The theory of online performance marketing is pretty compelling. Run lots of tests across all variables (ads, targeting, landing pages…) and eventually you will find profitable ways to acquire customers. Unfortunately reality is rarely as simple as theory.
Between attribution challenges, emerging/evolving platforms, and combining data from disparate sources, online performance marketing has become pretty complex.
It’s tempting to think that your best opportunity for improving growth would be to dig deeper into this complexity. But in our experience, the biggest boost to performance marketing can generally be found by focusing on making sure that you deliver interested prospects to a valuable experience in your product. This is often referred to as “activation.”
Of course the challenge is that online/performance marketers only control part of the journey for delivering new users to a valuable experience. Most of the onboarding steps are controlled by product organization. However, product teams usually prefer to focus on their existing product roadmap, believing that they are one or two features away from a product that is so good that it will grow by itself. In other words, the reality is that activation often sits in the “no man’s land” between product and marketing.
While it may be tempting to go directly to the product team to try to convince them of the merits of shifting some focus and development resources to new customer onboarding, we generally recommend taking activation issues directly to the CEO. This will avoid the mutual finger pointing that happens with a direct approach to the product team. When preparing to speak with your CEO, the first thing you should do is outline the problem. Sometimes it’s as simple as telling your CEO “I can’t scale profitable spending if over 90% of our signups never use the product.” Other times you’ll need to do a more detailed analysis outlining the problem and modeling how improvements in activation will significantly expand profitable marketing.
Once your CEO has acknowledged the problem, you should quickly offer a solution. You should propose that the product and marketing teams set a clear objective around activation and work together to achieve it. An alternative would be to propose establishing a growth team to optimize onboarding, but this can often lead to a delay in addressing the challenges (reorgs are disruptive and time consuming). You and your CEO should try to agree on the approach that will most quickly address your activation challenges.
In the early days at LogMeIn, I faced this exact challenge. Fortunately when I explained to our CEO how activation issues were hindering our ability to scale profitable marketing, he actually put a complete freeze on the product roadmap. It was all-hands-on-deck from marketing, product and engineering to completely understand and improve the activation situation. Through lots of research and experimentation we were able to improve the signup-to-activation rate by over 1000% within four months. This led to a significant hockey stick in our overall growth rate. The accelerated growth rate was primarily based on our improved ability to scale paid marketing channels — most of which were previously money losers so had been cut from our marketing mix. Today LogMeIn is valued at over $6 billion and I credit a lot of this growth to our ability to work cross functionally.
I’ve heard similar stories repeated several times in other fast growing companies. Marketers realize that they need to cross company siloes to make their campaigns scalable. Here is a great example from my colleague, Dani Hart, where she explains how at her previous company they cut their customer acquisition cost in half by focusing on activation.
While activation is a great place to start, cross-functional experimentation should take place across all growth levers including engagement, revenue and referral. The fastest growing companies make cross-functional experimentation an important part of their company culture. In the short video below, Mark Zuckerberg explains the importance of a cross-functional growth team for driving experimentation at Facebook.