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Customer Futures Edge: The Marketing Funnel Funeral
From dusty marketing funnels to dynamic flywheels that attract, engage, and retain superconsumers
Hi everyone, thanks for coming back to Customer Futures. Each week I unpack the fundamental shifts around Personal AI, digital customer relationships and customer engagement.
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Customer Futures Edge: The Marketing Funnel Funeral
Frozen food. Vacuum cleaners. Smartphones. Electric vehicles.
Each disrupted the market. But it was more than that: they created a new ‘shopping aisle’ in the mind. A critical difference when a customer was thinking about buying a new product.
More precisely, each of these became a new category in its own right.
CustomerTech, Self Sovereign Identity, Digital Wallets, Personal AI. These are not just new markets. They are entirely new categories. Because they won’t just improve today’s digital customer relationships. They will completely reinvent them.
Digital leaders often spend time on breakthrough Product Design. Some focus on Business Design. But the real winners are those that master Category Design.
Category Design is now an entire discipline. With its own tools and techniques, an approach to defining products, and critically, how to communicate. And the prize is enormous: the businesses that can define and own their category can win over 70% of the market cap of that new category.
Take another look: frozen food, vacuum cleaners, smartphones and electric vehicles. I’d bet you can instantly name the leading brand in each. And therefore point to the (now wildly wealthy) category designer.
Each of those brands might not have been the first to bring their product to market. But they’ll have expertly defined their market category, the problems it solved, and shaped their entire product, business and communications strategy around it.
Back to Customer Futures. Today’s post is brought to you by Christopher Lochhead, one of the OGs on Category Design. His latest article from Category Pirates is about the death of the marketing funnel.
It’s so good, and so relevant for the Customer Futures community, that he’s generously agreed for me to share the whole thing with you in full. (Category Pirates is a top 1% paid newsletter on Substack).
I’ll warn you - it’s loooong. But in my view it’s required reading. All about the death of the marketing funnel.. and the birth of digital customer communities.
Here are the main points to take away:
Mercenary Marketers capture customers… but Missionary Marketers attract customers
Marketing Funnels are for capturing customers… but Marketing Flywheels are for attracting customers
Consumers have been freed from Marketing Funnels… and have chosen to organise themselves in Flywheel-Driven Digital Communities
Marketing must evolve from a Self-Serving Funnel to a Consumer-Serving Flywheel
It’s all about creating a niche, Superconsumer-Driven Community
So grab that coffee (or 3), settle into a comfy chair, and I’ll see you on the other side. Enjoy.
In 2015, Sam Parr and John Havel decided to reject the premise of the news landscape.
They noticed that young professionals and entrepreneurs wanted a different type of content—news that cut through the noise, provided actionable insights, and sparked meaningful conversations.
So, they started a “news without the B.S.” newsletter.
It attracted tech-hungry Millennials, but not by using a traditional marketing funnel (paid advertising, lead generation, nurture campaigns, promotions, etc.).
Instead, Sam and John created a platform that revolved around community. From the beginning, they focused on collecting email addresses. (In fact, you couldn't preview the newsletter without sharing your email.) But your email was just your entrance ticket. After signing up for the newsletter, you soon received an invite to join its ambassador program.
The program felt like an exclusive club.
As an ambassador, you could easily start a conversation with other ambassadors—like-minded entrepreneurs, over-achievers, and super connectors—and your network immediately became ultra-valuable.
The program started to build momentum and attract more people to both the newsletter and the community. Why? Because it resonated with a new generation of ambitious Native Digitals looking for unconventional insights and a community to call their own.
Most importantly, it was self-sustaining.
It brought in new people through a compelling referral program.
As an ambassador, you could refer people and get rewarded for it. The more people you referred, the more perks you got. This included an invite to a private Facebook group, discounted tickets to the company’s annual conference, and plenty of schwag to show your loyalty to the program.
Of course, the program took time to grow.
"Communities take forever to build up," said Parr in an interview with Simon Owens. "It was a slow burn." But the community began to attract more and more people as ambassadors connected online and in person.
Eventually, it took off.
