Which Comes First – The Product or The Ad?

June 20th, 2017

By Ben Klein and Michael Solomon

Ben Klein runs growth services for San Francisco based ETW Advisors. He teaches growth workshops in the Bay Area in addition to advising startups across the country. Companies include Tipalti, 10x Management, and Reefill.

ETW Workshop On Kickstarting Your Startups Growth

Have you ever wasted A LOT of money developing a product that you couldn’t even give away? Let alone sell at a positive ROI? The lean start-up movement is approaching a decade old and pioneers from Steve Blank to Eric Ries have paved the way for thousands of engineers to test, learn, build, and repeat. Anecdote was replaced with data, and customer discovery shifted ahead of product development. While the philosophy has taken hold, the tools to execute customer discovery have changed. None more so than the ascension of Facebook as a means of testing and learning.

At a networking event recently one of my fellow attendees asked me: “Ben, when would you begin buying ads on Facebook?” My reply: “Before I built the product.” Why? Because why would you want to spend all of your investors’ money developing a product before you even know if there is a market for it? Or better yet, if your cost to acquire a customer is even in the ballpark of a profitable transaction?

Let’s get really tactical. Take mobile app development as an example. Have an app idea? Have several app ideas? Don’t know which one to pursue? Then make 4 different landing pages for each and test them against each other!

For instance…

  • Set up a simple landing page template that is already designed to convert like this one from Leadpages: ly/fjq0y
  • Create 4 different versions with completely different marketing creative, and A/B split test them with a few low budget paid Facebook ad campaigns.
  • Then simply track the cost-per-action (CPA) for a “download now” button click which then pops an opt in box asking the user to enter their email to be notified when the app is released.
  • The opt-in CPA will actually be a more accurate KPI (Key Performance Indicator), but depending on your budget you may or may not get enough conversions on that action to get statistically significant data.

So as you can see, this process should be a part of your product development cycle from the start, folded into your agile development process as you build your MVP (Minimum Viable Product). Another product development pro tip would be to survey those who opted in. Have them force rank various hypothetical features and ask them what price they would be willing to pay for each. You similarly can run ads to your target audience on Facebook to further refine feature prioritization and pricing to inform a future product launch.

Speaking of Facebook ads… beyond cultivating an early prospect list, testing in this fashion brings two additional benefits – retargeting and lookalike audiences. Once a customer engages your ads a single time, a savvy marketer can very inexpensively retarget those same customers each and every time they return to Facebook. That’s why every time you visit Amazon and don’t complete your order for a product you simply looked at, you then see an ad for the shoes you’re still on the fence about following you around to every website you visit, including your Facebook newsfeed. Furthermore, from these early customers, Facebook enables you to build lookalike audiences to reach a larger targeted population who fit the same user profile and share common characteristics with those people who previously clicked on your ads. Facebook even recently released a brand new feature called Lifetime Value Custom Audiences which allows you to build a custom retargeting audience based on the LTV of your users who spend the most money on your products and services. This of course then allows you to create a Value Based Lookalike Audience which enables you to target cold prospects that are most likely to spend the most money on your offer.

Lean Startup empowered a generation of entrepreneurs to bring new products to market at lower cost and less time. The latest tools on Facebook permit the entrepreneur an even more efficient path to customer discovery; more ideas can be tested with fewer dollars and less development time. By the time your engineers are writing their first lines of code, you’ll already know you have a winner. All that’s left is for someone to build an actual time machine to see into the future. For now, we’ll have to live with Facebook. So which is it? The product or the ad? Which do you think comes first?

If you like this article, you might enjoy reading Your Technology Needs to be In the Hands of the Best