In the fast-paced world of customer acquisition, understanding the funnel stages isn’t just essential—it’s transformative. Enter ToFu and MoFu, the pivotal checkpoints in the customer journey.
ToFu, or Top of the Funnel, is where potential customers first intersect with a brand. It’s the pulse-check of brand introduction. Placed right at the onset, “Awareness” sets the stage for the AARRR (Acquisition, Activation, Retention, Referral, Revenue) framework, more commonly known as Pirate Metrics. Simply put, “Acquisition” is the next step, marking the phase where the brand story starts resonating with the audience.
Then there’s MoFu, the Middle of the Funnel. Here, customers are no longer strangers to the brand. They’re evaluating, contemplating, and sizing up its offerings against their individual needs. In the realm of Pirate Metrics, this is where ‘Activation’ gains traction.
A quick comparison between ToFu and MoFu churn drivers:
- ToFu: Think brand perception and first impressions
- MoFu: It’s all about product alignment with marketing promises
While both are crucial, our spotlight today is on the drivers of ToFu churn. Let’s dive in.
We’re covering more parts of identifying and solving churn in the funnel.
Identifying core ToFu churn drivers
“Clarity in positioning is potential retentiveness in customer experience.”
It’s not just about getting them to register, it’s about becoming a habit-forming product that creates value long-term.
- Positioning pitfalls: A brand that tries to be everything to everyone often ends up resonating with no one. A misaligned brand position might garner attention, but if it’s not reaching the target segment, engagement becomes fleeting. The risk? Mismatched expectations and rapid disengagement. The lack of clarity, especially regarding the niche, can misdirect communication and even product features.
- Expectation versus reality: “Trust is built in drops and lost in buckets.” The gap between promotion and delivery can be lethal. When potential customers encounter a disparity between what was promised and what was served, trust erodes. The result? A potential brand advocate is turning into a passive bystander. Here’s where our Causality frameworks shine. They can precisely pinpoint where marketing promises diverge from actual product deliverables, leading to eroded trust and potential churn. Product-Market Fit Testing your current strategic differentiator versus other potential differentiators can uncover opportunities to lower acquisition costs, find more valuable customers and improve payback periods.
- Inconsistent messaging: “Consistency isn’t about repetition; it’s about alignment.” A product’s feature might be revolutionary, but if the marketing narrative is out of sync, the message gets muddled. The consequence? Confusion, which often translates to churn. A disjointed narrative between what a product offers and how it’s marketed can create confusion, fostering an environment ripe for churn.
The challenges of CPO and CMO misalignment
The road between product creation and market presentation is a two-way street—both the Chief Product Officer (or Product Team) and CMO (or Marketing Team, and Product Marketing in particular for early-stage startups) “drive” on it.
Divergent perspectives
The lens through which a Chief Product Officer views a product, prioritising its features and functions, may not always sync with the broader, market-driven view of the Chief Marketing Officer.
This disparity can often dilute market messages, leading to ambiguity. For example, when launching a D2C insurance product, are you targeting the need for adults getting insurance for their aged parents? Or for helping someone be prepared in light of their hereditary risk of critical illness by helping them understand the costs of potential treatment so they can right-size their coverage?
Also Read: Debunking 5 common misconceptions about product-market fit
This is clearly a dysfunction at the strategy level, preceding execution and its effectiveness in implementing strategy. I call this the “Strategy Gap, ” and a deep coverage follows in my book.
Both are “selling insurance D2C,” but require different product marketing of benefits, different insurance products in the experience, and most crucially, different onboarding experiences to get them from defining their needs and evaluating their options to becoming paying users.
N.B. The three gaps are not to be confused with the Top of Funnel, Middle of Funnel or Bottom of Funnel. The three gaps are the strategy lens that complements the customer journey lens that the Enhanced Pirate Metrics cover.
Lack of cohesive communication
“Silos belong in farms, not in firms.”
Infrequent interactions or misaligned goals between the Product and Marketing can lead to fragmented strategies, potentially jeopardising customer retention in the ToFu stage. When product and marketing narratives diverge, strategic inefficiencies sprout. Entire feature sets may be wasted, and weeks or even months of work can be lost if CMOs and CPOs don’t sit next to each other. Fortnightly syncs just don’t cut it when a startup is moving at the pace it should.
