Iterating Without Understanding?

It seems there are two camps of “evolved” marketers these days. One group recognizes that it is critical to understand customer needs by engaging them at every opportunity. The other group is completely focused on metrics driven iteration. Until recently, few combined these powerful forces.

I started in the camp of online metrics and scorned the beanbag marketers who didn’t “get” analytics. At Uproar in the mid to late 90s, metrics were our competitive advantage. We tested, measured and optimized everything. We knew we couldn’t afford any waste if we were going to have a chance to beat the heavily funded Silicon Valley gaming startups and the established companies getting into online games (Microsoft, Yahoo, Sony). Ultimately, this obsession with leveraging metrics to track ROI and improve conversion through iteration was key to becoming the worldwide leader in online games and peaking at a billion dollar stock market valuation. Despite their much deeper cash war chests, the beanbag marketers couldn’t compete with our no waste metrics driven approach.

Today the Darwinian economy has killed off most web businesses that don’t leverage metrics, so this is no longer a competitive advantage – it’s a necessity. But many web marketers stop there.

In my next startup I was fortunate enough to have a venture capitalist who helped take our approach to the next level. We attracted his investment with our metrics driven online marketing approach and then he quickly improved it. He constantly grilled me with the question “Who is your customer?” During our weekly meetings he never failed to ask about the last time I spoke to a customer. I got extra brownie points for meeting with customers in person. To be honest I initially focused on engaging customers just to appease this VC. But it didn’t take long until I was able to use this information to improve results. Informed iteration helped us increase purchase transaction rates 10X in just a few months, which made scaling a profitable marketing spend infinitely easier. Later customer engagements uncovered revenue opportunities we never could have found through metrics driven iteration. These revenue opportunities eventually accounted for more than half of the company’s overall revenue volume – making possible the eventual IPO filing.

It wasn’t until I began the Interim VP Marketing role at Xobni that I discovered Steve Blank’s The Four Steps to the Epiphany. This book added a systematic process for uncovering the critical information needed to build a thriving business and keep improving results.  The great news is that Steve Blank recently started blogging at steveblank.com. Perhaps even better news is that Venture Hacks now records Steve Blank’s lectures at UC Berkeley and posts them online.

The same Darwinian forces that made metrics a necessity for online marketers are once again shaking up the web startup world. It has become a major competitive advantage to combine Steve Blank’s customer development approach with informed metrics driven iteration. And it’s only a matter of time until this approach becomes a necessity for survival.

So what’s next? I’m certain that eventually a platform will emerge that ties it all together. This platform will facilitate the process of collecting and analyzing actionable customer information and manage the iterations that deliver optimal results. Up to this point we’ve always had to custom develop these tracking and reporting systems, while using disconnected systems to drive understanding (surveys, Excel…). Off-the-shelf analytics programs have been bloated with data that is useless for improving results.

Rather than holding my breath for someone to deliver this dream platform, I’ve been advising KISSmetrics as they work to create it. I’ve given them total visibility into my approach and turned over reports that have evolved over many years of execution. Of course they have given me equity in the company – but I’d be passionate about this metrics driven customer development platform either way.