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#69 Unlocking True Activation: Strategies for SaaS and Marketplaces | Ely Lerner
00:43:29
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- [00:00]
Eli Lerner
Foreign.
- [00:07]
Ty Grange
Welcome to another episode of the Always Be Testing podcast. I'm your host, Ty Grange, and I'm thrilled to talk to Eli Lerner today. Eli, how are you?
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Eli Lerner
Really good. Excited to be here, man. Good to chat again.
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Ty Grange
Absolutely. It's a, It's a balmy 25 degrees here in Austin, Texas. We have a light dusting of snow on the ground, so I'm bundled to the hilt. And I'm not in my normal podcast studio at the capital factory downtown because schools are closed. The whole city shuts down when we get one inch of snow in Austin. But what are you going to do?
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Eli Lerner
Yeah, I'm sure that would happen in San Francisco if we got any snow.
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Ty Grange
But yeah, with those hills you see.
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Eli Lerner
Slipping and sliding, it would be really bad.
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Ty Grange
Yeah, we've had a couple of good ones here and this is minor to manageable so far. Fingers crossed. As long as the power stays on, we're good to go. So far, so good.
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Eli Lerner
Yeah, yeah, exactly. Love it.
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Ty Grange
Amazing. Eli is a phenomenal growth practitioner. He has done a lot of advisory in house as well as externally as a consultant. We were fortunate enough to meet at Reforge, which I've touted on the program many times. It's probably the best training platform in my opinion, for growth and product. And Eli's well versed as a entrepreneur in residence. Is that correct?
- [01:28]
Eli Lerner
Yeah, the technically, the EIR at Reforge stands for Executive in Residence. It's a play on EIR because you're not actually building a startup for them, you're, you're building courseworks and frameworks and, and delivering that stuff. But I, I have, yeah, I love Reforce. They have some really great stuff.
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Ty Grange
Absolutely highly recommended. And then, and yeah, Eli, maybe tell us a little bit about what are you focused on right now?
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Eli Lerner
Yeah, so last maybe three and a half years coming up now, I've been doing this sort of full time hands on advising practice, which honestly I love. Like, it's been a bit of a, a journey of finding product market fit for the product that is me. And so it's been iterative over time. But I can tell you a little bit about kind of like maybe even what I mean when I say advising because I think one of the things I see is like people use advising, consulting, coaching, all these different words and they all mean different things. And so maybe the framework that's in my head basically is really advising is all about teach to fish. And then you have this line where when you cross that line, you're in consulting, like you know, fractional interim, full time, where you're actually owning delivery. What I do these days entirely is it's all on the advising side of the line. So it's all teach to fish, not delivery. But it's about as close to that line as you can get without crossing it.
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C
Right.
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Eli Lerner
And so I feel like I found this perfect sweet spot that I really love where I can get deep with the founders and spend a lot of time with them and be there long term, but I'm leveraged enough to do it across a whole bunch of companies at the same time because I'm not doing, I'm not crossing that line into delivery. Right. So maybe just some perspective on the kinds of companies I advise is also useful here. I primarily focus on sort of the software verticals broadly, right? So consumer marketplace, fintech, SMB, SaaS, enterprise SaaS, kind of that space includes AI dev tools, those kinds of things. But like things that are software. So not hardware, not dtc, not biotech space, crypto, those are the, I don't really touch those areas, but the software verticals broadly I focus on and I think like one thing that is unique or maybe common across all those software verticals is like you don't really have a separate product strategy, growth strategy, go to market strategy. Like those are really one tightly coupled unit that has a ton of interplay led by that founder CEO in early stage. And so like that for me allows me to sort of plug in and be that kind of like partner to that founder CEO to help them grow their business broadly across every function, at every altitude. Right. And so I really enjoy that. So really what I'm doing is like this really hands on thing where I'm spending an hour a week with every CEO that I'm working with, sort of pair programming for that CEO job, right. I focus on what, what is the most important thing to focus there and their org's time on at any given time. What are we doing, what have we learned again across all of those altitudes over time? I also spend some time outside of that, like diving into data, watching qual, getting up to speed enough on their product, their business, their market, their customers to be a thought partner in those weekly sessions, which again I found that when you're doing the high level, kind of like monthly, every other month, advising, you're just not close enough to the ground to really be a thought partner. You can share your past experience, but you can't combine the past experience with like where the rubber meets the road, right? Like that. I feel like I am here because I love impact. Like, I'm sort of a builder at heart. And I found that this position sort of allows me to not only bring my past experience, but actually help with the hard part, which is like taking those ideas and actually implementing them day to day. And so that's been really, really fun. I love it. What else can I tell you about that advising stuff?
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Ty Grange
How long are those engagements, Eli?
