Beyond Basics: Innovative Marketing Strategies for Startups Responding to Macro Changes and the Vax 💉 or Vits 💊 Dilemma
Beyond Basics: Innovative Marketing Strategies for Startups Responding to Macro Changes and the Vax 💉 or Vits 💊 Dilemma
Is your SaaS product ready for a changing market? Discover the factors that could reset your marketing strategy and how to respond to sustain growth
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Today, we will dive into the topic on every founder's mind: Growth. 📈
As a startup founder and small business owner, we're always chasing after the next big milestone, whether that's achieving a certain number of users or hitting a revenue target. But here's the thing: not all growth is created equal, and pursuing it blindly can lead to disastrous consequences. 😬
A few years ago, I learned this the hard way when I was tasked with growing my startup's revenue in the US by 100% year-over-year. I invested heavily in search marketing, dove headfirst into top-of-the-funnel campaigns without a clear audience strategy, and even followed the advice of media account managers without applying critical analysis. But it all worked a little too well, and I soon realised that pursuing growth at any cost could have disastrous consequences.
In my previous article, "Why Building Your Startup's Brand From Day 1 Matters," I discussed how building a strong brand is crucial for a startup success, and today's article is a continuation of that topic. It's essential to understand the impact of growth on your business, especially in the changing macroeconomic conditions we're facing today. 🌍
In this essay, I want to share some insights on how to grow your startup sustainably, and you will learn about:
Assessing Your SaaS Product's place in a changing market
Adjusting marketing growth based on macro-trends
Macro factors that will reset growth marketing, and
Marketing in a changing market
Whether you're a seasoned SaaS marketer or just starting, this article aims to elevate your understanding and help you adjust your marketing strategy in a changing macro.
So, sit back, grab a coffee, and dive into the world of sustainable growth! ☕️
The Vax 💉 or Vits 💊 Dilemma
As a SaaS company, it's essential to understand where your product stands in the market. Is it a 'Vitamin,' a 'Painkiller,' or ‘Vaccine’ ? Knowing this can help you better understand your product's value proposition and potential for success.
Vitamins, Painkillers, and Vaccines are the categories used to classify SaaS products based on their perceived value to customers. Vitamins are nice to have but not essential for the customer's day-to-day operations. Painkillers are products that solve a specific problem for customers and provide immediate relief. Vaccines are products that prevent future problems by providing long-term benefits.
To determine where your SaaS product stands, think about its value proposition. Does it offer an additional benefit, solve a specific problem, or prevent future problems?
Here's what you need to know about each category:
Vitamins: These are SaaS products that are nice to have but not essential for day-to-day operations. They provide additional benefits, such as increased productivity or convenience. Examples of Vitamin SaaS products include project management tools, social media analytics, and customer feedback platforms.
Painkillers: These are SaaS products that solve a specific problem for customers and provide immediate relief. Painkiller SaaS products address a specific pain point that customers are experiencing, and their value proposition is centred around solving that problem. Examples of Painkiller SaaS products include payroll and HR management software, accounting software, and cybersecurity solutions.
Vaccines: These SaaS products prevent future problems by providing long-term benefits. Vaccines SaaS products offer a long-term solution to a problem that may not be immediately apparent to customers. They are designed to prevent problems from occurring in the first place rather than addressing them after they arise. Examples of Vaccine SaaS products include backup and disaster recovery software, predictive maintenance software, and employee training platforms.
Now, let's take a look at some examples of companies in each category:
As you can see, each category has its own set of successful companies. Buffer, for instance, is a Vitamin SaaS product that helps businesses manage their social media presence. On the other hand, Salesforce is a Painkiller SaaS product that provides a range of CRM solutions for businesses. For example, Slack is a Vaccine SaaS product that provides team collaboration and communication solutions. ZoomInfo is another Vaccine SaaS product that offers sales and marketing intelligence solutions.
As a SaaS startup in this macro scenario, you must identify whether your product is a Vitamin or a Painkiller. If your product is a Vitamin, getting customers to pay for it may be challenging. Your focus should be on developing a solid value proposition that clearly articulates the benefits of your product. On the other hand, if your product is a Painkiller, customers will be willing to pay for it. Your focus should be on delivering a product that solves a specific customer problem.
