Lenny's Podcast: Product | Career | Growth
01:06:54 · Jason Cohen
[01:06:54] S1: NRR. And then maybe it's stalled, so this is really a stalled question. Maybe your acquisition channels, your marketing channels are saturated. We're done. I mean, what we tend to do is flog the people doing AdWords, flog the SEO people, get more searches. It's possible that this is it. Maybe this is it in some sort of physical law. There literally isn't anything else, or maybe just this is how good we can be. This is it. But there really are limits. There's different words for it. Inventory is sort of the old word, like with magazine ads. Inventory was the word, but there's just this amount. There is only so many searches in your area, and you can only appear once in the search results for a given keyword. So there is this limit of what you can get. Even if you're in the number one position for everything or other things that are not even practical, there's still a limit. And there's some kind of practical limit that's below that we don't really know, but maybe we're there or maybe we're close. And worse, channels tend to decline over time. So I think people talk about S-curves. " Oh, I didn't figure out this market. Then I figured it out. We unlocked it. Now we're getting a hundred leads per month through Facebook," or whatever. But then it kind of taps out and then we go into this optimization mode, "Can we eke out another blah, blah, blah, blah?", which is right. It all is right. And you call that an S-curve because it's shaped like that, but that's not what happens. What happens is it starts with an S-curve and then it starts sagging. Its butt starts sagging down. So I wrote an article about this called the elephant curve, which is what I named it, because it's like this trunk, but then it's this butt. And there's different reasons why this happens, but if you talk to any marketer, they'll all tell you, "Oh my God, let me tell you this story." They all have stories about it because yeah, this is what happens. There's different reasons. First of all, the audience gets saturated because there's all these little marketing isms, and I don't know if they're true or not. I don't think any of it has any data that actually proves it, but whatever. If words start with the same letter, that's better. I don't think anyone's ever proved that's true, but marketers seem to think so. Okay.
01:09:03 · Jason Cohen
Well, one of the things is someone has to see it seven times before they act. Okay. All right, well, maybe they saw it seven times already, so they don't want it or they saw it 20 times. So initially you hit people who hadn't seen it yet, but now you have. And especially with magazine ads, as I used to do before there was no such thing, that's exactly what would happen. You'd have this nice surge and then like, "Well, we've seen it before." So you still get a little trick. You still get some because it was just that moment they needed to see it again. Okay. But a lot of people have already seen it and they don't want it, or the channel is declining and they'll never tell you. When I did magazine ads, every year they would tell you what their circulation is. Every year it would go up and then the magazine would go out of business. Conferences are the same way. "Attendance is great. Attendance is great. Oh, wait, we're out of business because we couldn't get enough people to come. What? They said it was great." But more quietly, AdWords, Facebook ads, even SEO searches, this does happen all over the place. Affiliates, it can happen. And now with AI, I don't even know. It's disrupting everything. We've all heard stories going all different directions. I think the answer is, "I don't know." Shrug is the answer. And what will it be like in two years? Another shrug. But the point being, they're not all going to be growing a lot. That's not one of the futures that AI will bring us. So it has this sag. That's just a very long way of maybe trying to prove this point, but it's yet another reason why you can't just rely on marketing forever because you try to stack things, but there's not an infinite number of marketing channels you could advertise in that your customers are actually going to, and they sag. Oh no, it's even harder to keep up. So it's kind of like the secret in reinforcing my very first point here with this, but here, are they all saturated? Because we could flog marketing all we want. It's not going to work. So maybe growth is slowing because all our channels are saturated, possibly even sagging, but even if not, okay, not growing, and so we can't just flog the marketing department. It's going to take something else. The obvious thing is get more channels, but again, maybe there aren't any.