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Eli Lerner
Yeah, I mean, essentially indefinite, right? Like at the highest level again, because I'm not coming in to help with a particular project. Like CEOs are bringing me in because they want to grow their business faster, which is your job as the CEO of a company. I think what I found is, you know, every startup is a series of inflection points, right? And I think people maybe don't always realize that there are more than just like the, the fundraise. Obviously the fundraise inflection points are major inflection points. There tends to be actually a number even in between the fundraisers where like, what got you here won't get you there. And so I really, as, as I've been doing this over the last few years have had this like, meta realization that at the end of the day, one of the big things I'm doing is helping people like cross the threshold at each of these inflection points. And so I think like, again, like most of my engagements tend to either be like one inflection point and so maybe in the like three to six months range or like by the time we get to one inflection point, we're getting to the next inflection point, we just keep going. And so there's a bunch that have been, I've been ongoing for a really long time, which again is also really great for that like long term leap learning of like you learn when you're an operator. But I found that this like perfect balance of hands on advising has allowed me to even have an exponentially faster learning curve because I'm close enough to the ground and there for a long enough time to really see what's going on. And then I'm doing it with eight companies at the same time. And so like the pattern matching between the companies is just awesome.
- [06:21]
Ty Grange
I like the idea of hands on advising and it's really, it makes a lot of sense for so many reasons. I think there's obviously data and reality and existing wins and information to support that model. But to be, to feel and actually be in the trenches with the founder and with the team, to be well immersed in their Data and their competitive set and their challenges just. It sounds obvious but it just, it seems like such a better smart way to go about any kind of engagement like this.
- [06:53]
Eli Lerner
Yeah, no, I love it. It's a fairly nascent idea but I think more people are doing it. There's a handful of us in the reforged kind of ear partner network. They're all doing sort of our own flavor of it. But I do think more people will be doing this as we go forward because again it's so, it's one like more fun and more impactful for somebody on my side and more impactful and more valuable for the founder. And so I think you're gonna see more people doing this kind of.
- [07:18]
Ty Grange
Yeah. Are there. Without giving us like the whole story which is probably, you know, a little detailed and you don't wanna share like a specific data. But is there a couple examples where you're like wow, that was amazing. I was able to kind of align, come in, guide them in the right direction. They were able to kind of deliver. We saw this huge impact. Can you kind of speak to a little bit of the impact side of what you do? Because I think the common notion is like, oh, you're an advisor, you're a consultant, you're basically just giving people these coaching tips and it's not necessarily the case, especially with your focus.
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Eli Lerner
Yeah, no, I think that's totally right.
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C
Right.
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Eli Lerner
I mean this also answer your question, but I think you hit on something important here.
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C
Right.
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Eli Lerner
Which is part of the reason I don't like doing high level advising. Because you get in this place where you're like, I'm going to hand you a bunch of ideas and concepts and then probably nothing is going to come out of it. Like that's what happens a lot.
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C
Right.
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Eli Lerner
And again for me like I do this because I want to have impact both on the founders themselves and their teams and their customers and the businesses. Like that's why I'm there. And so I feel like when I'm actually here like I can actually help drive that impact in a much more so sort of hands on way. Yeah, it's a, I haven't done a reflection exercise to see like what are the most common from a numbers point of view. But just off the top of my head like I do think a situation that's happened pretty commonly is maybe like one of the mid early kinds of inflection points is this inflection point where you know, a product has some traction but they have, they've never really sort of bent that curve into hypergrowth, right? And what happens is like they'll get some early traction, they'll get some growth, they're feeling good, and then they start to plateau on that because they don't really, they haven't really figured out a compounding way to grow the business. It also tends to correlate with like not fully understanding product market fit in in all the different ways. And so we spend some time on that sometimes too. But like, honestly there's just like a, a version of that that has come up a number of times is like activation as the lever, right? Like true activation in sort of the reforged definition, which I don't think everybody is aware of, but I think is a very good definition. I kind of think about it as like capital A activation is really going through like sign up, set up, which is all of the activities needed to like experience the core value of the product the first time. But then like truly going through those habit motions and building that habit around receiving the core value of that product, basically as close to the natural frequency of need as possible.
- [09:44]
C
Right?
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Eli Lerner
And again, this is something people at this point don't always understand, which is like, what is our share of voice, share of wallet, like what is the natural frequency for the problem that we are solving and what percent of that are we actually capturing? Because again, what happens a lot is you get people to come in, they use, they activate by sort of a traditional definition because they like got the core value one time, but you haven't really got them into that habit. You don't have high share of voice in, in terms of what percent of that natural frequency they're using your product to solve that problem. And so like they don't retain essentially.
- [10:15]
C
Right.
