Spotify's Mayur Gupta: Don’t Confuse Marketing’s Outcomes from its Outputs
Mayur Gupta, VP of Growth & Marketing at Spotify, has always been a prolific blogger. Since I first met him several years ago, when he was Global Head, Omni Channel Experiences & Platforms at Kimberly-Clark and then went on to become CMO of Healthgrades, I’ve always been amazed with the depth of his learnings that he so freely shares in an effort to pay it forward. His latest blog, below, is literally a handbook for anyone who is looking to optimize their marketing efforts. I am proud to share his excellent work and thinking that provides so many helpful tips for success!
Don’t Confuse Marketing’s Outcomes From Its Outputs
Contributed by Mayur Gupta, VP of Growth & Marketing at Spotify
When You Market to Grow
I started my career as an engineer, glaring at black and blue screens scanning log files, analyzing and tuning JVM crashes, recovering databases. Many of these resulted from memory leaks in my own code (lessons learned for life). Gradually steered towards technology that would redefine the world of advertising and marketing; product managing Adtech and Martech platforms; from ad servers, search bid management systems to CRM and analytics/BI solutions. My perspective in all those years started and ended with technology — latest web/app servers, design patterns, latest frameworks, languages and more. I wanted to do everything possible with technology for the sake of technology. It was all about the “Output” and not the “Outcome”. I learned my lesson the hard way as I got closer to the business and was held accountable for results and impact. The infatuation and excitement of technology alone did not matter anymore.
Having crawled my way into the world of marketing and business growth; I see many making the same mistake. We are confusing Marketing’s Outputs from Marketing’s Outcomes. There is a greater focus on doing “things”; the next big global campaign, a brilliant creative idea, testing a cutting edge AI decision or technology.
Marketing needs to dramatically evolve from the days of the Mad Men to being core to an organization’s GROWTH ENGINE. It is a complex (not complicated) integration of many parts and pieces -data, insights, tech, content, creative, storytelling, channels, media, planning, analytics etc that in isolation don’t mean much. It is no longer one-dimensional or linear. It needs to be held accountable for impact and outcomes. This mindset shift is not a choice but a quintessential response to surviving in a consumer-led era. Money and the multi-million dollar campaign can no longer buy love or loyalty. The consumer is in full control and command.
Let’s not confuse Marketing’s Outcomes from the Outputs. Here is how I define them; over the next few weeks, I will share deep-dives into each one of these:
Marketing’s desired OUTCOME is ultimately GROWTH
Why else would or should you market? These are the 3 simple reasons why marketing should exist:
1. Create New Demand with consumers who would not organically come into your world — Inspire and influence your non-core audience in the outer circles who don’t even consider your product.
2. Capture the Demand that is Ready & Waiting, you believe you have the right to win them now. Acquire these users in the most efficient and effective way possible.
3. Retain, Engage and Amplify Demand by continuously maximizing user value, that will increase engagement, which will increase retention, loyalty and lifetime value. And if your stars aligned, your existing user base will become your biggest marketing channel.
Before I get pinned down for not talking about the brand, shaping culture, defining purpose; that’s part of the foundation to get to these outcomes. I summarize that strategy in 3 broad intertwined buckets:
Grow the Brand — Leverage the power of your brand, it’s bigger purpose and personality, it’s connection and influence on culture and society to ultimately inspire audiences in those outer circles. There is a reason why they are in the outer circles.
This is the serendipitous and at times irrational part of marketing that cannot be subdued. The watch out is when you over index on building the brand with no accountability or understanding of the business impact or outcome.
Grow the User Base — In a 1–2 punch, this capitalizes on top of a strong brand, capturing the demand that has been created (caveat — you may have a different approach if you’re still in your 0–1 stage as a startup, there may not be a brand just yet). Bring them home. Establish this as an always-on engine, intertwining data, science, technology with personalized content and storytelling, experiments and iterations to drive efficiency and effectiveness. Think both organic and paid growth, applying the flywheel principles.