By the time HubSpot acquired The Hustle for an estimated $27 million, it had over 1.5 million subscribers.
The Hustle developed a strong sense of community among its readers. It encouraged conversations in comments, forums, and in-person events (which started a digital WOM wildfire). Most importantly, it created a space for Superconsumers to connect. And, in turn, this created a sense of belonging and loyalty among members.
In other words, it succeeded thanks to a self-revolving, velocity-increasing marketing flywheel.
The Hustle was not like a legacy media brand puking out content in a never-ending one-way stream of consciousness. Instead, it drove connections and conversations. It was not a thing you consumed. It was something you were a part of.
(Most Native Analog media businesses still do not understand this.)
And it worked because humans, more than (almost) anything else, want to experience being part of something greater than themselves.
Mercenary Marketers Capture Customers, Missionary Marketers Attract Customers
Marketing is fundamentally broken.
You already know the underlying reason why—we covered it in The Big Brand Lie mini-book. Brand marketing is something we do to customers. Category marketing is something we do for customers. That logic extends to all areas of marketing, especially the marketing you do to attract customers and create demand.
(Note: When most marketing people say “demand creation” they really mean capturing existing demand, instead of creating net new demand from nothing.)
For example, companies have forever wanted to put “brand value” on the balance sheet. But it’s impossible. Brand value doesn't show up on the balance sheet because brands don't own it. The brand’s network owns it.
Here’s another way to think about it:
Do Warren Buffett and Charlie Munger own Berkshire Hathaway?
Sure, they own some of it. But the real owners are those crazy 40,000+ people who show up at Berkshire’s annual “Woodstock” shareholder meetings. Without them, Berkshire wouldn’t be Berkshire. These people attend year after year, flying in from all over the world just for a three-day weekend in Omaha, Nebraska. Why? They go to see old friends who they met 25 years ago and build new relationships. They go to hear Buffett and Munger share stories. They go to participate in the event and enjoy the experience. And they go to tell themselves (and the world) that they’re part of this unique group of investors.
Said differently, they go because they’re devoted to the Berkshire community—not because they were pushed through some sort of marketing funnel.
They’re attracted (to be part of something). Not captured (to buy something).
Marketing Funnels Are For Capturing Customers, Marketing Flywheels Are For Attracting Customers
Funnels provide a linear path for companies to push consumers from awareness to consideration—and ultimately to purchase. Flywheels put the customer front and center, captivating them with valuable content and experiences that speak to their deepest desires.
The difference is causing an irreversible change in marketing.
Funnels have been the go-to framework for an Analog world and the early days of the Internet. And there’s no doubt they’ve been effective. But they worked for reasons that are (increasingly) irrelevant in today’s Native Digital world. In the past, companies invested heavily in advertising campaigns that emphasized the “unique value propositions” of their products or services.
This approach worked well—but only because people had a small network.
Sure, you could tell your neighbors that the new auto shop in town screwed up your oil change, but that was about it. Word-of-mouth recommendations stayed within personal networks and local communities. As a result, companies controlled the narrative without being challenged by a slew of bad online reviews. Companies also had a lot more power over their customers before the Internet.
Today, a hotel with disgusting rooms could find itself trending on Twitter for all the wrong reasons and have zero recourse.
It’s toast, from a tweet.
Further, the funnel user experience can trigger a red flag warning in the minds of many. Scammers, hustle pornstars, crypto, NFT, and F.A.R.T. shysters plant funnel mines (that blow up on our phones) all over the Internet. As a result, marketers that over-funnel customers run the risk of sounding like a shambolic real estate training program barking things like:
“Get rich quick, real fast.”
“Come to my conference…invest in my sure thing….just six easy payments…click now.”
“Don’t wait…space is limited...first come, first served… limited time offer…act now.”
These obvious (cartoonish) sophomoric ploys to dislocate us from our money make it clear that the stuff being marketed is suspect. Said simply: People think, “They make it sound way too good to be true. This must be a scam.” Or, “If they have to push it that hard, it must be crap.”