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Eli Lerner
And again, like in a huge number of cases now, sometimes up to 50% of what people see as churn is actually just incomplete activation.
- [10:26]
C
Right.
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Eli Lerner
And so a whole bunch of times now I've helped people really. Again, this can be the difference between a growth curve that is flattened out and one that starts sort of taking off again, right. And zapping it with a number of clients actually with pretty like consumer SaaS and enterprise and all these different things, right. Actually you see some pretty similar patterns across those.
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Ty Grange
So I think there's. Yeah, the activation one is really fascinating. So mistaking churn for incomplete activation is one of the most, I don't think a lot of even like even growth learners and growth, some growth practitioners probably don't even realize how big that is. Can you double click on that a little bit? Because that's really interesting.
- [11:06]
Eli Lerner
Yeah. I mean again I think like this it's true. It's like in, in and again. Now I've worked across a huge number of businesses at many different stages across many verticals. It is probably one of the most common unlocks is really like understanding what percent of your turn is true. Sort of like fully activated, kept that habit first consistent period of time and then churned versus never fully activated.
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C
Right.
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Eli Lerner
I think like again we could go into this if you want.
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C
Right.
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Eli Lerner
Like one of the things here that is really helpful is actually segmenting your measurement.
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C
Right.
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Eli Lerner
Like really understand what, what that true capital A activation point looks like. Like what do you need to see in their early life cycle behavior to know that somebody is fully activated where you're achieving a high percentage of shared voice with their natural need there. And you've seen that sort of correlate like those early life cycle actions correlate with high long term engagement and retention. So you know that once they get to this point like you, they're going to stick around pretty well. They are probably fully activated and then have the split where you look at like okay, what percent of people, new users are we getting to that point? What are we not? And then of the people who get to that point then we can look at their long tail churn. Because long tail churn still happens. Right. It's more likely to be external factors though not always. Sometimes there are internal factors that affect it and like tracking that churn as sort of true churn. Right. This is true. Like these were activated, they were engaged, they were getting lots of value and now they are churning out as one segment and then the other segment is again like the set that is not fully activated is turning left and right. This is always what's happening.
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Ty Grange
Yeah.
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Eli Lerner
So like tracking those specifically as like that's actually your activation funnel. Like that's what you should be improving there. And when you do that like LTVs go up incredibly well. Like. Right. Like retention is your biggest leverage lever on, on business in general.
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C
Right.
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Eli Lerner
And so like improving that activation so you get those people into the fully activated set is really powerful one. So let me throw one other thing here that I think is also fairly common which is this goes back to this thing about not fully understanding your icp. When you look at that segment of users who haven't fully activated, it is reasonably common in my experience for a not insignificant percent of them to be not icp. Right. And so that's the other thing you need to do here is Understand like, okay, given sort of the general product that we have today and like, improvements that we can make, but not like substantially different product, how what percent of these people who are not fully activating could we activate? Because some of them is actually you're always going to require some non icp. But again, understanding the ones that don't activate as the subset that aren't icp, and adjusting your acquisition efforts to try to target more a higher percent of ICP also changes these metrics, right? It'll change that activation metric, it'll change the retention metric, it'll change ltp. And all you did was like, adjust the mix of users that you're acquiring. Right. And so I think that's the other thing to pay attention to here within that set of not fully activated.
- [14:01]
Ty Grange
That's amazing for users that are less. For audience members that are less familiar with the great reforged frameworks and definitions. When you talk about activation versus, like someone who's not fully activated, can you give like an example or a definition for folks?
- [14:19]
Eli Lerner
Yeah. So, I mean, again, I think like, maybe using an example of like a fitness app for simplicity here, like consumer fitness app, right? Where like, you use the app to work out. I think a lot of sort of like lowercase A activation. The way that people have thought about it historically is I signed up, I went through the onboarding form. Some folks even think about that as activated. Like, they filled out the onboarding form, they filled out the profile, so they're activated, they'll measure that. And maybe slightly better definition is like, I did that and then I did a workout.
- [14:46]
C
Right?
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Eli Lerner
Because until I do a workout, I've never really received the true value from your product.
- [14:50]
C
Right.
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Eli Lerner
But I think it's a good example, which is like, you are very likely to see a whole bunch of people do a workout and then not stick around.
- [14:58]
C
Right.
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Eli Lerner
And like, just because somebody did one workout with your product doesn't mean that they are like, receiving. They've gotten to that point of having an established habit where when they have the natural frequency of need, they're like, oh, I'm going to use this product for my workout.
- [15:13]
C
Right.
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Eli Lerner
That's maybe the, like a more obvious version which is like, I came in, I did the thing and then I never came back.
- [15:19]
C
Right.
