20 posts tagged with "marketing"

It takes time for good technology to gain popularity. From the chart below, we can see that, even for the Internet, it still takes 17 years for 50% of US households to adopt it, no matter how profoundly it has changed our lives today.

That’s why I am always respectful towards all kinds of innovations - no matter how small it appears today, who would imagine it will take over the world tens of years later?

As a builder or businessman, we have a product or service to sell, and the question is - how to speed up the process for it to take over the market?

The Model​

Everett M. Rogers came up with Five Intrinsic Attributes of Innovation in his Diffusion of Innovation Theory :

• Relative advantage: how much is the product perceived as better than the existing standard? We often ask, is this product 10x better than the existing one?
• Compatibility: how easily can I apply my experience to the new product? Customers hate changes even with new versions of an existing product, not even mention utterly new products with entirely new features.
• Complexity: Is it easy to use?
• Trialability: Is it easy to try?
• Observability: Is it obvious for people to observe the change?

The Chasm​

In addition to the intrinsic attributes above, there are interactions between the innovation and the market segments. We call it the technology adoption lifecycle (TAL), which categorizes customers on the market into five pieces.

The Chasm theory indicates that there is no smooth transition from early adopters to the early majority because those two market segments want different value propositions. Crossing the Chasm applies the “D-Day analogy” to solve the problem - focus, focus, focus! Focus is all it takes to attack each segment one by one - like D-Day - you take over the beach first and then move to the next target.

The Math​

Every entrepreneur would dream of a beautiful S-curve for their innovation to diffuse into the market. So to unveil the math curtain, let’s see how Scott Page explains it in the book model thinker, Chapter 11: Broadcast, Diffusion, and Contagion.

The abstraction here is to partition the population into two groups:

• informed: people who know or have something and
• susceptible: those who do not.

Group informed starts empty, and group susceptible is all the relevant population exposed to conversion. The growth curves are in various shapes with various models to convert people from susceptible to informed.

r-shape for broadcast model​

This model assumes that

1. people capture info from public channels, and there is no word-of-mouth / mutual reference between individuals
2. once converted, there is no moving-back

And then we get this formula

$$I_{t+1} = I_{t} + P_{broad} \bullet S_{t}$$

• $P_{broad}$: the broadcast probability
• $I_{t}$: the number informed at time $t$
• $S_{t}$: the number susceptible at time $t$
• Initially, $I_{0} = 0$ and $S_{0} = N_{POP}$
• $N_{POP}$: relevant population
• $N_{POP} = I_{t} + S_{t}$

We could learn from the model that...

• In this broadcast model, all susceptible will be eventually converted to informed, and it is just a matter of time how soon it will complete.
• To maximize informed, we should maximize susceptible first. It means that our ads should reach as many potential customers as we can.
• To speed up the conversion, we should make our ads as high-frequent and impressive as possible.
• With the formula above, we could make a rough prediction for future sales with the ones in the previous two periods.

s-shape for diffusion model​

This model assumes that

1. people capture info by mutual reference and there is no public channel
2. once converted, there is no moving-back
3. people are randomly mixed

And then we get this formula

$$I_{t+1} = I_{t} + P_{diffuse} \bullet \frac{I_{t}}{N_{POP}} \bullet S_{t}$$

• where $P_{diffuse} = P_{spread} \bullet P_{contact}$

We could learn from the model that...

• How fast the conversion happens is determined by how frequently those people contact each other and how much they would like to share the info.

mixing of r-and-s-shape for Bass model​

Most consumer goods and info spread through both broadcast and diffusion. Usually, for the same product, companies are running ad campaigns; meanwhile, customers are referring new customers.

susceptible-infected-recovered (SIR) model​

All the models above assume no moving back from informed to susceptible. We seldomly abandon our adoption of many home appliances - dishwashers, air dryers, etc. However, it is not the same for fashion styles, diseases, and ... your brand in the real world. In this case, things are contagious only for a particular time. People may forget your product as time passes by and then get recovered.

Let's introduce $P_{recover}$ the probability of recovery, then we get the susceptible-infected-recovered (SIR) model.

$$I_{t+1} = I_{t} + P_{diffuse} \bullet \frac{I_{t}}{N_{POP}} \bullet S_{t} - P_{recover}I_{t}$$

For disease control, the infected will rise first, and we hope it will eventually drop.