And consumers are right to think this way. You’ve never seen Patagonia, Apple, Nike, or Spanx do any of that slime-burger cheeseball marketing, have you?
As a marketer, you have to beware of the over-funnelization of marketing.
A marketing funnel is something we do to consumers. A marketing flywheel is something we do for customers.
People today are more informed, connected, and empowered than ever before.
They don't want to be pushed—they want to be engaged. They want experiences that make them feel like they matter. And they spread those word-of-mouth recommendations like wildfire through social media and online reviews.
That’s why marketing flywheels are not just about attracting customers.
Flywheels are about engaging people in meaningful conversations and building a sense of community and connection. They don’t focus on selling a product. They focus on delighting the hell out of your customers by providing personalized experiences that make them feel like they're part of something special.
And guess what?
Delighted Superconsumers are the best marketers.
They spread the word, they bring in new customers, and they cause the flywheel to start spinning faster. That’s what makes flywheels a positive feedback loop. Happy customers attract more customers, leading to organic growth and an army of loyal customers. It's a win-win.
The power has shifted from companies to consumers.
Marketing is no longer about pushing customers down a funnel. Instead, it's about creating experiences and communities that are so legendary, people can't help but sing. Here are a few whys:
Funnels are getting more expensive. Funnels require massive amounts of money. Companies spend millions of dollars to drive people down their funnels and convert them into customers. But the customer acquisition cost (CAC) of funnels is only increasing. This isn’t surprising. In 2022, Google brought in $224 billion in ad revenue—compared to $95 billion just five years earlier. Advertising is more competitive than it’s ever been. Even though, according to Nielsen, only 54% of marketers are confident in measuring ROI across digital channels.
Funnels are a one-way street. Once you push customers through your funnel, they drop out of the bottom. All of the momentum and money and effort you put into getting those customers disappears. But hey, you got the sale. Some companies think this is a great idea to put customers into another funnel, which just perpetuates the problem.
Funnels force consumers to listen to brands. You may think your messaging is “customer-centric” but it’s really pushing your agenda. It’s driving customers to your action. Buy this, upgrade to that. Funnels force listening, instead of encouraging conversation.
Funnels are all about selling the product. Every “touchpoint” in your funnel is designed for one thing—sales. Of course, you need sales. We’re not naive to this fact, and we want you to drive revenue. But in a funnel, the end goal is always a sale. Sure, you may provide support and answer questions with the best intentions, but it all leads to selling YOUR product.
Funnels let the brand lead, not the customer. Consumers don’t lead funnels—they’re pushed or pulled into them. So, they wind up following the company’s lead. If you think no one knows what customers need better than you do, you’re misguided. Customers know better than you do. And if they’re not leading, you’re likely headed in the wrong direction.
Funnels are full of leaks. Every funnel has leaks, but not just at the bottom. It also leaks at the top and all the way around. The leaks are DVRs that allow you to skip ads. Browsers with incognito mode to dodge data tracking. Generous retail return policies that sometimes get abused. It’s almost a miracle that any marketing reaches any consumer in a meaningful way.
Marketing funnels are an expensive, short-term game that put consumers second. (And a disproportionate percentage take on a hustle porn star “BUY NOW!” / “CLICK HERE” vibe that makes customers want to get the-click-away from them.
If you rely on your brand and funnel for marketing, you risk falling prey to the “price fighter in any category whatsoever” strategy. That is to say, the people who spy a giant new market category jump in (like penguins jumping off of icebergs, because other penguins are jumping off icebergs) fighting for their place in someone else's line.
The uncomfortable truth is for your brand to succeed, you must let it go to the network.
When we create categories, companies, products, and brands, we think we own them. In reality, our customers own all of it. Because if customers do not feel a sense of ownership in a category, company, product, or brand, that will lead to apathy. And consumer apathy leads to commodity categories. (Of course, no business school trains marketers in any of this. 💪🏴☠️)
This entire strategy scares the 💩 out of all the great branded companies.
If you do not move your customers from the end of the funnel to the center of the flywheel, you're dead.
You have to go FROM capturing customers in a funnel TO attracting customers with a flywheel.