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Eli Lerner
That's maybe more obvious, though, again, with fit that definition, a slightly less obvious version is where they stick around some for a little while.
- [15:26]
C
Right.
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Eli Lerner
I think this is another one that people miss where, like, you've got a product, they're using it some they're not using. They're probably not super high engaged, they're probably not using all of the different functionality, their frequency is not super high. And then they, you know, after three, four, five months, you kind of like are losing more and more and more of those people. And so again, that this is a situation where I don't know what's a good example here, but like, entertainment app has more extremes, but let's use it because it's maybe the easiest, right? Which is like your natural frequency of need for entertainment is basically all the times you were bored and like sitting in line and whatever, right? You're competing with TikTok and YouTube and Instagram and Netflix. It's a lot of competition in that space, right? But I think that, like, understanding for your users, if they're only coming in once a week, but you know, the natural frequency of need is daily, that's a really good sign that, like, they're not fully activated. Right. Your share of voice in terms of that natural frequency is pretty low for most of those users. And what is very likely to happen is they're just not going to keep. They don't really have a habit established, Right. Like, you know, folks are probably fairly familiar with Nir's book Hooked or whatever, right? Of this, like trigger response thing. It's the same idea, right? What you want to have is a place where when they have the need, their brain goes, oh, yeah, when I have this need, I use this app, right? Every single time. Like, that's what a habit looks like. And so that's what you're trying to get to that place. Right. And again, it depends on. This is why understanding what the natural frequency of need is for different subsegments of your customer base is important because in some situations, like the natural frequency is for this subset of users is lower than the natural frequency for this subset of users. Maybe just on the side here, like, if there is some sets of users where the natural frequency is less than like monthly or even around once a month, that's a danger zone for frequency in general. Like, even if that is, even if you're getting 100% of their natural frequency, it's a very low frequency need. And so if you have a different subsegment that has a higher frequency need, that's probably a better ICP to start with because you're much more likely to be able to build a habit when the natural frequency is weakly or better.
- [17:24]
Ty Grange
Yeah. Do you have some things that you've seen work? Well in terms of gathering that natural frequency accurately with subsets of customers or prospective customers to define and ensure that you're kind of on a good trajectory with that ICP when working with the brand.
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Eli Lerner
Yeah, that's a great question. I think there are a few different tools that can be helpful here. I do, like, maybe to uplevel it slightly and then I'll also answer that question. But like, I think one of the most important first steps in this sort of like diagnosing the leverage in activation is this sort of like qualquant ship loop that can be really useful, which is like, start with qual. Like, go talk to even a handful of customers that look like your icp, from what you can tell, like, aren't totally off, off the rails and have like, gotten reasonably far down. Like, they set up their thing, they got the experience some, but they aren't at that full activation place.
- [18:21]
C
Right.
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Eli Lerner
And when you're talking to those users, you're basically looking for one of essentially three plus or minus one things in terms of categorizing them. So the first one that I help folks with is essentially like positioning, understanding gap, right? And so like, this is somebody who has the problem that your product is solving. Your solution would work for their kind of like given an instance of that. But either they don't understand that your product solves that problem and or they don't understand that they have the problem, or they don't understand that it solves it, or they don't understand how to get it to solve it.
- [19:00]
C
Right.
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Eli Lerner
So this is sort of like your first bucket of gap. Your second bucket of gap is a solution gap. And so these are the people that have the problem that your product solves, but because of some specific nuance of their need, the way that your product works today doesn't quite solve the problem for them.
- [19:15]
C
Right?
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Eli Lerner
So that's the second bucket. The third bucket is problem gap. And so within problem gap, these are people who don't have the problem, like the core problem that your product is solving. There's sort of two subtypes of problem gap. One is people who don't have the problem and don't really even have an adjacent problem. Those are just not icp. Like, you should be counting them as not ICP through your funnel. You should be measuring them separately. Don't, like, make your data noisier later in the funnel because you're counting those people like, they're not a good fit for your product. They're clearly not icp. The one that might be interesting here is they don't have the problem your product solves, but they have an adjacent problem that is close enough where again, sort of small improvements to how your product works could actually expand product market fit. Sometimes these are called near adjacent users, right? They're not exactly in the current ICP because your product doesn't yet solve it, but they're close enough that actually some expansion into your ICP could, could help them.
- [20:02]
C
Right.