However, we hope the informed will rise to the top for our products. The SIR model produces a ==tipping point==, aka, ==basic reproduction number ($R_{0}$)==.

$$R_{0} = \frac{P_{diffuse}}{P_{recover}}$$

Products with $R_{0} > 1$ spread through the population, while products with $R_{0} < 1$ dissipate.

Take COVID as an example. Its $R_{0}$ is 2 to 3. $P_{diffuse} = P_{spread} \bullet P_{contact}$ and that is why people wear masks, keep distances from others and avoid crowds to lower the diffuse probabilities.

$R_{0}$ is the ultimate question for marketing - would your marketing be contagious enough to fight against forgetfulness?

By the formal definition, the mass media version of the tipping point is usually wrong. For example, a kink is not a tipping point in the chart below for the number of Google Plus users in the first 14 days. Instead, $R_{0}$ is the real tipping point.

Elements of GTM - Reach, Frequency, and Quality​

Finally, here is the summarization of all components that are worth optimizing for go-to-market campaigns. Please note that spreading information carries costs, unlike diseases, so we need to consider ROI.

• Reach channels
  • Customer Segment Size: Make sure your ads are going to the susceptible targets, as many of them as possible.
  • Customer Segment Attributes: The more each person in the segment is likely to contact and share the info, the more contagious the group is. It would help if you prefer people with a strong frequency and willingness to share information. (Attacking visionaries first!)
• How-to
  • Frequency: Make sure people cannot ignore your message by conveying it multiple times.
  • Quality Conversion Rate: Make the ads likable and memorable. It's usually something they are familiar with but still a surprise.
  • Make it big and fast. Don't forget that people will forget! Ideally, make diffusion rate > recovering rate.
• ROI. Don't spend too less or too much on customer acquisition (LTV:CAC = 3:1).

Why some ideas survive while others die? Two principles: being memorable and making people eager to spread. In the book Made to Stick, the authors have summarized six elements to make ideas stick, SUCCES for short, which represents Simple, Unexpected, Concrete, Credible, Emotional, and Story.

Simple - Cut down to the key message of an idea​

Too often, we want to explain an idea thoroughly, but revealing too much detail is not good for people to understand. They will soon forget all the details and even the core message. We should simplify our message and understandably convey the idea, just like journalists would create good headlines for their reports to grasp readers’ attention.

Unexpected - Draw people’s attention by surprising them​

The human brain would neglect selectively to things familiar to save energy. Only something surprising can draw its attention. The fact implies sticky ideas are also unexpected. It proves to be effective to use curiosity gaps to grasp attention. If you present some surprising facts or statistics in your idea, curiosity will drive people to get more information.

Concrete - Use concrete materials to be understood and remembered​

Abstract terms are hard to understand, let alone to be remembered. When communicating an idea, we would better use concrete and understandable terms, along with examples and descriptive imagery.

Credible - Make an idea believable so it can spread​

Ideas ought to be credible if they want to be spread out. Generally, there are three ways to add credibility to a plan. The story has experts or people with relevant experiences to back up Use realistic facts and statistics to add credibility to the story Encourage the audience itself to be a reference

Emotional - Appeal to people’s emotions rather than present dry data​

Imagine we have the campaign to ask people to donate to starving African children. There are two options: presenting the population of starving children, or showing a picture of a child in need of a donation. Comparatively speaking, people are more likely to take action upon the latter because it appeals directly to human emotions. Therefore sticky ideas should focus on emotional triggers instead of dry facts.

Story - Inspire people to action by telling a story​

It is a common mistake to focus on an empty slogan without any story when people are communicating ideas. A slogan is sticky, but it can not inspire people to take action like a story. For example, Subway has benefited immensely from the true story of Jared Fogle, who was an overweight man but managed to slim down by having two Subway meals per day.

Copywriting is the simplest and most direct way of impressing your customers. Persuasive copywriting = three means of persuasion + copywriting. Three means of persuasion are emotion, logic, and credibility.

1. Capturing readers' emotions​

An excellent copywriting creates emotional resonance with customers. And emotions push people to act. If your copywriting hits the bottom of the consumers' hearts, customers will spend much time and money on your products.

2. Cultivating creative thinking​

More than rhetoric, creative writing deals with real problems. Using real-world practices to improve your creativity:

• Writing more in various styles.
• Reading more fiction and digging into people's emotions.
• Jumping out of the comfort zone, learning something new, and asking harsh questions against yourself.