To understand why, let’s look at what happened to BuzzFeed.
As the name suggests, BuzzFeed got to be BuzzFeed because it wrote really great clickbait headlines. It figured out how to goose the algorithms, both on social (especially on Facebook) and on Google. And it did great SEO. But algorithms change over time, and so do tech companies. Facebook decided to pivot away from the media in general, so referral traffic to news sites like BuzzFeed slowed—and then completely stalled.
What made BuzzFeed is taking it out.
That's because BuzzFeed built its marketing “house” on liquefaction.
In the context of geology and engineering, liquefaction is a phenomenon where soil temporarily loses its strength and stiffness (often due to an earthquake). Intense shaking makes the ground act like a liquid, which makes it tough to support anything on top of it. This is called "ground failure." And it can cause buildings and infrastructure to sink, tilt, or even collapse. (Liquefaction caused massive damage to San Francisco's Marina District during the 1989 Loma Prieta earthquake.)
When the tech industry shook things up, BuzzFeed's artificial foundation collapsed.
John Herrman, a writer who worked at BuzzFeed News during its heyday, described it well in an Intelligencer article about BuzzFeed's early strategy and eventual downfall (the emphasis is our own):
"In the early days — let’s say 2011 to 2012 — there was a lot of windfall traffic for media companies. Random stories from years ago would suddenly have hundreds of thousands of readers, having been stripped of their original context and reshared by Facebook users. These new readers arrived in large numbers but didn’t really stick around. Their arrival was interpreted as an invitation. In hindsight, it was a warning."
He explains what that warning means today:
"Creators on YouTube and TikTok and Twitch are meeting people where they are, with no need for a third party like BuzzFeed to get involved."
Emphasis on "no need for a third party to get involved."
People no longer need BuzzFeed for entertainment or tech news. They can follow creators and journalists directly. And if they want to have conversations with these people (which they do), they can join communities like The Hustle, hop on a niche Twitter Space, join a Slack group, or launch their own digital community on a platform like our friends at Mighty Networks provide.
Now, we know marketing funnels, like cable TV, will hang around long after they’re useful. But people have been freed from cable TV and have chosen to give their attention (and dollars) to streaming services. In a similar way, people have broken free from marketing funnels and found new places to invest their money and time.
Which is why entrepreneurs, marketers, executives, and creators are using flywheels to build, leverage, and monetize digital niche communities.
If you’re enjoying this, and want to keep up to date about the future of Personal AI, digital wallets and customer engagement, why not subscribe:
Consumers Have Been Freed From Marketing Funnels And Have Chosen To Organize Themselves In Flywheel-Driven Digital Communities
According to GWI, over 76% of internet users participate in some sort of digital community.
That means most people using the internet today are involved in at least one digital community, and they join because they’re looking for a more personal connection. They want a space that feels less intimidating, is more trusting, and lets them be involved. So, they flock to Reddit, Facebook Groups, Twitter Spaces, Slack channels, and private branded communities.
Given this shift, it's no surprise that 75% of large companies have at least one online community.
We believe this number will go up meaningfully.
We can even foresee a time when 50% (or more) of companies have native communities. It stands to reason that as more and more of life, work, and play shift from Native Analog to Native Digital, the average Internet user will move from hanging out in analog places to investing time in digital spaces. Why do we think this is true?
In 2020, Facebook ran a survey to find out what role online communities play in people's lives. The result: 77% of respondents said internet communities are their most important groups.
This is massively important, so it’s worth repeating:
77% of respondents said internet communities are their most important groups.
(If you’re a Native Analog, we must interrupt our regularly scheduled flow here and pause together. Let these words sink in for a sec. Only 23% of people value IRL communities over Native Digital ones.) These are not in-person friend groups or poker buddies or golf leagues or church groups or co-worker softball leagues. These are digital communities. And these groups are already a meaningful part of people's lives.
Why is this the case?
It's easier to build meaningful relationships in a digital community.
Until about 20 years ago, people found community within their communities.
They connected with their friends and neighbors on the sidelines at Little League games, during neighborhood barbecues, at church, and while perusing weekend garage sales. They stopped by without asking (an egregious mistake in the eyes of any Native Digital). And they rang the doorbell instead of texting "here."
