Performance Marketing for Startups: When and How to start the Journey
I get asked often by founders and startups about when and how to invest in growth & performance marketing.
In most cases, this is a legitimate ambition to scale beyond the initial tinkering that got them to product-market fit, at other times it’s innocent curiosity or FOMO.
My advice has largely been:
- Get the fundamentals in place first so you’re set up for success. I know it’s easier or more fashionable to blame the platforms instead, but many issues stem from lack of internal readiness or goal alignment. And that’s largely in your control.
- Start small. Prioritize one channel [ideally the primary watering hole for your ICP] and drive scale before you spread yourself too thin by diversifying to multiple channels. One size does not fit all.
Review Pre-conditions for Success:
1. A compelling and differentiated value proposition that’s vetted with your core users. This is not a laundry list of 20 features from your product or tech team, but the benefits that truly matter.
2. Audience: Nail down a tangible SOM (Serviceable Obtainable Market) rooted in ground realities vs. the lofty TAM number often used for pitch decks. This should be backed by qualitative insights on your ICP’s pain points and buying process.
3. Reconfirm & have clear evidence of Product Market Fit with your current user base. Performance campaigns can kickstart the acquisition flywheel rapidly but they shouldn’t be used to compensate for engagement or conversion/ retention issues. Fix the leaky bucket first before you add in more users.
4. Run water through the pipes:
- Explore organic channels first before you invest in paid. E.g. If you want to test paid ads on Facebook or Instagram, get your hands dirty with an organic approach first. Learn about what kind of content (both messaging and formats) resonates with your audience and breaks clutter in an increasingly crowded space.
- Understand and optimize the journey to conversion via your site or app.
- It’s important to note that many drop offs are entirely normal because users could be in early stages of their buying journey and may not be ready to convert, but you should resolve unnecessary friction (e.g. unclear navigation, slow loading or laborious checkout flows) before you pay for new users to have a sub-optimal experience.
- Yes, you can install tools like Hotjar to help diagnose these issues as you scale, but a quick dipstick research with a few of your core users [particularly prospects who didn’t convert] will suffice at this stage.
5. Goals & Unit economics: This is one of the most important steps to get right because it informs your channel mix, potential to scale as well as sustainability of your investments. To be clear, it’s not necessarily about being profitable from the get go. It’s about ensuring performance marketing has the appropriate goals and guardrails given how your business is set up to make money short term or longer term.
- What is your monetization strategy? One time transactions vs. recurring revenue? Or via ads once there’s a material & sticky base of users?
- How much is a new customer worth to you? By when do you need to recover acquisition costs?
This due diligence is critical to plan your performance marketing budget and set the right efficiency benchmark for your business - whether it’s ROAS (Return on ad spend), Cost per Install or Cost per MQL (Marketing Qualified Lead) as the case may be.
Ensure benchmarks are a combination of cost efficiency and productivity so that you’re not unduly incenting lower quality acquisition.
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