Marketing

The Growth Marketing Arms Race - Lessons From “Moneyball”

 After having re-watched the very entertaining movie "Moneyball" recently, I realized that its business lessons were pretty applicable to the growth marketing realm. Those relevant lessons fall into three themes. First, that it’s hard to compete at the same game with (much) bigger money. Second, focus on the metrics that matter most. Third, it’s an arms race.

“Guys, you’re still trying to replace Giambi”

This quote relates to the situation the Oakland A’s ran into at the beginning of the movie. They had just gone deep into the playoffs with one of the lowest payrolls in major league baseball. At the end of the season, three of their top players were given large offers to play for other teams with much higher payrolls. The A’s, being a smaller market team, could not match the offers. The scouts, who thought in a traditional “this is how we’ve always done it” manner, were discussing how to best replace the best player that they lost, Jason Giambi. The team, in fact, could not afford to do so.

The analogy here is that, unless you are extremely well funded and loaded with talent, you probably are not going to compete head-to-head, marketing tactic by tactic, with some of the 800 pound Silicon Valley gorillas that are in the same space as you. Your company most likely can’t afford to “nation-build”, meaning you are not going to be able to do all of the comprehensive facets of marketing and sales at scale in the same manner that they do. You may have heard references to a “Silicon Valley playbook” - and you just can’t try to do all of that. What this all means is that unless you have those substantial resources to bring to bear, you aren’t going to be able to grow using those same techniques unless you are similarly resourced...in fact, you should be thinking the opposite way. Trying to replicate the Silicon Valley growth playbook without having the same resources is like trying to “replace Giambi”.

An example of the ability to compete in a similar situation can be seen in the affiliate marketing space. By definition, affiliates have less margin to work with than the merchants (aka “brands”) whose products they sell. That is because they often take a percentage of the sale, which must be less than the gross margin of the product, otherwise the merchant would probably not offer the affiliate program in the first place. What this generally means is that an affiliate sells a product at the same price as a merchant, and makes less money than the merchant by doing so.

So why do affiliates exist and how can they be successful? The answer is that they often have a specific, and much more developed marketing and/or sales competency than the merchant. Some examples:

  • A contact or customer base that they can cross-sell into

  • Buying power vs. a certain media type

  • Formula for selling similar products

By doing these specific things well, and potentially combining partnership strengths into a cohesive go-to-market plan, they often can get it done better than “the brand”. This competency is usually very focused, and because of that, it can be replicated against multiple products. They stick to doing what they do well, continually try to get even better at it, and beat the bigger brands to those sales.

“You get on base, we win. You don't, we lose.”

In Moneyball, the protagonists recognized how critical on-base-percentage (OBP) was to the overall success of an offense in major league baseball. In fact, they realized that the likelihood of scoring was more mathematically linked to this number than metrics that were often more highly emphasized as “success” like home runs and runs batted in (RBIs). The analogy here for growth marketing is that of key performance indicators (KPIs) vs. vanity metrics.

Every day, you should be able to look at one or two metrics, and know where you stand vs. objectives that matter. These metrics should be easy to understand, and those running the business should know why they are important, how they originated, and their downstream impacts. Key metrics should not require analysis to dig deeper to understand context or if there are any caveats. They mean what they mean, and that should not change based on circumstances. Every business has metrics that are the true leading indicators of success.

This is not to say that deeper analyses are “one and done”. This should be done periodically to reset, and in some cases, reconstruct these metrics to make sure there aren’t any changes to underlying business conditions or seasonality factors. In fact, like the movie, I’m glossing over how to even get to your version of “OBP”. Some things to consider in doing so are the notions of “de-averaging” and “attribution”. De-averaging simply refers to drilling down in order to break metrics into more granular (yet discrete) buckets. Within digital marketing, there are channels, platforms, campaigns, targeting, ad types, and so on. Within each, ideally you are able to trace the path to revenue - and if you are really good, you can even understand some of the indirect impacts of one on another. This last concept is attribution, which ideally can be directly and indirectly measured. A great example of this in action is with cohorts. Cohort analysis is most prevalent in situations where leads are generated, followed by a sales cycle that occurs over time (often in B2B situations). A great article covering this concept is Blow Away the Board: Cohort Analysis and Other Reporting Fundamentals You're Missing.

