I see this sometimes and I’m probably guilty of it, where i’m at a pre-pandemic conference as a speaker and I would go to conferences, and I would talk about growth. And I would say, hey this is how to increase traffic to your website and here’s examples of how we grew and this is how you double and triple your demand from your traffic.
But it’s really not that easy anymore because every market is somewhat saturated, or very competitive (see: 8 Important SaaS Trends For 2021 & Beyond). People are better at their jobs. I am definitely in the market and growth side of things, and seeing how marketing has evolved from this place where it really wasn’t sitting on the table with sales and all of these other teams to generate revenue.
To get onto that table, marketing has got better at being able to be part of the core Go To Market and actually generate real revenue for the business. And to do that, marketers have upgraded their skill sets and marketers are really good at doing that, and the tools we’ve got are better.
If you look at the Mar Tech space, we have just so many great tools we can use to grow our business. Trying to empathize with founders is hard and anyone who tells you differently when you go to these Conferences, most of that stuff is just like conference speak, it’s not the reality of growth.
I do think that you can approach things in a way where you don’t try to just look at a carbon copy of your competitors and think “Well, how do I compete on the same things that they’re competing on?” Think first principle and how you break apart problems into kind of their fundamentals and trying to see if there’s ways that you can do things differently. Just because all your competitors are doing one tactic or one channel, it doesn’t mean that that’s the right way to do it, or there’s something that you can do.
So I think there’s a couple of things, the two reasons companies fail for me are, they’ve misunderstood the problem they’re solving and they’ve solved the problem that no one, not that no one cares about but no one cares enough about that it makes a big impact in their life, makes a difference if they have that thing or not.
And that’s the kind of channel’s NPS answer: how much would you miss this product? We had one survey for it and it’s like, “how much would you miss this if we took this away from you?” The other one is they kind of misunderstand or they don’t think earlier enough of how am I going to acquire demand for this and that’s what Brian Balfour calls product channel fit. So you have product market fit and product channel fit.
On the product channel fit, is like how do I build something into my product? Or how do I add an early point start to figure out where my product will actually acquire demand from? (see: How to Have a Successful Launch for Your Startup) And trying to figure out if you can skew your product and your Go To Market into a couple of places where you can actually acquire demand and you can have something that helps you differentiate yourself from competitors.
One of the examples, was a I think their name is Genius, now they’ve kind of rebranded but they were a site that had rap lyrics, they would just show you that there’s two songs, that was a really competitive space. It’s wild to think how competitive that space was but there’s just a lot of lyric websites, and so how can you compete in that space when there’s other sites that have all of these lyrics?
Because if you think about it, you break apart that problem and you kind of come at it from a first principles in terms of what you know, the thing you can compete on is just having more songs than any other company, volume, and that’s how every other brand tried to approach the problem: “We’ll just try to get more songs into our database”.
What they did is they actually pulled it apart and said no, we can actually do is, we can create better user generated content and run these lyrics. So they embedded the things into the product and allowed you to actually figure out what the lyrics actually mean. They have user generated content, you can comment on all of the lyrics, annotate the lyrics and actually say, “Hey, this is what they were talking about”.
Because they did that, they rank better in Google and all of these other brands, and they dominate. They went on to be the most successful company within that space, or one of them and I think that’s how you need to think about how you can actually compete in the space that you’re in.
If you hit the point where you’re going from startup to scale up, and then when scaled up to hit ceiling on Channel, it means that you’ve been successful, so first of all, great, you’ve had a great run. You’re probably a public company, you’ve probably had a good run and your stock prices, like things are in general going well, but you want to do even better.
So there’s a couple of things I think about in terms of the growth seasons. One of the things is you want to always diversify from a position of strength. So what tends to happen is, a lot of large review sites grow from Google, right? There’s certain channels that are going to help you scale and outside of those channels, it’s going be hard for you to find something else, but you want to diversify from a position of strength.
So when you are in a Scaled up company, one of the things you want to be really good at is forecasting. So one of the things that we do is, we do a top down model based upon existing trends: “how do we think we’re going to perform over the coming year, if we keep all things the same resources, playbooks, the same”
Then we look at bottoms up and we say: “how much revenue do we need to generate?Then how does that translate into the amount we need to generate to hit that amount of revenue” and so then you take that if you’re kind of the leader, but on a scale company, you say to your team: “okay, bring me back the top demo off your channel, bring me down the playbooks that you’re going to operationalize to hit that growth.”