Clara Shih, the founder and CEO of Hearsay Systems, says, "If you're a Painkiller, customers will be clamouring for you. They'll want to work with you, they'll want to pay for you, and they'll want to use you. If you're a Vitamin, it's slightly more of a slog. You must go out there and evangelize your product, vision, and value proposition."
Understanding which category your SaaS product falls into can help you better communicate your value proposition and potential for success to investors and customers. Whether your product is a Vitamin, Painkiller, or Vaccine, focus on creating a solution that addresses a specific need in the market and provides real value to your customers.
So, which one is your product - a Vitamin or a Painkiller? Once you know the answer, you can focus on the right marketing strategies to attract and retain customers
How to Optimize Advertising Spend in a Challenging Macro Scenario? 📉
As a startup founder, you're likely facing a lot of uncertainty in the current macro scenario. You may wonder whether to cut advertising spend to reduce costs or maintain it to boost sales. While there's no one-size-fits-all answer, it's crucial to base your marketing decisions on the sales outlook.
During challenging times, many businesses tend to cut back on advertising spend. However, maintaining advertising during a downturn could boost sales both during and after the recession. I learned this firsthand when we faced the pandemic in March 2020.
At that time, we initially decided to stop advertising and take a wait-and-watch approach. However, we quickly built a dashboard to monitor online impressions, clicks, signups, sales conversion rates, and customers.
It took some trial and error, but we eventually figured that out:
Cutting spends on non-converting keywords
Aligning keyword bids closer to cost benchmarks
Keeping off aggressive auctions and positions
Focusing on payback at a micro-region and channel view
We maintained healthy web conversion rates to signups, resulting in us spending only 70% of our online marketing budget for the rest of the year. We refused to pause our advertising efforts in an uncertain macro environment. We were determined to stay the course– the decision paid off!
We reported this on a weekly & monthly basis and stayed the course pretty successfully.
So, why does it make sense to maintain or increase advertising in changing times?
Research has shown that advertising can significantly impact a downturn. There's less competition for advertising space, meaning personal ads are more likely to be noticed and persuade consumers. Plus, advertising costs usually go down during a recession, making increasing your share of advertising space easier.
With that said, it's essential to keep in mind that the effectiveness of advertising depends on various factors. One of the most critical factors is achieving Product-Market Fit (PMF). PMF is a concept that refers to the degree to which a product satisfies a strong market demand. When you achieve PMF, your product is in a sweet spot where it meets a critical customer need and has a large enough market to generate significant revenue.
PMF is not an absolute state but a process requiring continuous improvement and adaptation. To achieve PMF, you need to understand your customers' pain points and create a product that solves their problems uniquely and compellingly.
The next section will dive deeper into what PMF is and how it influences your marketing decisions. As a startup founder, understanding and achieving PMF is crucial to success in a challenging macro scenario.
Rethink the Relationship Between PMF and Growth Marketing 🤝
Once you've achieved PMF, scaling your business is next. However, making decisions regarding your advertising and marketing spending can be tricky. It's essential to determine your current PMF score first.
On a scale of 0-1, if you're still finding PMF, it's best not to invest in any paid advertising. Instead, focus on non-paid search, participation in online communities, and organic listings on social channels. Moving from 0-1 to 1-10, you can allocate some budget towards performance marketing, like paid search and video ads.
Once you've achieved a PMF score of 10-100, it's time to scale elegantly. This means deciding whether to cut advertising, keep marketing spending constant, or cut marketing spend proportionally to the sales outlook. If you cut advertising, focus on non-paid demand generation channels like SEO, online communities, and organic social media listings.
However, if you're confident in your sales outlook, you can consider increasing your marketing budget and exploring new channels like competitor take-downs, promoting white papers to passive researchers, and creating thought-starting TOFU (Top of Funnel) content. It's essential to keep your focus on customer pain points, content creation, and personalized outreach.
Additionally, if you're in a competitive market, you may need to explore paid advertising channels like paid search and video ads.
