Jake Finkelstein is the founder and CEO of Method Savvy -- a data-driven advertising agency that works with growth-stage and enterprise class companies to build repeatable processes for revenue growth. Jake began his career in the music industry, most notably working with artists such as Johnny Cash, Incubus, Modest Mouse, Ben Folds Five and The White Stripes. When not working with entrepreneurs or playing music, Jake can be found cooking, reading and writing. You can catch up with him on Google+.
Entrepreneurs are an optimistic bunch. We ignore what most people look at as impossible challenges and see problems that have solutions. We believe. And work hard. We find a way to make it happen.
But that doesn't mean that a young company trying to take its great idea to market is a pretty thing to watch. Finding product market fit is difficult even for seasoned marketers. Worse yet, startups regularly struggle to understand how to properly invest in customer acquisition and retention.
Why? Because too few of us have calculated our sales funnel math.
The Secret To Marketing Success Is For Your Business to Make More Money From Customers Than It Costs You To Acquire Them
I know. That's obvious. Yet in practice, it's harder than it seems. Many of us have a gut-level desire to come up with fun, creative marketing ideas, throw them against the wall and wait for the revenue to roll in. Even if that works—and that's a long shot—that doesn't mean that it will be profitable.
Thankfully, there is a reasonably easy way to build a model around how much you should spend to acquire and retain a customer... and then compare it against your real-world performance to keep you on track.
I like to imagine that there's a person somewhere who keeps a book with a long handwritten list of the dumb mistakes that entrepreneurs make (even though we should really know better). Mixed in among valuing ideas over execution, giving up too much equity to seed investors and hiring bad employees there's an entry, written in all caps, that reads: HIRE AN ADVERTISING AGENCY.
Repeat after me: Don't. Do. It.
Advertising agencies are good at many things, but like trying to drive the Autobahn with a learner's permit, hiring an agency as an early-stage startup does little more than set you up for disaster. That's not to say that advertising agencies are all bad (disclaimer: I own an advertising agency and have worked in the industry for nearly 15 years, so admittedly I may be a bit biased), but spending what monies you have in the bank on agency retainer fees and advertising media is about as far from smart as you can get.
Here are five reasons your early-stage startup should run, not walk, from advertising agencies. --Read On
One of the more alluring qualities of startups is the optimism that permeates every bit of the company culture. I'm a sucker for the take-over-the-world attitude and nothing is more exciting to me than tackling big and complex challenges. Yet no matter how large the idea that is being brought to market, we all know that there are learnings to be had... and this is especially true when it comes to marketing.
As a grizzled veteran of more than my fair share of failed startup marketing campaigns, allow me to highlight some of the surprises that lay ahead for your first-timers.
1. You're probably not selling to who you think you are.
Every marketing campaign starts with the best of intentions, but then you get out there and start asking people to actually pay you money for what you've created. Quite often you'll discover that the people you think should be interested in buying your product either aren't interested or aren't yet ready. Don't be afraid to chase the low hanging customer fruit. It'll fund your growth and give you some great learnings as you continue the customer development process.
2. Your customers won't act as rationally as you might expect.
This one always gets me. It goes something like this:
You: "If you buy X from me it can [save you money, save you time, make you money].
Them: "Nah, thanks, I'm good. I'm using Product Y right now."
You: "Yes, but isn't Product Y [hard to use / expensive / not giving you what you want]?
Them: "Well, yes, but its what we've gone with and changing now [is too expensive / makes me look bad / would make me do extra work]."