“Scaling growth before having product/market fit is the fastest way to kill your startup.” - Sean Ellis, “Using Product/Market Fit to Drive Sustainable Growth.”
Early-stage startups are in a vicious catch-22.
Investing money to get new customers before product-market fit is like pouring water in a massive leaky bucket. The bucket will keep you from the immediate threat of death, but it’s terrible for sustaining all of your crops.
It’s one reason why growth marketers like Sean Ellis often focus on growth after hitting product-market fit. The path to growth is easier and faster for late-stage startups.
But if you do not invest in growth, no one will buy your product.
Here’s another challenge you’ll face early on.
The marketing strategy you use after product-market fit is often different than before you hit product-market fit.
So what should a smart co-founder like you do before you reach product-market fit?
Invest in a go-to-market strategy.
A go-to-market strategy is the plan a startup takes to get new customers for a new product. In other words, all the marketing that takes place before reaching product-market fit.
Finding your first loyal customers is difficult because they need:
Once you reach product-market fit, customer acquisition becomes a lot easier. Customers use your product longer. They refer customers to your product. And they will gladly pay a premium.
Until you hit product-market fit, you need to be lean and agile (I’m speaking broadly, not just in your project management style).
This is why I recommend early-stage startups focus on one goal: What do I need to do to reach product-market fit? In other words, what will help you get 1,000 customers who will be very disappointed if your product no longer existed?
Your go-to-market strategy will help you map out this process.
One of the most common errors I see startups make is they fail to get the fundamentals right (or they never revisit them).
At this stage, you should have:
Here is what you should include in your go-to-market strategy:
Here’s how to create a go-to-market strategy, step-by-step.
An efficient go-to-market strategy should answer the following questions:
There’s a temptation to take every customer you can get when starting out.
But not every type customer receives the same value for your solution. And some customers will hijack your product and do more harm than good.
Justin.tv was built for people to livestream their lives. Within a year, it was used to stream copyrighted content. Needless to say, these were not the right customers.
Start by focusing on the one customer type you believe will receive the most value from your solution.
The exception is if you are a two (or more) sided marketplace. In which case, you should choose only one customer persona for each side of the market.
It’s likely the hypothesis of who your best customer persona actually is will change as you grow. That’s a natural part of the process for early-stage startups.
Podia began by targeting coaches. Once Spencer Fry reached 100 customers, he learned his best customers were content creators, not coaches.
Justin.tv later discovered their best customers were video game players.
Yes, you may “lose out” by missing your target customer in the beginning. But focusing on one customer will help you from changing your positioning, marketing strategy, and product roadmap with each new persona you come across.
After picking who you will target, you will want to decide what acquisition channel will most likely produce the highest ROI.
The best channel will depend on:
To start, you should consider each channel. What would success look like?
Once you have each channel mapped out, you will want to prioritize which channel you believe to be the most effective.
To prioritize your channels, score each channel from 1 to 5 in these three areas:
This prioritization is known as the “ICE” framework.
Once you’ve given a score, add up the numbers and rank your channels. In the event of a tie, prioritize the test with the highest Ease score. It’s better to attempt more tests because you don’t know if a test will be a success and by how much until complete.
While there are several growth channels available, the majority of channels fall into one of these 12 categories:
1. Virality and network effects.
Virality isn’t just when your cat video hits the front page of Reddit or Youtube. It’s about optimizing the time it takes a customer to invite or refer more friends to your product. This is called a viral loop.
Viral loops are most common in network effect products like Facebook and LinkedIn, which increases in value with each new user. Unfortunately, it’s also hard to create viral loops and network effects.
2. Search engine optimization (SEO).
SEO is the process of improving the ranking of your content for keyword phrases your customers search for using search engines.
The three largest search engines people focus on are Google, Youtube, and Amazon. Although there are similar principles when using each platform, there are different distinctions for finding success.
People love SEO because once you have a successful fly-wheel, it often requires very little time or money to keep getting ongoing results. Something you write 5 years ago can still give you new customers, while after you spend money on ads, that’s all you get. SEO also allows you to educate your audience to become better customers.
That said, it is challenging and often time-consuming to get the SEO fly-wheel spinning. If you do SEO right, you should see organic traffic in 2-4 weeks. But it often takes 6-12 months before you get enough traffic that converts.
It’s also worth noting that SEO requires content marketing to work. But content marketing does not necessarily use SEO.
3. Paid advertisements.
Paid advertising is one of the largest traction channels with companies paying millions of dollars every year.
Paid advertising includes search ads, social media ads, banner/display ads, and native ads. If you branch into offline channels, this includes billboards, (satellite) radio ads, TV ads, print ads, and mailers.
While advertising is easy to pay-to-play, it often costs a lot of money to do it successfully. How much money?