- [20:03]
Eli Lerner
And so I think this can be really useful for like basically every, every single person you talk to will fall into one of these buckets. This is an exhaustive list of potential situations, right? And so understanding kind of like what, how much of it is in each of these buckets and then focusing on those to try to improve that can be really powerful. Related to that is the question that you asked, right, which is about natural frequency. So as you're doing that qual and then the subsequent quant on top, usually again, you'll do a handful of things kind of like conversations first and then based on what you learn, survey or in app survey can be a useful way to kind of size the things that you found qualitatively within the user base. But the third lever is ship, which, which is again, ideally trying to find things that are small. And you can ship very quickly. That will also sort of help prove or disprove some of the hypotheses you're learning qualitatively in. When you're having those conversations, though, like, the other thing you were doing is really like you're doing a generative quality. You're trying to understand that person holistically, who they are, what their needs are, what their life looks like. Maybe I talk about consumer here. It's similar in B2B but with the added like the dynamics of the business obviously in B2B. And in doing that, like you're, you're going to want to understand like, okay, what, like what flavor of this problem do you have? How often are you having it?
- [21:18]
C
Right?
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Eli Lerner
Like that's what you're looking for, like, how often do you have this problem? And then like one thing that can actually be really useful here, just another aside, but in case it's a useful tidbit for folks, is when you ask people general, like generalizations, people are not very good at like assessing their past in aggregate. And so you get pretty inaccurate information when you're like, oh, how often do you have this problem? Or whatever. People don't know, they don't think like that. Just a little tool here that can be really helpful is they'll like walk me through the last seven days. So not making people have to think and not making people have to make assumptions or generalizations. Just be like, let's just walk day by day through the last seven days and you tell me everything that happened generally related to the kind of the problem that we're talking about and just go every single one. And from that you can actually get a really tight indication of like how does this problem show up in their life? How frequently is it likely to show up? Like how are they when it does show up, what's happening for them? When do they come here? When do they not?
- [22:18]
C
Right.
- [22:18]
Ty Grange
That's super, that's super interesting and to zoom out a bit for, for the audience. You're correct me if I'm wrong, but you're looking at seed up to series B. Is that correct? Or do you kind of go further up the food chain?
- [22:29]
Eli Lerner
Yeah, I, I work with again as we said, it's all about a series of inflection points. And the inflection points start at the very beginning and they go basically forever. Right. And so I think most of the clients that I work with are between they've raised a seed through about series C. Like that's kind of this like hypergrowth or like traction hyper growth set. I have recently started working with a, with a small number of pre seed clients which is also really fun. And historically I've even done a few in the much later stage where they're trying to sort of incubate their wave two right. Like their second horizon kind of thing. That's the one place where I will potentially advise a non CEO founder. Like if you're doing that well in a later stage company you have a GM type person with penal responsibility for doing that zero to one work. If you have that, I can plug in and sort of advise that person like I would a CEO in an earlier stage.
- [23:16]
Ty Grange
Yeah, that's awesome. Yeah, that's great. And I think, I think we can kind of jump back into some of those topics a little bit too. There's just so much within the growth stages and ecosystem. I want to, I want to spend some time on partner marketing because it's something that we really kind of lit up with. It's something that's near and dear to us. It's very central to our strategic focus. You had some really interesting ideas around it. I'd love to maybe hear even just like your definition of it as it relates to the types of clients and work that you deal with. And we can kind of Go from there.
- [23:50]
Eli Lerner
Yeah, no, I think this is a great one because I mean, honestly, like where to start here? Distribution is in some ways the only thing. Companies live or die by distribution. And I think if you look historically, you see these waves of new models of distribution. Whenever there's a wave of a new model of distribution, you get a spike in really big, really valuable generational companies that get built during that window of new sort of arbitrageable distribution. And then over time again that that sort of. It gets arbitraged away in a way. In a way. And what ends up happening so far is that like essentially the platforms end up taking the majority of the value, right? And so then the first of these was. Was maybe like the web itself and then you had search, then you had like the first early wave of social and then you had mobile. Right. I think once in a while still you're hearing folks who think that AI is sort of the newest one of these. I sort of Disagree. I think AI and gen AI and LLMs are super impactful in a lot of ways as a distribution channel, skeptical as like a new wave of distribution. But really like if you look at it for the most part we don't have a distribution wave at the moment that really hasn't been fully arbitraged out. The one that I am really excited about is maybe your area here, right, which is like influencers broadly and we define some of these terms. But like I think there's a lot of potential in this space of especially when you're talking about sort of like what. What are generally considered micro influencers, right? Like I don't know exactly the definitions, but like a hundred thousand to a million, like that sort of million, sort of hundred thousand to a million followers kind of middle segment. Because I think what we've seen a lot over the past five years is like a huge growth in the number of people in this segment where they have like reasonably large, really highly engaged, really targeted audiences and like struggle to make any money. A lot of people in that range still have day jobs, right. Because the platforms again eat all the value. And so like if you're not these sort of like top 1% influencers, there's a ton of people that are really struggling to monetize at all. This to me is a really interesting, and I've worked with some folks on really interesting stuff in this space. But like thinking about kind of like what looks like one of these waves of distribution where there is potential and there, and there is unlock there like this to Me feels like it has some of the shapes of that and we're starting to see some of that where again, like you've got this set of people who have amazing audience, highly engaged audience, but are struggling to monetize. And then you have companies and brands and that want to reach those people. When you can find synergistic ways to work together that are ideally not, you know, like your, your sort of least synergy version of that is the like very transactional. I give you $3,000, you make three posts on your Instagram to hawk my product and that's it or whatever. Sometimes that works. And especially if your LTVs are high and you find the right people, like that can work. But the more synergy, the more incentive alignment you get between the company and the influencer in that space, the more sort of like win, win value there is there where things that are good for both of you kind of can help both businesses. So be on pause there. But that some thoughts on.