3. Considering different requirements for different assignments​

4. Telling stories and secrets to customers​

Telling a secret is a beautiful way to ignite customers' interest -- Most people are curious about things behind-the-scenes. Doing this improves the click-through rate (CTR).

5. Applying sweet talk​

Straight compliments satisfy customers' self-esteem. People like to feel unique. This method originates from the three types of persuasion by Aristotle.

6. Valuing less of the grammar​

It does not mean you can completely ignore the grammar. Our ultimate goal is to convey the message to customers. Sometimes, concise and crisp expressions are the most important, instead of grammar.

To increase product sales and leave a good impression on potential customers, copywriting plays a crucial role. How can you improve your copy? In Andy Maslen's "Persuasive Copywriting," six key copywriting methods are introduced that may inspire you.

Create Emotional Resonance with Readers​

Good copy can evoke emotional resonance with customers. Emotions play a critical role because they drive us to take action. Therefore, once the copy touches the hearts of consumers, they are likely to spend significant time and money on the product.

Read and Write More to Foster Creative Thinking​

It is undeniable that some rhetorical techniques used in writing can be beneficial. However, creative writing requires the ability to address potential issues, which is more important than merely using fancy writing techniques. If people can refer to the methods mentioned below, they will surely find their creativity flowing.

• Writing more articles across various fields can cultivate creativity.
• People should read novels and delve into the emotions and thoughts of the characters.
• Stepping out of the comfort zone to learn knowledge that is not directly related to oneself, while asking some probing questions to help reshape oneself, is essential.

Consider Different Requirements for Different Tasks​

Sometimes, certain companies provide relevant requirements for copywriters to reference. If there are no specific requirements, authors should research to clarify writing points and reflect them in the text. Additionally, especially for beginners, it is crucial to keep paragraphs short and clear, and to pay attention to the tone of voice used for different tasks.

Tell Stories or Share Secrets with Consumers​

This is a great way to pique customer interest, as people are irresistibly drawn to captivating stories. Moreover, most people are curious about behind-the-scenes secrets. By adopting this approach, customers are less likely to resist the temptation to learn more. Thus, they will click on the headline to discover the story or secret behind the product.

Offer Compliments or Use Wise Methods Found in Greek Mythology​

Straightforward praise satisfies customers' self-esteem. Additionally, they enjoy feeling special and unique. This falls under one of Aristotle's three modes of persuasion (ethos, pathos, logos), specifically "pathos," which fulfills customers emotionally.

There's No Need to Rigidly Follow Grammar Rules​

This does not mean that grammar can be ignored. The ultimate goal of copywriting is to provide effective reading for customers. Frankly, sometimes people do not even notice these minor grammatical errors; on the contrary, such writing can make the copy clearer and easier to understand.

Data Domain is a data backup service provider that went public in its sixth year after founding and was acquired by EMC two years later, becoming EMC's second fastest-growing business after VMWare. The CEO of Data Domain shares the story and logic behind this in the book "Tape Sucks," which may be the best SaaS book I've read in recent years.

The company's background is venture-backed, with top-tier investors. Most team members hold PhDs, indicating that the problems the company solves are quite challenging; top talent is more interested in solving difficult problems than merely interesting ones. There were four founders: one with an academic background, one with an engineering background, one with a product background, and one an expert in data. The author joined the company a year and a half after its founding, just before the Series A funding was about to transition to Series B, and became the CEO.

The problem the company addresses is using hard drives for data backup, replacing cheaper but less reliable tapes. This is also the title of the book and the company's slogan: "Tape Sucks, Move On."

No Pain, No Gain​

Only the Federal Reserve can create new money; everyone else's money is obtained from others. Narrowly speaking, most businesses are zero-sum games.

So when starting a company, you need to understand from whom you are earning your money. With limited budgets, what will they stop buying once you enter the picture, and what will they buy instead? Who are you replacing, and why will you succeed in replacing them?

"Creative destruction," or "no pain, no gain," is a fundamental truth in business; you better understand whose lunch you are stealing.

Target a product category that is being questioned or is declining; this increases your chances of success. Do not target a product category that is on the rise.

Start from Applications or Use Cases, Not Technology​

Company operations always consume resources. When you launch a missile, if there is no target, it will continuously consume fuel and eventually fall.

