Traction — by Gabriel Weinberg and Justin Mares (notes from Paul Bennetts)

by Paul Bennetts via paulbennetts.co

Gabriel Weinberg and Justin Mares are the founders of DuckDuckGo. DuckDuckGo is an Internet search engine that emphasizes protecting searchers’ privacy and avoiding the filter bubble of personalized search results. DuckDuckGo is venture backed by Union Square Ventures. They also invested in Twitter, Tumblr, Etsy, Zynga and more. Fred Wilson, partner at USV had this to say about Traction,

“The entrepreneurs who walk out of our offices with term sheets walk into them with Traction. It’s a pragmatic guide to solving the entrepreneur’s number one challenge.”

My notes
What is traction really? Traction is basically quantitative evidence of customer demand. It is a quantitative metric. It will show up in the numbers. Hence, you need to understand and track numbers well.

Paul Graham, co-founder of Y Combinator, picks one number to judge traction. Weekly growth rate. In my mind, it is usually many data points bundled together that show traction. But it’s fair to say that the whole point of a startup is to grow quickly. Period.

Startups can get traction through 19 different marketing channels. The authors researched 40 successful startups to document this. Many tried multiple channels until they found one that worked.

Far too many startups focus on the same channels. And ignore the most underutilized (and likely promising) channels.

Keep in mind that it will be hard to predict the channel that will work best.

19 channels (don’t dismiss any of these because successful companies have built off each) include targeting blogs, publicity, unconventional PR (stunts), SEM, social and display ads, offline ads, SEO, content marketing, email marketing, engineering as marketing, viral marketing (referrals), business development, sales, affiliate programs, existing platforms, trade shows, offline events, speaking engagements and community building.

Marketing provides incredible opportunity to secure traction. The problem is our natural tendency is to focus on product. Startups need both a product strategy and a distribution/marketing strategy. Don’t focus on one at the determinant of the other. Spend equal time doing both — product development and in parallel distribution development (testing channels).

Building something people want isn’t in itself enough to get traction. You need to understand marketing, channels, monetisation, addressable market. And beware of how hard it will be to reach the market (i.e. stuck with an inexpensive product that requires a direct sales force) and how many other companies are doing the same as you.

Most founders believe that while their product is still leaky, that testing traction is a waste of resources. They worry about burning marketing money as new customers leak out of the funnel. The opposite is true. Getting new cold customers helps you find the leaks in your product. The goal should be to iterate your product and inform your distribution strategy.

Starting up can be seen in 3 phases 1) making something people want; 2) marketing something people want; and 3) scaling your business.

As Peter Thiel puts it,

“Most businesses actually get zero distribution channels to work. Poor distribution — not product — is the number one cause of failure.”

You need a repeatable framework to find channels that work for your startup. Weinberg and Mares created their own framework called Bullseye.

Step 1: The Outer Ring — What’s Possible
Write down what ultimate success would look like for each channel. Think of at least one idea for each channel. Don’t mess up this step by not brainstorming long and hard enough.

Research is critical to success. You must understand the history of what has gone before you. You should learn what marketing strategies have worked in your industry, as well as the history of successful and unsuccessful companies in your space (in relation to what they did in marketing).

Step 2: The Middle Ring — What’s Probable
Run cheap traction tests in the channels you are most excited about. Do tests in parallel.

You should be able to answer for each channel you test 1) cost to acquire a customer (cost of the channel); 2) how many customers are available (scale of the channel); and 3) what kind of customer is going to come through that channel (quality of the channel).

The purpose isn’t to scale up a channel that is working yet. The purpose is to spend say $1,000 per channel and spend a month testing and getting a rough idea of a channel’s effectiveness. If you are testing all 19 channels this could mean budgeting over $20,000 for initial marketing tests. In my mind, you should probably budget $50,000 to find channels with potential (or thereby lack of).

Step 3: The Inner Ring — What’s Working
The final step is to focus solely on the channel that is working and will move the needle for your startup. This is an interesting deviation from most common lines of thought, which is to have a handful of channels going at once. As a thought exercise, it is interesting to think what better results might be achievable, if you directed all your traction efforts, ideas and resources toward only the most promising channel.

As you scale, your most promising channel can change as it becomes saturated or too expensive at scale. Most people will say to use paid advertising to kickstart your marketing engine. But the most successful startups are those that can build a large organic channel without the heavy reliance on paid marketing (a good case study on Etsy). In my view, the end goal should be referrals and repeats. Referrals as in an organic marketing channel and repeats as in new sales coming from existing customers.

Weinberg and Mares firmly believe that founders working on other marketing channels that have reasonable success is distracting and should be discouraged. They believe you are better off focusing all your resources, efforts and ideas on making your best channel even better. In my mind, there is something to this line of thinking.

If no channel turns up as promising in your first iteration of tests. Rinse and repeat. Or feed learnings back into product. And then try again.

It was interesting to see that from all the successful companies they researched, most were employing underutilized channels.

Over time, all marketing channels become saturated. As more companies discover an effective strategy, it becomes crowded and expensive and/or ignored by consumers. This point is critical and often not well understood. For this reason, you should be allocating time and budget to constantly running experiments for new channels, particularly new platforms in their infancy.

Last note, my favourite chapter was ‘Critical Path’ which talks about setting milestones to your traction goal. That chapter alone is a must read for all founders.

Highly recommend checking out Traction by Gabriel Weinberg and Justin Mares.