"Community" looks very different.
People connect with friends through livestream gaming sessions on Twitch. They host Zoom dinners with friends around the world. They stream church while sitting in their pyjamas at home. They sell their junk through digital marketplaces like Facebook Marketplace, eBay, or Poshmark. If they're a Native Digital, they probably don't know the names of everyone on their block or in their building. And thanks to Ring, many people don't even have to answer their doors.
Comedian (and Native Analog) Sebastian Maniscalco captures this shift:
The nuance we want to dive into here is how in-person analog conversations have moved to online digital communities. This is not only altering the physical world we live in, but the digital worlds we create online. It's altering our sense of community, forever. What we’ve known as analog community is shifting from the way it was, to a new and different way. We’re in a community cocoon time. And this transformation is creating a different future for community.
Here’s a deceivingly simple (but remarkably powerful) example of how this is playing out today.
You meet three new people on a work Zoom because you’re going to be working on a project together.
The conversation is great. And before the call ends, you all agree to connect on LinkedIn, Slack, and Discord. You meet in the Native Digital world and immediately create digital community connections. (We all regularly enter these new digital communities. But we don’t all realize what is happening when this happens.)
Here’s another deceivingly simple (but remarkably powerful) example.
You meet three new people IRL at a conference.
Shortly after meeting a person in person, you immediately transfer the relationship from analog to digital. You share mobile numbers so you can text, and/or connect on any number of social apps. (Does anyone carry business cards anymore?)
We do this because we understand that if we’re not digitally connected, we probably will not connect again.
Said differently: If our relationship isn’t in some way digital, we can’t have a relationship.
Think about this in your own life. How hard is it to stay in touch with someone who’s not digitally connected? Could you make friends with a new person in your life who was not digital?
If you want to have a conversation with consumers, your marketing must evolve from a self-serving funnel to a consumer-serving flywheel.
If you want to be a Category Queen, a community is (becoming) a must-have.
Creators are already carving their own niches in the world through digital communities. The most valuable ones create compelling experiences that provide a safe, comfortable way to meet new people—and let people gather expertise at the same time. And what supports these communities?
Marketing flywheels build momentum by putting consumers and community at the center of the conversation.
In a marketing funnel, community is at the bottom—it’s an afterthought. In a marketing flywheel, community is at the center—it’s the main focus. This is why flywheels generate velocity over time through the active participation of Superconsumers. They put a community of Supers at the center, focusing on their needs and wants, instead of a brand’s target KPIs or MQLs (marketing qualified leads). It’s a continuous cycle, where customers drive WOM and attract new potential customers who also drive WOM. And on and on.
Flywheels solve many of the funnel’s core problems:
Flywheels are less expensive than funnels. Yes, you still have to throw money at it to build momentum. But the CAC drops over time. That’s because a flywheel benefits from the network effect. Known as Metcalfe’s Law—coined by the co-inventor of Ethernet, Robert Metcalfe—the network effect shows that as the number of users in a network increases, the value of the network also increases exponentially. Of course, this increases the overall usefulness, functionality, and value of the network. (Coincidentally, the network effect looks much more like a flywheel than a funnel.)
Flywheels get consumers talking to one another. It's important to remember word-of-mouth (WOM) marketing is, was, and will always be the number one form of marketing. But it doesn't show up in most marketing plans. Why? Because people understand Superconsumers, but they don't understand category design. But once you have a community, who's in your community? Your Supers. And what do Supers do? Sing your category POV song. And who writes the lyrics? You do, which means you're constantly putting the right words in the right mouths.
Flywheels are a roundabout. In a flywheel, Supers share your unique POV both inside and outside the community. This keeps people in the flywheel AND brings more people in, which makes it spin faster and faster. As your flywheel accelerates, you won’t need to constantly put money into new marketing campaigns or ads like a traditional funnel approach. Instead, you just need to make sure community members are engaging in the content and bringing others in.
