Do you want to stop wasting your money on aimless marketing campaigns that deliver uninspiring results? Marketers from a Rakuten Marketing study said that on average they waste 26% of their budgets on ineffective channels and strategies – that’s soul-crushingly high! The famous quote, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”, coined by John Wanamaker over a century ago highlights that it’s an old problem. Fortunately, we have a proven formula for achieving business growth through digital marketing.
Growth marketing is the next leap in the industry that helps avoid wasteful spending. It’s a process that involves gathering and ranking ideas, creating experiments, and studying data to fine-tune a campaign. The key ingredients of growth marketing are strategy and performance. A strategy is required to give marketers a direction and performance is the way you’ll get there. The synergy that’s achieved when both ingredients are combined leads to fantastic results!
But don’t take our word for it, in this article you’ll learn the types of strategies that you can deploy and how to achieve an optimal state of marketing performance.
5 types of growth strategy
Achieving business growth without a clear aim is almost impossible. Consequently, the lack of momentum can cripple the chances of growth. In this section, you’ll learn the commonly used strategies that will help you steer the ship in the right direction. Depending on your resources and nature of your business, you can activate every strategy on this list simultaneously to maximize your growth potential.
Market penetration: increasing market share is the goal of market penetration, which can be done by bundling products, advertising, discounts on large orders, and lowering prices. The latter may not feel attractive, but it’s an effective short-term strategy for beating the competition.
Market penetration can focus on launching new products or developing existing ones. It doesn’t have to be complicated to be effective. For example, nowadays you may struggle to find packs of toilet paper in quantities lower than 24 rolls. A toilet paper company could differentiate their brand by offering 12, 8, and 4 unit packs. Get creative and resourceful! Figure out where the opportunities lie in your market that doesn’t require groundbreaking new products or services.
Once you find activities or channels that work it’s important to scale the winning strategy to increase the positive impact on the bottom line. Market penetration will occur at a faster pace. Speed is one of the advantages of growth marketing – it’s about sprinting to the finish line.
Market development: is there no room to grow in the current market? Then the optimal ROI decision could be to grow into new markets. Launch your products or services to a new geographical area. It’s a good idea if you have saturated existing marketplaces with advertising, yet the growth momentum has decreased.
Footwear giants such as Nike have successfully executed a market development strategy by going global – their goal was to hit $27 billion in 2015. The strategy is effective because you can utilize your current business model and replicate that blueprint in untapped markets. However, don’t forget to research what makes the new market different. You may need to make changes to your products and advertising to get the best results.
You can turn the problem on its head by following the Blue Ocean strategy. This involves making the competition irrelevant by creating and capturing new demand. Instead of competing in existing markets, you can create new markets through innovation.
Product development: outdated technology, lack of customer excitement, and stagnated sales growth are key indicators that should induce product development. Releasing new products creates a sense of excitement around a brand that gives it an organic boost. Customers have a genuine reason to pay attention to your marketing.
For example, in the SaaS world products remain competitive by releasing new features, fixes, and updates. Customers stick around because they constantly feel like they are getting extra value.
Again, you don’t have to release a groundbreaking new product to achieve the desired effect. Consider the release of Cherry Coke in 1985. The new flavor was simple, and apart from the use of a darker red, the can even look the same! The release of Cherry Coke sparked a renewed interest in the brand and the product is still going strong 3 decades later.
Product development involves phasing out poor performing products to make room for new ones. Think about the customer experience and the message that you’re conveying when selling outdated products. It reflects poorly on your brand and gets in the way of new products.
Alternative channels: more than 80% of consumers interact with 2+ channels before buying. Therefore, appearing on more marketing channels is the right strategy for business growth. Top channels for your consideration include social media, pay per click (PPC), e-mail, website marketing, and video. Stretching your marketing budget across each of these channels may result in a higher ROI rather than investing in one. Here at Ladder, we specialize in the discovery and validation of new channels across the digital landscape.
You might be surprised to learn that only 64% of small businesses in the US have a website. It’s shocking because small business websites are relatively cheap to build, yet the payoffs could be huge.
Do market research to find out the marketing channels where your target audience is most active. Rank channels based on factors such as competition, earning potential, and cost. Allocate your budget to the most promising options to branch out your marketing efforts.
Market segmentation: marketing budget waste comes from advertising to people that have a very low chance to convert. Market segmentation is about breaking up the audience based on various characteristics such as location, interests, and preferences. Targeting increases the ROI of marketing campaigns because the offer is tailored based on the recipient.
