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Three meditations: something to think about, a “how-to” resource, and a marketing deep dive. Ommmmmm.

Something to Think About

One "How To" Resource

I thought Rob Snyder did a great job with this step by step tear down of sales demos for people who hate sales.  Wait a second, Chad.

This is a marketing newsletter. You turncoat!

Hang on, hang on. 🤗

I think a Rob’s approach here is actually great for validation interviews, customer calls, and all kinds of face to face conversations where the golden nuggets that marketing so desperately needs often hide.

A Marketing Deep Dive

Pattern Matching and Survivorship Bias

One of our core values at CMO Zen is “stronger together.”

We sometimes call this our “Voltron” principle. For our clients we believe no single CMO can outperform all of us together.

And it applies in other areas. For example, in addition to my full-time role as CEO of CMO Zen, I teach venture capital courses at the University of Utah.

But I’ve never been a VC. 👀

My fundraising experience is 100% from the founder side.

I’ve been fortunate to lean on venture investor guests who bring experience to the students that I don’t have.

Over the years I’ve learned that investing and marketing address some similar challenges.

Investing is generally considered a trade off between risk and reward.

But the real world isn’t that simple.

At one end of the spectrum are clear, predictable, inverse correlations between risk and reward, and at the other end are pure chance like the lottery or the roulette wheel.

Somewhere in the middle is a narrow zone that isn’t entirely chance, but is not truly “risk” either, meaning it cannot be defined in terms of mathematical probability or actuarial tables.

This is the zone of uncertainty.

Fabled VC Jerry Neumann wrote how success in VC investing isn’t about risk at all, it’s about uncertainty and the opportunities that live there.

Early stage Marketers and VCs live in this zone of uncertainty.

Uncertainty is what makes this feel like chaos.

Here’s what I mean.

When it comes to investing in early stage companies, there is no formula for consistently picking winners.

While some VC’s may debate this (to the death), all startups by definitioncontain flaws with the potential to metastasize and kill the company.

Things are no better for marketers.

“Half my advertising spend is wasted; the trouble is, I don’t know which half.” This statement attributed to John Wanamaker captures the uncertainty that exists in marketing.

And it’s not new.

Wanamaker died in 1922, so this has been the state of marketing for at least 100 years!

My friend, John Huntinghouse, VP of Marketing for TAB Bank put this in modern parlance when he said, “Marketers don’t starve, they drown.”

There are so many possible channels, it’s natural to be overwhelmed. There’s always a new technique being touted. (Often enthusiastically shared by the CEO as if he’s just discovered the secret marketers have been searching for—something we refer to as “leading by LinkedIn.”)

Just like you can’t pick winners for investment, you can’t look at what one company is doing in isolation and know that it will work for you.

The Power Law

With all this uncertainty, why does anyone invest or spend precious marketing dollars at all?

Because the returns can be huge.

And they need to be.

VCs need big returns and marketers need high ROI channels.

Garrett Jestice, shared how the power law distribution at work in venture capital also applies to marketing channels.

A power law distribution illustrates that most of the impact (portfolio returns, ROMI, etc.) is concentrated in a small number of deals or channels.

So investors buy in at the pre-seed, seed, and A stage because to make their returns work, they need to get in when the equity is cheap.

And since you can’t run a rocket ship with no fuel, marketers continue to spend on marketing in an effort to find the disproportionate ROI.

And both end up with misses.

Which leads us to the million dollar question.

How can you miss less often?

How can you make sense of the uncertainty?

Pattern Matching and a System

The first part is what VCs like Ben Capell from Peterson Ventures and Sid Krommenhoek from Album Ventureshave shared with my class.

They “pattern match.”

They use the supercomputer inside their heads, informed by experience and expertise… to look for signs that they are onto a winner.

Pattern matching alone isn’t enough though.

Frank Slootman, CEO of Snowflake, went so far in in his book, Amp It Up as to criticize pattern matching altogether, “One of the more irritating habits VCs have is “pattern matching,” making recommendations and suggestions based on what other supposedly successful companies were doing. No two companies are alike, and just  because another company is doing it, doesn’t make it right.”

Hm.. how do we square those two?

I think Frank’s irritation is a little shortsighted here.

Pattern matching is a great start—maybe the only place TO start.

We just need to solve for some of its weaknesses. Pattern matching can be unreliable due in part to survivorship bias.

The classic example of survivorship bias is this story of WWII bombers.

Bombers would return from missions over Germany with holes in them. Initially military commanders recommended that the areas of the planes with the most bullet holes should be reinforced with armor.

Statistician Abraham Wald countered that armor should instead be placed in areas that had no bullet holes.

He posited that returning planes had survived hits where the holes were. But that planes hit elsewhere had not returned at all. By reinforcing those area, more planes would make it home.

Survivorship bias can cause us to overvalue patters from companies that win.

And it can be checked by introducing a process for working through the uncertain stuff.

For investing this looks like a strategy, an investment thesis, or a mathematical model. This narrows the focus and thereby reduces the risk.

Marketing has a methodology for this too, but it is less well known/practiced.

Jim Collins called this approach “bullets before cannonballs” in his book, Great by Choice.

Consistently winning at marketing can’t be the result of throwing budget into a black hole and hoping for the best.

Marketing should be more science than voodoo and pixie dust.

Here’s the system we use to avoid drowning:

  1. Build a list. List the possible channels, places where your ideal customer goes to get information or solve problems. (We call this a “Watering Hole” analysis. Here’s our playbook for it.)
  2. Score on preference. This is pattern matching. Rank order the channels based on your intuition, experience, and expertise as to which channels you believe are most likely to produce results. Channels that are already working should be at the top.
  3. Score on cost. Rank them highest to lowest based on the cost. This doesn’t need to be “to-the-penny” accurate. If you’re really unsure, try using T-shirt sizes: S, M, L, XL.
  4. Final Weighted Rank Order. Add the two scores together to create a combined score. You can weigh them according to your needs. If you are super budget-conscious, maybe you double the “cost” score, etc.

With this final ranking, you now have a plan.

Lean into any channels that are working first. Then how many channels can you test with “bullets” (based on your ability to execute and available resources) over the next calendar quarter?

KPIs for a successful outcome are determined before we launch the first test.

Let’s say you have one channel that’s working and three you can afford to test. Those four channels are your marketing planfor the next quarter.

Add up the cost of each and you have the variable portion of your marketing budget for the quarter.

So often marketing budgets are really just “spending plans.” Using this method, we actually have an effective bottom-up budget—a decision to make a specific investment in discovering the channels that deliver the highest ROI.

Marketing plans and budgets can be a real administrative burden on internal teams.

Using this method, you arrive at both over the course of a few days.

Easy peasy. 😄

Chad Jardine, Founder & CEO
CMO Zen

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