Ten marketing lessons for every early-stage founder
We weren’t always investors.
Before Cherry, we were founders and operators working across various roles. We worked in product, finance, business development, strategy, and marketing — and it’s this last area we’re focusing on here.
At Spotify and Zalando, we helped our companies grow from zero users to millions spanning international markets. We helped our companies evolve from initial ideas to small startups to household names in Europe and beyond. Now, as investors, we want to support the founders who we back in achieving their growth goals.
And that requires us helping them unlock their marketing know-how.
Sophia headed marketing for Spotify for seven years and helped the company grow from figuring out an actual product to bringing it into the hands of millions of users in more than 56 markets worldwide.
Christian joined Zalando in its very early days as CMO and led all marketing operations until the company went public. Zalando started as an unknown brand in Germany and soon earned 95% brand awareness in core markets after only two years by applying its “marketing machine.” This resulted in expansion into 15 European markets at high speed.
Together, we’d like to share our field notes from years spent as marketers and VCs to help founders not just to scale their companies faster, but much stronger (and, hopefully, avoid a bunch of mistakes that we made 😉). So, we’ve started with our top ten points to kick your marketing machine into gear.
Here we go:
1. Create a unique — and protected — brand name
2. Nail what your brand should stand for
3. Get your 3 USPs straight once and forever
4. Don’t scale before you know your product is badly wanted
5. Every dollar counts — bulletproof your marketing analytics
6. Look at your KPIs every single morning
7. Don’t stop at traffic
8. It’s all about rinse, lather, repeat
9. Define, optimize, and fuel your marketing flywheel
10. Foster a loved brand and community
1. Create a unique — and protected — brand name
We strongly recommend you check any brand protection infringements on Day One.
Christian: Over the past couple of years at Cherry, for various reasons, we’ve witnessed at least 15 re-brands in our portfolio. No, it’s not the end of the world, but this should happen sooner rather than later in the lifetime of a company. If you are still early-stage, the pain and complexity of exchanging your brand is much smaller than when you are already present in a variety of markets and have spent time and money on building your brand in them.
First off, ask a brand lawyer to check your name and register it on at least a continental level if not on a global level directly. If there are too many conflicts, go back to the drawing board. Remember, it only gets harder later.
Quick anecdote here: At Zalando, we felt such pressure in our second year as someone filed a similar brand name in our trade group of apparel. This put us under massive pressure to find a solution as we otherwise would have had to change our name after having already spent millions of dollars in advertising with it. Luckily, we came to an agreement with the other party and could continue to use our brand. But, make no mistake, this caused a bunch of sleepless nights.
2. Nail what your brand should stand for
Think seriously about what’s your reason for being as a brand, what’s the insight that took you there, what’s the problem you’re solving, what’s the solution to that problem, and who you want to present yourself as.
Sophia: Who are you and what role do you want to play in your users’ lives? Repeatedly ask yourselves this when you define your brand.
At Spotify, we wanted to be the product that enabled people to listen to all the world’s music for free at your fingertips. What was our reason for being? Why was this even important? We believed that listening to music would lead you to a richer life and experience more emotions since that’s what music does. It makes us feel intensely and live more deeply. We also wanted to empower the world to enjoy more music.
What was the spark that led Daniel and Martin to start Spotify? It was the fact that, at the time in 2006, there was no other way to enjoy music legally online and just click play to listen. No one else had cracked the problem of listening to music online while serving a great user experience. These were the problems we wanted to solve.
So, think seriously about what’s your reason for being as a brand, what’s the insight that took you there, what’s the problem you’re solving, what’s the solution to that problem, and who you want to present yourself as.
3. Get your 3 USPs right once and forever
We encourage you to define your three USPs early on, implement them without any compromise, and repeat them everywhere all the time
Christian at an event back during his Zalando days as CMO.
Christian: At Zalando, we experienced absolute chaos in the beginning of what to put on any advertising material as our unique selling propositions (USPs). Some marketing team members liked one attribute more than the others and we quickly had a very creative set around 10 different USPs.
Yet, we saw that customers could not remember our core USPs and they got diluted by missing consistency. Therefore, we defined our three core USPs and from that day onwards they were put on every single marketing product and ad exactly in the same wording, order, and so forth. This type of consistency made everything more streamlined, and ultimately strengthened our value proposition to the consumer.
We encourage you to define your three USPs early on, implement them without any compromise, and repeat them everywhere all the time (Sophia gets to that later). And, yes, just three. No customer can remember any more than that.
4. Don’t scale before you know your product is badly wanted
For some reason, we humans seem to get more excited when access is limited. This approach can be used as a smart marketing tool while you’re scaling in a controlled way.
Sophia: To test the waters to see if you have built something that consumers want, roll out a beta test where a limited number of users are invited to try the product and provide feedback. This was something we did at Spotify after having seen how well it worked for Gmail and their invite-only strategy.
We also did it to be able to scale the technology in a controlled, high-quality way and to see how our users would interact with the product. We knew we had built something we ourselves loved to use, but how about the people on the street?
We rolled out a closed beta test and immediately received some quite stunning reviews. “Best thing on the internet” and “best innovation since sliced bread” were some of the comments from our community of beta testers. This testing also boosted a strong relationship with our early adopters. We valued their input and feedback and they felt like a part of the Spotify journey. This type of back-and-forth builds a relationship of trust and loyalty — on both sides! This, in turn, builds a strong foundation to build a brand on.
After all this, we then made sure to capture the demand and encourage people to sign up for our waiting list. For some reason, we humans seem to get more excited when access is limited. This approach can be used as a smart marketing tool while you’re scaling in a controlled way.