Make Customers Happy​

"Everything revolves around the customer" is a common saying, but how can you truly achieve this?

Everyone in the company should listen to and discuss user feedback. Before receiving the first round of funding, the company had already gathered specific feedback about the product from dozens of customers. The importance of all other ideas ranks behind customer feedback.

This has two benefits:

1. Maintains focus
2. Aids sales: Customers prefer to work with vendors who genuinely care about their business and learn from them. For specifics, refer to the HBR 1993 article on Customer Intimacy.

Not every business is buyer-driven; for example, the iPod was not created because customers wanted it.

Create Your Own Blood Supply​

Buying things is hard; selling your product directly is more challenging than letting someone else sell it. However, the authors decided to build their own marketing and sales teams for several reasons:

1. Intermediaries put you further away from customers, making it harder to achieve intimacy.
2. You become dependent on others, losing control over your destiny.
3. No one will want to sell your product more than you do.
4. You can only take home 10-20% of the profits.
5. They believe their product is genuinely good, so if competitors sign agreements with intermediaries, it must be because they cannot compete with them directly.
6. If the company's goal is to go public, this approach is more controllable and predictable.
7. If you find strong salespeople, it not only strengthens you but weakens your enemies. This is what victory is; Ulysses S. Grant once said that victory is breaking the enemy's will to fight.

Building a marketing and sales team is fraught with challenges and can take years. Essentially, it involves continuously finding ways to make the sales team

1. Efficient
2. Cost-effective

Building a marketing and sales team is a costly endeavor, so a crucial prerequisite is that their product has an 80% margin.

To control expenses, marketing and sales are done together.

Clarify Sales Channels​

1. Direct sales: buy if you want,
   1. If you don't buy, your competitors will.
   2. If you don't buy, your customers will.
2. Omnichannel strategy: large suppliers correspond to saturated channels and big clients, which can attract small and medium clients directly. The omnichannel strategy does not affect profit margins; with intermediaries, prices are slightly higher, and without them, they are lower.

The more directly you can reach customers, the more power you have.

When to Persist and When to Give Up​

When not making money, focus on conserving strength; once you find a good breakthrough point, spend resources quickly and efficiently. In the growth S-curve, there are two key questions to repeatedly ask yourself:

1. When will the breakthrough point come?
2. Once the breakthrough point arrives, can you invest enough resources for growth?

Cash is the fuel that allows the business rocket to fly; if the fuel runs out before reaching escape velocity, the rocket will fall.

Set and collect data evidence to reach milestones for securing the next round of funding.

Growing Pains of the Team​

The company faced a ceiling in team growth due to insufficient guidance for leadership and being overly stingy in hiring managers.

Initially, almost everyone was an independent contributor focused on getting things done. No one was dedicated full-time to recruiting and performance management. Without proper processes in place, it was impossible to onboard new hires effectively.

In the early stages, growth is always more important than profitability; slightly managing the efficiency and rate of cash burn allows the company to survive. Consequently, when sales reached 40 to 50 million, there were only two finance staff. The desire to survive led to a reluctance to hire unnecessary managers and raise funds.

Hire Potential Stars Instead of Superstars​

When the company is still small, the people you want may not want you; if you can't hire superstars, you can hire potential stars. Good potential stars have the following characteristics: full of energy, enthusiastic, ambitious, smart, hardworking, and eager for the job.

After hiring many potential stars, the company even developed a culture of "everyone has a mission to prove themselves."

Rapid Experimentation​

How does the company achieve rapid experimentation?

1. Lead by example from the top. Quickly and openly acknowledge, address, and summarize mistakes.
2. Prohibit a culture of punishing mistakes or settling scores later. Whether people or machines, mistakes and errors are inevitable; sincerely learn from them to avoid repeating them, or create a mechanism where making mistakes does not cause harm.

Are Large Banks Suitable Initial Target Customers?​

No. Because large bank customers:

1. Are overly picky
2. Are too conservative, leading to long sales cycles

Startups should focus on places where they can quickly sell products, rather than getting bogged down with large banks.

The key is to find traction. Data Domain found traction in the mid-market and channels, avoiding trouble, increasing installations, refining products, and making customers happy.

Once mid-market customers are secured, then pursue high-end clients.