You need a systematic approach to market segmentation that’s automated – even if you’re a small business. Establishing a scalable system when small allows you to reap the rewards as you grow. It’s an important ingredient for growth and ensures brand consistency when a company transitions to a larger size.
Market segmentation is easier than ever before with marketing automation software such as HubSpot, ActiveCampaign, Klaviyo, Omnisend, and Marketo. Integrating one of these into your businesses could be a game-changer.
Increasing ROI through the right KPI’s
Key performance indicators (KPI’s) provide a tangible way of measuring and monitoring the journey towards achieving a goal, literally like roadsigns for achieving business growth. Growth marketers focus on KPI’s that have an impact on ROI. Track the following KPI’s to figure out if you’re going in the right direction:
MRR and CMRR: MRR stands for monthly recurring income. Subscription-based business models use MRR to see how much money is generated. It might be streaming services such as Netflix or a monthly magazine like National Geographic.
You can take one step further by introducing CMRR (committed monthly recurring revenue). It’s the more powerful version because it indicates the number of customers that have committed to pay per month.
Cost per qualified lead (CPQL): this is the amount of money used to generate a lead that has a good chance of converting. It’s an evolution of CPL, which does not specify the strength of the lead. More money is required to qualify a lead, so expect CPQL to be the higher value.
Service companies like Ladder focus on CPQL to better gauge the likely return from potential leads. It helps determine the amount of money a business is likely to spend in the long run.
Average revenue per customer (ARPU): it’s the amount of money you earn per customer.
Customer acquisition cost (CAC): the amount of money you spend generating a customer. Comparing this number to the ARPU allows you to assess the profitability of your business. Ecommerce businesses use CAC to figure out how much each customer has to spend on the marketing campaign to be profitable.
Lifetime value (LTV): how much do your customers repeatedly spend over the long-term? Generating customers can be expensive. Therefore, it’s more cost-effective to make money from existing customers. Your company cannot be profitable if the LTV value is negative. It means you spent more to attract customers than they have spent. SaaS companies focus on LTV and the break-even point. The goal is to retain customers long enough to get a positive return on investment.
Payback period: this is the length of time required to generate an income equal to the CAC. Shorter payback periods are vital for businesses where cash flow could be a problem.
3 examples of growth strategies to inspire you
Case studies and examples are a great way to learn. Leveraging the insight of proven strategies from successful marketing campaigns helps avoid costly mistakes. Here are a few notable growth strategy examples worth reading:
- Dropbox created viral loops: back in 2008 Dropbox pioneered a way of storing files in the cloud rather than locally on the computer. Nowadays the idea is taken for granted, but it was challenging to convince users to part ways with their external drives and USBs.
Dropbox succeeded by giving a reward for getting others to use the file storage software. When new users sign up they too receive the incentive and the process repeats itself. The self-perpetuating customer generation machine is like a spreading virus that grows exponentially.
They ran hundreds of experiments before coming up with this viral tactic. This goes to show that growth marketing is not luck – successful ideas are born out of testing and failed attempts.
- Black Milk Clothing: diversification can be a powerful growth strategy in marketplaces where competitors are sticking to conventions such as trends and seasons. Black Milk Clothing is a clothing company that decided to diversify by adding dresses, swimsuits, and leggings that features comics and popular movies.
Marketing was mainly word of mouth through social media. The unique design aspect of the clothing means buyers are more likely to share what they have bought with friends and family. The combination of diversification and word of mouth marketing can yield insanely high ROI. It’s powerful enough to turn the tide for a small struggling business in a fiercely competitive marketplace. Black Milk Clothing is now a brand worth multiple millions.
- Postmates: when Postmates reached 5 million yearly deliveries they launched a new service. It allows customers to pool orders in the local area to save money on shipping. The new service has the catchy name of Postmates Party and adds unique value to customers. Postmates were able to achieve this with a small but resourceful team of engineers. The systems they put in place were designed to remain effective as the company scales during periods of business growth.
Venture capital funding generated over $670 million to boost product creation efforts. Therefore, Postmates grew its growth team and implemented massive changes. They now have a bigger growth team, which means they are well-positioned to expand Postmates even further.