In flywheels, the conversation is the product. What’s a major reason people spend thousands of dollars to go to conferences? It’s not the products. It’s the connections and conversations. People joined (and stayed) in The Hustle community because of the conversations—they wanted to build their network. In a flywheel, the conversation is the product. It’s what people come for, and it’s why people stay.
Flywheels let consumers lead. What happens when you put a bunch of Superconsumers together? Things get weird. They start sharing stories, swapping ideas, and going down ultra-niche category rabbit holes. And if you listen, you’ll learn a ton about what matters to them and how your company can help. A flywheel encourages these conversations and lets consumers lead them.
The power of a flywheel is its ability to attract Superconsumers, generate compelling content, and create a self-driving WOM-manufacturing machine. It gets people talking to one another. And that conversation becomes the product, which naturally generates engagement and lets people build meaningful relationships—all within your community.
We know flywheels aren't a new strategy, but they have rarely been intentional. They haven’t started with a community as the goal. It’s usually happenstance. But as Native Digitals emerge and take over, the demand for digital community naturally builds.
To understand the power of an intentional marketing flywheel, let us tell you about a yoga instructor from Texas.
Adriene Mishler uploaded her first instructional yoga video to YouTube in 2012.
Over the next 11 years, she posted videos for anyone and everyone who may be interested in trying a downward dog. She created videos called "Yoga For Back Pain," "Yoga For Seniors," "Yoga For Flexibility," "Yoga For Chefs," and even "Yoga For When You Feel Dead Inside." Her video titles were simple and effective, which was exactly what viewers got from the workouts.
Her low-key, doesn't-have-to-be-perfect attitude drew in people who you might never imagine rolling out a yoga mat: construction workers, pipefitters, ER doctors, electricians, janitors, chefs.
There was no pomp and polish. The videos were often shaky, and Adriene told jokes between poses. But it was a community of imperfect (real feeling) yoga practitioners. This unique POV is just one reason why the "Yoga With Adriene" YouTube channel hit 150,000 subscribers in 2014—and kept growing. In 2017, it was at 2.4 million. In 2018, it hit 4 million.
Today, "Yoga With Adriene" has 11.8 million subscribers on YouTube.
"We’re creating a space where it’s not just safe but encouraging people to commit to the practice of self-discovery, versus just doing something that’s good for you because you’re told it’s good for you. Am I getting too weird here?"
(Remember, weird is where the opportunity lies in category design! Arrrrr!)
What Adriene started as a YouTube channel eventually became a Facebook Group, which turned into a private Mighty Networks community called Kula. And while millions of people watch Adriene's free YouTube videos every day—her top video has over 49 million views—over 220,000 people are part of the free Kula community. Even more legendary? 99% of all the content within Kula is member-generated. And the channel consistently turns down $500,000+ offers from advertisers every year.
It's clear "Yoga With Adriene" is the Category Queen of digital yoga classes.
While this community is unique, it uses a standard flywheel to draw people in and grow the community.
Now, the marketing flywheel—originally introduced by HubSpot—is a legendary model. But it’s missing a crucial category design lens. So, we decided to make a few adjustments.
The Category Marketing Flywheel
The Category Marketing Flywheel drives growth for a company by attracting, equipping, and delighting Superconsumers—and it uses data and generative AI tools to accelerate the outcomes.
It leverages a few other category design frameworks, so let’s recap what you already know:
WOM is the most powerful way to drive growth.
Superconsumers spread WOM, often voluntarily.
In order to attract Superconsumers, you need a unique POV.
A unique POV is the soundbites customers use in word-of-mouth marketing.
To get your POV into Supers' mouths, you need FROTOs that move the customer’s thinking FROM where they are TO someplace new and different.
If you're equipped with a POV, that's built on FROTOs, that center on a big problem for your customer, you can reorient their thinking so they join you in the future.
The way you share FROTOs, and use them to drive WOM, is through a community. You build a community by getting Supers into your flywheel and keeping them there. And you do that in three phases: Attract, Equip, and Delight. (You may have seen this explained through another marketing flywheel. But remember, we’re looking at it through a category lens.)
Here’s how to get your Category Marketing Flywheel spinning.
