
Or, with something like Yelp or TripAdvisor. If there are only two reviews, it's not that helpful for figuring out what restaurant you should eat at, or what hotel you should stay at. But when there are 2000 reviews, and there are 2000 reviews across 200 different restaurants or hotels, that then becomes helpful, because there are network effects.
Kieran: So the two reviews for two hotels is helpful for people like me who prefer restaurants that have a menu with only three courses on, so I don't have to make decisions.
Scott: Paradox of choice.
Kieran: Yeah, I may be a good user for that version of Yelp.
Scott: And then, the fourth component of virality, which is tied to our overall topic here, is product channel fit. And what that means is to experience virality, the core product value needs to be naturally visible to someone else. A great example is a Chrome extension called Loom, and what that is is it allows you to record your screen, and then you share that with someone else, and it cuts down on the back-and-forth that you'll have in Slack or email.
Kieran: Yeah, exactly. So virality is not an easy thing to incorporate into your product, and I think you've described the things that you need to have, for it to be a viable source of users. And when I say viable, I mean have a meaningful impact on your funnel.
Another thing that Brian describes is a user-generated content funnel or a user-generated content SEO strategy. That fuels organic growth because people create content that ranks in Google and acquires net new people into the product itself. Examples of this are Pinterest, where people create a bunch of content, and Pinterest aggregates that content together to rank for a lot of different key phrases, or Yelp, or TripAdvisor. One of my favorite examples is a company called Rap Genius, or it's called Genius.com now, where they created features that allowed people to provide commentary around rap lyrics, and generate a lot of user-generated content that ranked in Google and managed to acquire a lot of net new users back into the product.
Scott: And in his article, Brian Balfour talks about the power law of distribution. And really what that means is you have one or two channels, usually one, that tends to drive the most amount of users to your platform. Let's look at a couple of examples:
HubSpot is an excellent case study for SEO. Over the past 12, 13 years, we've been doing a lot of inbound marketing. All that inbound marketing ties into organic search, and that's helped us build up a great foundation on acquiring users via search. Another good example is Facebook, and either there's the social gaming aspect of it, Zynga is a typical example that's used a lot.
But another one that I think is interesting, which lines up to product channel fit, is Upworthy. Upworthy's a website that has viral content, essentially. And the thing is is that they build their content, or you can think of that as a product, to fit within the channel. So they write content that they know is going to perform well on Facebook. They don't try to do their content and then distribute it everywhere. They know that Facebook is their power-law channel, and they will write content according to that channel.
A third example is with virality. One that's not cited very often, it's a new product that's coming out, that's Bird Scooters. So they're these electric scooters that you can hop on, and the fascinating part about virality is it doesn't always have to come from your phone, or it doesn't need to come from email. It can happen in person. And what's interesting with these Bird scooters or Lime scooters, as you'll see them more and more popping up in bigger cities, at least in the States, is you watch someone go by on this scooter, and you're like, "What the hell is that thing?" And then you see a logo on it that says Bird.
And as you see those over and over and over and over, it starts to capture your attention, and so you're looking at virality not only from your phone or your computer but what you're experiencing in real life.
Kieran: The big next battleground for Silicon Valley is electric scooters!
Scott: Yeah, exactly.
Kieran: Cool and I think then, the last one you have sales partnerships. That's a pretty standard way to go to market and Salesforce, Oracle, IBM are good examples of that. And the tl;dr of this article is really; you should focus on succeeding in one or two channels, versus trying to do them all. Try to figure out what is a good fit for your products and try to dominate a couple of channels, and that's usually how the most successful companies become really big companies.
And there's a classic example of Pinterest, that we've described before, who acquired growth through Facebook and that channel got taken away from them when Facebook made some changes, similar to Upworthy, and then they shifted a lot of their focus to Google and managed to grow from that channel. So you need to have a couple of channels that you are willing to go all in, invest, and are a good fit for your product.
And that brings us nicely on to the next topic.
Scott: Cue rap.
2. Finding the Fresh Powder in Growth
Scott: All right, and our next topic is finding the fresh powder in growth. Andrew Chen recently did a great podcast interview on the Intercom podcast and had some interesting notes for acquisition with high growth companies. So he talks about virality and B2B, mentions the common examples like Slack, Dropbox, DocuSign, but also has an interesting point about trying to get virality to work, with B2B companies that are reliant on other channels unrelated to virality.
So for example, if you're acquiring a ton of users from Facebook ads or Google ads or SEO, but you don't have any natural virality, which means when you use the product, it gets shared with someone else, they end up signing up for the product, it's pretty risky, because you're really putting all your eggs in one basket on a channel that you don't entirely control.
If Facebook changes something up, if Google changes something up, you can be in big trouble, because you have so many of your eggs in one basket.
Kieran: Yeah, I think what Andrew means by well-funded is startups who get a lot of investment, go all in acquisition and don't succeed. And they're very reliant on a couple on a single channel. That channel gets taken away from them, and they have no other types of acquisition channels that are working for them.
And I think what natural virality also means, brand, word of mouth, if you were acquiring a lot of people through paid or you're acquiring a lot of people through Google, then you should be building up some word of mouth for your product, so if those channels start to diminish, you don't overnight have zero people signing up for your product, similar to a Zynga, who got crushed when Facebook deprioritized social gaming.
Scott: Yeah, here's an interesting point that Andrew mentions, that even virality can sometimes feel saturated. So for example, a really common tactic with virality is an app will plug into your contact list during the signup flow, but it's been done to death. A lot of people have done that over and over and over, which goes back to the law of shitty clickthroughs, which goes back to Psych 101. If you see the same thing over and over and over and over and over, you're eventually going to ignore it, because everyone else is doing it.