- [27:11]
Ty Grange
I love that so much. There's so much that it's just exactly hitting on what we're seeing in the data, what we've observed and a lot of trends that go even beyond marketing or performance marketing that people are picking up on and taking advantage of. I mean, the examples are everywhere. You know, our observation is like we're sort of in this dearth of trust era where there's this big trust gap. These influencers that you're alluding to, whether you call them micro or medium, are stepping in. They're adding authenticity, they're adding trust, they're validating in a way that other institutions and sources of information just are not as much anymore. And so I love to hear what you're saying there. And I think it's kind of a wild notion, exciting one to think of these huge waves of distribution that people like Benedict Adams talk about stratitry talks about all the interesting thinkers of our time reforge yourself. And yet here you are considering is Influencer that next wave of distribution. I think there's a really compelling case to be made for that. We're obviously betting on that heavily and observing and, and thinking about it a lot. I kind of joke with people like is Influencer is the new oil. It's a total joking phrase and silly. But the provocativeness is sort of half correct in that you look at Marquis Brownlee who basically signed a deal like he can kind of make or break brands, almost like that's been talked about actively on social. He's like careful and cognizant of that, you have him making pretty bold assessments of Apple or Samsung or Tesla. You see him getting basically partnered heavily with Ridge wallets, a prominent D2C, very sophisticated performance marketer that's spending a lot of money. You see hexclad following suit, or perhaps even before he was Kimora the innovator with Hexclad and Gordon Ramsay. Right. So, yeah, I, I'm sure you're starting to see it pop up more with your, your consulting work and your observations and clients.
- [29:21]
Eli Lerner
Yeah, no, definitely. And I do think like, as I said, there's, especially when you go down to this sort of micro, middle influencer set, there is a hunger from the influencers for things like this. Right. Again because like if you don't have 100 million followers, you don't make a lot of money on TikTok and Instagram, these platforms, right? Like the platform gets a ton of value, you get very little. And so I think this is like, there's something there that has some pull to it, which is, which I think is a really powerful force. I think one of the things, one of the reasons it hasn't totally taken off yet as like a really prominent thing is it maybe is less, it's more complex and less obvious the ways in which you take advantage of this dynamic than in prior waves of distribution, right? Like, I mean especially search. Like maybe in the very early days of search the concepts of SEO weren't around and people had to figure them out, right. There's no complexity there with social. I think you also have the same thing of like Zynga and some of these others sort of like happening upon ways of using social, like first wave social to be really high distribution. Um, mobile was kind of a mess when the App Store first launched, right? You had to kind of like figure out what could actually work there. Um, and so I do think that we're in a similar phase with this kind of influencer wave if it does become a, a full scale wave where like it's not immediately obvious how to make these things work. And I think they are less rep, rinse, repeat actually than in some of the prior waves of distribution because like the value exchange maybe just again, another side here, but like the, one of the ways I think about it is like you take your, you know, I have 500,000 followers, like lifestyle influencer, TikTok, YouTube, I probably do most of the channels. I don't make very much money. I maybe have like a bunch of link in bio, affiliate link stuff that like doesn't do anything for me, right. I'm not really big enough to get like big brand sponsorships, right. And again, which makes sense, like the big brands have trouble with influencers like this because they need a lot more reach and like it's hard for them to work with all of these different people. And then of course the platform barely pays you anything. But like the thing that I think about there is value exchange, right? Where like this is a person that has the potential for creating value for their audience, but the platform itself is currently built such that the only value they're incentivized to create is like short form entertainment content.
- [31:48]
C
Right?
- [31:50]
Eli Lerner
Because that's what the platform monetizes. But I think that as you, as you sort of like play this forward, finding ways to synergistically work with those kinds of folks to provide like, use them to provide value to their audience in a way that is far more valuable and the audience is willing to pay for beyond just like short form entertainment content, right. And again they're like the audience, their audience is hungry for that from them. They in many cases have the, like have some of the things necessary to do that. There just isn't a way to meet those in the middle. And that's where again the software, the brand like comes together.
