Did you know that one of the biggest challenges for marketers is that they can rarely provide enough evidence that their work positively affects revenues and have an impact on business? Especially in software companies marketing is often perceived at best as something “probably” working but difficult to measure thus ineffective, at worst as unnecessary spending. Still many do marketing just because everyone else does it. Another pressing problem is that marketing as it used to be doesn’t work anymore. There’s a perfect solution for both problems, which I’m going to talk about in this article.
The need for ROI
Return on marketing investment is often something vague at best. A survey by Fournaise Group reveals that senior executives don’t believe the marketing function demonstrates commercial thinking, with 73% of CEOs stating “marketers lack business credibility and the ability to generate sufficient growth.” 80% of CEOs simply don’t trust marketers at all, while 91% do trust CIOs and CFOs. The same survey highlights 72% of CEOs agreed with the statement that marketers “are always asking for money but can rarely explain how much incremental business this money will generate.” Ouch. According to another survey among CMOs, the current trend is that marketing budgets are shrinking, and marketers are more and more under pressure to demonstrate ROI.
What’s wrong with marketers having problems demonstrating ROI? A study by Harvard Business Review found that more than 80% of marketers are dissatisfied with their ability to measure marketing ROI. You know why? It’s not because marketing ROI is impossible to measure - it’s hard but definitely measurable in our digital era. Here’s the real reason marketers are so gloomy: The effectiveness of marketing is disappointing and getting worse. Once ROI is measured, it’s clear that marketing function is pathetic. A McKinsey study of publicly traded software companies in 2014 showed ZERO correlation between marketing investment and business growth.
Traditional marketing doesn’t work anymore
Even when marketing software products, most of the marketers are acting as if they’re releasing something really big. As if software is a movie blockbuster: a big launch, a press release, a media coverage, a massive online advertisement with a large budget. The desire is to “buy” attention, instantly attracting as many customers as possible in a very short window of time. That’s what traditional marketers do, and that’s what they were trained for. As a result, the product either succeeds or fails. And even when it succeeds no one has any idea why or which of the ingredients of the huge and expensive marketing campaign were responsible for it.
The techniques of the traditional marketing, including the relatively new online advertisement, are in crisis since the advertising becomes both more expensive and less viewed. More and more companies are pouring dollars into online ads at a faster pace than the growth of the online population. It leads to the growth of the competition for the same eyeballs, which inevitably leads to the soaring ads prices. At the same time, people are fed up with ads and the more ads they see, the more they try to avoid them not paying any attention or, radically, by installing ad blockers. In short, traditional ads have become at worst completely invisible, at best little more than white noise.
On the other hand, a myriad of new channels, marketing techniques and approaches has emerged in the recent years. The world of mouth prevails as never before. People now trust strangers’ reviews more than promising passages by companies. New marketing approaches got popular such as influencer marketing, content marketing, SM marketing. Nevertheless, marketers continue to pour money into old techniques which don’t work anymore. Even new promising techniques and approaches that allegedly work for other companies don’t guarantee to work in your particular case. Anyway, modern channels and techniques soon will fade into oblivion and replaced by new ones. How to keep up with the constantly changing marketing landscape? Which channels or techniques would work for your product? Should you drop all traditional marketing techniques or still do some? What’s coming up next? Nobody knows.
The only way to figure out which way to go to acquire and bring in new customers is to test different approaches. And test fast before your competitors discover what works for them and kick you out of business.
Marketers can learn a lot from software developers
"If you're pushing code once every two weeks and your competitor is pushing code every week, just after two months that competitor will have done 10 times as many tests as you. The competitor will have learned 10 times, an order of magnitude more, about their product than you." Facebook's VP Growth Marketing, Alex Shultz
It’s noteworthy that software developers used to have similar problems which marketers are facing now. The landscape of new technologies, programming languages, frameworks, hardware and standards had been changing rapidly in the 90s. Customers’ needs and wants had been changing swiftly as well, so did the requirements for software products. As a response to inevitable and frequent market/customer-driven changes to software requirements along the product development lifecycle, a host of incremental software development methodologies was invented. The methodologies grew out of the real-life project experiences of leading software professionals who had experienced the challenges and limitations of traditional waterfall development on a project after project.
By the late 90s, various methodologies formed and competed with each other to become the successor to Waterfall. In 2001, seventeen software developers met at a resort in Snowbird, Utah to discuss software development methodologies and as a result published the Manifesto for Agile Software Development. Since then, hundreds of thousands of development teams applied the method, and as of now, it’s the most popular software development methodology which proved to be highly efficient on a myriad of software projects.
As the Harvard Business Review article pointed out, long development cycles where the design stage was separated from the release stage by many months, or perhaps even years, was no longer appropriate in a world where your users’ needs changed by the day. Agile has transformed software development and provided a framework which was flexible enough to deal with these ever-changing needs.
