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Hacking for Growth With Rover, Lumosity, and Poshmark

December 16, 2014

Consumer companies need to scale users with the lowest acquisition cost possible. But users aren’t all equal. For a marketplace company, supply has to grow in concert with demand. A lucky few companies are able to grow virally or through social channels with minimal expense, at least for a while. Are there techniques for getting out of the gates and continuing to scale without breaking the bank? When is the right time to focus on quality vs. quantity? When is the time to step on the gas and go for maximum market share?

Watch this interactive session with Aaron Easterly, CEO of Rover; Kunal Sarkar, CEO of Lumosity; and Manish Chandra, CEO of Poshmark. All three companies have achieved different levels of scale in different product categories—Rover is a dog sitting marketplace or a dog boarding marketplace. Lumosity makes cognitive training games for web and mobile platforms. Poshmark is a marketplace for women to buy and sell fashion from a mobile device. We’re pleased to share in-depth, candid thoughts from these incredible founders on what growth hacks have worked for them, from initial strategy to present day.

Initial Strategy

Manish Chandra, Poshmark:

“There were probably two phases in the first year. The first phase was what I call the incubation phase. There, we grew very slowly. From the time we started alpha testing of the software until we fully launched, it was about six months. At the end of six months, we only had five hundred users. But three hundred of those users were actually active. They had a closet, they were selling, many of them had bought something and our early-stage thing was really to get a whole architecture of participation going. We learned a lot and defined the product to the process.

The second phase was how we started to scale it. There was very little cost-effective mobile marketing available. We had this notion of a virtual shopping party in the app where people would come together in real-time to shop with each other. We then took those parties into the real world. We partnered up with local fashion bloggers through fashion events and probably in the first four months threw to eight or nine events. It was harder to measure because it was off-line marketing, but what we saw on Google Analytics is we would throw these parties in the city and suddenly that dot would start to get bigger and bigger.

It was happening because of three things. One was local PR, so we had a PR consultant who was helping us. The second thing is we would recruit these fashion bloggers who would then publish on their blogs and talk about the app. The third piece was the word-of-mouth. People started to kind of form these little windows of communities.”

Kunal Sarkar, Lumosity:

“When we started in 2007, we had two phases as well. In our first phase we focused very much on PR. In our case, we are creating an experience that has to do with your needs around the brain. One of the things that we noticed early on was that any time there was an article online about the brain, it gets shared a lot. Whenever the New York Times science section has an article about the brain, it’s almost always one of the most emailed articles of the day.

So we focused on PR as a way to get a bunch of users for free initially that helped us understand the mechanics of the product a little bit and understand what the user funnel looks like. How do users engage? What messages work, what messages don’t work? We were really focused on learning. Then we went from PR into paid marketing but stayed very much in high-intent paid marketing channels. There isn’t a ton of scale there for us, but getting flows of users through and starting to learn about what makes users engage, what makes them excited about purchasing, and what makes them continue to purchase actually set us up for our next phase of broader-based growth.”

Aaron Easterly,

“I think the most useful thing we did in the early days was to actually harness one side of the marketplace to drive the other side of the marketplace. One of the big things about Rover is that there are forty million dog-owning households in the U.S. The vast majority of those know how to care for a dog but would never think of getting paid to be a pet sitter. With that ‘non-professional’ group of people you could actually get them to go post their Rover profile and hand out business cards, because they are super excited about this and there wasn’t a conflict of interest because they didn’t have an existing business. Everything was going to go through Rover. It actually resulted in probably the majority of our initial transactions—sitters out there approaching dog owners and posting themselves into online forums. The nice thing about that hack is it has a side benefit of scaling supply in a constant with demand because the sitters you bring on basically bring on their own demand.

The other thing that we did is we asked an initial entrant for third-party references, because a dog, for 76 percent of Americans, is emotionally the equivalent of a child. It’s not a pet, it’s not even a family member—it’s a child. Making sure that there’s a high quality bar for sitters is important, but by providing tools for them to go ask for those references through Facebook and through email would then distribute awareness that this thing existed. We could get a little bit of a viral effect. It solved a marketplace quality issue, and was a growth hack as well.”