- [32:27]
Ty Grange
So anyway, one of the things we're, we're toying with internally is kind of, we've developed kind of like a scoring mechanism and I, and I, you know, you step back away from that and talk about that. But there's all these factors that converge on, let's say it's a mid tier influencer of this, a hundred thousand follower count, if you will. Yes, there's influencers of those sizes that are commercially earning money at some clip on that, whether it's flat fee or commission. Okay, great. But your point is well taken. They're not going to necessarily earn a lifestyle, earn a like significant living off of that. You could, but it's not common. I feel like there's, there's like this almost quadrant of factors that can kind of make that a magical, better, authentic, you know, distribution mechanism. Right. And so like we could probably kind of come up with that pretty rather quickly. But I think that one, one thing that you kind of referenced is this. There's kind of like mutual selection or buy in where this isn't just the brand convincing me with a dollar, waving a dollar. This is like I'm a user, I'm an enthusiast, I'm fired up about this product or service. Obviously that's a big factor. And kind of like that brand, customer ICP overlap, right? Like how much of that brand really kind of hits with this particular individual? Is this the exact icp? Is this tangential? Is this someone that people that those folks aspire to be or. So I think there's like all these interesting factors that we could kind of jot down and kind of consider as how strong is this, does this partnership become and how much we've seen this multiple times. I think there was like a, When I was running the ModCloth partner marketing program, we found like one of the bachelorette who had left and become a small influencer, did this like Halloween sweater and we would get a certain ROI on, on placements. But like this, like I want to say doubled the ROI that we saw on it because I think that just kind of like it hit that quadrant just right from an off, like believability, like attract, like I want to be this. Or this is just a, you know, the product, the influencer, the moment, the photo. Yeah. And I think you could make the same case for technology and software, definitely.
- [34:58]
Eli Lerner
I mean, again, I think what I would describe what you're talking about is incentive alignment at its core.
- [35:02]
C
Right?
- [35:03]
Eli Lerner
And like, the more incentive alignment you have, the better this goes. One thing that I was thinking about as you were saying that is this, I think there's also this aspect of like early adopter, early majority, late majority kind of crossing the chasm framework here, where especially for early stage software startups, you tend to be in this place where like your solution to the problem works for the early adopter set of that icp. Because early adopters by definition can sort of like see through the noise and kind of go through some pain to get the value, even though the project isn't quite like as mature yet. I think a thing that is always challenging for startups as they kind of go through this period is like they'll acquire these people who are icp, but they're maybe more mid, late majority icp. And so the product just isn't all the way there yet. One of the amazing things I've actually seen happen with influencer in this state is like when that influencer is that early adopter, it's actually valuable to their audience to show their audience how they're getting value from this thing that those people couldn't figure out how to get value from. And so basically what you're doing is like you're taking this early adopter person who can like pull the value out of your product, who happens to be on Stage with like, you know, 100,000, 500,000 other people like them who are not early adopters, where they, like, they're like, oh, wow, this is so helpful. Like you, I also have this problem and like, yeah, I heard of this app, but, like, I couldn't figure it out. And they're like, oh, wow, this is actually valuable for me as your audience member. You are giving me value. So now the influencer is getting what they want. And then for you, with the company, like, you're literally having the early adopter teach all of the late majority that they can get this value and how to get it. And they already have distribution. Right? Like, that to me is like one of the perfect examples of sort of these, like, incentive alignment synergy that we're talking about here.
- [36:51]
Ty Grange
Dude, I really like that thought of, like, how can you. You're. You're sort of, you know, dogfooding it and you're kind of opening up things and saying, hey, this is what's working, this is what's not. I think that's where that, that candor and that real blunt honesty kind of comes into play. And we drop some fun stuff in our latest newsletter on just trust. And that's really the center of everything we're doing with, with third party influencers and, and creators and affiliates and just. I think you just hit the nail on something that I picked up. I did, like, this little review of, like, okay, you look at like, Mel Robbins, who's like, the taking over Rogan on the charts, which is crazy. You think about Rogan, you think about barstool sports and like, Call her daddy and Gwyneth Paltrow and all these, like, they've kind of nailed it, right? Like, because they've gotten to scale. They've blown up in terms of just popular success, but it's for good reason. They're like, very unabashedly, this is what I am now. I watched the last night's national championship. I watched guess which version of the broadcast I watched. I watched the Pat McAfee version. Comedy, entertainment, like, dropping inappropriate statements like that. I think there's some interesting overlap between that level of truth and being like, hey, I can't get it to work. Here I am trying to do this with this, with the software. At this stage of the business, I would love for it to do this. And I think that that trust building where there's like, hey, I don't know, I'm human. I'm figuring it out. Like, I think that just gives people so much more than anything that's a Polish perfection attempt, which is where all this seems to be going, don't you think?