Agile development, in essence, offers a lightweight framework for helping teams, given a constantly evolving functional and technical landscape, maintain a focus on the rapid delivery of business value. As a result of this focus, the benefits of agile software development are that organizations are capable of significantly reducing the overall risk associated with software development. In particular, agile development accelerates the delivery of initial business value, and through a process of continuous planning and feedback, can ensure that value is continuing to be maximized throughout the development process. As a result of this iterative planning and feedback loop, teams can continuously align the delivered software with desired business needs, easily adapting to changing requirements throughout the process. Finally, as a result of following an agile process, at the conclusion of a project is a software system that much better addresses the business and customer needs.
Agile Methodology for Marketing Software Products
What’s true for code is also true for the rest of the business especially software development business. With a deliberate lag, marketers recognized that they were experiencing similar problems. As in software development, the landscape is changing ever-faster: anyone can create and publish content, fewer people respond to messages in traditional channels, millions of people create reviews that power our choices. The ways in which consumers discover new content and products are evolving at a rapid pace. Digital marketing channels rise and fall quickly. Early adoption of new technologies and new online platforms is of vital importance for companies looking for a growth edge. The marketing game has changed and keeps on changing.
To respond, the marketing discipline needed ways of working that can consistently adapt to these changes. That means a move away from the traditional annual marketing plans and large marketing departments towards short cycles of testing new marketing ideas and channels within small dedicated teams who can work efficiently setting appropriate metrics, experimenting, and testing ideas, new and old channels during short sprints. A host of Agile Marketing Manifestos has been created and here’s one of them.
Agile, in the marketing context, means using data and analytics to continuously source promising opportunities or solutions to problems in real time, deploying tests quickly, evaluating the results, and rapidly iterating. At scale, a high-functioning agile marketing organization can run hundreds of campaigns simultaneously and multiple new ideas every week. In many companies, revenues in the segment offerings and product lines that use agile techniques have grown by as much as a factor of four. And even the most digitally savvy marketing organizations, where one typically sees limited room for improvement, have experienced revenue uplift of 20 to 40 percent. Agile also increases speed: marketing organizations that formerly took multiple weeks or even months to get a good idea implemented find that after they adopt agile marketing practices, they can do it in less than two weeks.
There are a number of prerequisites for agile marketing to work. A marketing organization must have a clear sense of what it wants to accomplish with its agile initiative (e.g., which customer segments it wants to acquire or which customer journeys it wants to improve) and have sufficient data, analytics, and the right kind of marketing technology in place. This technology component helps marketers capture, aggregate, and manage data from scattered systems; make decisions based on advanced propensity and next-best-action models; automate the delivery of campaigns and messages across channels; and feed customer tracking and message performance back into the system. The most important item is the people—bringing together a small team of talented people who can work together at speed. They should possess skills across multiple functions (both internal and external), be released from their day jobs to work together full time. The mission of the agile marketing team is to execute a series of quick-turnaround experiments designed to create a real bottom-line impact on a metric they’re improving.
Sounds like a great marketing methodology? It is. However, there is something even better for marketing software products.
The Growth Hacking Method
The Growth Hacking method was originally designed to tackle startup-specific challenges, in particular very limited marketing budgets and the urgent need for quick growth. While the method is great for startups, it also proved to be highly efficient for large established organizations, so companies like Facebook, Uber, and Spotify have many growth teams.
Agile Marketing is a huge step forward and is the best marketing methodology that solves the problem of a rapidly changing market for companies producing and selling traditional goods. However, it’s incomplete in the context of marketing software products as it misses a few key software features that can be used for marketing purposes.
You know what’s the strongest advantage of software as a product? With software, you can add new features, fix problems and deliver new versions of your product in a matter of seconds. You can also build literally anything into your product. Even marketing. That’s how software is different from the majority of other products. Just think about it - you can add feature usage stats to learn how users actually use your product, user behavior stats collectors so the marketing ideas tested can be measured, get feedback right in product, use the software product as a communication channel to send messages to its users, you can even built-in some viral marketing functionality or a referral system! What is more important - you can monitor everything almost in real time and make tweaks and adjustments as needed to make the product better, users happier and business more successful.
Since IoT is growing in popularity, we can expect some traditional products will eventually have some form of software attached to them. A good example of a traditional product closely coupled with software is a Tesla electric car which gets regular updates and even new features, such as driver assistant (or possibly self-driving) without a need for buying a new car model or driving to car service center to flash a new ROM version.
Combining engineering and marketing talents
In its essence Growth Hacking relies on harnessing software development to build marketing into products themselves. That’s the main difference between Growth Hacking and Agile Marketing. Agile Marketing teams work independently from engineering. Even being agile, the method still relies on external and preexisting marketing channels. The new methods of marketing that are built into the product itself can only be discovered and implemented with technical know-how.
Modern marketing of software products implies combining marketing, data science and programming know-how to make the impact on business growth. Growth hacking stacks on top of Agile Marketing and add a very important element - the product and the product development team to form a holistic marketing approach. In my opinion, it’s the best marketing methodology for marketing software products available at the moment.