Lead by Example, Experience the Battlefield, and Stay Motivated​

In a brawl, what kind of leader is most motivating? Of course, it's the leaders who charge to the front and beat the enemy. Similarly, as the CEO in charge of sales, the most motivating thing is to travel for a few days, meet five or six customers daily, and return to share experiences and customer feedback with the team.

If you don't do this, you will distance yourself from your team members, making it harder to relate and understand each other.

The marketplace is like a battlefield; if employees cannot feel the cold wind of competition every day, if they cannot sense their efforts defeating bloody opponents, if they cannot feel the atmosphere of the battlefield, how can you expect them to be motivated and work hard?

Express Humanity with Authenticity​

The first rule of leadership is to be yourself and be the person you want to be. Two reasons:

1. If you don't feel worthy of being followed, and you have to follow others, how can you expect everyone to follow you? They can directly follow the people you follow.
2. People can easily see through pretentiousness; if you pretend, you will come across as lacking enthusiasm, preferences, humanity, and energy, and no one will remember what you said.

How to be an authentic leader? == Publicly show your determination, enthusiasm, energy, passion, and relentless desire for success.==

For example, the author participates in triathlons and makes controversial statements. When questioned about why a large tech company could replicate their technology in six months, the author responds without hesitation: "You can send a thousand women to have babies, but no matter how many there are, it still takes nine months; software development is the opposite of economies of scale: the more people involved, the slower the progress."

CEOs Must Overcome Ego​

• The CEO is not the owner of the company; the investors are.
• Arrogant CEOs often lack self-awareness, while outsiders can easily see it.
• Never miss the opportunity to praise others; if the company does well, you will receive all the accolades, which is not solely your achievement.
• A self-centered leader often says "I" instead of "we," and "my" instead of "our."

Start Internationalization Early​

No matter where you conduct sales, it takes a long time; it's best to start early.

The Board Does Not Operate the Company​

• The board supervises and advises but should not operate the company.
• Listen to the majority's opinions, consult with a few, and make your own decisions.
• Sometimes a company grows beyond the board's level of experience.

Going Public​

By the fifth and a half year, the company's cash flow had been positive for some time, and it wasn't lacking in operational funds; why go public?

1. When competing with giants, a publicly traded company with financial transparency reassures customers.
2. Investors need liquidity.
3. It makes operations more standardized.

Be sure to bring in people with the right industry experience to help you.

Acquisition​

Two years later, NetApp and EMC competed to acquire the company; they chose EMC because:

1. Their product line was too narrow, threatened by comprehensive data center solution providers.
2. EMC offered a full cash acquisition.

Corporate Culture​

In business, the essence of culture is a collective value system—a group of people reaching a consensus on what is valuable and what is not.

Whether you are there or not, whether you define it or not, company culture will exist; good culture makes the company a more pleasant place, so its value is self-evident. The author even believes that company culture is the only form of sustainable differentiation.

At that time, the culture formed throughout the company was called RECIPE:

• Respect
• Excellence
• Customer
• Integrity
• Performance
• Execution

Challenges to cross the chasm​

1. Lack of customers
2. Existing customer’s payment cannot cover the next period
3. Unaligned demands from different visionaries
4. Competitions from alternatives
5. Unsatisfaction from investors

Analogy to Invasion of Normandy​

Analogy: it’s aggression, as the Allied invasion of Normandy on D-Day, Our long-term goal is to take over the mainstream market that is currently dominated by an entrenched competitor.

Solution: focus on a niche market that is

1. Readily achievable
2. Leverage-able for long-term success

If we do not take the niche, we do not worry about our next targets.

Why niche-and-next strategy?​

The niche-and-next strategy is counterintuitive and thus hard to stick to. If we do not adhere to it, it is like lighting a fire without kindling.

Reference-able customers are satisfied ones​

It is ==fatal== to be a sales-driven company; our company should be a market-driven one. Unfortunately, following this strategy takes discipline because leaders can hardly resist the temptation to make short-term money.

The sole goal of the company at this stage should be creating a pragmatist customer base that is reference-able for the mainstream markets.

To achieve the goal, we must ==ensure the first set of customers completely satisfy their buying objectives with the whole product — a generic product that is needed for the customer to have a compelling reason to buy.== The key indicator of this effort is the word-of-mouth reputation among buyers.

Be a niche market leader to sell to pragmatists​

Another reason to be niche focused is that we need to achieve market leadership because pragmatists customers want to buy from market leaders. However, you are small and are still crossing the chasm, so the only available strategy is to take a “big fish, small pond” approach.

