The Key to Hacking Lead Gen
Note: this article also appeared on Geektime
Life events such as moving houses, buying a car, getting pregnant, planning a wedding, or planning a vacation cause a lot of stress and cost us a lot of money, making them popular targets for disruption by entrepreneurs looking for a “pain” to solve. Furthering the appeal of these industries, the incumbent lead gen industry players in these spaces often times look out of touch and out of date.
It’s easy to underestimate them, assuming that simply by providing a better user experience you can win market share. I mean, just look at their spammy messaging, lack of a mobile app, and lousy workflow…surely we can do better, can’t we?
Being top of mind
The challenge of working in these spaces is that they involve needs that come up rarely. This means customer acquisition via showing up at the right time and right place is crucial, and any innovations not addressing this are window dressing.
Incumbents in these spaces know this and usually do a good job optimizing for search engine rankings or have been around long enough to be top of mind. This means the playing field is not even: they can acquire customers via traditional channels for as cheap or cheaper than you can.
For example, a moving company lead gen website I’m familiar with generates leads mostly from SEO and PPC, charging $20 for leads that cost them ~$16. They have very thin overhead and are very aggressive in their marketing, not exactly a very attractive company to “disrupt”.
The two key questions
This is why the first questions I always ask startups looking to win market share in these industries include:
- How will you reach top of mind for users at their time of need?
- How can you do this at scale more efficiently than the competition?
Typically, the right answer to both of these questions is to provide useful tools that capture consumer attention upstream in the funnel before they face their “problem” (where it is cheaper to obtain customers) and that has a natural way of engaging users over time. Usually, these tools empower a community of users to create content or data that feeds back into the tool to help them solve a must-have problem. By enabling this, the company positions itself as a “trusted advisor” for the topic of interest at scale.
The Valley of Death
We see many companies entering this space, raising seed rounds, but then failing to raise their first large institutional rounds. There are two primary reasons for getting stuck:
Good but not great metrics
It’s easy for founders to jump ahead and think of all the interesting paths to monetization they’ll have after they’ve built their tool. However, the lead gen tool must be the core competency and main focus of the company, not an afterthought. Like all consumer facing digital products, it’s hard to tell what will be a hit or miss.
Unclear business model
Sometimes startups successfully build a community but don’t have a clear story on how they will monetize, either because they are not really “trusted” (ie they play a very small role in the background of users lives), the quality of the leads is questionable (user segments and intentions are not clear), or the industry structure marginalizes the value they can capture (needing to go through lead aggregators that clean up and market the data).
The CAC/LTV mindset
Unless you have built a tool that is a clear breakout hit/category leader, you need to come with proof points of your business model viability earlier than you may think. So if you do choose to enter the “trusted advisor” space, plan your milestones with a focus on de-risking your CAC/LTV equation as soon as possible.
This means being laser focused on providing proof points that you’re changing the funnel economics of the industry you are disrupting, by innovating in go-to market and monetization. Nothing else here is as important.