A common scenario would be a B2B SaaS business that generates leads using several different channels. When looking at the full lifecycle of those leads in the sales process (using cohort analysis over several months), each channel’s leads convert to revenue at a predictable rate and predictable expected lifetime value. So, in looking at each channel, it makes sense to look at the marginal contribution of each using this process. In addition, as the marketing & sales mix changes, it also makes sense to de-average further to understand the drivers, and associated changes in those metrics that can be expected as the lead mix changes.

If you pick the right variables to measure, and understand the inputs that can be varied and tested, optimization becomes a fairly straightforward exercise.

“No matter how successful you are, change is always good. There can never be a status quo.”

At the end of Moneyball, it mentions in a caption that the Boston Red Sox won the World Series two years later. The Red Sox were the team that offered Billy Beane (the main protagonist and pioneer of the data-driven moneyball concept at Oakland) a would-be record breaking salary to be their general manager. They were impressed with what he had done at Oakland with such a low salary budget, and believed that he could help the Red Sox win a world series if he brought the system to Boston. Billy Beane turned down the offer with Boston to remain at Oakland. It turns out that Boston espoused the concept, executed it, and won it without him.

It’s an arms race. The way I picture this in my own marketing career is to think back five years (or even a couple of years), and wonder how much more effective I would have been had I known then what I know now, and had I had the same tools & technology we have now. Visibility of digital activity continues to improve, as does the availability, accuracy, and usability of data.

Everything is easier to implement, and things we saw as cutting edge only a couple of years ago becoming standard operating procedures for well run marketing organization.

If you flip this paradigm and look into the future, we realize that this arms race isn’t slowing down, and we had better keep pushing the boundaries or we will be left behind. Technology, especially low code and no code tools, are becoming more prevalent across many functions of marketing. Creative marketers are becoming more technical, and the line is now getting blurred between what a “marketer” might do vs. what a “product developer” does. An example of this are transactional communications from digital products. Once the provenance of only developers, sophisticated automation tools with easy-to-use APIs are allowing marketing and customer success teams to also script and execute UX playbooks on behalf of product and company.

Given the multitude of and growth of exciting digital marketing technologies and techniques, it is very easy to get “shiny object” syndrome. Even though they are simpler to technically implement, it does not mean that they are simple to do well, or that they are the right fit for your business situation. Just because you can, does not necessarily mean you should.

You must always stick to fundamentals, and do what you do well. Keep your eyes and ears open for new or existing solutions that could significantly help you execute better. Beware of the fact that any new tool takes time to integrate, which is typically more precious than the money it costs. That said, if you do find something that you think can really help advance your business, try it. See if you can trial it for a while, see if it works for your business situation and your technology stack; and especially to see if it really does for you what it is supposed to do.

Picking the right battles may be as critical as winning them. Like core competencies in any discipline, one cannot expect to have the skills & bandwidth to be highly effective at all aspects of marketing. The smaller you are, the truer this gets. However, if you leverage your strengths and properly utilize the correct aspects of what is now available to any marketer, you can win in your niche and grow from there.

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If you are a marketing, sales or product leader at a growth-oriented company and you feel there is untapped potential in your organization, we encourage you to take a look at our Go-to-Market Resources section to help identify and prioritize areas of opportunity.

Alternatively, you can always contact us to chat directly about your growth challenges and opportunities.

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Get weekly insights, monthly deep dives, free guides, templates and other resources to help on your way to being a Go-to-Market PRO!

Blow Away the Board

Get weekly insights, monthly deep dives, free guides, templates and other resources to help on your way to being a Go-to-Market PRO!

Blow Away the Board

Get weekly insights, monthly deep dives, free guides, templates and other resources to help on your way to being a Go-to-Market PRO!

Practical Go-to-Market coaching specifically for B2B software and service companies between $5MM-$50MM in revenue.

Practical Go-to-Market coaching specifically for B2B software and service companies between $5MM-$50MM in revenue.

Practical Go-to-Market coaching specifically for B2B software and service companies between $5MM-$50MM in revenue.

Practical Go-to-Market coaching specifically for B2B software and service companies between $5MM-$50MM in revenue.