Current Strategy

Kunal Sarkar, Lumosity:

“The strategy has to keep changing as your user base changes. After the first phase that I described, the next phase that we went through was sort of broad-based marketing where it was much more focused on driving volume. At first it was display ads and a lot of online channels and online video, and more recently it’s been television.

Television makes some assumptions around what sort of response rate we could get and we started feeling like we could make that investment. We made a bunch of ads that are focused on discovery; getting the concept in front of people. It worked well for us, so we scaled it up so the strategy now has been around getting awareness out there. The metrics we started tracking became quite a bit different. More recently we started tracking things like brand awareness, because television helps with that.

In the last six months we’ve had to start rethinking that a little bit again because as our registered user base has grown, sort of had to shift from going from discovery to reengagement and that’s a new challenge for us. It needs to keep evolving, which is always a new challenge.”

Aaron Easterly,

“Startups can go really wrong by spending too much money early. Paid acquisition was at least part of our strategy from the beginning. We have an interesting dynamic because of how we designed the marketplace – it gets smarter over time. It learns. We learn which sitters are highly effective, we learn which sitters respond quickly, we learn who gets repeat customers and as we get more reviews in the marketplace and it’s clear to someone in the city “Wow, everyone’s using this,” it actually becomes progressively easier to convert.

Seeding the market with transactions, reviews, and data so that our algorithms can learn is actually highly valuable. So, our weighted average cost of acquisition continues to go down in every city. Most people tell you, you get to this stage and all of a sudden you’ve tapped out your channels and that goes up. We see the exact opposite because of those marketplace dynamics. Paid was an important element to get people over the hump in the early days. The difference over time, though, is that as the marketplace continues to become more efficient, and as people are more comfortable with the concept, there’s a lot more pay channels that are now cost-effective as well as a lot more just organic.”

Manish Chandra, Poshmark:

“For us, the strategy has always been to get the sellers empowered to market on our behalf. It’s really about giving them more tools which are super easy to use, which they don’t even think of consciously as tools. The first thing, as I said, is the listings themselves were designed in such a way that that will lead to a byproduct, which is marketing of this content. The second thing we did is give sellers implicit tools, so we had social elements to the platform.

SEO, which is part of a backend way of growing today, is actually driving a chunk of our growth. SEO traffic has doubled in the last year. Fundamentally for us the contents that these sellers are creating, which are fashion listings, is a huge driver of growth. Optimizing it, presenting it in different ways, figuring out the communication and tools around it, and putting it in different social channels is very, very powerful.”

Measuring Success

Aaron Easterly,

“For us, providing a toolset for sitters to go share things is important because then you can control the instrumentation of how that gets shared. That makes tracking easier. We’ve isolated from Google analytics to KISSmetrics to a couple of other platforms. We’re somewhere in the middle now. Certain things we had to build in house. For us, there is a big difference between organic and what I call faux-organic.

In our experience, there are a lot of startups that spend a lot of money on non-trackable things and then convince themselves their customers came organically. We work really hard to figure out how to measure that. TV is tougher, social is tougher, but we create calls to action so that we can close the loop.”

Kunal Sarkar, Lumosity:

“You should use all of the tools out there and if those tools to serve your needs, great, but almost always it’s very hard for those tools to ingest the data that really matters to you. I think it’s really important to invest in analytics infrastructure and it’s really important to make sure that’s right. It’s hard to get it right. In our case, we invested twenty percent of our product bandwidth to this. You probably can’t rely on third-party tools exclusively; you probably have to build some of your own tools and investing in them will inevitably pay off.”

Manish Chandra, Poshmark:

“I would say that data is important, but so is having some high-level KPI’s that you can track constantly so that you have sensors that you’re looking at. Sometimes what happens is we are so in the weeds that we are looking at these downstream metrics that we miss signals at the very top level.

The second thing is how do you look at data? If I have nine people looking at data, and there’s not a normalized way of looking at the data, and each of them are making decisions, at the end the decisions can be flawed. We built an in-house system. Part of the flow with data is that everyone can look at data and come to different conclusions. You have to come up with some standardized ways to consume the data.”