Customer Acquisition expert Brian Balfour on startup marketing

Brian Balfour is an expert on customer acquisition and product development.

He has a co-founded 4 companies in the past 10 years, 2 VC backed, 1 angel backed, 1 bootstrapped. 2 were acquired, 1 shut down, 1 TBD. He knows his stuff.

Brian was recently interviewed on GrowthHacker.tv. It was a realistic growth hacking talk filled with personal examples and insightful advice.

Towards the end of the interview, Bronson Taylor says “this is going to be one of those interviews that people watch over and over”. I tend to agree.

These are Brian’s key points and takeaways on personal experiences, growth and traction, common startup mistakes, what a real growth hacker does, channel focus, and how to become a growth hacker:

Quick jump:

Brians personal lessons

Lesson 1: Brute force

His first startup was a college specific social network (pre Facebook and MySpace). They were trying to figure out how to grow users and decided to get their hands dirty by using brute force.

One night at the University of Michigan they plastered the campus with flyers. Students couldn’t get to class without seeing a flyer at least 3 times.

In the first 12 hours of doing that they gained 1500 users. So they got in their cars and drove around to all the college campuses in the area and repeated that process over again.

They got to 30,000 users in 30 days. Back in 2003 that was pretty great.

Lesson: Don’t be afraid to use brute force, not everything has to be Facebook viral growth. In the early days, all you’re really looking for is traction. Sometimes offline is your best channel.

Lesson 2: Partnerships

Viximo: A social games distribution platform that took successful Facebook games and distributed them to about 20 international sites.

They grew that from 0 to tens of millions of users across their gaming network in less than a year.

They did that by establishing part ownerships with each of the sites, bringing something very valuable to them which was high quality monetising games that they couldn’t get on their own and in return getting a good flow of users. They then used B2C optimization techniques on all of the different sites to get even more.

All of a sudden they went from nothing to a couple million dollars in yearly run rate in about 48 hours by stumbling across the right combination of game and site. This only happened after trying a lot of different combinations.

Lesson: He wasn’t as methodical about the testing of combinations of games and sites, they just got lucky. If they would have been more methodical about it they could have learnt much quicker what did and didn’t work. Once they found it, they were able to repeat it over and over again.

Lesson 3: Volume vs focus

Boundless: A free alternative to students (expensive) textbooks. In the early days they only had alternatives for about 3 college textbooks. So they had to be super targeted about their money and resources to target only the students that they knew they had an alternative for.

The big win was in the first couple of weeks as they reached 10,000 targeted users. They did this by combining a correct selection of channels using medium and long tail search techniques to get really targeted, and by researching and targeting specific classes that they knew they had the textbook alternatives for.

Lesson: Big numbers and volume is not always the big win. It’s about who you’re getting in the door as well. That comes down to selecting your channels wisely.

Traction vs growth

There’s a big difference between traction and growth. In the early days of a startup you’re never looking for growth, you’re looking for traction. Traction doesn’t imply growth. To simplify it: traction is pre-product market fit, growth is post-product market fit.

It’s less about funnel optimisation, and more about establishing a steady stream of users and customers into your product so that you can figure out the other variables in the equation – things like activation, retention, referral, customer lifetime value, etc.

There are a lot of different ways to get traction like press, guest blog posts, using alternative advertising channels like Reddit, some of the brute force stuff from above like in person marketing.

But there are only 5 scalable growth channels: search, display, facebook, viral/WOM, and sales. Press isn’t scalable, it’s a blip on the radar. At some point you have to figure out how to play in one of those 5 channels, but you don’t necessarily have to figure that out at the beginning. There are lower cost techniques to get traction.

So once you’re at the growth stage you can take all of these hypothesis around all the variables in your growth equation (you should have an actual written out equation) and start to optimize the resource allocation against increasing these variables within these growth channels.

A lot of companies think they are ready to grow, but if you ask them a couple of questions about their retention and monetization they’ll realise there’s huge holes in the equation. Startups like Viddy hit growth too soon and peak then crash. This is because they haven’t figured out the traction funnel before they turn on the growth machine.

There is a time for traction and a time for growth.

Traction is a learning phase to figure out what you know so the growth phase doesn’t kill you, it enables you.

Common Startup Mistakes

  1. Traction vs Growth (as above)
  2. Not focusing on the right scalable growth channel
  3. A lot of people tend to look at growth hacking as the top of the funnel, the acquisition piece. But growth is really about looking at the whole funnel.

That’s why the best growth guys tend to be a mixture of a Product Manager and a marketer. The reason is, most businesses don’t tend to build their long term sustainable advantage at the customer acquisition piece of the funnel.

