Good morning and welcome to the fortieth edition of The Skeptic Investor! Wishing all our readers a Happy Republic Day.
For this Republic Day special (Tuesday) edition, we want to celebrate the incredible talent emerging from India and building for the country and the world. In partnership with the Indian Silicon Valley podcast hosted by Jivraj Singh Sachar, we’re bringing you first-hand insights from Anand Jain, Co-Founder and Chief Strategy Officer of CleverTap.
Chances are that if you’ve been on social media off late, you’ve seen more sponsored posts and ads than posts from people you know. This cartoon below aptly (and humorously) sums up the current situation of social media marketing.
An interesting bit of the cartoon is the phrase “right software.” What is the software that marketing teams use? That’s what we’re going to explore in this issue - ‘MarTech.’
We also explore Andreessen Horowitz’s relationship with the media, the Airbnb IPO, and the Cyberpunk 2077 disaster.
Let’s dive in!
India Building Martech For The World
One clear trend of the pandemic has been the emergence and rapid growth in the D2C (direct-to-consumer) sector. As the sector grows, the amount spent on social media marketing and digital communication steadily increases as well. Be it Email, SMS, WhatsApp, Facebook, Instagram, Google, TikTok, other mobile games and apps - companies are spending loads of money on advertising and communicating with consumers on these platforms. Rather than slowing down, the pandemic has led to an increase in expenses. This trend echoes across the wider consumer-tech ecosystem as well.
Enter, ‘Martech’ or marketing technology platforms. Essentially, marketing technology is the term used to describe software or other tech products that help marketing teams do their jobs effectively. There are two areas where martech really shines - helping marketing teams and their campaigns become more efficient, and in providing actionable insights into your current customers and all your campaigns. Both go hand in hand in increasing customer retention rates and thus, the customer lifetime value (CLV) for companies.
Customer lifecycle management or marketing automation platforms are quickly emerging as umbrella martech tools, integrating all the needs of marketers under a single horizontal platform. Martech majors like CleverTap are building global castles in this category.
The Customer Lifecycle Management Opportunity
Customer data is the fuel that empowers all customer-facing companies, especially the digitally native ones. Companies in diverse segments like OTTs, E-Commerce or D2C retailers, Food delivery etc. all have various channels and tools (like Google Analytics) for both customer and user/audience data collection. Once this data is collected and stored, the internal business analytics teams are supposed to process this data and use visualisation tools (like Microsoft Power BI), to gather customer insights and thus, inform further marketing decisions. The digital marketing and product teams, in turn, use customer insights and segmented data provided by the analytics team, to inform their future campaigns, retarget, engage, and offer personalised services to customers.
However, this whole process is easier said than done. Monitoring website traffic, metrics, ads, and communications across several platforms and ensuring that they’re all consistent is no easy task. It gets even tougher when you try and personalize them. For instance, if someone has visited your website, it is important that they receive your ads on social media. Then if they visited your website again, they need to see product recommendations. Also, you need follow-on communication to keep them engaged through push notifications, emails and even WhatsApp messages.
Now imagine if someone tries buying something on your website, but leaves your website during the checkout process (Abandoned Cart). They should receive some form of communication that urges them to complete the purchase. What if it’s 10,000 people every day?
In addition to all of this, you also need to monitor what’s working, what’s not working and make changes multiple times a week, if not more often. Imagine doing all of that manually. Close to impossible right?
Platforms like CleverTap, MoEngage and WebEngage essentially combine all of these functions under one platform. This not only makes the process much easier but also helps improve personalisation and engagement for customers, thus leading to exceptional increases in customer retention metrics.
You need to have analytics and personalised communication, all happening automatically at scale. That’s what brought us all together to CleverTap. We saw that meaningful communication is a very hard problem to solve.
- Anand Jain, CleverTap
For an e-commerce app, a tool like Clevertap would enable the company to analyse all their customer data in real-time and segment customers in categories like Loyal Customers, Potential Loyal Customers, At-Risk etc. Such analytics are automatically performed through machine learning. Based on the category and attributes of individual customers, the platform would also allow the app to send personalised communications to customers/users through multiple channels like SMS, Email, Push notifications, in-app notifications, ads etc.
The India Martech Playbook
Martech players providing customer lifecycle management services have reached impressive benchmarks for funding, revenue and global scale. Both CleverTap ($35M.) and MoEngage ($25M.) announced Series C rounds in 2020, and WebEngage has notably been backed by Social Capital. Analysing their journeys reveals several lessons for building in the martech space.
Chasing a product-market fit needs to be the sole initial focus for any new SaaS venture. Current martech leaders benefitted from choosing their niche focus-areas and target markets at the get-go with CleverTap focusing on mobile-app marketing in global markets while Xeno targeting retailers in India. While the emergence of product talent has been a boon for such startups, they need to sharpen the focus on the needs of their target customers and follow a rapidly iterative approach. According to Anand Jain, CleverTap benefitted from an initial set of non-revenue focused partnerships and open feedback that allowed them to perfect their product and evaluate customer success.
An under-appreciated part of product success is the focus on the entire product experience. For example, if the target customer base is startups/SMBs, then provision of ROI-based pricing, customer success & retention strategy consulting, easy-integration support, and data cleaning can be important product differentiators. Enterprise customers, on the other hand, usually prefer initial employee training services with their self-service tools. Furthermore, larger companies highly value propositions like data security, feature customisations, complex API integrations, and custom but fixed subscription pricing.
