👋 Hey, it’s Sundar! Welcome to experiMENTAL: my newsletter helping B2C marketers make smarter decisions with secrets from early Marketing at Uber and 10+ years in consumer marketing.

Dan Hockenmaier wrote a fantastic essay titled “When to join a startup”, that I highly recommend, and it got me thinking:

When should a Marketer join a startup?

While the risks Dan talks about apply, there’s a deeper level that a Marketer must think about. “What is the job to be done?” and “Am I good at doing that job?”.

Note: The first part of this essay will be paraphrasing Dan’s essay and then I’ll share my perspective.

Start of paraphrasing Dan's essay

YC’s famous motto is “make something people want”.

That’s true when you’re first trying to find product-market fit. There will be a small niche that companies must focus on, but it’s a lot more complex when they want to grow past that and survive in the long term. The YC motto becomes, as Dan eloquently writes, “Make something people want and sell it profitably to many of them in perpetuity”

Every successful business faces (and ideally overcomes) 5 key risks:

1. Technology risk 

2. Market risk 

3. Scaling risk

4. Business model risk

5. Defensibility risk 

These risks are not always linear and especially in Series B - Pre IPO, companies oscillate between business model risk and scaling risk.

Technology risk

“Can we get the product to work?”

A company might have a brilliant idea, but the first hurdle is whether the solution is technologically feasible. In SaaS and consumer tech, this risk is easily mitigated because the technology is available, but that’s not always the case in Deep Tech and Hardware.

Vertical Take Off and Landing (or VTOL) is a good example of where the biggest risk is the technology.

Market risk

“Can we build something people love?”

Solving market risk is often called finding product-market fit (PMF), and it is the holy grail that early stage founders are searching for. There needs to be concrete evidence that customers love the product, are willing to tell others, and want to use the product for a long time.

Scaling risk

“Can we acquire lots of customers?”

When finding PMF, the main growth drivers are word of mouth and referrals. That’s a great sign of having PMF but that’s not scaleable. Companies have to figure out how to get their product in front of more customers and for most B2Cs that’s through viral growth loops, paid marketing, and/or SEO.

Business Model risk

“Can we serve customers profitably?”

VCs expect initially unprofitable businesses. That’s why they’re providing funding, but the promise is that eventually companies will have a profitable business. Certain business models are notoriously difficult to crack (e-comm) and some are easier (B2B SaaS), but the long term solution must be that the business model itself is profitable. Layoffs and cost cutting measures are short term and long term unscalable.

Defensibility risk

“Can we maintain market share?”

Companies that get to this point (Post IPO) have survived longer than 99.99% of businesses, but they can’t step off the gas. More competition. More scrutiny. More expectations. This is why companies must think about defensibility risk and how they’re going to survive the next 100 years after surviving the first 10.

End of paraphrasing Dan's essay

Jobs to be done.

Dan talks about joining a startup from the perspective of risk, but I think about it from the perspective of “Jobs to be done”. What is the role of Marketing at each stage of a startup that helps it mitigate risk? What is our job as Marketers?

For each stage, I’ll share:

1. Job to be done → what the role of marketing is

2. Strategy → how marketing can attack the problem

3. Metrics → what metrics Marketing should look at

4. Ideal Marketer → which Marketers are most successful in this stage

Technology risk → nothing

Technology risk is inherently a product and engineering problem. Marketing is unlikely to be involved at this stage so there isn’t a job for Marketing.

Market risk → Pique interest

Job to be done: Pique interest and find validation of Market - Customer fit

Most founders fail to understand that solving for PMF is actually solving two distinct problems.

1. Product - Customer fit

2. Market - Customer fit

Product - Customer fit → Does the solution solve the customer’s problem?

Market - Customer fit → Is there enough demand for your solution?

This 2nd problem is where Marketing comes in. The goal of Marketing is to pique interest by validating messaging around value props and get signal on Market - Customer fit.