5. Every dollar counts — bulletproof your marketing analytics
Every marketing dollar we spent needed to be tracked.
Christian: We had a very strict rule at Zalando: Every marketing dollar we spent needed to be tracked.
We needed to know exactly what the return of that dollar was and whether we would do this again. This all was very aligned with one of our company values of “what you can’t measure isn’t there.”
To make sure we could track our whole spending, we built a marketing analytics department early on. In our case, this was led by a mathematics PhD who loved numbers (certainly not a bad prerequisite for this role). His team ensured that we had a functioning and up-to-date marketing report every day. These days, most of this can be done via different analytics tools (Google Analytics, etc), although these usually don’t cover all channels of operation. For example, all offline channels are usually excluded here and a CRM is not always fully integrated. So, you need someone who helps you to get the complete landscape overview of your marketing spend, efficiencies, and revenue resulting in your main steering KPIs, CAC, and CLV.
We also had a rule that we were okay to pre-finance a customer for 180 days, meaning that a customer needed to break even after six months (CAC = CLV). Whether you take 180 days or 360 days or only “first transaction profitable” depends on your business model. The longer the customer lifetime, the longer you can pre-finance a customer. Another important factor is your funding and if you can afford to “wait” 180 days or 360 days until you earn your customer acquisition costs back.
The main lesson here is that you need to establish this mantra in your marketing or growth team, and that you always have to be aware of this equation, and require absolute clarity on all marketing spends per channel. A bulletproof marketing analytics team is crucial to give you the database to make the right decisions (and to determine in which channel do you get more bang for your buck and where do you shift more budget to).
6. Look at your KPIs every single morning
Each and every morning, look at all important KPIs and take immediate actions if some KPIs are out of place.
Christian: Having understood the importance of marketing analytics (point 5 👆), this is an easy one 😉
Each and every morning, look at all important KPIs and take immediate actions if some KPIs are out of place. Double down if suddenly a channel proves to be more efficient than anticipated and shift budgets to more efficient channels if a channel’s KPIs worsen for whatever reason. Shift the budget and try to understand and fix the lower performance in that channel before you shift the budget back in.
I always had our daily CACs and revenues in my head and whether we were on plan or off plan. This is also important in interactions with investors who would always want you to be fully on top of your numbers.
7. Marketing doesn’t stop at traffic
One of the most exciting parts of a marketing strategy is the ability to understand more about your users and how they are acting, thinking, and going on about their lives, and what type of role they allow you — a brand — to play in them.
Sophia and team burning the midnight oil as they embark on Spotify’s marketing strategy.
Sophia: Once you get users to sign up, it’s then about providing something meaningful to them that they’ll love and use on a daily basis. We were driven to understand our users’ behavior in order to create our communication and build our product in relevant, tailored ways.
Once you understand users’ patterns and daily routines, you can receive insights like “people in the US are more likely to want to be served music automatically similar to how Pandora has done it as opposed to people in the UK who were more actively creating and sharing playlists and leaning in more.” These pieces of information played a huge role in shaping our communications targeted towards these different user groups.
One of the most exciting parts of a marketing strategy is the ability to understand more about your users and how they are acting, thinking, and going on about their lives, and what type of role they allow you — a brand — to play in them.
When there’s room in your budget for segmentation studies, such studies can well be worth every dollar spent.
8. It’s all about repeat
Stay consistent throughout your communication channels and repeat the message.
Sophia: Once you’ve identified your core messages, make sure you stay consistent throughout your communication channels and repeat the message.
And repeat it all of the time. And repeat it everywhere.
You can hit the message in your product design, in the terms & conditions, in all of your social media channels, in your marketing campaigns, in your press releases, in business interviews, in founder tweets, in your offline activation marketing, and on the homepage, in your notifications and newsletter, and so on. Keep them simple and repeat them often and consistently. This makes it easier for current and desired users to remember who you are, what you stand for, and why they should choose your brand.
9. Define, optimize, and fuel your marketing flywheel
We are fully convinced that every successful company needs its own individual marketing flywheel.
Christian: Both at Spotify and Zalando we developed our own marketing flywheels that helped us steer and control the growth of the companies.
A clear proof point is that all major consumer companies and most B2B companies have a very clear flywheel which spurs their growth. It won’t be possible to build a large company without having identified and fine-tuned such a flywheel in many day-and-night sessions gathering all your data and insights.
But what the hell is the marketing flywheel? The flywheel gives an overview of all relevant customer acquisition and retention channels that a company uses successfully to grow its customer base (new customer acquisition) and to nurture its existing customer base leading it to further engagement and ultimately monetization and revenues 💸
Since all companies are different, they all have different marketing flywheels as well. For some growth via social media is super important, for others, the key driver may be different like growth through above-the-line marketing, etc. Take the time to define, optimize, and fuel one that suits your company.
10. Create a loved brand and community
It’s about sharing — and daring — to be personal and, at the same time, generous and fun.
Sophia: How do you go about building a loved brand and community? At Spotify, I always wanted us to be personal, honest, generous, and fun in our communications. If you think about the characteristics that set a friend apart from the crowd and why you feel great when spending time together, it’s about sharing — and daring — to be personal and, at the same time, generous and fun.
The way we greeted someone calling the reception, behaved at our offices, how we expressed ourselves in our external and internal communications, how we built the product, how we trained the customer support team, how we created our offline expression at festivals and events always had the same sort of Spotify vibe and tone of voice. I wanted it to be easy to get a sense of what the Spotify DNA was.
It helped that we were young, ambitious, and from a small country up north, taking on the whole music industry in a playful and fun way while always putting our users front-and-center; and obsessing about building an outstanding product that was taking both fans and creators into account.