After reaching some semblance of a product-market fit and starting initial acquisition, the platform needs to focus on customer success. For a martech tool like CleverTap, tangible customer success would come in the form of improved results for the client in metrics like Customer Lifetime Value (CLV), repeat and retention rates, ROAS on paid campaigns, time spent on website/app, and Net Promoter Score (NPS). Driving customer success for early adopters is crucial not only for retained revenues (and reduced churn), but also for driving organic referrals, increasing expansion revenue from existing customers (by cross-selling or up-selling services), and establishing key industry evangelists who will generate much-needed vertical trust for these horizontal players.
For any SaaS player, the reality is that at the time of renewal, will the customer come back.
- Anand Jain, CleverTap
Martech players have adopted innovative means of driving customer success over the past few years. MoEngage, for example, has established #GROWTH, an exclusive community hosting networking events, podcasts, webinars and even masterclasses for marketers. Other players have also adopted channels like sponsored marketing events, case studies, calculators, AMAs and Whitepapers to drive both the success and loyalty of their customers. Almost all martech platforms employ in-house retention strategists and customer success managers to help their clients while using the platform.
As per a Mirum India Martech Survey, 64% of marketers in India see the lack of internal skills while 59% of marketers see cross-organisation adoption as martech hurdles. Hence, martech platforms necessarily need to expend on client skilling in India and even adjacent foreign markets.
Growing In India & Beyond
At an early stage, driving evangelism and organic word-of-mouth growth is enough for any B2B SaaS players to reach product-market fit and achieve favourable unit economics. But what next? The very nature of a horizontal business segment like martech makes a platform susceptible to competitors, thus it is essential to keep up the burn and grow despite early profitability. Furthermore, as the customer base expands, sustainable sources of growth like referrals and same-client expansion revenues take over and become important moats.
Establishing a powerful interlocked network of marketing and sales is crucial for establishing a thriving customer funnel. Martech firms further need to invest in a team of marketing specialists who can consult final-stage leads and present personalised use-cases. While a good SaaS lead generation funnel appropriately defines the Marketing Qualified Leads (MQL), Sales Qualified Leads (SQLs), and Product Qualified Leads (PQL) funnel, martech platforms struggle to offer freemium or trial period versions since they require client data to showcase any initial benefits. However, innovative models like ROI-based pricing can give an edge in certain SMB focused markets. Apart from direct sales efforts, establishing channel marketing partnerships with complementary service providers can be an important leg-up for client acquisition, especially in new markets.
Next comes geographic expansion. While players like CleverTap and MoEngage are known to have built for the globe from the very beginning, every geographic region has slight variations in product needs. Hence, expanding in adjacent markets with a similar product-market fit can be an important strategy for global growth. Both these martech players have made in-roads not only in the US market but also in the SEA region close to home.
While traditionally, penetrating adoption through SMBs and then scaling up to enterprise customers was a recognised strategy, the best-in-class approach of these companies to product has allowed them to rapidly crack foreign enterprise customers as well. In a customer success and consultation heavy market, martech players have effectively utilised the cost arbitrage of using talented customer support managers in India for the world.
Multiple Winners Allowed
As both the internet adoption and the consumer-tech ecosystem continue to broaden globally, marketing analytics, communication and engagement will be important growth hacking tools. Martech platforms, especially in the customer lifecycle management segment, are well-poised to tap these opportunities. The sheer size of this landscape makes it a multi-player market, with space to accommodate numerous large and even niche-focused players. As for the product, martech platforms should focus on adding multi-service functionalities in the domains of AI/ML and even UI/UX focused offerings like A/B Testing, No-Code functionalities, and even heatmaps.
In India, 80% of marketers expect their organisations to invest in tools & technologies in the coming year (Mirum Survey). Given that the Indian D2C space is expected to be a $100 billion addressable market by 2025, retailer-focussed martech players like Xeno can plausibly achieve impressive scale milestones even in the domestic market.
What We’re Listening To
In this podcast, Anand Jain, Co-founder and CSO of CleverTap, reveals crucial insights for achieving SaaS product-market fit and building for the world. He talks about product-first entrepreneurship, constant reiteration in the face of failure, managing distributed teams and building long-lasting personal networks.
Thought Leaders
This is the story of how Andreessen Horowitz disrupted the world of venture capital by cozying up to the media and then, how they purposefully threw that relationship away. Read here.
If you’re in any way connected to the gaming world, you know about Cyberpunk 2077. The game created unprecedented pre-launch hype for years and was set to be launched in 2020 by a highly respected and world-renowned developer, CD Projekt. But once launched, it was a spectacular failure. Read this Bloomberg piece Inside Cyberpunk 2077's Disastrous Rollout.
What We're Watching
Recently, the Sensex touched 50,000. Despite the general gloom and doom, there was in 2020, the stock market performed extremely well. With a large number of companies ready to go public in 2021, you’re probably wondering how to evaluate them.
In this video by Aswath Damodaran, a Professor of Finance at the Stern School of Business at New York University, he discusses Airbnb’s IPO. He starts from Airbnb's history, financial and potential market and argues that the timing was right for its IPO. He also values the company's equity at around $36 billion. While the stock has already gone public (and as of today has a market cap of $109 billion), it is interesting to see his approach.
Tweet of the Week
That's all for this edition! We hope you liked it and would love to get any feedback you may have. This newsletter is written and curated by Mishaal Nathani and Ashutosh Gehlot.
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