Thread by @jspujji

In this podcast: What is the biggest mistake in customer acquisition... I have seen inside the mktg orgs of 250+ startups over the last 10 years. It has nothing to do with FB ad creatives, GOOG keywords or LP optimization.

It’s misunderstanding your "Revenue Event" 🧵

https://twitter.com/patrick_oshag/status/1377597397455536132

Here's the concept: every biz has a “revenue event,” the moment the cash register rings. E.g., For Zynga, it’s when virtual gold is purchased, for DSC, it’s when you enter your CC, for Rocket Mortgage, it’s the CLOSING of a loan, for a SaaS company, it's when the bill is paid

I believe all customer acquisition (and arguably the entirety of the business) starts by identifying and deeply understanding this revenue event. Everything prior to the revenue event is your marketing, everything after the revenue event is retention.

Here are (some of) the most important variables to get right around the revenue event: 1) Nominal size of revenue 2) Steps in the funnel, 3) Time in the funnel, 4) Economics in the funnel

1) Size of Rev event - Zynga can make $2 or less in their first rev event, a single stick of lipstick maybe worth $10 in gross profit, a Disney+ subscription someone may buy annually for $100+, a mattress is $1000+, mortgage is $10K and a long term Saas contract is millions.

This impacts all of the marketing strategy. For example, if you’re selling single low priced make-up SKUs, the keyword “mascara” will likely be priced to your economics but an impression on Facebook is competing with all of the above products and is likely to get priced out.

2) Steps in the funnel - one of the largest “alpha” creators in cust acq is how well traffic converts to revenue AFTER the click. Zynga goes from impression to click to download to charge from apple, not many steps so most of the optimization happens after the rev event

A mortgage seller goes from impression to click to research to fill out lead form to qualification to sales call 1, 2, 3 to underwriting to house escrow to close. Each step in that funnel is an opportunity to win vs your competition.

The best companies know and optimize each step in their funnel. It is a virtuous cycle that lowers your CAC and lets you compete more aggressively in the bidded media markets.

3) Time in the funnel - How do you know if your marketing is working? Understand the time from impression to revenue event. If you measure too slowly, you will not react, test or optimize fast enough. If you measure too fast, your data will be incomplete and cause thrash.

Zynga can measure daily or in some instances faster. Rocket mortgage has to wait 90-180 days to know how their impressions matured to revenue. Knowing this also flows into strategy/tactics. Beyond timing, optimizing each step of the funnel is critical which brings us to…

4) Economics of the funnel - The best marketing teams I’ve seen know the marketing economics of each step of the funnel off the top of their head and are constantly optimizing these economics. They don’t just think in CPM or Cost per acquisition.

For example: In Gaming: “Cost per Registered Install” “Cost per 3Day Revenue” In Mortgage: “Cost per Lead”, “Cost per Sales call”, “Cost per Underwritten Loan”, In OTT: “Cost per First watched show”, “Cost per Annual sub.” and other metrics like Volume of impressions per X.

Now imagine you’re Rocket Mortgage and you understand you make $5k per loan. What can you bid on FB or Goog for an impression/keyword? Well, if you’re 5% better than competitors at each step of Click to Lead, Lead to Sales call, Sales call to underwrite, underwrite to close...

... you’re 25%+ better (there’s compounding), you can pay 15% MORE and still end up with a better CAC. And in paying more, FB/GOOG will serve you way more volume of impressions leading to a virtuous (and continuous) cycle of compounding customer acquisition.

There’s a ton more to the “how” here (e.g., creative testing, media optimization, team recruiting/training) which is covered in the podcast and which I will highlight with more threads in the coming days and weeks. Follow me @jspujji if you’d like to read more threads like this!