Hacking Startup Growth with Brands

Posted on: August 9, 2013
Posted in Strategy

Here is a three step how-to with deeper explanations on how startups should think about working with brands. It will be different depending on whether you are social, e-commerce, etc.  I think the framework applies broadly to many startup business models, mobile apps or web.  The tl;dr summary:

  1. Understand the relationship between the brand you are working with and your user / customer – I talk about extending the agile metaphor to the sales and marketing funnel. What’s your goal and desired outcome? It goes way beyond user growth.
  2. Creating branded products, iterating and hacking growth. You should ideally map a sustainable process to one product and work with brands horizontally across a variety of markets or vertically inside one. If it works extend this to other products and an API.
  3. Create direct relationships with brand managers. We did this easily with the most progressive brands in the world—Nike, ESPN, Lululemon, Man United, Showtime, MTV etc. Do not use agencies—more on this below.

Extending the Agile Metaphor to the Sales and Marketing Funnel

Work with brands as a strategy, not for the sake of it. This is obvious but stating it here directly. What do you want out of it? It’s important to think this through both pre and post product market fit. If it’s a minority part of your marketing and growth strategy, go for it. Brands today have massive engagement and reach and you can gain users as well as awareness within the tech circle, access to capital and relationships etc.  Some startups do it well—e.g. early on Twitter nailed its interactions with celebrities.

The killer method to think through what you should build is to start is by dividing up the marketing funnel and map the value-add your startup can provide – e.g. increased awareness, conversion, engagement, or referral. If you don’t understand this in depth, read this book as it’s the definitive source. This topic deserves a standalone post but buy the Lean Entrepreneur and read chapter 9 on the sales funnel if you really want to understand agile customer marketing. It is absolute gold.

This is similar stuff as to Dave McClure’s AARRR metrics, which is best-in-class in startup marketing (watch this Youtube video).

So you can extend the agile metaphor to the sales and marketing funnel –  what does this mean, how do you do this in practice and what do you build?

Tanuj Parikh developed this totally new marketing funnel for us. It was incredible.  If you compare it to the original funnel we had a specific value prop for brands. We were going to excel as an engagement platform. Not every brand we talked to wanted this, but the ones that did ate it up and we were able to record metrics that far exceeded engagement they observed on other platforms. Our hook was a retention event built around a topic that users were interested, which was delivered in real time (to all members of the group).

Highlight how your service allows your users to interact with their brand. The medium is the message—since your medium is different than other mediums and brand marketers like to segment paid, owned and earned media you are telling a story here. Do it every chance you can with metrics—i.e. collect metrics from partnerships along the way and make case studies that explain what you are doing, and tell this story elegantly.

For example, our service was inherently viral when we developed our growth strategy. And that’s how we thought about working with brands. We already had product market fit with clear strengths (higher conversion and engagement) so we were effectively passing this benefit on to the brand.

Hacking Growth and Iterating Product

Now on to what to build: at Groupme we asked for a very lightweight integration + co-promotion, and we did the work of hosting branded pages—groupme.com/brand. This model worked for us so well we extended it to hundreds of tier 1 brands and used it as a foot in the door for our mobile API strategy—in 50% of cases Groupme was also embedded directly inside their mobile apps. Tons of apps are still using our APIs today (excellent post on how we designed them here).  We effectively de-risked the integration and did all the product. We also appealed to the marketers inside these organizations by offering a different channel to market to their audience, one which was new and innovative (mobile, local, social).

To pitch it, make a lightweight prototype, which is pixel perfect. BD should do this. Do not hand this over to a designer or product team except when you can’t do something in Photoshop.  Iterate around your core product, “develop” prototypes, and make the brand feel like they are front and center and inside your product. Before you write any code.

Since social is technically paid, owned, and earned (they pay, they own, they earn the buzz), it spans across a lot of different budget buckets. Brands get a lot of owned media for free in social so it’s difficult to make them pay as explained here. But sometimes your imperative on working with brands is not just money or user acquisition, it’s knocking down a new demographic to grow, showing new use cases for your product, or even being the loudest in a crowded market to get access to funding or to get acquired.

Avoid Working with Digital Agencies

I have horror stories working with digital agencies—we had hundreds of meetings with little to show. I remember working with one agency in particular, constantly updating the team of this awesome deal we could do (insert massive brand here), and 4 months after having been on many meetings and calls (again with the agency—who wants to serve as the gatekeeper for everything) we are excited to have our first direct F2F with the brand (finally) and they don’t even know what our startup does. Like explain to them what Groupme is. WTF huh?

The reason it doesn’t work generally in agency-land is deals don’t fly for anything nonstandard, which is difficult to get done with multiple parties. But the fact is in startups everything is risky and non-standardized at the early stage. Agencies don’t and will never take risks. Startups have to by default.

Instead you need to work with the experimental brands who are doing leading edge stuff.  All experimental brands have people in house who read TechCrunch just like you do and know what’s trending. You do NOT want to work with the brand if they don’t have progressive people in house. Trust me. You have a narrow set of resources at a startup. Avoid wasted time. Go to the progressive people and create relationships. It’s all about relationships. If you have strong direct relationships you can create game-changing collaborations.

Less talked about, agencies have a lot of resources so by their nature are well-staffed. There are young people there whose job is to understand “who is the next big thing” so you will get inbound and cold calls from people. This feels good! The problem is these low level people are literally just trying to learn the lay of the land, and have absolutely zero influence in making a decision. At most they could possibly set up a meeting for you. Meanwhile, YOU are the decision maker on your end of the deal. And 6 months later after educating them, you are lucky to be 2 pages inside a 50 page deck they send to their clients. This is fact, I have seen it from all sides.