What you’ll start to see is a flag, just some flags, you can see a flag on your month to month, quarter and quarter, year on your growth rates within the channel, that’s a flag.
When you’re building forecasting models, and you’re starting to see diminishing returns, and then your team are coming back with playbooks that are just the same playbooks, and they’re kind of running out of ideas, that’s a flag, when your team telling you they don’t want headcount for the coming year, or they want a small amount of headcount, because they’re not sure what else they can do, or how they can hire people to continue to grow that challenge, that’s a flag.
So you want to diversify from a position of strength and so a good example of this is Canva. What’s fascinating about Canva is, if you go back and look at their early growth, Canva grew from virality, and there’s really three types of virality: 1) there’s just word of mouth virality.
2) user virality, which is your product is inherently viral, so when I use a product, and I would use it with you, you would be exposed to that in a way that would make you want to sign up, a really good example of that is Calendly. If you think about Calendly, I booked a meeting with you, you see me then you’re like, “oh, that was a good experience here”, but meanwhile I watch this app, I will go sign up.
And then the third type is 3) incentivized referral, which is kind of like the Pay Pal story. The way PayPal grew in the early days was they actually paid you $20 to open an account when you open the account, there’s $20 in the actual PayPal account. And then if you actually refer other people, you would get additional money in that account and actually, I think it was about at some point, 10-15% of all of their demands coming through incentivize referrals.
So coming all the way back to Canva, they were really growing through word of mouth, talking about product market fit, product channel fit, they solved the problem that people had cared about, and this was the best solution.
So you saw a lot of their growth coming from direct traffic. What they did is they diversified from a position of strength, which is why I love their story because they build on this, and they’re still growing from virality, but they built on this amazing organic machine that every single company is now trying to copy which is they built all of these different templates for every single use case and they scaled with those templates and they embedded them in their ecosystem and they drove links to different places, and they managed to rank.
So now they have this really nice channel in terms of organic as well. Just so people are reading and you’re trying to build the Canva template model, keep in mind that Canva literally has 1000s of use cases for their product and that’s why templates work for them, it’s not going to work for every single brand.
So they diversified from a position of strength and I think that’s one of the critical pieces that companies miss in terms of those growth learnings is that they wait until they hit the growth ceiling, they panic, and then they have a small amount of time that they can actually fix it, because they’re going to, at some point plateau. It’s just going to cause demotivation in the team, it’s going to cause loss of trust in that team from the executives and at that point, it just starts to kind of cascade and starts to collapse on itself.
The other thing I would say is, you also want to have a ratio between the goal, like the kind of channel that you’re growing from and new channels. So you think, I have this amount of resources, X percent of it is spent on the existing growth channel, Y percent needs to be spent on trying to discover a new channel, and that ratio should probably dependent upon how much growth you think is left on the existing channels. So if I’m building on search, and I think, “wow, there’s just a ton more growth”, meaning maybe I can grow 100, 200, 300% more year on year, then maybe 100% of my resources should be in there.
Then as that starts to diminish, I take 5-10% and I start to look for new channels. You can kind of build a total addressable market models for channels. Like paid marketing is a really easy challenge to see where your diminishing point of return is, you can build on that, you can somewhat build it in search, you can’t build it with all things, so that is kind of hard. But just know that sometimes you can’t avoid it, because it’s part of being a scale up.
The way to counteract that is to have a really strong brand. So do not only invest in growth and performance market, and make sure you’re invested in brand, and that’s hard for some companies because they can’t get the metrics that tell them if the things they’re doing make the brand is successful.
But if you don’t grow your brand, and if you don’t build the brand, at some point, you hit these events, sometimes you start to plateau and performance metrics or market metrics, and then you have nothing left – and I think that’s something you want to be kind of aware of.
Kieran Flanagan is an author, startup advisor mentor who runs his own podcast called the Growth TLDR and is currently the VP of Marketing & Growth at Hubspot.
He is a thought leader on growth marketing and speaks at events across the globe. Listen to the full podcast interview with Kieran Flanagan on SaaS District here.
Kieran has a proven track record in helping SaaS businesses, from start-ups to enterprise-level grow their traffic, users, and revenue.