For simple math, let’s say a click costs you $2. If 2% of those who click your ad become a customer, it will cost you $100 per customer ($2 X .02 = $100). And this does not account for the money you’ll invest getting better customer data either. That alone can cost $3,000-$15,000, depending on how accurate your customer persona is.
Sometimes you need to hand-hold a potential customer to make money, which is often done through sales. The sales process includes generating leads, qualifying them, and turning them into customers.
As a go-to-market strategy, sales is one of the fastest paths to getting new customers. And it’s not uncommon for startups to use sales in addition to another acquisition channel.
Sales often requires you to sell high-ticket products so your profit margin works out. Usually the average value of the product should be no less than $3,000 a year. Here’s the math:
Let’s say you pay a salesman or woman $80,000-$100,000 a year after bonuses. With a 3:1 lifetime value (LTV) to cost of acquiring a customer (CAC), that means you need $240,000 to $300,000 in sales a year. At 100 sales a year, that’s about $3,000 in annual contract value (ACV). Or $299/month for a monthly subscription when you account for churn.
You may find it best to start by doing sales first, then switch to another acquisition channel once you hire someone else.
5. Business development and partnerships.
Business development is focused on exchanging value through partnerships. This includes influencer marketing, affiliate marketing, and integrating your product with other products that promote you to their customers.
Business development is like sales, but focused on a partnership rather than selling directly to your customer.
From traditional press releases, to PR stunts and working with blogs, press can help you get potential customers, improve your social status, and increase awareness.
What gets a reporter’s attention? Here are X of the most common opportunities for startups:
This means you need to provide their readers with:
The more you can combine together, the more attractive your story. For example, if you do a PR stunt which helps you get your first 10,000 customers, this becomes a new attractive story. Add some original data where those 10,000 customers came from and you have a more powerful story to share.
If you want new customers through press, you will usually do better with relevant niche publications than large publications.
To scale press, most pair it with SEO and occasionally with ads. You can also keep creating more press-worthy stories.
7. Engineering as marketing.
Do you have a team of engineers? You can leverage their skills by building tools and resources that reach your customers.
Some common tools include calculators, WordPress plugins, and educational microsites. You can then collect leads through these tools and get people to buy your product. Sometimes a side project becomes successful enough to be a main product.
Engineering as marketing is often a major competitive advantage because you’re giving something free that your competitors might charge for. That said, this approach requires you to market the new tool too.
8. Social media.
There’s never been a product that serves everyone. But social media giants like Facebook, YouTube, and Instagram are as close as you can to reaching everyone. Even smaller sites like Reddit can help you reach thousands (if not millions) of customers with a single post.
Many social media sites have a low organic reach until you’ve built a larger brand. This is why most startups focus on paid ads and community marketing. But don’t overlook the connections you already have on those sites.
Keep in mind that while it would be great to “go viral,” the odds are stacked against you. You have a much better shot of creating constant wins, or using platforms that scale through SEO.
9. Community marketing.
Community building involves investing in direct connections with your customers and potential customers. Developing deeper customer relationships can result in increased activation, retention, and referrals.
But if you don’t have customers, you can become a prominent member of another community. Forums, Facebook groups, and Reddit communities (called subreddits) are some of the fastest ways to build relationships in your industry.
Building your own community is difficult, but the rewards can be massive. Reddit, Wikipedia, and Stack Exchange is largely built on the community they’ve created. This is also one of the few ways to scale community marketing.
10. Email marketing.
Email marketing is often declared to have the highest ROI. Not only can you use it to find new customers, you can also use it to engage (activation), retain, upsell (revenue), and generate referrals.
Because messages from your company are right beside updates from friends and family, email often feels very personal. When done wrong, email will also make people feel angry, damage your brand, and decrease future email deliverability rates.
Keep in mind it’s also difficult to get a large enough email list to acquire customers. By itself, email marketing cannot grow unless you have some mechanism for others to share and join your newsletter.
But it is possible to start just by emailing a few interested friends. Newsletters like The Hustle, Startup Digest, and Product Hunt all began as emails sent to friends, which now have thousands of customers.
Email marketing is also easier to automate. Many email marketing tools like MailChimp, ConvertKit, and Active Campaign allow you to build automation email sequences.
Typically email marketing is paired with SEO or content marketing to build a list.
11. Trade shows and offline events.
Almost every industry has numerous trade shows and events. And since everything is in-person, you have a rare opportunity to meet journalists, industry influencers and bloggers, customers, vendors, competitors, and partners in one place.
Simply setting up a booth will get you some results. But to get the maximum leverage, you need to be proactive. Set up meetings in advance, host networking dinners, and determine your strategy to get people to come to your booth.