Another essential factor to consider when scaling your business is the influence on sales outlook. You can maintain your current strategy if you feel no pressure to increase sales. However, if you need to reduce your sales outlook by not more than 30%, you may need to prioritize customer retention and focus on marketing to your existing customer base. If you need to reduce your sales outlook by not more than 30-40%, consider expanding into new markets or languages. If you can focus on new customer acquisition only, prioritize marketing efforts towards cross-selling to your existing customers.
To help you make informed decisions, refer to the table below, which provides an overview of the decision-making process when scaling your business based on your PMF score:
So, now that you have a better understanding of how to scale your business after achieving PMF let's explore the three macro factors that will impact growth marketing in the coming years. These factors will help you stay ahead of the curve and ensure that your marketing efforts continue to deliver results in a rapidly changing landscape.
Let's explore them in more detail.
The 3 Factors That Will Transform Your Startup's Growth Marketing
Success in today's startup world depends on adapting to changing market conditions. As growth marketing continues to play a critical role in achieving this success, staying on top of the game is essential.
With that in mind, let's dive into the three key factors that will reshape your marketing strategies over the next 18 months:
Here are the three pillars:
Sustainable Brand Growth: Do more with less
Beware of the Drug Called Paid Search: Be cautious with budget
Focus on Customer Value: Build loyalty, drive growth
Let's examine how these factors can transform your startup's growth marketing.
Sustainable Brand Growth
As a startup founder in the SaaS world, building a strong brand is essential for your company's growth and success. But what exactly does "brand" mean in this context? It's not just about a logo, colors, and tone. Your brand is what people think of your company, including your product and the people working there.
As I discussed in my previous blog, "Why Building Your Startup's Brand From Day 1 Matters", building a solid brand from the beginning can help you establish a clear identity, build trust with your audience, and differentiate yourself from competitors. As a startup founder, you are responsible for defining your brand values and mission and communicating them effectively to your team and customers.
While marketers can be crucial in building your brand, it's not solely their responsibility. As a startup founder, you should be involved in shaping and defining your brand identity.
If you will use your brand as a lead-gen strategy, especially on online channels, be prepared for it to be a slow but sure strategy to grow. As I have been helping startups, here is what I have seen:
The data shows that a brand-influenced strategy may take longer to show results, but it can be 7x more efficient in revenue generated for every dollar spent than a non-brand strategy.
Here is how their acquisition models looked:
And here is a brand vs non-brand efficiency comparison:
As you can see, the non-brand sessions contribute to over 80% of their web sessions, and 60% of the signups are non-brand, with brand signups making up just 40%. However, the efficiency metrics paint a different picture:
Signups coming from brands are 3x better in conversion rate than non-brand signups, despite accounting for just 19% of the brand traffic.
Of the 40% of the free trials influenced by the brand, 64% ended up converting into paying customers, while non-brand signups only converted at a rate of 36%.
The sales team is twice as effective in converting brand-influenced signups into paying customers.
For every dollar spent on brand, the company made $7, compared to just $1 for every dollar spent on non-brand.
These insights demonstrate the importance of building a solid brand from day one and continuously refining and adapting it as your company grows. To achieve this, keep the following in mind:
Clearly define your brand values, mission, and unique value proposition from Day 1
Develop a strong brand voice and tone that reflects your brand personality and resonates with your target audience
Create a consistent brand image across all touchpoints, including your website, social media profiles, marketing materials, and product interface.
Build a strong community of advocates who share your brand values and mission.
Continuously monitor and measure your brand's performance and make adjustments as necessary.
Beware of the Drug Called Paid Search 🌿
"As a startup founder, you are the driving force behind generating revenue and leads for your company. The stakes are high, but the opportunity to take control of your company's success is also a privilege."
The paid search might seem like a quick fix to drive traffic to your website, but weighing the costs and competition before diving in is essential. While it can be effective for specific keywords and commercial intent, tracking your ROI and balancing it with other marketing tactics like SEO to create a comprehensive strategy is critical.
One way to create a targeted approach tailored to your product and the audience by focusing on mid-funnel and bottom-funnel strategies as part of your demand gen strategy.
Let's take a closer look at two products to see how this can work in practice:
First up, let's check out the spend vs revenue graphs for Product A and Product B:
As you can see, Product A has higher spending but lower revenue than Product B. This indicates that there might be a misalignment between the product-market fit and the brand and marketing execution for Product A.