1. Attract Supers with a unique POV.
The first phase of the flywheel focuses on using your unique POV to attract Supers to your community and get them interested in what you have to offer.
Superconsumers are the greatest evangelists. And a community of Supers is going to drive your flywheel in a way that a forced funnel never could. This is true whether you're in a more casual B2C environment or in a more sophisticated B2C or B2B environment. For example, Pirate Christopher sees this work all the time for the team at Clari (he's a proud advisor). Here's how a typical POV conversation goes between Andy, Clari's CEO, and potential customers:
Andy: "What's your current approach to revenue collaboration and governance?"
Potential customer: "Huh? I'm not sure I know what you're talking about."
Andy: "Well, most people think revenue is an outcome. It's actually a process."
Potential customer: "Huh? What do you mean it's a process."
Here, Andy changes how the conversation unfolds with customers, which gives him the opportunity to explain what it means to "run revenue."
If you share your POV with customers—and it resonates—it’s time to invite them into your community.
2. Equip Supers to make more Supers through content and community.
Once you have a community of Supers, you want to get them talking to each other. Get one Super to talk to another, and they'll talk forever. They'll become fast friends. And when a potential Super overhears that conversation, then that person becomes a Super.
As a marketer, you want to be able to eavesdrop on that conversation.
The way to do that, without interrupting, is through a community.
Supers need somewhere to talk and someone to start the conversation—that’s where you come in. You want to provide the right mix of Obvious and Non-Obvious content that Supers are interested in and want to interact with. For example, Beyond Type 1 was launched in 2015 to fill a gap in the diabetes patient advocacy category. The digital community focuses on helping people with diabetes improve their everyday lives. It connects members with pen pals, offers programs for college scholarships, and helps with practical needs like buying insulin.
Today, it has over 58,000 members.
On top of helping members, the community makes it easy for the non-profit to run simple market research polls to track what's important to its members, which informs its business and marketing strategies. The first community was so successful, the non-profit launched another one called Beyond Type 2—and it's already taking off.
The reason is simple.
“When you show up at a community, there's always something you can talk about with anybody who's there because you're both there for the same reason,” says Gina Bianchini, the co-founder and CEO of community platform Mighty Networks. “You both have a shared language. You both are there to go deeper together.” (Pirate Christopher talked with Gina about the power of niche digital networks on his Follow Your Different podcast.)
If you can create a place where people connect with each other, you’re providing customers with something more valuable than your shiny new synthorlator.
You’re helping them connect with people.
By doing so, you’re learning more about your customers—and they’re learning more about the category, company, and product they love. Tactically, this is a good time to plan a Lightning Strike and create legendary POV marketing that Supers can’t help but talk about and share. (You can also use the tactics we shared in The 3 Marketing Metrics, Part 2 mini-book.)
The goal is to get Supers so excited about your category, company, and community, they can’t help but tell tons of other people.
The more Supers, the merrier.
3. Delight multiple Supers & create A WOM factory.
This phase is all about creating radical interest and driving WOM. In the past, the challenge with WOM marketing was that you couldn’t measure or monetize it. Well, now you can through community.
Engagement within the community (conversations and content participation) is one way to measure WOM. On top of that, tracking the number of people your members invite to the community through referrals helps you find Super spreaders who contribute to the WOM effect. This "upstream marketing signal” gives you valuable data, which you can use to inform price points, create product offerings, choose new features and upgrades, and more.
The products and services you create as a result are how you monetize WOM.
You can create courses, offer webinars, sell your books, guides, products, consulting services, and more. Anything that you would offer through Amazon or Shopify or your own website can be sold within your community. And because it’s in your community, your Supers will tell you what’s the most valuable to them.
If they love it, they’ll start to tell others about it.
This is similar to how it works with your one friend who is a massive foodie. They love trying new restaurants, and you deeply trust their recommendations. Now, imagine a half dozen of these foodies raving about some random food truck that is only open on Tuesdays at 8:13 pm when there is a full moon. You’re going to put that date on your calendar and make sure you’re there. You might even invite a bunch of friends and make it an experience!
