I’m about to use a finance metaphor. Bear with me here!
It’s well known that index funds always fair better than mutual funds. Index funds follow the market, invest by market cap, and often have low fees. Mutual funds are managed funds that are frequently traded, invest based on a fund manager's hunches, and incur higher fees. The costs associated with frequent changes in a mutual fund add up, and almost always underperform an index fund. Yet people still invest in mutual funds.
Most of us operate our marketing like fund managers of mutual funds. We focus on the wrong drivers of growth and are constantly changing our strategy. Instead of investing in the whole customer journey, we invest in select parts.
This can be seen most clearly when we:
blame our failures on a system, tool or lack of a specific feature
spend too much time investing in customer acquisition
think more complexity will lead to better outcomes
assume small data sets are meaningful and change our strategy accordingly
constantly evaluate tools instead of our customer journey
lust over the newest tool, trend, technique or advertising platform
fail to track meaningful metrics that tell us what is working
All of these changes, evaluations, small data sets and feature comparisons add up. They lead to wasted time, money, energy and results that simply won’t meet our expectations.
There are high fees associated with the cost of switching tools, trying new technologies, making poor decisions based on hunches and building a stack of SaaS subscriptions (of which you won't have enough time to get value out of) as a solution to a growth problem.
Time and time again the people who try and grow their business like mutual fund managers get fired or even worse their business fails.
Taking an index fund approach to growing your business is not only logical but will save you time, money and pain. You’ll also outperform your competitors by sticking to a strategy of growth that is proven to work and is more cost effective as the value driven compounds over time. Your customer journeys are index funds. They are investments in growth at every stage of the customer lifecycle. They work while you sleep and require little to no changes over time. Just like an index fund your investment upfront will compound into a lifetime of gains.
Let’s take an example of a software company with a SaaS business model like Ortto. There are only 5 key journeys (investments) that are needed:
lead nurture (turning subscribers into trials)
trial conversion (converting trials to paying customers)
trial abandonment (recovering trials that didn’t buy after 30 days)
new customer enablement (making sure customers are successful in the first 30 days)
customer retention (continuously communicating value to the customer and driving referrals).
That’s it. That’s the entire customer journey. It ensures every new lead has the best possible chance of converting into a paying customer, becoming successful and referring others. It stops “leakage” from paid marketing programs by putting all of your leads to work. It leads to the most solid foundation that will compound over time.
But why is it when all this seems so obvious on paper we still act like mutual fund managers? I put this down to the pressures associated with growth. We act based on emotion (just like mutual fund managers). We fear we won’t achieve our goal unless we focus our time on the latest hunch to hit our monthly target. Our sense of greed leads us to spending money on channels we think will drive immediate results. We have a hard time justifying any investment in “index fund” strategies because the time to invest appears to give us no immediate gain.
But just like mutual fund managers, it’s a loser's game.
So what can you take away from this? Start investing in the growth of your business like you would an index fund. It may seem boring, but it works. Invest the time mapping the customer journey, investing in the 5 key journeys that matter and take the time without emotion to build a solid foundation for compounding growth.
Mutual funds never beat the market. You have been warned.