After a startup establishes product market fit, scaling demand generation becomes the the next major challenge. Doubling or tripling ARR each year for several consecutive years is not easy. The best marketers create a demand generation portfolio. There are four axes to measure this portfolio: scale of investment, sophistication, breadth and potential.
At the outset, a startup may rely on a single channel of customer acquisition. But over time, in order to achieve larger and larger bookings, the company must diversify. Diversification prevents channel saturation risk. As spend in one channel grows, the cost of customer acquisition rises to untenable rates. Diversification also mitigates channel concentration risk. A change in terms of service of a dominant distribution platform might challenge the business’ existence.
A demand generation portfolio might include search engine optimization, search engine marketing, social media marketing, influencer marketing, conferences/events, referral marketing, branding, partnerships, reseller agreements, outbound sales development, channel activation, analyst relations, and so on.
How can one manage a broad and growing portfolio? By measuring them on those four axes.
Sophistication: How sophisticated is the organization in leveraging the channel? How much experimentation, insight, predictability has the team developed?
Breadth: How broad is the demand generation strategy? How many campaigns, how many creatives, how many partners, how many referrers?
Potential: How many customers and much revenue could this channel bring if successful?
Scale of investment: How large is the business’ investment in the customer acquisition channel? What is the spend on the people, software and media?
Why are these four axes important? Imagine a table like the one below.
At a glance, a head of demand generation or a CEO can determine where the company is spending its demand generation efforts. And, whether the asset allocation is the optimal one given the current stage of the company.
In the case above, the startup has a very sophisticated search engine marketing function with a reasonable cost of customer acquisition but has not scaled that program yet. On the other hand, LinkedIn spend is maxed out , but the team is still early in optimizing the channel. Last, referrals have substantial scale but not much potential.
There are no right answers about what an optimal portfolio should look like. That will change over time and by company. The important part of this framework is to create a shared lexicon about how to evaluate demand generation portfolios, and what the best asset allocation might be for the business.
Image credit: Four dimensional object called a dodecaplex, copyright Paul Nylander