Advertisements are everywhere nowadays in the society of consumption. Although the ways of advertising have changed quite a lot over the past century, the incentives stay the same behind the scene: drawing attention and trying to sell.

Selling Attention​

Dating back to the early eighteenth century, most of the ads were just informational instead of being persuasive. This situation did not change until Benjamin Day launched his own newspaper in 1833. In order to obtain a large audience, he set the price at a penny while rivals sold at six cents per copy. The loss was inevitable. However, he began to invite businesses to publish ads in his newspaper with an exposure fee. As a result, the newspaper became phenomenal. Because of Benjamin Day, the world started to realize the value of selling the attention of the audience.

Methodical Advertising​

Advertising became more methodical at the beginning of the 20th century, and it was considered as a science. People start to use advertisements specifically for grabing attention. Demand engineering was one of these scientific approaches. It advertised a problem that was never recognized, or sometimes totally fabricated at first, and then claimed the solution of using a certain product. Advertisers of the 1920s also realized that a good reputation could be engineered as well by creating and publicizing a brand.

Forms of Advertising​

The main focus of advertising was in public space before the 1920s. Things changed afterward. Radio advertising became very popular, and advertisers were willing to sponsor the radio content, and hear their names being mentioned during the broadcast, which could draw immediate attention from a large audience. However, the role that radio played in advertising was soon replaced by television, which turned out to be a much more effective way of attracting attention till now.

The emergence of the Internet brought another round of ad revolution, during which emails showed up as a new form of advertising. A survey in 1973 found emails comprised 75 percent of all network traffic. Email is very effective because it rewards people. Receiving an email makes people feel good. Search engines such as Google also become significant sources to harvest lots of attention from users. In order to monetize the attention, the Googlers employed an advertising tool called Adwords to display relevant ads to users based on what they are searching for, along with the results.

In today's consumerist society, advertising is ubiquitous. Although the forms of advertising have changed significantly over the past century, its ultimate goal remains the same: to capture the public's attention and successfully sell products.

Selling Attention​

In the early 18th century, most advertisements were merely informative and did not aim for eye-catching effects. This began to change when Benjamin Day launched his own newspaper in 1833. To attract more readers, he priced his newspaper at one cent while his competitors charged six cents. With the newspaper's success, losses were inevitable. To increase profits and reduce losses, Benjamin started inviting advertisers to place ads in his newspaper and charged them for it. Ultimately, his publication achieved great success, making the world gradually aware of the value of selling attention.

Advertising Methodology​

By the 20th century, advertising began to take shape as a systematic field and was regarded as a science. An advertisement could be crafted to grab attention. Creating demand is one of many scientific methods. This method involves heavily promoting a problem that the public is either unaware of or that is entirely fabricated, and then claiming that a certain product can solve this problem. Additionally, advertisers in the 1920s realized that word of mouth could also be shaped by establishing and popularizing a brand.

Forms of Advertising​

Before the 1920s, advertising was primarily focused on public spaces. However, shortly thereafter, radio advertising became extremely popular. Advertisers were eager to sponsor radio content just to hear their names mentioned during broadcasts—because this would immediately attract a large audience's attention. Later, television quickly replaced radio as the dominant medium for advertising, becoming a more effective way to capture attention, a trend that continues to this day.

The rise of the internet ushered in a new wave of advertising revolution, with email emerging as a new form of advertising. A survey in 1973 showed that emails accounted for 75% of traffic on the internet. Emails are highly effective because they feel like a reward or incentive for customers—receiving an email feels good. Meanwhile, search engines like Google gradually became important resources for capturing user attention. To monetize attention, Google's founders introduced the Adwords advertising tool: it displays relevant ads alongside search results based on user queries.

Acquisition Efficiency Problem：How to achieve a better ROI in advertising?​

In details, Lyft's advertisements should meet requirements as below:

1. being able to manage region-specific ad campaigns
2. guided by data-driven growth: The growth must be scalable, measurable, and predictable
3. supporting Lyft's unique growth model as shown below

However, the biggest challenge is to manage all the processes of cross-region marketing at scale, which include choosing bids, budgets, creatives, incentives, and audiences, running A/B tests, and so on. You can see what occupies a day in the life of a digital marketer:

We can find out that execution occupies most of the time while analysis, thought as more important, takes much less time. A scaling strategy will enable marketers to concentrate on analysis and decision-making process instead of operational activities.

