Startup diary: For every €1 you spend in marketing, make €2 in revenue
Our podcast is now live. (A search for voxgig on iTunes will bring it up.) It is, as with most things we do, a soft launch. There’s only one episode just yet. Our general strategy for getting things done is accept embarrassment with version 1, and then iterate our way out of mortification. It might be a little painful at the start, but it helps us avoid wasting resources – it’s easy to be wrong about what you think people want.
Before we get into our tactical approach to publishing a podcast with a new episode each week, let’s step back and review the strategic reasons for going to the effort of doing so.
We’re a Software-as-a-Service (SaaS) business. That means we need people to come to our website, like what they see, sign up, and use the system.
Getting people to visit your website is something you have to work very hard at. The cost of doing ends up as the major cost for any SaaS business. It is technically known as the Customer Acquisition Cost (CAC). This is an important metric for our business model, as it helps you determine if you have a real business.
You couple it with another metric, Lifetime Value (LTV), which is the total revenue you’ll generate from a customer over the total period that they use your service. For example, if your service costs €50 a month per user, and each customer has on average 10 users, and the average customer stays for 20 months, then the LTV is 50 x 10 x 20 = €10,000. If you add up, on a monthly basis, all your marketing and advertising costs, and I mean everything, including salaries, and divide that by your number of customers in that month, you can estimate your CAC. Let’s say it’s €5,000 (If you’ve ever spent money on Google or Facebook ads, you’ll know that’s easy to rack up).
That means that for every €1 you spend on marketing, you can generate €2 in revenue. That’s good! You can express this idea as a ratio: LTV/CAC. If it’s greater than one, you’re good. If it’s less than one, you might have a problem.
Things are not quite as simple in real life as my example workings. There are more accurate ways to calculate these metrics, and you might push your LTV/CAC under one to gain market share. A quick google will turn up far more than you ever wanted to know about LTV/CAC if you go looking.
One way to reduce your CAC and improve the ratio, and hence improve the ‘unit economics’ of your business, is to use inbound marketing. Instead of paying for expensive high-volume advertising (you will end up doing this later anyway), concentrate on building a highly qualified audience for good quality content. This gives you a initial community to kick start things when you launch.
To build our community we’ve invested in the speakers’ newsletters – you get the numbers on that each week. We’ve also decided to launch a podcast, where we interview public speakers about speaking at conferences. Both of these activities are very much focused on the needs of the reader or listener. We’ve not talking about more traditional product newsletters or pitches here. This is about community-building. The other way we build community is via our event professionals meetups (I’ll need to give you an update on those next). And we also plan to launch a newsletter for event organisers soon. All of these things come together to generate an highly-engaged audience that will hopefully both trust us (great content, no ads), and find our product useful.
How will we know if we are succeeding? You have to track ‘conversions’. That means, of your monthly audience, what percentage are turning up at the website, and what percentage are signing up for user accounts? We will live and die by these numbers. In practical terms, we will continue to experiment with the content and production of our inbound marketing mix, and try to find ways to increase the audience and improve conversions. This approach has to be quite scientific – the content costs money to produce, and the premise is that it is a least an order of magnitude less expensive than simply advertising all the time.
So that’s why we do a podcast. Now, how do we do a podcast? We’ve figured out how to produce the audio, but we’re still figuring out the promotion piece. As with the speakers’ newsletter, we need to ‘operationalise’ the podcast – turn it into a weekly, disciplined and measured process.
For the newsletter, we use a project-management tool (asana.com – highly recommended) to track each recurring weekly task. Every day brings together some element of the newsletter so that we can hit ‘send’ on Fridays. For the podcast, we’ll need to work out which day of the week we’ll publish on (it is received wisdom that some days of the week will see higher audience engagement – we’ll see), but unlike the newsletter, we have a much longer preparation period.
The biggest challenge with publishing a weekly podcast that is based on guest interviews, is scheduling those interviews. Great guests are great speakers, and tend to be very busy successful people who travel a lot. The scheduling effort (and associated costs) was not something we fully appreciated. Then each podcast episode needs: a separately recorded introduction, audio preparation, written show notes, a blog post, updates to our website, quality review, and uploading to the distribution service (we use libsyn.com – I’ll let you know how it goes). Most of those activities do not happen in the week of publication. Our challenge is to track the flow of work for each podcast and ensure that every week we have one ready to go. Our initial strategy is to build up a reserve library of recording as we figure this out – we have 12 podcasts in various stages of readiness right now, but it has all been pretty ad hoc so far. That will need to change once we launch. Then we need to build a process to promote the podcast. We need a social media strategy, of course, but we also need an outreach strategy – just like the newsletter we may decide to reach out to people who would probably be interested in subscribing. Finally, the newsletters, podcasts, and all of our material needs to cross-promote – and we’ll need to figure out the best way to measure all this.
If that sounds like a lot of work, you’re right. We have had a lucky break that makes all of this possible – a new head of marketing will be joining soon, and will take on much of this work. In a startup you always hire only when the need is utterly desperate and you just can’t keep up with the workload anymore. When it comes to our marketing, we’ve reached that point.
(Newsletter update: 4,624 subscribers, and an open rate of 14pc. Podcast update: six downloads – well, you’ve got to start somewhere)
Richard Rodger is the founder of voxgig and former co-founder of Nearform, a Waterford-based tech consultancy
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