Launching a company can feel like a race. With a startup, you generally have three years, give or take, to get to profitability or at least have the option to be profitable. But as any seasoned runner knows, there is more to winning a race than pure manpower—proper preparation, knowing when to conserve your energy and when to push it, and how to fuel yourself are just as important.
Same rules apply with a start-up. You can’t get to profitability if you run of out money first. But it’s hard to get money if you don’t have strong results to show you are worth it. And you can’t get the numbers if you don’t have customers. One of the most important decisions startup executives have to make is where and when to spend to drive growth.
There are many schools of thought on which strategy is best. Many believe it is better to go out with a minimal viable product and invest heavily in marketing at the beginning till you have a strong enough revenue stream to be somewhat stable, then go back and work out the kinks with the product or service.
We took a more uncommon approach three years ago when creating Rover.com, a marketplace that connects dog owners to dog sitters. During the first two years we barely did any marketing or PR, instead we focused on getting the product right. In that short time we’ve seen our community of engaged users expand like wildfire, and we are now the largest nationwide network of dog lovers for hire in the country. We have over 10,000 people join Rover every week and we are currently active in over 10,000 cities across the United States.
So how did we do that? We laid out a three-phased launch strategy, outlined below.
Phase 1 – Validate the Value Proposition
Our main objective during Phase 1 of our launch was to validate the value proposition. We needed to confirm that Rover.com could be a service that consumers would appreciate, and that pet sitters would also use to facilitate their business.
This is an important step for any new product or service but it was even more imperative for us due to the nature of the dog boarding industry. There are approximately 70-80 million dogs in the U.S. and an average person spends 26 nights away from home each year. The commercial dog sitting market in the U.S. is about $6.5 billion a year. However, only 10% of pet owners would use a commercial solution, like a kennel, when they traveled. The majority would rely on friends, family or neighbors because they either didn’t have another option or they didn’t like the ones available. In order for Rover to be successful we needed to confirm we had not only a better alternative to kennels but an offer people would prefer to use instead of calling in favors.
Fortunately, our data confirmed we were on the right track: 65% of our users are people who, prior to Rover, would not have used a commercial service to watch their pet.
Phase 2- Understanding Marketplace Dynamics
We are often asked why we choose the price structure we did–taking a percentage of services delivered is risky. You can’t rely on monthly membership fees, and issues like diversion make the business more complicated. So why did we do it? We wanted to have the data from the initial search to the review following the stay so we could optimize the site and user experience.
The data was critical in Phase 2, during which we focused on better understanding Rover’s marketplace dynamics. If customers were having a great experience, what made it so great? What could we do better? How could we enhance their experience? Our goal was, and still is, to exceed customer’s expectations so they want to recommend Rover, and we hope that never changes.
Research recently conducted revealed that more than 90% of Rover customers have recommended the service to someone else. Those referrals are priceless and is more effective than any form of paid marketing.
Phase 3 – Increase Awareness and Adoption
The analytical, data driven approach of Phase 2 has turned into a cultural norm that we, as a company, continue to infuse in everything we do. The insights gained have shown that most of our customers naturally end up preferring their Rover sitter above all other options, including the “free” ones, i.e. friends, family and neighbors. So driving preference is all about getting people to try the service the first time, which means we are ready to move into Phase 3 and will look to increase our marketing efforts so we can raise awareness across the country, making Rover.com a recognized, trusted household name.
This approach may not work for everyone. Every company, market and offering are have different needs and climates. But I do believe one piece of advice can be applied across the board: Data should be your guiding light–analyze, reanalyze then do it again. There is no such thing as knowing too much about your business.