Founder Lesson
One of the things that has most surprised me about launching Switchyards Downtown Club is the skills that new founders are requesting. My guess before launching was that new founders would want developers first and then designers right after that. Idea-stage founders are certainly looking for those skills, but much to my surprise, they’ve asked for marketing talent and advice the most. As a result, I’m always looking for new ways to think about all the different parts of startup marketing.

This podcast caught my attention when Eric Ries described his “law of sustainable growth.” His main point what that "new customers should come from the actions of past customers,” but this caused me to think about how I view the different parts of marketing for new products and the order to do them.

Here’s how I think about the first three phases of marketing for a new B2C product (in order)...

First…viral growth. I define viral growth or “viral hooks” as new users being pulled in as a result of the very nature of existing customers using the app. This is different from “word-of-mouth growth” that’s fueled by a simple of love of the product, so people talk about it. It’s also different from a “network effect” that’s defined as a product getting better with more users. There are some decent examples here of companies that grew virally (even though the author isn’t slicing the definition as fine and I’m doing here).

For my purposes, OMGPOP is a good example of viral growth. Their most popular game, Draw Something, required that people compete against each other, so just using the app necessitated existing customers pulling in new customers.

Another famous example is HotMail. At the bottom of each HotMail email message was “Get your free email at Hotmail.” So each new email was another chance to pull in another user.

Having a viral hook in your product isn’t always possible, but I would always recommend that founders be creative as possible to try and get one because there’s no better foundation for growth.

Second…word-of-mouth growth. Once you’ve exhausted the product-based ways to do marketing, next comes fueling (free) word-of-mouth growth. In this bucket, the actual tactics aren’t helpful until you have your brand narrative in place. What’s the authentic mission of your business? What’s the best way to talk about your customer value proposition? What’s your personality & culture?

Once you have a strong brand in place, you’ll be able to execute the right word-of-mouth tactics (eg social, PR, email, content like blogs/video) that will cause a large portion (10-30%) of your users to tell lots of others about your product. None of this is paid (eg referral). It’s just brand-related ways to get lots of inbound interest.

Please note that the first two foundational elements of marketing (viral & word-of-mouth) aren’t paid marketing channels.

Lastly…forced marketing tactics. This bucket includes the most popular paid digital online advertising tactics. Most startup founders that I meet begin to think about marketing with this bucket and skip the other two. It’s disappointing to hear a founder talk this way because all of the marketing tactics you can do here are magnified when the other two buckets are humming. Tactics here include affiliate marketing, contextual ads, pay-per-click, popups/banners, social media ads & search engine optimization. Once you prove engagement and have a sense of lifetime value (LTV) of your customers, paid methods are good ways to scale.

There’s a very common myth out there that B2C startups are “expensive to launch.” What is missed here is that great B2C startups are actually 100% free to grow in the very beginning because the early, free users join so easily and tell so many people, so the vast majority of early users are totally free.

Founders and investors will only spend lots of money later on when they know engagement and free growth is high. What comes first is high engagement (as a result of a great product) and free growth (the first two buckets outlined here).

And if you are particularly interested in marketing, here are all my blog posts tagged “marketing.”.

Sidenote: Here's a great VC post about organic top of the funnel customer flows.

Get Right to the Lesson
I’d recommend listening to the entire thing, but to get right to the point go to minute
39:55 of this podcast/video.

Thanks to these folks for helping us all learn faster
Eric Ries (@ericries)
This Week In Startups (@TWistartups )
Jason Calacanis (@jason)
Jacqui Deegan (@jacqKD)
Jacob Beemer (@jacobbeemer)

Please let me and others know what you think about this topic
Email me privately at dave@switchyards.com or let's discuss publicly at @davempayne.