There a few exceptions to the above rule, most specifically If your startup is specifically centered around selling media, then of course you will work with the agencies—but this is the minority of startups.

The worst part by far about agencies is you will do a bunch of work and then never hear back from them. They will literally go dark. There are certainly great people within agencies and I’ve met friends there even after failed deals, so this isn’t meant to uniformly criticize, it’s more intended to dispel the myth that they are necessary.

Instead, go direct to brands, they are listening.

Keep a pulse on who is open to experimental collaborations and cold email brand managers. We actually did this with Kristina Simmons when she was at Lululemon and ended up having our APIs integrated inside one of their flagship mobile apps, which enabled us to experiment around a new market (retail). And sometimes the inbound will come to you when you start getting press. This is how Jason Madhosingh contacted us—a year later we had an entire sponsorship at SXSW and a custom built prototype of a bill splitting product with American Express. Lastly get your investors to introduce you. Kevin Carter from SV Angel killed it for us here and worked tirelessly on our behalf.

The truth is, places like TechCrunch kind of popularized consumer web / tech and all the digital people at these big brands read it and understand what is going on. If your company is hot or doing interesting things, there’s a good chance progressive brands will absolutely know who you are.  If you aren’t yet, they will understand your narrative and show more desire to be experimental.

That’s it! Please leave comments, share or email directly with questions.

  • Jason Madhosingh

    the usual thoughtful post by Steve. Well done. And thanks fo the shout out.

    • http://stevecheney.com/ steve cheney

      Thanks a bunch Jason. You were great to work with.

  • sbermo

    Great advice. We are experimenting with startups at BabyCenter. If you are a family tech startup looking for distribution, talk to me. We move quickly to test and learn with you.

    • John Jackovin

      We would love to talk to you at Baby Center. Bawte focuses on automating product registration which, as you know, is big for juvenile products. You can reach me on Twitter at @Jackovin or @Bawte.

      • sbermo

        Thanks John! I look forward to connecting.

    • Alex Griffiths

      Would love to connect also Seth. We have an immediate opportunity for your review. Will be in touch tomorrow morning!

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  • http://panelpicker.sxsw.com/ideas/view/8591?return=%2Fideas%2Findex%2F10%2Fcompany%3Agolinharris Len Kendall

    I’ll offer some input here since I worked on the digital agency side for 7 years before starting CentUp.

    1) Your overarching point is that the money and time you may spend on an agency more often than not will not pay off. I agree. The upside of you landing a deal with a client is money, the upside for the agency guy or gal is they get a thumbs up. Although you giving their client a valuable partnership or service is something that will keep that client happy, it’s just 1 of 100 things that agency person needs to do to keep them happy.

    2) That said, they are well-stocked with good people and talent. YOU as a startup probably don’t interface with many of them because you’re stuck in meetings with account managers. My advice is to look to digital agencies as places to recruit solid designers, developments, and biz devs.

    3) Sorry about your horror stories. Next time (if) you consider working with an agency, I’m happy to make solid references to people I believe will serve you more effectively. Now that I’ve seen both sides of the equation I think I have a good eye for this.

    GREAT POST!

    • http://stevecheney.com/ steve cheney

      Thanks Len! Appreciate you taking the time to add your candid remarks (+ offer to help). I agree that their (agencies) upside isn’t worth nearly as much which is why it’s best to avoid and go to directly to brands.

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  • http://www.marketersstudio.com David Berkowitz

    This is a great read, and I agree – as a longtime agency guy – that agencies can be more of a hassle than they’re worth. The one thing I take issue with is “progressive.” I’ve come to respect that most brand managers have jobs to do, and their jobs are to grow the sales and market share of their brands. Most startups are distractions from those goals. Just because someone on the brand side is ignoring a startup doesn’t mean they’re not progressive. If you’re not getting buy-in from the brand, you’re doing it wrong. Maybe your startup sucks. Maybe you’re talking to someone who’s not a decision maker for what you’re doing. Maybe you have terrible email or phone skills. Maybe you have a great product but your marketing of it is terrible. It’s very easy to ignore those and just say, “Oh, the brand guy wasn’t progressive enough to go for this killer idea.”

  • Pramod Dikshith

    Fabulous post. It’s very much in alignment with what I experienced while working for a startup before. I agree to the most part on what you have said about working with Brands directly. However from my experience penetrating into Brands as a startup with little brand awareness is like entering Fort Knox. They invariably refer companies to their agencies or ignore them saying “send me something” unless and until it comes from a reference. I think David Berkowitz nailed it in the comment below. On the contrary, I saw “some” agencies were more open to talking and looking at what we had and exploring ways to integrate into their overall strategy. I think brands do use agencies to help them filter the calls they get in. My opinion of agencies did change after seeing what David Berkowitz was trying to accomplish working with startups to help brands build connections with consumers in different ways

    • http://stevecheney.com/ steve cheney

      Thanks for reading – agreed on brands being difficult to penetrate if your startup isn’t as well known. For us it got easier over time. But even in the beginning we were able to bring on large brands (MTV etc) by going direct. We were *never* successful through an agency. Even though they open doors in theory. I think it’s dependent on traction / awareness etc. Without that partnerships make little sense anyway IMO.

      • Pramod Dikshith

        If you are able to get in the door nothing like it :) . You have a few less people to convince. Great posts Steve. Really enjoying reading your blog

        • http://stevecheney.com/ steve cheney

          Thanks :)

  • http://www.passjoy.com/ Jim Bonner

    Steve, wow, this post just saved us a bundle. We were just debating whether to work with agencies! :)

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  • http://www.socialnerdia.com/ Esteban Contreras

    Love it.

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