Becoming an event speaker is also an excellent opportunity to generate new customers. Not only will this increase your brand, select people are paid to speak. And if you want to go all-in on this channel, you can host your own event.
Trade shows mix well with sales as you can generate leads, qualify, demo your product, and close customers all in one trip.
12. Content marketing.
When was the last time you read an article online? How about the last time you heard a podcast? Or perhaps watched a video?
Content marketing is everywhere. From articles like the one you’re reading to infographics, videos, and podcasts, content marketing spans a wide range of the acquisition channels.
When done right, content can help you educate the market, build an email list of exciting prospects, land publicity, build relationships, and much more. It’s also one of the best ways to increase your brand. Popular venture capitalists like Mark Suster, Paul Graham, and James Currier are so well-known because of their blogs.
Unfortunately, content marketing often requires knowledge of another channel to become successful. As such, it’s often slower than other acquisition channels.
SEO and social media tend to be the two most common ways of getting traffic to your content. Email marketing is also common to get people to become repeat visitors to your content. But you can also create a paid content funnel using ads, an article, and premium content to get an email address.
The first five customer acquisition channels are the easiest to scale.
Those channels are virality/network effects, SEO, paid ads, sales, and business development/partnerships.
Once you have an established system, these five channels require very little added effort to continue scaling. For example, once you have a business partner, they can potentially send you each new customer they get.
The last seven acquisition channels are easier to get traction, but harder to scale.
Those channels are press, engineering as marketing, social media, community marketing, email marketing, trade shows/offline events, and content marketing.
Each of these seven channels require either one of the scalable five channels, or hiring a larger team to make it scalable.
For example you can scale content through paid ads or SEO. You can also promote your content on Reddit or Youtube, which occasionally gets enough ongoing traffic on it’s own. But by itself, content doesn’t scale.
At this stage, it’s okay if your acquisition channel isn’t immediately profitable. You may make $3 an hour. Or you may lose more money than you gain. The road to becoming a million dollar startup has many potholes when you begin.
The goal of a go-to-market strategy is to start getting a better idea of who your customers are, what they value on each channel, and learning what it takes to make your marketing more profitable.
Right now you don’t need to worry about how profitable it is to scale your marketing. But it is worth taking a few minutes to think through what it would take to make it work.
Let’s say you plan on spending 30 minutes a day on Reddit for the next 90 days, not including Sundays. That’s 77 days, or 38.5 hours. You estimate you could hire someone to take over this procedure at $15 an hour after taxes and benefits. So this experiment if successful will cost you about $577.50.
If you want a 3:1 lifetime value (LTV) to cost of acquiring a customer (CAC), that means you need $1,732.50 worth in new customers. If you estimate the average LTV is $300, that means you need six customers.
How will you track the success of this campaign? Unless you are only running one campaign at a time, you need some way to track your metrics. You can set up a promo code for people to use to track their purchase. That said I do not recommend discounting your product, unless you want to become the low-price leader of your market because it lowers your brand value.
Again, it’s fine if you’re cost to acquire a customer isn’t profitable right now. This step is to help you decide if it’s worth scaling once you hit product-market fit.
Every channel will take time before you find success. And with so many options you can mix-and-match, it’s tempting to lose focus and chase after every shiny marketing object that comes your way.
But not every channel is equal. Different products, skills, and resources will lead to different results. What works for one startup may not for another. As PayPal founder Peter Thiel once said,
“It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution - not product - is the number one cause of failure. If you can get even a single distribution channel to work, you can have a great business. If you try for several but don’t nail one, you’re finished. So it’s worth thinking really hard about finding the single best distribution channel.”
There’s a balance you need to strike between spending too many resources on a bad channel and not enough resources on a lucrative channel.
To start, I recommend investing 2-4 weeks and $500-$1,000 testing each channel.
At this stage you are not trying to get a lot of traction. Instead you’re looking for data to tell you how much the channel could move the needle.
Because tests often take time to run after they’re set up, you can run many experiments at the same time.
Unless you are running an experiment by yourself, it’s helpful to map out:
At this stage, it should not be elaborate. Keep it simple. The more moving parts, the more you increase your odds of failure.
Think of what’s the least amount of steps to see results. Or if you prefer hijacking lean startup lingo, what’s your minimum viable marketing experiment?
Once your experiment is successful, then add extra layers of complexity. In addition to reducing the odds of failure, you can measure the effectiveness of each new step.
Let’s recap what should be in your go-to-market strategy.
At this point, you should execute on your go-to-market strategy until you have 100 customers.
Once you have 100 customers, you will want to look at the customer personas of this batch.
It's typical that your best customer is not who you originally guessed earlier on. Pick the best customer persona and focus exclusively on them as you grow.
Now your website is growing and getting new customers. Let's look at consumer psychology to better understand your customer's needs and turn more visitors into buyers.