Performance is the growth marketer’s journey
Measuring and improving performance is the journey of the process. It’s great having a clearly defined goal, but it’s going to be an uphill struggle without a roadmap of how to get there. Execution of the chosen strategy gives us performance, which can be good or bad. Data-driven decisions are the key difference between growth and traditional marketers. The nuts and bolts campaign progression lies in the data – so why not use it to your advantage?
Tracking performance allows you to navigate the most challenging and complicated marketing campaigns. Fortunately, there is a systematic approach. It can be repeated for any business competing in any marketplace.
Growth marketers make decisions based on data, not assumptions
58% of a marketer’s test group say that over half of their decisions are based on gut feel. That’s a shockingly high number of professionals leaving too much of the process up to chance. Human decision bias prevents choices from being objective. Making the wrong choices in daily life may not lead to serious consequences. For instance, choosing the wrong coat might result in being too hot or cold for that day – no big deal in the scheme of things.
However, what if you were to measure the negative ROI costs of “gut feel” decisions versus using data? You may get a completely different feeling in your gut and not the good kind either. It may lead to investing in the wrong channel, audience, campaign, ad variation, or landing page.
Growth marketers come to work having left their dice at home and focus on data-driven decisions. They allow for a systematic way of making logical conclusions, which in turn drastically increases the profitability of a campaign.
Sound good? You’ll need to start by collecting data and organizing it in a digestible fashion.
Data gathering is the foundation of performance
Achieving business growth depends highly on making the right decisions, which derive from data. Nowadays acquiring data is not difficult with the right software. Choosing the right data to capture is half the battle. Consider the KPI’s outlined in the 1st part of this article. However, the best data to track depends on your business, market, and business goals. We perform audits before engaging with clients, which is a standard element of our sales process.
You’re spoilt for choice with data gathering and tracking software. The market is flooded with CRM’s (customer relationship management) that are easy to integrate. Here is a brief overview of the top choices:
- HubSpot CRM: this innovative CRM system is mostly for small businesses on a budget. Marketing automation and social media campaign management are the key beneficial features of HubSpot’s marketing software, which can easily be combined with the CRM. The duality of the systems results in a powerful growth marketing tool worth adding to your arsenal. Keep in mind that the CRM is free, but comes with expensive add-ons.
- Zoho CRM: the mixture of features offered by Zoho CRM at a competitive price makes it stand out. You get in-depth analytics, multi-channel customer interactions, contact management, forecasting, and sales force automation. The free trial gives you a chance to see what’s under the hood before committing money to the CRM.
- Salesforce: this CRM package is ideal for large and small businesses that are expanding. Growth marketers can take advantage of outstanding workflows, automation, and Salesforce’s Einstein Analytics for diving deep into the data.
- Facebook Analytics: Facebook offers advertisers free analytics data based on their campaign performances. You can view information such as page likes, actions on the page, story reach, and much more.
- Google Analytics: marketers using Google’s PPC platform can view data for free using their analytics platform. The suite of impressive features means PPC marketers have all the data they need to optimize campaigns.
- Ad platforms: most ad platforms provide analytics data to assess campaign performance. The quality of data and tools provided differs and might not be comparable to Google or Facebook Analytics.
How A/B split testing improves performance
A/B split testing is at the heart of what growth marketing is all about. In a nutshell, it’s the process of fine-tuning a marketing campaign by testing two versions of a particular component. It might be an e-mail subject line, landing page, or PPC ads. You are limited by your imagination with what you can test. Over time a marketing campaign is improved as changes are systematically made to improve ROI based on experiment results.
Different people will have different opinions about what works best. A/B split testing draws the focus on data instead of dealing with conflicting opinions. The results allow marketers to continually improve websites, campaigns, products, and better understand users in a constructive manner.
Structuring an A/B test correctly ensures you gather actionable data. Here are a few pointers:
- Segmentation: setting up tests on different parts of your audience takes A/B testing to another level. You can focus on how each segment of your customer base reacts to the change. The data collected enables you to build a laser-focused marketing campaign.
- Test scope: how long will the test run for and what is the sample size? The time you need to see meaningful data depends on the nature of the variations. Consider using Evan Miller’s sample size calculator. In the name of fairness send an equal amount of traffic to each version of the test. You should also check to see if the data meets the statistical significance threshold.
- Measurement: decide on what you are going to track to determine which version is the most effective. For instance, if you are testing two CTA’s (call to action) above the fold, then the clickthrough rate is a worthwhile metric to measure.
