F2 Managing Partner, Barak Rabinowitz, had a valuable conversation with Kady Srinivasan, the CMO of Lightspeed, a $1B publicly traded company specializing in point-of-sale and e-commerce software for the retail, restaurant, and hospitality sectors.
Kady has been a part of three massive exits over the last decade, including Dropbox, Klaviyo, and Owlet, and was recognized as one of the world's top 20 Chief Marketing Officers in 2019.
In the conversation below, she generously shares her insights and practical frameworks to help founders maintain focus and efficiency in the early stages of their startups and as they scale.
Watch the complete video or read the excerpts below:
Four Key Principles that Generate Successful Marketing Strategies
Once you get the basic marketing principles right, you can adjust and change your playbook based on what your company needs at the time for different scenarios. Your playbook is never going to be the same but there are four principles I think founders should consider.
1. Make sure your distribution strategy has efficient unit economics
I believe that finding the most efficient unit economics for your distribution strategy is crucial. By distribution, I'm referring to the go-to-market function, which is essentially how you disseminate the concept of your product, platform, or service. The key here is to identify the most efficient unit economics. I've noticed many founders tend to do what comes easily, rather than considering whether it's the most efficient or profitable course of action.
This is when it becomes necessary to pause and ask, “Can I make this profitable over time?” and subsequently, “Can I scale it?”
Consider partnerships, for instance. Initially, you might attract organic partners who want to join your ecosystem. You see the volume and think it's beneficial, without necessarily considering its profitability. Then, you may adjust and optimize for profitability, without considering whether it can truly scale and what internal changes are needed to facilitate that growth.
2. Make Sure Your Revenue Models Create Stickiness
The most successful companies I've been part of have always had a revenue model that creates the greatest stickiness and retention. So, the revenue model can't just be about where my top-line revenue growth is going to come from. It also needs to consider where my net new business is going to come from. Do I need to get it through the sales motion or PLG or whatnot?
The revenue model really has to think through where the company can get the most profitable customers. Then, it needs to consider how to ensure that when we reach the maximum value for these customers in our product platform, they are going to be sticky and will be retained over a long period of time.
For instance, at Dropbox, we looked at retention rates over a 10-year period. That was how sticky the product was. You can see that the lifetime value of a customer who sticks around for 10 years is much larger. We could afford to spend more money to acquire more of those customers because we knew how to retain them. So, your revenue model has to make sense from that perspective.
I'd say that any company with less than 100% NRR is probably getting this wrong. If you're not able to add to your net revenue retention for every cohort, if your NRR is not greater than 100%, then you're just bleeding those users through the funnel, and it's probably not very efficient for you.
At that point, I would argue, you need to question the product-market fit because there's something clearly wrong with the product itself. It's really hard for marketing to solve this particular issue. You could fine-tune the market so that there's a smaller number of customers who are more like your ICP, but that won't solve the scale issue.
3. Position Your Product to Show Off Its Greatest Strength
If you boil all of marketing down to one single sentence, for me, it is that you need to position your product to show off its greatest strength. And then you have to match your advertising strategy to position it appropriately.
At Klaviyo, for instance, our greatest strength was that our product had so much data that we could tell you what every possible customer of yours wanted at any given point of time. So it wasn't about the marketing automation, it was actually about the data that was powering the insights that got people back. And that was our greatest strength. And we did everything to position the product around that particular benefit.
When you consider your advertising strategy, marketing strategy, digital marketing, etc., none of that will matter unless you have distilled that core truth down to the one thing with which you want to position yourself. And particularly for many founders who are so brilliant, who have come up with these product platforms that are so versatile, they can do anything. You have to find that one thing. Otherwise, nobody will know you for what you can do. You start there and then build from there.
4. Have Your Product Show Users Immediate Value
The fourth principle is to find the product strategy that creates the least friction in getting users to gain value from the product. And here, I'll give you an example.
At Klaviyo, we would see people start to use the platform in 60 minutes and it was because they could start seeing the value of Klaviyo in 60 minutes.
The product UI was super intuitive, but the most important thing was that people started to see immediate value from using the product. And then when they see that value, customers stick around, retention increases, stickiness increases, and you get to see what people are using. So your positioning becomes very clear, and your distribution becomes part of that beautiful, virtuous flywheel.
Freelance vs Full-Time Marketing Hires
I'd say there's probably three sort of sniff tests to think about whether to hire a full-time marketer or work with a freelancer.
The first is to identify the most critical capabilities you need immediately and those that may not be urgent. None of them are non-essential; it's all about timing. For instance, you might find that a content writer isn't immediately necessary. Instead, you might prioritize hiring product marketing specialists who can evolve with your company and product.
The second thing I'd say is that any startup in the early stages, any hire that a founder makes, they're going to have to weigh in. They are going to have to help the marketing person or the salesperson or the CS person be effective and set them up for success, which means there is a little bit of an understanding of that particular capability that a founder needs to start to build for themselves.
And then the third sniff test to determine what skills are a commodity in your field compared to those that need to be specialized for your company in your category and in your product life cycle. The commodity skillset could be something like SEO which is a bit commoditized unless you're a HubSpot and you want to construct your entire go-to-market distribution strategy around inbound marketing.
Setting and Tracking Marketing KPIs
I consider three categories of metrics when setting up this kind of measurement: volume, velocity, and efficiency.
Volume refers to MQL, SQL, or any other funnel you've defined, from the top of the funnel to the closed or sometimes even post-closed. Velocity, which I'll return to, and efficiency, represented by ROAS. It could also be a magic number or sales and marketing as a percentage of revenue.
The second category, velocity, is often overlooked. It's all about timing. How long does it take for your SDRs to touch a lead? How long from start to finish for your AE to close a deal? How long for someone to get onboarded onto the product? The entire category around velocity significantly impacts your success.