Likewise, campaigns may acquire users unlikely to convert or segments that have high rates of churn, leading to low Return on Advertising Spend (ROAS) and misgivings that marketing is spending advertising but failing to drive revenue.
Different success metrics
When one eyes product innovation and the other targets market penetration, harmonising visions become a tall order. While a CPO might be tracking product retention and features, the CMO might be gauging success by market reach, traffic to a page and brand resonance.
Within the four fits lie tradeoffs that leadership must make deliberately.
For example,
- a focus on profitability vs quantity of users,
- shorter time to revenue vs longer but larger deals etc.
What are the four fits in the overall business model?
Market product fit
This is about finding the right audience before perfecting the rest of the fits. Before even beginning with the product, companies must identify their audience. A lack of clarity here can result in product features that don’t match the needs of the intended audience. From a marketing perspective, the benefits might be communicated in terms that don’t resonate with the target niche.
Product channel fit
A product must fit into its marketing channel like a key in a lock. It’s a two-way street: the product must be built keeping in mind where it will be marketed. In the absence of this fit, the product can seem out of place, leading to subpar engagement or retention rates.
Channel model fit
This revolves around the economics of marketing. If there’s no alignment between the ARPU (Average Revenue Per User) and CAC (Customer Acquisition Cost) with regard to the chosen marketing channel, the results can be economically unsustainable.
Model market fit
Ensuring that the business model aligns with the market’s potential is essential. If the market potential doesn’t support the business model, the company might not achieve its revenue goals, regardless of product quality or marketing prowess.
The risk of misalignment
When marketing and product teams don’t have a precise understanding of these fits, both brand and product marketing can go astray. A misaligned brand position may cast too wide a net, failing to appeal to the intended niche.
Also Read: Achieving product-market fit: The ultimate guide to growth, strategy and positioning
Inconsistent messaging, a gap between promoted benefits and delivered features, or products not tailored for specific niches all stem from this lack of alignment. Essentially, a misstep in understanding and implementing the Four Fits can be a costly mistake, leading to churn, wasted resources, and missed opportunities.
This is particularly evident when users experience message mismatch in registration and onboarding flows. As much as 90 per cent of users download an app and never open it a second time, and misalignment is a significant contributor to this.
“With misalignment, you never know if strategy or execution led to missed targets; and no, there is no clarity in the next steps.”
The Four Fits play a pivotal role in ensuring seamless alignment between a company’s product (CPO’s domain) and its marketing strategies (CMO’s domain).
Optimising through CPO-CMO collaboration
Unity in strategy brings consistency in messaging. Avoid the Strategy Gap.
“Alone we’re smart. Together we’re brilliant.”
Unified messaging
A genuine reflection of the product’s value in marketing campaigns is non-negotiable. It’s the bridge between promise and delivery. It’s imperative for marketing campaigns to mirror the true value proposition of the product, ensuring consistent communication with potential customers.
Regular collaboration
“Encouraging a rhythm of regular inter-departmental sync-ups ensures alignment, fostering mutual objectives and shared success. Promoting a culture where product and marketing teams engage in consistent dialogue ensures strategic alignment, minimising potential missteps.
Shared feedback mechanisms
When feedback flows freely between departments, it nurtures an environment ripe for joint strategy adjustments. Implementing a joint feedback system ensures agile strategy modifications based on real-time insights, paving the way for continuous improvement.
Pirate Metrics and awareness
The well-regarded AARRR (Acquisition, Activation, Retention, Referral, Revenue) framework, i.e. the Pirate Metrics, offers a deep dive into customer engagement. But to truly capture the essence of customer engagement, we must preface it with “Awareness.” After all, before acquisition even begins, a potential customer first becomes aware of a brand or product. So let’s think of it as the Enhanced Pirate Metrics or AAARRR.
Final thoughts
ToFu isn’t just a phase; it’s the cornerstone of the customer journey. Its proper understanding and optimisation set the stage for all downstream interactions. The fusion of CPO-CMO perspectives, steered by causality frameworks, is indispensable for reducing early-stage churn and fostering lasting customer relationships.
For those keen to delve deeper into the intricacies of ToFu optimisation, seeking expertise in causality frameworks can be a game-changer. Stay tuned for our next instalment, where we’ll uncover more secrets of effective customer acquisition.
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Image credit: Abobe Firefly
This article was first published on August 21, 2023
The post Demystifying ToFu churn: How strategic CPO-CMO collaboration makes the difference appeared first on e27.