01:11:14 · Jason Cohen
So again, there's many possible things to do, but this is this critical thing to notice, because I guess I would put it this way. Do you know right now which channels are saturated and which aren't? If the answer is no, I'm like, well, okay, maybe that's... because the answer is all. It needs to change how you think. Just adding one little feature and then hoping we can flog AdWords is not going to work. Even if the feature's great, not going to work. So there's different things that could work, but that's not one of them, and yet that's probably what we're doing. "Let's add another feature and marketing can flog it," is often the answer. But if you're in this state, that isn't the answer. So this is why you could say it's obvious to say this or that, but are you acting like this is true? Often we don't. Okay. So there are many things to do. Again, we don't have to enumerate all of them or something. It's just simply the right question to ask. But for example, some people are like, "We've done direct. Maybe we should try things like SEO and social and these other indirects or vice versa. We're really good at SEO, but we've never taken out ads." Often if you've done ads and they're optimized, you know what content might be good to write stuff for SEO, and maybe even vice versa, maybe. So it's a good idea and sometimes it works, but here I have no data, I only have my feeling here. And actually, you probably have a lot more visibility into this, but my experience is a product that sold really well direct actually doesn't do well in things like social and SEO and vice versa. If you're getting a lot of traffic through SEO, adding ads often costs a lot and doesn't really move the needle. You can tell me, is that... because I don't have data to support that theory.
01:12:55 · Lenny Rachitsky
[01:12:55] S0: Yeah. My take is you could always get some percentage of win from all these different channels. Usually one channel's where most of your growth will come from. And so over time, everyone just adds every channel. Everyone's doing ads. Everyone's doing SEO in some form, but it's usually sales or word of mouth or ads that drives everything. Everything else is kind of this little layer on top.
01:13:16 · Jason Cohen
[01:13:16] S1: Yeah. So should you do that? Yeah, probably, especially if you're at some scale and you can just afford to because it's such a clear thing to do, but probably you'll have to get more creative about what it means to add a channel or something like a new product or a new market where it's actually new. It's expanding in a new way rather than trying to incrementally expand what you're already doing. So an example of getting creative on a channel is what Constant Contact did when they had this very problem of, "Growth is slow. We don't know how. We sell email marketing newsletters to small business before all these modern tools existed." And one of the things they did that restarted growth is they physically went to a bunch of cities and held workshops showing, "Here's how to do email marketing for your small business." So the restaurateur and the dentist and everyone would come to these sessions and they'd teach them how, of course, teaching them how with Constant Contact so they became customers, right? Now, you would think there's no way this is cost-effective. Physically being in these cities and dragging people in for a $20 a month product? No way. It was very effective and actually solved, in that moment, restarted growth. They were very clever about... First of all, it's a clever idea, but then they were clever about how to do it. They took power users who are also agencies, so these could become customers of theirs. Okay. So you could be clever about how is it that we do something different, something new. So that's possible. Of course, it's always hard to say, "Think of something clever." That's a weird finger wagging thing to do, but okay, it's true. But yeah, it could be a different type of channel. For example, HubSpot famously tested selling through agencies instead of direct. That ended up being 50% of their revenue after four or five years, so it's one of the main reasons why they were able to continue growing. Same thing happens with my company, WP Engine. Tons of our websites are sold through agencies that create WordPress sites. So there could be something that's not direct anymore. Another channel of human beings or something like that could in fact dramatically change your growth rate. There's lots of examples like those, but it could be it's time for the next product. And I said that earlier, because it's always possible.
01:15:26 · Jason Cohen
Of course, we all know that's very hard, it's risky. I have sort of a framework that I use to think about that kind of expansion, which I'm happy to provide. I've also written it up, but I'm happy to say it right here. But usually you want to stay in the target market you're already good at and grow from there. But sometimes the whole point of the expansion is to change [inaudible 01:15:51] or add something where you're leveraging something else about the company that you have as an asset going somewhere else. So this is what this framework helps decide. But one way or another, you probably want to plant one foot into some strength or asset that you have, move the other foot, which is the risky part, but the idea is that, "Yeah, well, we have this big upside, so we're taking that bet," and that becomes a smart bet. Of course that's true for any of these things, but especially if acquisition channels are full and it's like we literally can't ask the marketing department, that's just not one of the choices, it almost forces us to start taking these more drastic bets to say, "Well, we got to do something and that's not one of them."