We can break down Market - Customer fit into 3 unique problems:

1. Channel → where does our ideal customer live?

2. Benefit → what solution do we offer that most resonates?

3. Message → how can we position our benefit that is most enticing?

Here’s a great early example from AirBNB. Instead of investing in paid ads, or social media, AirBNB reached out to hosts on their platform and created an automated script that would post the listing on Craigslist.

In addition, every time someone listed a short term lodging on Craigslist, AirBNB would reach out and ask if they wanted to post on AirBNB too. It was manual and tedious but low-cost and it worked.

“Increases your earnings by $500/month” directly speaks to a benefit that AirBNB’s ideal client would be very interested in. The marketing job was to pique interest and they not only piqued interest but were also able to understand where the customers lived and what messages resonated with them.

Strategy:

1. Test a bunch of things. It’s the Wild Wild West so no clear directions. This is why finding PMF is so difficult. If it was easy, startups wouldn’t fail so much.

Metrics: 

1. Conversions

2. Overall product signals (activation, retention).

The focus is to get signal that there’s early traction and on to something. CAC is too early of a key metric because companies don’t know the paybacks / LTV of their customers. Is $200 CAC too high or too low? I worked with a travel tech startup where the 1st order value was $2K so our 1st Order Value / CAC on first purchase would have been 10x. At Uber, spending $200 on 1 user would have been wildly unprofitable.

Companies should use CAC benchmarks as a guide and general intuition but through optimization across the user journey, they can bring CACs down by at least 50% over time, so focus on volume of interest (through conversions) and not the efficiency of those conversions.

Companies should also investigate the source of their traffic. Early on, companies may need to seed a bit of interest with paid ads but there should be a healthy amount of organic traffic. This is a measurable way to see if Word of Mouth is active and if the product is loved enough that customers want the product to go viral.

Ideal Marketer: 

1. Marketing generalist.

2. Freelance specialists

If you’re a Marketing generalist with experience in startups then this is a good stage for you. There’s a lot of ambiguity and uncertainty in addition to a lot pivoting and throwing away of work.

If the company has conviction of what channel might work then a freelance specialist is also a good hire at this point.

Scaling risk → Scale CACs

Job to be done: Scale CACs and find complementary channels.

B2C companies at this stage have found a core channel but need to scale it AND need to find a complementary channel. In addition, startups often introduce email as a zero cost channel that can drive activation but also boost retention. Companies must tolerate a bit of risk around experimentation as finding new channels will require an inefficient deployment of resources before it gets efficient.

Strategy:

1. Improve CAC on core channel by optimizing core journeys

2. Experiment with new paid channels

3. Introduce owned channels

Metrics: 

1. LTV / CAC or payback

2. ROAS

Companies will need to evolve their reporting and tracking to introduce more nuanced metrics like LTV / CAC or payback and ROAS. While LTV is an imperfect metric, there will be older cohorts that may have reached terminal value allowing for longer term modeling.

At this point companies have a decent understanding of customer’s behaviors and can begin making optimized decisions around how much to invest. For owned channels, companies should begin investing in Lifecycle marketing program and take advantage of the healthy customer base that they’ve built up.

Ideal Marketer:

1. Channel specialists

2. Marketing leaders

3. Marketing analysts

As a channel specialists, you’ll take some of the raw work and start to add structure and process to it. A great example is if you’re a Meta specialist. You’ll likely inherit an account that’s unstructured and unoptimized. Just by reconfirming the channels and ensuring no overlap between ads you can gain CAC efficiency.

As a Marketing leader, you’ll be managing a small but nimble team and it’s important to set the direction. It’s also a good opportunity to make sure the marketing is continuously aligned with the product efforts so that you have an optimized journey.

This is also where you should start to add Marketing Analysts who can look at channel level retention curves and other patterns to begin optimizing CACs.

Business model risk → Prove incrementality

Job to be done: Prove incrementality through data science.