Assembling dedicated collaborative cross-functional Growth Hacking teams lets companies efficiently marry powerful data analysis and development know-how with marketing expertise to quickly come up with ideas and test them with no delays to maximize the growth and speed of improvements. It also helps to break the traditional corporate silos which slow down the task completion, create a deliberate lag in both responding to changing customers demands or technological developments, and rolling out new capabilities and product improvements and marketing channels through which to reach customers as well as new products and features and implementation of marketing and sales strategies critical to attracting, activating and monetizing customers. By rapidly testing promising ideas and evaluating them quickly according to objectives and related metrics such teams facilitate the much quicker realization of the best ways to solve tasks.
The ultimate goal for growth teams is to find every last bit of growth potential through a rigid focus on continuous testing of lots of tweaks to a product, its features, messaging to users, as well as the means by which they are acquired, retained, resurrected and generate revenue. The team itself needs to be small enough for everyone to remain clearly accountable to one another. Amazon CEO, Jeff Bezos famously referred to “two-pizza teams,” i.e., as a rule of thumb, teams should be no bigger than 8-12 people, so a team that can be fed by two pizzas.
It’s important to note that setting up growth teams doesn’t require abandoning traditional organizational structures or traditional marketing strategies. Growth teams don’t necessarily replace more traditional departments, but rather complement them and help them optimize their approaches. While established departments, let's say a marketing department, cover lots of various routine tasks and functions, growth teams exist to work exclusively on some specific tasks and metrics, such as growing userbase, improving customer retention or better monetization of the existing userbase. Growth teams should be created on every stage of the product lifecycle and can work on different scales: from launching a new product or specific marketing channel down to optimizing some particular metrics such as user or customer retention rate. Teams can range from dedicated units built from the ground up, to groups made up of existing staff from different departments to ad-hoc groups built as needed.
Growth hacking method isn’t only about bringing in new users. It’s also about getting better at any activity like customer activation, retention or monetization. The method can be applied at any stage of the product lifecycle - no only at the growth stage and literally for improving any KPI or function to make the product and company successful. It’s about running a host of experiments at a high tempo to find opportunities for growing some specific KPIs in a measurable fashion. Growth teams may work not only on a tactical level but also on a strategic level, for example by tapping into new markets or changing product positioning, acquiring other companies, etc. In short growth, teams can and should be involved in all stages and all levels of growth from evaluating product fit, to customer acquisition, retention, and monetization.
Heavy Use of Data and High Tempo Testing
The problem of a traditional siloed approach is that teams work in isolation on their own tasks. Product managers may conduct surveys and run tests in isolation from marketing departments, who gather their own data and use it independently of other teams. Meanwhile, developers use their own data or rely on the yesterday’s data provided by others which exhibits the outdated customer needs. There should be an integrated way of collecting data and the holistic approach to data interpretation and use. Growth teams comprised of experts with different backgrounds from different departments make cross-department collaboration and information sharing possible. Gathering data is super important for marketing as long as if you don’t have measurable data, you can’t improve, meaning no agile sprints are possible.
The success of many modern growth teams is driven by the rapid-fire generation and testing new ideas of new ideas for both product development and marketing since the two have to be coupled, and the use of data on user behavior to facilitate the ideation and testing processes. Central to agile philosophy is increasing the speed of performing a task by working in short “sprints” and regularly generating new ideas, testing and iterating on the product and its marketing over time. This approach also ensures that you deliver fast, getting fast results and then adjusting the ideas backlog, the plan for the next iteration and all the rest according to the user feedback or market reaction on every iteration of the product lifecycle (sprint).
Growth Hacking is the best methodology for marketing software products. At the same time, it is not about discovering a “silver bullet” solution. The truth is, there’s no “silver bullet” - never was and never will be. Some hacks and discoveries that worked for other businesses may not work in your case at all or even ruin it if performed without deep thinking. Growth hacking is a very creative and scientific way of accumulation small wins over time. If you’re lucky enough, you can find the hack that will provide max outcome for the product growth and adoption, but even if you’re not lucky enough, the persistence and discipline of following the process will lead you to success anyway.
Principles of Growth Hacking:
- out-of-the-box thinking and focus on combining development, marketing, data science, design, and financial talents to find the unconventional ways for solving various business tasks
- focus on zero to little spending and exclusion of ineffective spendings
- breaking down traditional organizational silos and assembling cross-functional collaborative teams that bring together people with expertise in various fields: research and analytics, software development, product management and marketing
- use of qualitative research and quantitative data analysis to gain deep insights into user behavior and preferences
- heavy use of data and accurate metrics to measure the effectiveness of marketing tests and to prioritize and decide which test and experiments to run next
- experiment-driven real-time market testing at the high tempo with rapid generation and testing ideas
- commitment to being quick to react on the results