Any technique or advantage you find at the top of the funnel, over time will be competed away. If that’s where you’re competing, you’re playing a game of continuing to find more and more new techniques that no one else knows about to exploit.

Instead, you should be focusing on how to monetise your customers better, or retain them longer, or activate them at a much higher rate. When you do that it has an equal effect, changing the CPA to LTV equation in your favour.

Building sustainable advantages like that in the funnel is a lot more stable then constantly trying to find whatever the new technique or hole in the customer acquisition space is.

What a real growth hacker does

The term growth “hack” implies a kind of ‘shooting from the hip’, magical process, throwing things together and just seeing what works without any methodical thinking – growth is the complete opposite of all of that. There are really 3 steps to it.

  1. The framework of looking at growth as a full funnel item.
  2. Establish the growth equation, which is about figuring out the variables in your equation that you can optimize and tweak that have big impact long term.
  3. Establish a process, a regular rhythm of listing out all of the things you want to test, and each one of tests is correlated with a specific variable in that equation and tracking the results of all of those tests, just like an engineering process of developing features.

It’s a very methodical process of going through a list of things against the variables you think have the biggest impact. That’s what he warns against with ‘growth hacking’. Usually it starts off with a deeper question, not ‘how do we grow?’ but rather ‘how do we optimize this one variable better?’ and that question leads to ‘here are the ideas or product features that might help with that type of stuff’.

Focus on one channel at a time

When a company comes to him and he asks ‘how are you going to grow?’, they might list out 5 different channels. The reality of the situation is that diversifying yourself across 5 channels is a death sentence.

There’s so much you can do in one channel in terms of strategy, optimisation and copy testing that you have to be diligent about evaluating the channel and prioritizing your strong hypothesis rather than trying to spread yourself thin and optimize 5 at once.

The reality of the situation is that the majority of successful startups grew through one channel – Zynga was Facebook, Groupon was email, TripAdvisor was search.

It’s very rare that a business has grew equally through 3 or more channels.

Figure out what they one major growth channel is and focus on it like a hawk.

Further reading: 5 Steps To Choose Your Customer Acquisition Channel.

On career advice: become T-shaped

If you look at some of the great growth guys and CMO guys, they seem to be all shaped like a T.

They go really deep on 1 or 2 channels and then go broad and understand the mechanics across the other ones. Just like optimising 5 growth channels at the same time is hard, optimising yourself with 5 channels is equally as hard.

Pick the one or two channels that you think you might be really interested in. Pick something very established like search which you know will be around forever, and take something emerging like mobile that’s such a massively changing landscape, get in early and go really deep on it.

But also take the time to understand the broad surface level of other pieces. Understand the advantages and disadvantages of different channels.

You’ll start off in a small company where the CMO will be very tactical and focused on that one channel that they’re really deep in but as the company grows they’ll bring in channel experts that will help the company growth in those channels, and the CMO isn’t tactically doing it but they need to understand it.

Get inside a company that’s fast growing, that’s metrics focused. Some of the best places to learn are lead generation companies. These guys are always on the bleeding edge of the latest techniques and they’re very mathematical, operating on slim margins. Or there are growth teams forming in startups everywhere.

Make sure whoever is leading that team is a phenomenal teacher – you should be focusing more on the teacher than the startup, that’s where you’ll get the value.

Pro tip: build your own growth group

Lastly, one of the best things he’s done was establishing a growth group. Himself and another friend got together the best user acquisition and CMO types.

The point was to establish honesty and trust.

Once a month someone would come with a presentation prepared on what they had tried, they exposed the data and the metrics – because a big part of this stuff is that its so data proof which is usually private, and a lot of times its hard to get people to open up about it.

Establishing that small group of trusted people who are also testing and playing around with this stuff is the best way to learn and get the inside track on things that you might not have time to try out.

Tl;dr

  • Researching, understanding and focusing on the right channels for you saves time, effort and money
  • In the early days aim for traction not growth
  • Establish a growth equation; figure out the variables in your equation that you can optimize and tweak that have big impact long term
  • Establish a methodical testing process, test all variables in your growth formula to determine what variable has the biggest impact
  • Focus on one channel at a time
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  • http://www.referralcandy.com/ Visakan @ ReferralCandy

    This is great, thanks for writing it! Astounded that it’s not more widely shared/discussed.

    • https://ryangum.com/ Ryan Gum

      Thanks Visakan, right back at you & ReferralCandy.
      I definitely got a lot out of this interview and I thought others would too – glad you proved me right :)

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