Two important things to note are being clear about what the funnel looks like across sales and marketing, both pre-sale and post-sale. Be clear about what it looks like for sales and CS. What are the handoff metrics between sales and CS? And then, if you have account management who are upselling. Map out the entire funnel to ensure you have a clear, no more than six or seven metrics that you're tracking across the entire funnel. Be consistent about measuring these on similar cadences.
How marketing strategies should adapt to support a startup's growth
We could probably spend one full hour on this topic alone, so I'll give the TL;DR.
When you think about a startup's growth journey, most companies start with a single product, a single market and go-to-market motion. That's generally the case. Then they start to go in multiple different directions. Either you add on new products in the same market or you do more go-to-market. You start expanding PLG, SLG, partner, etc., or you start to say, "I'm going to do geographic expansion into EMEA, X, Y, and Z." And then other audiences. So you could go from within e-commerce to services, for instance, or something like retail or construction.
I think it's so important for the marketing strategy to be in lockstep with that sort of expansion because otherwise, as a marketer, you could be thinking about how to introduce new products while the company is going hard on building out a partner ecosystem - and then you're not in lockstep. You're completely misaligned.
So founders and heads of go-to-market should be sitting down together and thinking about what are the company’s expansion levers? Where is this company going six months, eight months, nine months from now? What is the most conviction we have about where all of this is going? And then make sure your marketing or strategy is designed to go in lockstep with each of those.
And I won't touch on what the right kind of expansion is because that's a huge question mark. Do you start with expanding via go-to-market first or geography first or more product upsell kind of stuff first? These are those kinds of considerations - it's about thinking about when you go from your X to let's say Y on the upper right hand, the single everything to multiple everything. Here you need to think about the steps you want to take and make sure the marketing strategy is completely in sync as you go through that.
Frameworks and best practices for creating messaging that resonates with customers
I use this fairly common framework that consumer packaged goods marketers use. By the way, CPG marketers are probably the best in the business, world-class. So they use this framework called ABCD.
A stands for audience. So who is your audience?
Then B stands for Benefits. If you have a product, it is not enough to talk about the features. You have to translate the features into benefits, into what does it do for the customer? What is the benefit it's offering to the customer? Right, if I give you a marketing automation software, I don't tell you this is an email software. I tell you, because of this, you can grow your company or get this much revenue out of email marketing.
The benefits are actually two-tiered. There is a functional benefit, which is you get to make more money out of this, out of using this email software. Or then there's the emotional benefit, which is how you communicate to customers that by using your product they get to design the company of their choice and live their destiny because they can make all of this money by using your software. So there's the functional and the emotional piece.
C is the one that's most often ignored by a lot of marketers which is reasons to believe. We call it RTB in the business. So compelling RTB basically just says, why the hell should I believe you? I'm pitching you all this and the customer comes to me and says, I don't understand why I should believe you. And that's where the proof points come in. Then I can say to you, because all of your competitors who've used our product are seeing 60% growth. Don't you want that? So that's the hero metric or the proof point or the social proof that you need to put out there.
And then the D is dramatic differentiation, which is basically just how do you differ from everything else? For Klaviyo, for example, it is the CDP layer. So I think using this makes a ton of a difference in terms of becoming very precise about how you position yourself and how you create the right kind of messaging.
But also keep in mind it's not static. And that's a common pitfall I've seen people fall into, particularly because touching on your previous question, when you said, how do we, as we go through this journey of single product to multi-product, you can imagine every single step of that journey is going to need an ABCD. Because the reality changes. The product might change, the audience might change, the proof points might change. So you have to keep reviewing, revising and making sure it's still relevant.
Common mistakes founders should avoid when developing their go-to-market strategies
I think doing too many things at once is a common one that I've seen. A lot of the times, founders are doing too many things because they can or because they have the horsepower in the organization or because they have the money. If you're not being deliberate, it overextends the management team in ways that create a lot of opportunity cost.
The second thing is this balance of doing a bunch of things that are scalable but not profitable, hoping that someday you’ll find the profitability equation. So by dumping a bunch of money in Google AdWords thinking, well, it's not profitable just yet, but I think there's a bunch of things there. Let's go do more of it. No, no, stop. Got to figure out how to get it to be profitable first before you start to scale up.
And then this last one I'd say is, I don't have a fixed opinion about this, but what I've seen in many cases is founders have a little bit of a tendency to force fit their product into a market rather than reading the market fit as it is.
And so there's a bunch of failed products that are pushed through because founders think it's a good idea. But then again, the balance to all that is founders have a vision and like, you know, I'm not a founder, so I can't argue with someone that's truly a visionary. And so I think it comes down to the founder to really develop a sense of, am I pushing this too much because I think it's a good idea? Or am I really seeing a white space that nobody else is offering? And that's why I think it's a good idea. So finding that balance between force fit versus product market fit.
How AI is reshaping marketing
I believe that traditional marketing methods, such as advertising, blogging, and creating SEO equity, are being disrupted by faster tools that create more velocity. I strongly encourage people to explore all the tools available and consider how they can disrupt their own marketing methods.
However, I find the deeper use cases and workflows, which may not be as visible, to be more interesting. Let me give an example. In many companies, the enablement of sales teams is often done through training on messaging and positioning. The sales team then has a corpus of knowledge that they refer back to when speaking with customers. What if this entire workflow was disrupted? What if, as a salesperson, you were trained by a platform and had real-time access to information and objection handling at your fingertips, instead of having to memorize it? This could disrupt the way we increase productivity. One of marketing's roles is to make salespeople more productive, and there are many emerging use cases that can make things much easier. If you're one of the old-world content people, it could even put you out of a job. So, it's evolving rapidly.
