“But even that 10% of our revenue that I was spending on performance marketing, I wish that I can go back in time and say, ‘That’s stupid.’” Rent the Runway has always capped its performance budget at 10% of revenue, she said. Performance marketing is the “kind of advertising that makes you feel good” as a marketer, Hyman said, because “you feel like customers are coming in and converting.” The upshot is that marketers and entrepreneurs misallocated budgets from what is now often thought of as “brand marketing” – or even money earmarked for physical product development – to direct response or performance marketing.
Those brands have struggled to keep their head above water – and Jet no longer exists – but their VC backers were comfortably hedged, in a way, because all these startups were pouring money into Google and Facebook, where the same VCs were more heavily invested.Īnd the irony of it all is that the growth hacker mindset doesn’t necessarily help grow a brand.Ĭreating a simpler checkout or cleaner and more enjoyable site is the basic work of any brand that sells online, Hyman said.īut running hundreds of tests on site elements and making slight adjustments in style and presentation can mathematically affect metrics without actually bringing customers any closer to the brand. “They wanted you to spend money on those ads.”ĭuring its first decade, Rent the Runway had big VC-backed competition, including Stitch Fix, Jet (before its acquisition by Walmart) and Bonobos (another Walmart purchase). “Those VCs also were investors in Facebook and in Google,” Hyman said. The more cynical take makes the so-called VC performance marketing playbook look more like a guide for growing into a big, strong fly – as written by a Venus flytrap. “There was an arrogance where we thought that we were smarter than these old-school companies who were spending their marketing dollars on things like retail stores and billboards and events,” she said.Īnd that’s the rose-tinted outlook on growth hacking. Although marketers may have felt like they were making gains – capturing an enemy’s piece – they never actually grew their own side. “What happened was all of these startups wasted an incredible amount of time and money building these growth departments that were just pushing chess pieces around the board,” Hyman said. The problem is that those marketers were focused on metrics and product display page tests, not growing the number of people who love the brand. Nobody’s against converting customers at a slightly higher rate. This data-fueled “growth hacking” mentality was effective when it came to short-term metrics.Ĭhanging the color or display of the buy button on a product detail page, for instance, might slightly improve or reduce the average purchase rate of that product – which is fine. “We should do this all day long,” Hyman said. And if the lifetime value of customers was greater than the paid media prices, that was evidence the model was working. VCs encouraged brands to spend big on online advertising acquisition costs. Facebook ads were cheap, and Google Search was easy.
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