Grow the User Value — Retention is hard and building loyalists and advocates harder. There is little marketing can do if the product isn’t sticky, but just a great product cannot drive stronger engagement alone. You have to continuously add value to the most loyal users, not only the ones at risk. Ensure the expectations match the experience, that prevents churn. Apply the understanding of your micro-segments with relevant messaging on and off platform, demonstrate value to bring them back, one more time and one more time. Incentivize behavior and think virality.
The big question — what comes first, what should I prioritize, should I invest in growing the brand or growing the user base? The simple answer — it all depends. If you’re a startup in the 0–1 Pre-PMF phase, you invest everything you have in your product, build a core user base, optimize your product and let the experience build the brand. This is when your funnel gets inversed.
But if you’re in the 1-N Post-PMF phase; ready to scale across segments and markets; then you absolutely need the power of your brand as the foundation for your subsequent scale. Pure performance and a great product with no cultural and emotional bond can only get you this far.
More to be discussed in the follow up deep-dive post. In the future post, I will dig more into:
The inter-dependencies of Demand Creation and Demand Capture.
How best to distribute your investment?
How do you measure the impact and incrementality of either?
How does it vary by market maturity and more?
What “outcomes” do you hold your marketing function accountable for?
Marketing’s OUTPUTs — enabling the OUTCOMES
Here are 10 of many outputs/enablers for marketing that drive the OUTCOME, in no specific order.
1. Don’t Isolate but Amplify Brand and Performance (demand creation x capture x retention)
Of course based on where you’re in your growth curve. For instance, as a startup, do you need brand marketing before reaching product-market fit or can you even afford it; great POV from Andrew Chen on brand marketing for a startup. In a mature market, what should you spend on brand vs performance where most of your addressable audience has high awareness and consideration levels? On the flip side, can you scale your product from 0–1 to 1-N without the foundation of a culturally and emotionally connected, purpose driven brand? Your brand should reflect your belief system; provide a common purpose that serves as the underlying platform for meaningful expression and conversation with the users. Does your growth efforts and performance spend benefit from a strong brand (efficiency and/or effectiveness or organic growth)? Are you able to measure and correlate?
2. Define clear KPIs and Measurement strategy for both Outputs & Outcomes with Leading and Lagging Indicators
Throughout the demand curve (creation to retention), hold marketing accountable to specific KPIs quarter by quarter. What are your leading vs lagging indicators, what can marketing influence? What is the incrementality of marketing? What channel plays what role for what type of user? Use data and analysis to not just understand what happened in the past (rear view), but to plan ahead. Become agile, measure, analyze and optimize towards the “outcome”.
Measure the Brand — How much is your brand loved and trusted? Do the users feel connected with the brand; do they relate to your brand’s purpose? How does the strength of your brand vary from market to market and does that reflect in your performance results? Have you run tests to prove correlation between brand KPIs (awareness, consideration, trust etc) to performance KPIs (CAC, SAC, CPR etc).
Measure the User Base — Size of users trying, registering, subscribing or buying your product. Depending on the nature of your business, this could also include revenue growth, # units sold etc. Measure not only the volume and cost of users (efficiency) but also the effectiveness (quality — user states of acquired users, engagement, retention levels). Understand the quality of paid vs organic users, are the retention rates at par? What role does each channel play; think beyond the last-click model into multi-touch attribution. Test and iterate to understand channel spend thresholds beyond which it becomes inefficient.
Measure the User Value — Percentage of users coming back to use, renew subscription or buy more product; a sign of delivered and evolving user value and ultimately a product-market fit. Differentiate causality vs correlation when digging into churn rates. Do you understand your user base beyond active or inactive — apply user states and cohorts based on engagement levels. Think LTV beyond financial metrics — a brilliant article on capturing Total Customer Engagement Value.
3. Differentiate Leading vs Lagging Indicators
The above gives you a broad spectrum of KPIs to measure across the 3 pillars of brand, user growth and user value. But it’s equally important to differentiate the leading versus lagging indicators of growth.
Every business usually has a North Star Metric they revolve around for example, Monthly Active Users (MAU), ARR, Total Subscriptions etc. While they are extremely useful to align an entire organization together in one direction, they are lagging indicators of growth.
For a positive or negative “effect” on these metrics, the “causes” would have happened many months prior. Marketing should be focused on monitoring, analyzing and optimizing leading indicators to influence/impact growth outcomes. For example MAU:DAU ratio, user engagement rates, specific user behavior on platform, for an eCommerce site this could be the number of reviews left by SKU and more.
