Why To Run Your Marketing Department Like A High Flying High Tech Startup

INTRODUCTION

Considered by many as the lifeblood of the 21st century economy, technology startups are known for pushing the envelope and out innovating their competition generating significant piles of cash in the process. Out of this success and innovation have sprung a series of methodologies (Lean Startup, Business Model Canvas, Customer Development) for launching and testing new ideas.

The latest in this line of research is in the field of analytics and that's where Alistair Croll and Benjamin Yoskovitz enter the picture. Both Alistair and Benjamin recently co-authored a book called Lean Analytics. While this book is targeted primarily at entrepreneurs launching technology startups, I sat down with Alistair to see how marketers, like you and I, could apply the very same principles in an effort to be more effective and beat the competition.
 

QUESTION & ANSWER SESSION

William: At a high level, what is the concept of Lean Analytics all about?

Alistair: It's about figuring out the one metric that matters to your business right now, and then improving that metric until it's at a place where you can move forward as a business. It combines the focus and discipline of lean models with the data-driven mindset of analytics.

For any company—particularly a startup—the metric that matters will depend on the kind of business you're in and the stage your company is at. It's not just for startups, though. For example, if you're running a restaurant, early on you care about getting the menu right and understanding your customers; later, you care about margins and staffing. And much later, you care about revenue from franchisees.

 

William: How can your teachings be applied to marketing?

Alistair: Well, if you take the formal definition of marketing (which encompasses product, price, channel, and promotion) then it applies to nearly every aspect. At its core, it is a book about product management.

If you mean the informal, "marketing communications" such as advertising and promotion, then lean analytics helps you to find the right message for the right audience.

We joke that Kevin Costner is a lousy entrepreneur (actually, he's a pretty awesome entrepreneur, working on technology to clean oil from the ocean, so we feel a little guilty when we say that.) But what we mean is that the "if you build it, they will come" attitude is bad. Marketing is about making what you can sell rather than selling what you can make. In today's rapid-prototype, cloud-and-social-media world, the cost of creating something is vanishingly small compared to the cost of being wrong. So the new mantra should be "if they come, you will build it." Marketers need to realize that attention is a scarce resource.

Sergio Zyman, who was the CMO of Coca-Cola and knows a thing or two about marketing, defined it as "selling more things to more people more often for more money more efficiently." I like to think that, for marketers, Lean Analytics can help get the most out of each "more."

 

William: What does success look like?

Alistair: Success varies by company, but the key is to know what success looks like before you start experimenting. Otherwise you're just thrashing around, or wasting your time. If you're going to launch a campaign, know three things: who is the audience, what do you want them to do, and why should they do it. Then decide what metric you're going to track (such as conversion rate, new enrolment, or people who came in for a haircut) and what what the line in the sand is that means you've been successful.

If you can't define these things on paper before you start marketing, you probably need to go back and look at your business model.

 

William: How do marketers get executive buy-in to leverage these strategies inside their own departments?

Alistair: It starts with understanding which metrics matter the most to your boss. If you're going to try and improve a metric that your boss cares about, you'll get buy-in. It's when you try to improve things that aren't clearly related to the business that people get upset.

There's been a lot of talk about "social media ROI." That's putting the cart before the horse. A much better approach is to say "business model" and then decide if social media—or anything else—can help the business model. Then the ROI just naturally emerges from the whole process.

 

William: Can you clarify the difference between data informed and data-driven marketing?

Alistair: Many people worry that we'll be blinded by data. Perhaps that's true: machines are good at optimization, but humans are good at inspiration. I'm less worried than many people, simply because I think that, as humans, we're so good at lying to ourselves we already ignore data all the time.

But detractors of data-only myopia are right about one thing: if you let an algorithm blindly optimize something, you may not like the results—like when Uber hiked its prices automatically (based on demand) during Hurricane Sandy, or Orbitz suggested more expensive hotels to visitors who used IOS devices. Those were algorithms acting without constraints, and they resulted in challenges for those brands.

Unfortunately, too often I see critics of "data-driven" models complaining just because they prefer to use their opinions. Opinions are easy and fun—you just have to be the loudest, most convincing person in the room. But all opinions wither under the harsh light of data.


William: How can marketers run tests to see if their marketing campaigns will work or not?

Alistair: This is a simple process of forming a hypothesis, testing it, and measuring the result. We do this every day. In bigger companies it's harder to do because you may have constraints, but one easy rule is to always do things three times. That means if you're sending an email to 15,000 people, send three different subject lines to random groups of 1000 people; then use the subject line with the highest open rate for the remaining 12,000 recipients.

That's a simple example, but it's the kind of thing we have to embrace as we move into an always-on, constantly-connected world. We have to learn from the data, and get better at asking questions. Always ask, "is there a hypothesis hiding in here I can test?"

 

William: What are vanity metrics and are they good or bad for marketers?

AlistairVanity metrics don't change how you behave. They just make you feel better. For example, "total visitors" is a vanity metric. It just goes up and to the right, forever. But it doesn't show you anything new. "Percent of new visitors" or "change in number of visitors" shows a bit more.

Good metrics have certain characteristics. They tend to be ratios or rates that compare things. They're usually easy to understand and share. And they're often correlated with a business metric that matters. On the other hand, vanity metrics convince you everything is fine as you run right into a wall.


 

William: If our audience could only read one chapter of your book which would it be and why?

Alistair: Well, they should read more than that, of course. But if they had to read only one thing, it would either be the One Metric That Matters or Deciding what to do with your life. The former, because it's the core of the book—finding the most important thing in your organization right now. And the latter, because if you haven't figured out what you want to do with your life, well, that's far more important than any job, whether you're a marketer or an employee in a big company.

 

 
wgriggs@spredfast.com's picture

William Griggs

@william_griggs
William Griggs is a Field Marketing Manager at Spredfast who specializes in pipeline generation.