PMF, Brand, and Marketing Execution for Product A and Product B
To improve the performance of both products, I recommend taking the following steps:
To wrap up, remember that paid search isn't a cure-all solution and should be cautiously approached. Instead, take a comprehensive approach to your marketing strategy, including a mix of tactics tailored to your audience and product. As the economy fluctuates, you must make the most of your marketing budget by focusing on cost-effective channels with proven ROI. A recent report from the IPA Bellwether shows that companies are still investing in marketing to drive growth despite economic uncertainty.
Look at the breakdown of marketing budgets by channel below to see where your company can make the most impact.
Overall, by prioritizing investments in areas most likely to drive growth and ROI, you can avoid the "drug" of paid search and build a comprehensive, effective marketing strategy for your startup.
Focus on Customer Value
Focusing on customer value is an essential strategy for companies during more challenging macroeconomic conditions, as it can help retain customers and increase customer loyalty.
5 Tips for Startups:
Offer value-added products or services to increase customer loyalty
Simplify the buying process to make it easy and convenient for customers
Prioritize customer support to build trust and create a positive customer experience
Offer promotions and discounts to encourage repeat purchases and drive sales
Integrate with other software to provide a more comprehensive solution for customers.
Examples of popular SaaS companies that follow these strategies:
Freshworks provides an effortless trial experience
Mailchimp offers very flexible pricing plans
Shopify integrates with various other software, including accounting tools, inventory management systems, and shipping providers.
Slack integrates with various third-party apps and tools, such as project management software and Google Drive.
Always keep the customer at the centre of your strategy. Focusing on customer value can create a positive customer experience, increase loyalty, and drive growth. With the proper focus and commitment to these lessons, your product-led growth strategy can help your startup achieve lasting success.
To learn more about Product-led Growth, check out our previous post on the topic.
7 Key Takeaways
Understand the impact of growth in changing macroeconomic conditions.
Communicate your SaaS product's value proposition as a Vitamin, Painkiller, or Vaccine.
Maintain advertising during a recession to boost sales.
Monitor macro-trends and adjust marketing growth strategies accordingly.
Focus on creating valuable solutions for customers.
Continuously measure and analyze data to optimize growth strategies.
Keep your customer at the centre of your product-led growth strategy.
Bonus: Lessons from Tech Legends 🚀 Insights from a Twitter Chat with Paul Graham and Craig Newmark
Let me tell you about a conversation I had on Twitter last week. I was browsing Paul Graham's website when I realized it had an old-school design. But, the content was still informative and valuable to startup founders, which got me thinking. So, I decided to tweet about it and tag Paul Graham to see what he thought.
To my surprise, he replied!
Then, I remembered Craigslist, another classic platform with a simple user interface, and I decided to ask Craig Newmark how he built his marketplace.
His response was a gem, and it's now something that I've pinned up on my board.
It's incredible how much you can learn from just a few conversations with industry experts. And I'm happy to say that this conversation with Paul and Craig led to an unexpected bonus: my personal best on Twitter!
This exchange reminded me of the significance of understanding your audience and catering to their needs rather than focusing solely on a flashy design. The conversation with the men who defined the ideas of "startups" and "marketplace" proved fruitful, and as a result, I even grossed my personal best on Twitter!
So, next time you build your startup or work on your product, don't forget to engage with your audience and listen to their feedback. It could be the difference between success and failure.
Recommended Reading 📚
A guide to getting started with PLG
Why Building Your Startup's Brand From Day 1 Matters
Driving Growth with Paid Ads
Marketing budgets cling to growth despite recession fears
And with that, I covered some key strategies to help your SaaS startup achieve sustainable growth.
As Seth Godin once said,
Remember, always keep the customer at the centre of your growth strategy. Your startup can achieve lasting success with the focus and commitment to these takeaways.
And that's it for this week! If you enjoyed this article, subscribe to our newsletter for more insights and tips on growth stories.
Don't forget to share this post with your team or anyone who might find it valuable. Thanks for reading, and we'll see you next time on Growthstore.xyz!
Until next time 👋
— Ramesh