Your Lagging Indicators (North Star Metric) is data relevant to analysts outside your company (WallStreet for instance) while your leading indicators are relevant to analysts within your company to influence proactive change in your growth trajectory. Brian Balfour in this article uses a simple analogy — the Ecosystem of Serengeti to explain the point.
4. Leverage data, technology and content to become ALWAYS-ON
Marketing can no longer be restricted to start and end dates of a campaign, give the user what they need before they know they need it. It’s an evolution from a pure push mindset of marketing with the brand at the center to a pull mindset with the user truly at the center. There is a reason why “customer centricity” is still largely a theory for most brands, it is DIFFICULT because it requires the underlying ecosystem of marketing to operate (as an engine) and not any single part in isolation.
5. Understand your audience, the “why” behind the “what”
Getting deeper into Causality vs Correlation, becoming an outside-in org (more difficult) and not an inside-out org (much easier). Apply the science (1st and 2nd party data, Qual & Quant research, experimentation and iterations) to define the WHO you should win as users, the WHAT are their needs and barriers and most importantly the WHY behind that WHAT — why are they coming and staying, why are others coming and leaving and why are those not coming at all?
Become “consumer obsessed”, identify your users beyond being Active or Inactive. Identify user states & cohorts along with user value — power, core, casual, lapse users where the states can be defined by specific on and off platform user behavior.
6. Convert Your Linear Funnel into a Flywheel | Organic and Paid Growth
Of course, who would not want to have an organic funnel that feeds itself; that’s a dream for any product. However:
It’s not always possible to have organic growth (either via loops/flywheels or network effect) on the get go, every startup should continue to strive for that as that’s the only way to drive sustainable growth
At the same time, “paid growth” or performance marketing driven growth isn’t always bad either as long as you ensure it’s not linear. You do that by ensuring the quality of your paid users are at par (almost) with your organic users. And if you did that, you have higher probability of converting your liner paid funnel into a cyclic flywheel — rewarding every paid user to bring another user organically or through a network effect
Having an efficient and effective paid lever is also a tactical lever that can be applied in specific growth crunch situations; depending on your scale you may “pay your way to growth” for a short period as a tactical move (not sustainable).
7. You can buy Acquisition (first date) but you cannot buy Retention (love & relationship)
There is nothing more difficult in overarching growth for any business than the art and science of bring a user back one more time and one more time; driving engagement, building habits and ultimately lifetime value. It requires constantly adding value not only to your users at risk but to your most loyal user — she is constantly under warranty and “day one” companies (as Jeff Bezos called Amazon) constantly push the envelope to add that incremental value.
There are a lot of products and platforms are there that inspire stickiness at the core of their experience, the more you use it, the more value you get. However, rewarding behavior as a core tenet to inspiring behavior is still lacking in most platforms. A great post by Todd Lutwak (partner at Andreessen Horowitz and ex-eBay exec) — The Lion, The Platform, and The Lesson talks about that underlying principle.
8. Organize Around Outcomes/Objectives and Not Channels
Avoid the temptation to organize, structure and plan around channels, instead organize around tangible business/growth outcomes. Consumers don’t think channels, they see convenience, value and experiences.
Growth is a cross functional outcome; no single function can drive scaled growth in isolation. Create cross functional teams/pods/squads that may include product, engineering, data analysts, research, media, performance, content etc but have a single objective that leads to a clearly defined set of KPIs. This is why Marketing needs growth planning and not media planning.
9. Experiment, Analyze and Iterate
One thing marketing needs to learn from product — there is no such thing as “perfection”, it’s only “experimentation” and “rapid iteration”. There is no amount of insight or creative thinking that can guarantee the right message to the right user at the right time. You just have to test your way to get that. Let the data influence your strategy — that is the real oil that will fuel your growth.
10. Don’t isolate Marketing from Technology
Cannot underestimate the value of an underlying Marketing/Communication Technology Ecosystem; without that you can have the insight, know the consumer, have the budget, have the message/creative BUT you will not be able to reach them, because you do not have the pipe.