- [38:38]
Eli Lerner
Yeah, no, I think that's right. I think like another way to think about. In some ways you're talking about sort of like the cross of authenticity and personalization.
- [38:46]
C
Right.
- [38:46]
Eli Lerner
If you think about these, these pieces where like historically in media people had to get a very watered down, genericized message and version of things because it was mass market. Like there's, you know, there's cable channels, whatever. Like that's all we got.
- [39:04]
C
Right.
- [39:04]
Eli Lerner
I think Influencer. Exactly right. Influencer has now enabled the rise of. Like you said, there were 10 different versions of that broadcast and you pick the one where the attributes of that creator matched the attributes of you. This is what ICP is all about. ICP is about the idea that like people are not just like one of five generic, like demographic buckets. They are complex people with a number of attributes that matter.
- [39:30]
C
Right.
- [39:30]
Eli Lerner
This is another thing I think people don't always realize about the concept of an ICP as an aside, which is like, it's not a Persona, it's a set of attributes. Right. And influencers, this place where again, these creators have this set of attributes. And so they, they create content that fits for people with those set of attributes and they build trust and authenticity because they are that person and they attract people like you who also have that same set of attributes and are looking for that. And then there's another one who has a different set of attributes that attracts a different set of audience.
- [39:58]
C
Right.
- [39:59]
Eli Lerner
And so I think that. And like, because that's so authentic and it builds the trust, as you said, right. This is really that person because they're not trying to be the thing for everybody, they're just being the them. And again, until the sort of modern age of social and influencer, that wasn't possible because there was no way for people to kind of like get. Discover the sort of overlap in attributes that match them. And now there is.
- [40:23]
C
Right.
- [40:23]
Eli Lerner
I think that was sort of like the why now of why this distribution wave has potential. Potential. And then the next unlock is like, how do you unlock that synergistic value exchange? That's the next piece. Because the first pieces are there, the audience is there, the authenticity is there, the personalization of the attributes is there.
- [40:41]
Ty Grange
Yeah, our theory is we. Yeah, and I'll probably pause there, not to go too hard down the pitch, but our theory is we can kind of do the work and systems and make sifting the gold through the sand to kind of make that model work. And we certainly have. But I think you do have a really good point. That, and this goes back to my, you know, kind of where your theories and mine align very well, is that it is, like, very misunderstood. It's very hard to kind of wrap your head around. And it's a lot of labor. And in a tech centric world, in a more programmatic centric world, where we're trained to go with the platform and feed the algorithm and all of that, and it's. It's quite not. It's not quite that way, even though obviously algorithms are at play for. For the content itself.
- [41:32]
Eli Lerner
But that's exactly right. Well, and again, like, when you do that, because it's the easiest, lowest friction path, but like, there's no, like, there's no outsized distribution advantage there. It's been arbitraged out and the platform's taking all of the value.
- [41:44]
C
Right.
- [41:45]
Eli Lerner
And like, yes, there are businesses that can grow significantly on paid, but, like, only so far.
- [41:49]
Ty Grange
Yeah. And I think the irony is, like, there's this, like, mix of kind of organic and paid in the tactic and the function of it. It kind of, it goes beyond a channel strategy and it kind of like there's tech partnerships, which is sort of almost a different beast, you know, the API connections and distribution that way, which. But there's something kind of magic about how those all kind of intertwine. If you're thinking about a massive partner.
- [42:18]
Eli Lerner
Program, we don't have time today, but we could do a whole podcast on, like, again, Reforge calls this a content growth loop.
- [42:26]
C
Right.
- [42:26]
Eli Lerner
And I think this is an important thing, which I've worked with a number of people on. Is this like the idea of thinking about a content. If the content growth loop is your primary growth loop, like, this is a holistic thing. It's not about a particular channel. Like, channels are a piece of it. It's not just about content strategy. Right. Like, you're maybe your legs of this tool here are like the content strategy, the. The audience strategy, both earned audience and sort of borrowed audience in these synergistic things and the distribution strategy and like, all of those different pieces together to drive this kind of like compounding loop via content. But again, it's like it's not just a TikTok strategy. It's not like it's a more holistic thing. So, yeah, good second episode on this topic.
- [43:07]
Ty Grange
I love it. Appreciate that. Eli. Yeah, man, thanks for taking the time and that was fun. And I'm gonna go check on my fireplace.
- [43:14]
Eli Lerner
Yeah. Good luck. Stay warm, man.
- [43:16]
Ty Grange
Rock on, dude. It was a pleasure.