Digital Marketing for Early Stage Startups
Jeremy Kagan, Prof. Digital Marketing at Columbia Business School
One of the biggest challenges for startups is marketing. After all, for a promising new company, the singular focus needs to be growth — the main metric by which the company prospers (and valuation increases). But where to start? Growth marketing is a daunting prospect — and going up against well-resourced competitors with a better understanding of the target customer is almost certainly a challenge. But the best startups can use some simple digital marketing ‘growth hacks’ to deliver early results: answers to some critical questions and critical benchmarks for a foundation of growth.
When planning for growth, startups often begin with the help of their networks: friends and family, accelerators programs, alumni groups, and other connections. The word of mouth and early adopter phase most startups begin at is easy — it’s often as simple as spreading the word through personal social networks. And the long-term plan to compete against the incumbents your startup is disrupting also sounds easy — after raising money or getting traction, we’ll hire an experienced marketing pro to build a team and drive sales. What’s missing in the middle — starting the marketing flywheel. Word of mouth, referrals, viral buzz, influencers, or whatever your plan, it all starts with the first customers learning about what you do and getting hooked. While all startups dream of tapping into the viral marketing flywheel, you’ll need to get in front of potential customers first. They can’t share or recommend what they haven’t been made aware of. And to do that, you’ll need to reach out with advertising.
Set your goals and objectives
Setting clear goals for your marketing is the prerequisite to success. In order to choose the right tools, you’ll need to know what job you’re trying to accomplish. Trying to get a B2B SaaS company qualified leads is very different than converting customers to purchase on an e-commerce site. Clearly describe what you’re marketing is trying to accomplish, and create metrics to measure success that match your goals. Trying to get consumers to try your new offering so they get hooked on your awesome product? An incentive to make that first purchase might do the trick. Looking to get potential enterprise buyers to convert into qualified leads by sharing their information? The right people completing the lead generation form for handoff to sales is what you want. Measure the right thing so you can track and optimize for success.
Create a foundational paid advertising baseline of metrics
It’s hard to know whether you’re getting a good deal if you don’t know what something costs, so to evaluate your different options in marketing, having an industry-standard benchmark can provide this. Search marketing is a great place to build your foundational understanding of what is ultimately most important to your company: your customer acquisition cost (CAC). This is important to all of your plans as everything from growth rates to pricing and how you’re going to make money on your product, whether it’s an e-commerce business, a SaaS business or something else, it all depends on how expensive it is to get your customer in the first place. Most founders know that ultimately the cost of acquiring a customer (CAC) must be less than the lifetime value (LTV) of that customer in the long run. But what’s a good starting point to understand a realistic and fair CAC? Start with Google Ads. Google’s search advertising product is an amazing thing — potential customers type in what they’re looking for with the express desire to get to an answer that solves their problem. Google’s free tools will let you estimate the cost of getting a lead to your website, and with that figure out a baseline customer acquisition cost.
Pick a dozen or two of the most relevant keywords or phrases to your business, and plug them into the tool. You’ll get an estimate of both CPC (basically the cost of getting the visitor to your website to turn them into a customer) and an estimate of how many visitors might be out there — total volume. Then simply use your current conversion rate or turn to a good benchmark for conversion rates, and you can estimate how many customers you can generate per day or month. With some simple math, you have a market-driven, industry-standard benchmark for your cost of acquiring a customer. Finally, you can use your own pricing to estimate the LTV — build a simple model based on the visitors and conversion rates, and compare to LTV. As Yogi Berra said, it’s tough to make predictions, especially about the future, but this will provide a fact-based baseline for you to build into your financial models.
Create useful content to be found and keep customers engaged
Once you know the CAC from advertising — paying for customers to pay attention to you — the appeal of keeping the customers you acquire around — and helping others find you through natural discovery — will become overwhelming. Content marketing is about creating useful or entertaining content that engages with current and potential customers to allow them to find you and stay engaged. This is when investing time and effort in creating content that provides value starts to be worthwhile. View content as both a way to attract new potential customers in an evergreen way through discovery, as well as a way to keep the hard-earned customers acquired through paid channels engaged and willing to return to buy again. The first reduces your CAC as more customers seek you out on their own by finding your informative and entertaining content through your blogs, email newsletters, and social followings. The second increases the lifetime value as customers buy more and more often — and makes the initial investment in marketing to acquire customers that much more valuable.
As a startup, it’s often tough to start planning for growth, especially as a member of the founding team. You look at your company and always see ways in which you can improve. The desire to wait for the perfect moment can be overwhelming. But the good news is by getting started you can be confident that whatever baseline you work out initially, you know you will be improving and getting much better. By working out a strong baseline, you’re not only creating a foundation for strategy and planning — you’re planning to get better!
About Jeremy Kagan
Jeremy Kagan is a Professor of Digital Marketing at Columbia Business School, and Faculty Director of the Digital Marketing Strategy executive education program, and teaches graduate and executive education classes. Kagan also teaches the Digital Marketing Intensive in the Cornell Tech MBA program, and Foundations of Entrepreneurship at New York University’s Stern School of Business. His book “Digital Marketing: Strategy and Tactics”, the first textbook for digital marketing, was published in 2018 by the Wessex Press, and is now in its second edition, with international editions now available as well. His new book “Designing the Successful Corporate Accelerator” was released by Wiley in 2021. He led the Eugene Lang Entrepreneurship Center at Columbia Business School, where he managed curricular and co-curricular offerings, the Lang Fund for early-stage investment, and the Columbia Startup Lab and launched the Columbia Alumni Virtual Accelerator. Jeremy previously was the founder and CEO of Pricing Engine, a digital marketing platform that enabled small businesses to benchmark, optimize, and expand their search and social advertising campaigns.
Jeremy has been a speaker and corporate trainer in the digital media industry. His clients include companies in content, services, and e-commerce, as well as traditional advertising agencies needing digital media expertise. Jeremy previously worked at Sony Music Entertainment in the Global Digital Business, where he was the Vice President of Global Account Management, working with large partners such as Nokia and Sony Ericsson. Before this, he was Vice President/Director of Strategy and Customer Insight for Publicis Modem, a leading digital advertising agency, where Jeremy headed research and innovation out of the New York office.