So how can you be the Seth Godin purple cow, and stick out a little bit? Where not just only inviting your contact list, which has been done to death. So it's much more unlikely that people are actually going to invite their contacts. So he talks about finding channels that have not been exhausted or finding tactics within virality that have not been exhausted, like leveraging your calendar perhaps, or maybe documents you're editing, that have a lot of data on who you're collaborating with.
So for example, there's an app called Crystal Knows, that will scan your calendar, and give you recommendations on how to interact with the people that you're meeting with.
Kieran: Yeah exactly. So I think it's ... With all these things, it's how you can be the person to do something new in that space, whether it's a channel or a tactic? I would love to meet the one person who signed up to every single app, and clicked yes when it's asked if they want to import his contact list, and then talk to the people who are on his contact list and see how much they hate him.
And Andrew does touch on the law of shitty clickthrough rates in this article, that we explained at the start of this podcast. And he really reiterates what I've just said, as marketers need to stay on top of new platforms. If you think about platforms today, you have Alexa Skills which is pretty interesting, you have a lot of ecosystems that are developing around gaming like Discord and Twitch.
And those two articles have done a great job of giving people awareness around the problem, the things that they should think about when they're building out an acquisition plan, and we should get into some awesome solutions.
3. How to Break Through Acquisition Ceilings
Kieran: And so this is a range of different articles you can go check out. It has some cool things that can help you from crashing and burning overnight when it comes to acquisition. And the truth is, there is no answer for this. Ceilings are very difficult to overcome. But here are a couple of suggested things you can do, go check out.
Scott: Let's start with one of the first ones, and that's actually to have a proactive dashboard, or what is known as a growth dashboard.
So, anyone who's not familiar with Noah Kagan, he's amazing. He's the founder of Sumo. He's the king of taco stands all over the world. If you start to read his content, you'll know what I mean by that. And he shared a video on how you can create a proactive dashboard, around a goal that you might have, and we'll include that in the show notes.
And what he does is it breaks everything down from, what you can do each month, to hit your goal. So let's say you need to hit 500000 users in a year. You can list out the channels that we think you will get growth from, such as SEO, virality, etc. And each month, list proactively, what are the things you can control in that channel, to actually acquire net new users?
And we've done that at HubSpot, at least as far as I've been here when I started with Brian Balfour's original growth team for the Sidekick product. That was a fascinating thing that I learned, is everything goes back to the growth dashboard. And not only looking at it from an acquisition lens but also activation, retention, monetization, etc. And if you notice one of your main acquisition channels could be slowing down over time, you can review what's being done, and ask the question, is there a problem with the channel that doesn't naturally fit within the product, or some deeper reason, which goes back to product channel fit? Or do I need a fresh pair of hands on this?
Kieran: So the other thing you can do is make sure you have some time dedicated to finding new channels for growth. How much you want to do that probably depends on where you are in the life cycle of a channel. So if there's a ton of search volume for keywords relevant to your product or service, and you've only just started to try to figure out how to get that volume or that search traffic for those key phrases, you may want to dedicate 100% of your team's time to that channel. If that channel isn't saturated, you're in the early stages of it; you don't want to start to go, "Oh, what's our next channel?" You want to figure out how to get as much value as you can from that channel.
But if you've been extracting growth from a channel for a while, you may want to have some of your team's time dedicated to experimenting with new channels.
Scott: So Kieran, you mentioned something earlier around saturation. And okay, at what point do you know if your channel is saturated, and if you should move on to the next channel, or if you continue to double down on that one channel? How do you think about that, as far as what do you do? Do you keep going down the path you're on, or do you start to diversify and look at towards the second channel? How do you know when you're quote-unquote "saturated"?
Kieran: It's pretty easy to tell if a channel is saturated if you have experience, using a growth dashboard, you'll see a continuing flattening out of a channel. At that point your asking yourself, have we exhausted growth from this channel, or does the team dedicated to that channel need some help to think more creatively about how they can try new things.
I think a lot of the time it could be due to the latter reason, the team who's dedicated to that channel need a fresh pair of eyes.
Scott: Awesome. So let's close it out with a neat little tweet from Rand Fishkin, on finding new channels, which we will also include in the show notes. But Rand has a tweet, and it says, "Hey marketer, go figure out sources other than AdWords or Facebook Ads we can use to reach our audience." End quote. And then he lists out a process.
- Step one, create a spreadsheet.
- Step two, go on Google and type in "top blogs in blank" or "most influential blank blogs." Put that in a spreadsheet. Sort through all the results, adding the names and the URLs, et cetera, into the spreadsheet.
- Step four. Repeat the exact same process for podcasts, news publications, people, events, websites, forums, YouTube, Facebook, Twitter, LinkedIn, et cetera, and then research every line in your spreadsheet with the estimated reach numbers, contact info, and then you can start to get estimates on acquisition channels that you might not have seen, but have been right in front of you the whole time.
Kieran: Yeah I think that's an excellent exercise to broaden your horizons outside of Facebook, Google, and a couple of other platforms that have a lot of people on them. So we'll put that into the show notes, the screenshot from that tweet.
What to Check Out From This Show
1. Product-Channel Fit for Growth
2. Finding the Fresh Powder in Growth
3. Build a Proactive Dashboard
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Topics: Podcast, Swipefile, Customer Acquisition