Solution: Automation​

To reduce costs and improve experimental efficiency, we need to

1. predict the likelihood of a new user to be interested in our product
2. evaluate effectively and allocate marketing budgets across channels
3. manage thousands of ad campaigns handily

The marketing performance data flows into the reinforcement-learning system of Lyft: Amundsen

The problems that need to be automated include:

1. updating bids across search keywords
2. turning off poor-performing creatives
3. changing referrals values by market
4. identifying high-value user segments
5. sharing strategies across campaigns

Architecture​

The tech stack includes - Apache Hive, Presto, ML platform, Airflow, 3rd-party APIs, UI.

Main components​

Lifetime Value(LTV) forecaster​

The lifetime value of a user is an important criterion to measure the efficiency of acquisition channels. The budget is determined together by LTV and the price we are willing to pay in that region.

Our knowledge of a new user is limited. The historical data can help us to predict more accurately as the user interacts with our services.

Initial eigenvalue:

The forecast improves as the historical data of interactivity accumulates:

Budget allocator​

After LTV is predicted, the next is to estimate budgets based on the price. A curve of the form LTV = a * (spend)^b is fit to the data. A degree of randomness will be injected into the cost-curve creation process in order to converge a global optimum.

Bidders​

Bidders are made up of two parts - the tuners and actors. The tuners decide exact channel-specific parameters based on the price. The actors communicate the actual bid to different channels.

Some popular bidding strategies, applied in different channels, are listed as below:

Conclusion​

We have to value human experiences in the automation process; otherwise, the quality of the models may be "garbage in, garbage out". Once saved from laboring tasks, marketers can focus more on understanding users, channels, and the messages they want to convey to audiences, and thus obtain better ad impacts. That's how Lyft can achieve a higher ROI with less time and efforts.

Customer Acquisition Efficiency Issue: How can advertising campaigns achieve higher returns with less money and fewer people?​

Specifically, Lyft's advertising campaigns need to address the following characteristics:

1. Manage location-based campaigns
2. Data-driven growth: growth must be scalable, measurable, and predictable
3. Support Lyft's unique growth model, as shown below:

The main challenge is the difficulty of scaling management across various aspects of regional marketing, including ad bidding, budgeting, creative assets, incentives, audience selection, testing, and more. The following image depicts a day in the life of a marketer:

We can see that "execution" takes up most of the time, while less time is spent on the more important tasks of "analysis and decision-making." Scaling means reducing complex operations and allowing marketers to focus on analysis and decision-making.

Solution: Automation​

To reduce costs and improve the efficiency of experimentation, it is necessary to:

1. Predict whether new users are interested in the product
2. Optimize across multiple channels and effectively evaluate and allocate budgets
3. Conveniently manage thousands of campaigns

Data is enhanced through Lyft's Amundsen system using reinforcement learning.

The automation components include:

1. Updating bid keywords
2. Disabling underperforming creative assets
3. Adjusting referral values based on market changes
4. Identifying high-value user segments
5. Sharing strategies across multiple campaigns

Architecture​

Technology stack: Apache Hive, Presto, ML platform, Airflow, 3rd-party APIs, UI.

Specific Component Modules​

LTV Prediction Module​

The lifetime value (LTV) of users is an important metric for evaluating channels, and the budget is determined by both LTV and the price we are willing to pay for customer acquisition in that region.

Our understanding of new users is limited, but as interactions increase, the historical data provided will more accurately predict outcomes.

Initial feature values:

As historical interaction records accumulate, the predictions become more accurate:

Budget Allocation Module​

Once LTV is established, the next step is to set the budget based on pricing. A curve of the form LTV = a * (spend)^b is fitted, along with similar parameter curves in the surrounding range. Achieving a global optimum requires some randomness.

Delivery Module​

This module is divided into two parts: the parameter tuner and the executor. The tuner sets specific parameters based on pricing for each channel, while the executor applies these parameters to the respective channels.

There are many popular delivery strategies that are common across various channels:

Conclusion​

It is essential to recognize the importance of human experience within the system; otherwise, it results in garbage in, garbage out. When people are liberated from tedious delivery tasks and can focus on understanding users, channels, and the messages they need to convey to their audience, they can achieve better campaign results—spending less time to achieve higher ROI.