To mitigate business model risk, Marketing needs to prioritize proving incrementality. This means it needs to upgrade it’s data, tech, and experimentation stack to incorporate methods like incrementality testing, MTA, MMM, etc. Companies often miss this “Job to be done” and waste so many resources here.

Companies also need to reinvestigate their previous marketing strategies. Campaigns and channels that worked 4 years ago to find PMF may be inefficient and experiencing diminishing returns.

A good example is Referral programs. Is the offer code that gives a friend $10 if they sign up still incremental? Maybe yes. Maybe no. Test it!

It’s also a good opportunity to begin introducing Brand Marketing as a way to further scale CACs and introduce halo effects for long term growth. These should ideally be done through digital and online channels as offline channels may be too expensive.

Strategy: 

1. Introduce more robust data science methods: MMM, MTA, Incrementality testing, Universal Control Groups, etc.

2. Test previous Marketing assumptions

3. Centralize marketing functions

4. Introduce Brand marketing

Metrics: 

1. Payback period

2. Incremental ROAS

3. Contribution Margin

4. Fully loaded CAC

5. LTV / CAC or Payback

Ideal Marketer:

1. Senior Marketing leader

2. Senior Data Science or Analytics leader

3. Data Scientist and Senior Data Scientist

4. Data Analyst and Senior Data Analyst

Proving incrementality is a scientific endeavor and requires the correct level of investment. In addition, influencing stakeholders and designing roadmaps means that you’ll need to build out a Data Science leadership team that can bear the brunt of the political fun that always shows up at this stage of a company.

Senior Marketing leaders will also be required to manage roadmaps and create efficiencies across channels with Omnichannel strategy.

Defensibility risk → Build brand

Job to be done: Build brand to create a long lasting moat

Once a company IPOs, it’s in very rare air. This is where the Brand must create a moat as the company expands to new verticals and adjacent markets. Brand marketing has unfortunately been thought of as a costly line item but it has massive ROI when done correctly. This is where Marketing should introduce more non digital and offline channels.

The goal here is for mass adoption across many sectors of the population and a brand name that takes up mental space rent free. Traditional marketing channels that are historically ignored by startups because they are expensive, hard to measure, and require long investments are worth testing and introducing.

It’s why companies like Booking.com, Netflix, DoorDash, Uber, Spotify, etc. all invest in Brand.

Here’s one of my favorite Brand Marketing ads from Uber.

Strategy: 

1. Introduce Brand Marketing with more complex channels like offline.

2. Start thinking about Marketing as always on.

3. Consciously think about brand architecture.

Metrics: 

1. Incremental ROAS

2. Contribution Margin

3. Fully baked CAC

4. LTV / CAC or Payback

5. Incremental Profit and POAS (profit on ad spend)

Ideal Marketer:

1. Brand leaders

2. Senior Marketing leaders

3. Research and Insights

Ideally, a company already has a research and insights team earlier but so many companies are focused on growth that they don’t think about these functions until later. This is a great time to introduce this function that is responsible for competitive intelligence, customer insights, and highly valuable market research.

A word of caution here is that most companies create unnecessary bloat. You don’t need 1 CMO, 20 VPs, 50 Directors. Marketing is best when there’s a unified and cohesive message and strategy so a flatter hierarchy is best.

When should you join as a marketer?

Much of when to join a startup depends on 3 things:

1. Skillset

2. Risk appetite

3. Level of experience

It’s a complex decision, but the question to answer is “Can I get the job done?”

By understanding the “Job to be done”, you’ll know that you’re joining at a time when your skillset is the most valuable. In addition, expectations are aligned and there’s less of a chance of burning out from doing work you didn’t want to do.

Takeaways

That’s it for this week, friends! Some key takeaways:

• Businesses go through 5 different risks

• Marketing has a “Job to be done” at each stage that helps mitigate risk

• When you should join depends on your skillset, risk appetite, and level of experience

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Missed the last newsletter?

Check it out: 8 startup marketing lessons from 5 years at Uber