- Number of variations: you could change one variable at a time to turn version A into B. However, that’s a slower process than introducing several variables at the same time. The problem with using more than one variable is that you can’t be sure which one is responsible for the change. The less traffic you have the more drastic the differences between variations should be. Therefore, you can be more confident as to what drove the difference in performance.
A/B split testing costs money, especially if you are constantly introducing variations that negatively affect the ROI. We have run 330 marketing tests and the failure rate was 57%. Therefore, you are more likely to introduce counter-productive variables than successes. Starting small allows you to learn the A/B split testing ropes.
So how do you achieve business growth with A/B split testing? The trick is to lose small, but win big. You’ll get the hang of it through repetition. It’s a lot of work, hard and plain boring at times. Stick with it and the rewards greatly outweigh the effort required.
The more tests that you run the higher the probability that you will find what works. Consequently, you can build further on it and discover new growth levers that you will be able to pull on and achieve exponential growth.
How to make decisions based on data and testing
The lack of statistical significance is one of the problems with data-driven decisions. Acquiring the right sample size is an investment of time and money. To make matters worse the confidence of statistically significant data is rarely 100%. Therefore, you might be making conclusions based on incorrect data. Some CRO agencies only work with clients that have over 1 million traffic per month, otherwise, it’s just not worth the money spent on the agency.
Ironically, using your gut feeling is a good strategy at the start of the journey to gather data in the right direction. Therefore, you receive the benefits of using data-driven decisions and also the speed of your gut-feeling – this is cascading significance.
Finally, conclusions from data need to create focused decisions. For instance, if the CTA button led to a 20% increase after being doubled in size, then switch to a bigger size. Or, let’s say you found that e-mail engagement was higher when humor was used – make sure more of your e-mails use humor from now on.
Additionally, you can make more meaningful choices when the harnessed data is segmented based on demographics or marketing channels. Gathering segmented data takes more resources, but the payoffs can be bigger.
The benefits of combining strategy and performance
Now that you have learnt about the role of strategy and performance in growth marketing, why should you implement the advice? After all, your current setup might already be working and generating enough results to provide some level of business growth. Let me reinforce the benefits of growth marketing to let you see why it’s not just another buzzword, but here to stay:
Accountability: the combination of clearly defined goals and actionable data is a powerful way of meeting marketing objectives. Nothing is left to chance since growth marketers tilt the odds of success in their favor by diving deep into “what’s going on”.
The accountability portion of the strategy comes from the data and analysis. Why was an e-mail subject line changed? Why did the landing page CTA get twice as big? The source of decision making is in the data and by building accurate customer personas, which is how growth marketers like it.
Higher ROI: the ultimate goal of growth marketing is to increase ROI – all decisions have this ulterior motive. Startups and businesses on a budget need prolonged periods of positive ROI to grow – it’s their oxygen. The granular approach of growth marketing significantly increases the chances of creating positive ROI marketing campaigns.
Nothing is wasted: growth marketing is a process of minimizing the size of your losses and increasing the size of the wins. Once you know what’s working and what isn’t you can avoid spending marketing dollars on fruitless activities. Every failed test is a lesson that helps us learn what doesn’t work but also what works better and what users like better.
Scalable and applicable to all businesses: any business around the globe can use growth marketing methodologies. It doesn’t matter if you’re launching a branch of fast-food restaurants in Brazil or a luxury watch store in Switzerland – the core principles are the same. Furthermore, the growth strategy framework minimizes risk because you can experiment while the business and budgets are small. Once the right formula is uncovered through arduous experimentation, implement the insights when the stakes are higher.
We built adaptive growth to first validate what works and then scale/optimize. Later on, we can find new things to improve. As a rule of thumb, 80% focus should be on performance and 20% on testing new ideas, channels, and tools.
Growth marketing never ends
The overwhelming and exciting reality of growth marketing is that it’s an ongoing process. It doesn’t matter if you generate a viral video marketing campaign that leads to a $1 billion cash deal, or attract 1 billion monthly users in just 6 years – there is more room for improvement. Perhaps there is a new marketing channel you’ve ignored thus far or have not given enough attention to a specific demographic? Growth marketers hate to leave money on the table. Their crosshairs are always on the next positive ROI move for the business.
Think of growth marketing as a sales funnel 2.0 and the next big thing in the marketing industry. To take full advantage of the opportunity, schedule a consultation with us for details on how we can help. Our tools and experience could be the light at the end of the tunnel you’ve been looking for.