Because Supers are the most trustworthy source of word of mouth—and you don’t want to miss out on their recommendations.
To get people talking within your community, you want to give them legendary customer experiences, exceed their expectations, and build loyalty. You can use customer feedback surveys, referral programs, and the tactics we laid out in The 3 Marketing Metrics, Part 3 mini-book to wow your Supers, drive WOM, and grow the community.
Let's go back to The Hustle example to see how it fits the Category Marketing Flywheel:
It had a unique Point Of View: It covered emerging startups, tech advancements, business trends, and industry events. But instead of writing lengthy articles, like TechCrunch or Wired, it was a different type of business/tech newsletter that broke stories down into easy-to-understand snippets. By doing so, it created the "News Without The B.S." category.
It targeted its Superconsumers: This included entrepreneurs, business professionals, and anyone interested in startups, tech, and business news. It provided valuable, Obvious (and some Non-Obvious) content that fit its readers. And this focus allowed it to stand out and build a loyal following.
It created a WOM machine through its community: The Hustle's ambassador program worked not only because it incentivized readers with free merch, but because it presented networking opportunities—something its Supers desired more than a free "Always Be Hustlin'" t-shirt. The merch was a short-term bonus, but the connections kept subscribers in the game long-term. And the more people joined, the more WOM spread.
There's one thing The Hustle didn't have—generative AI tools.
Now, it's clear AI is the big new mega category in tech right now. But for the vast majority of people outside of tech, it's a theoretical conversation. Most people hear about technology like ChatGPT and ask it a question. It gives them an answer. They go, "Oh, that's really cool." And that's it. They can see the power of the "answer" category, but they can't see the power of having AI as a co-creator.
They're not writing code with AI.
They're not creating with AI.
Why is this important? Well, if you take everything we've ever said about WOM and Supers and POV and FROTOs, and you combine it all together and connect it to a niche community—all powered by AI—what do you have? The Category Marketing Flywheel. This model is based on driving digital WOM, using unique POV content that is purpose-built to make you the Category Queen, by focusing on the Supers who make up your community.
And the way you compound the value and velocity of your community is with AI.
4. Leverage AI to increase velocity.
In the Category Marketing Flywheel, AI is your accelerant.
Tap into it, and your flywheel starts to spin faster and faster. As the flywheel spins, your company and community create more data. This fuels the creation of more content, which engages and delights Supers, which drives WOM, which attracts more people to your community.
This is why we’re encouraging every business leader, entrepreneur, and marketer we know to view their content as AI training data.
For example, Reddit has been using AI chatbots for several years but is now planning to sell some of its data to teach AI how to model human-like conversations. And the company has a TON of data. (In 2021, Reddit had over 50 million daily users who generated 8.3 billion annual comments, posts, and messages.)
"To simplify, say Reddit sells all of its data, and it’s able to command a 20% premium to Twitter’s price based on its specialty. It could make $8.3 million per customer each year. And on that basis, it would need to get just 40 customers to nearly double the $350 million revenue it made in 2021."
The world is moving to a place where flywheels create ongoing, legendary training data. And AI is only as good as the dataset it gets trained on. That’s why every once and a while, ChatGPT thinks Jack Daniels plays guitar in Green Day.
It is worth taking a pause here to share a story.
Pirate Christopher was recently on a Zoom with the CEO of a major media holding company with dozens of brands and galaxies of content. Not known for his subtlety, Pirate Christopher did his swaggery best to help this CEO understand how the value of his entire franchise could increase in a material way by leveraging the compounding network effects of digital communities, coupled with converting proprietary data and content into AI training data. But the CEO didn’t get it. Pirate Christopher failed in communicating the enormous opportunity this company has in the new Native Digital community/content world. (Which is why we’re laying it out here, for all of you.)
Said simply: If you know things and/or have things that other people do not, those things could be meaningfully more valuable as AI training data.
It behooves us to give this some deep, reflexive thinking.
Many people and companies are sitting on some differentiated knowledge, data, content, frameworks, processes, and templates. In this new category of generative AI communities, this kind of Creator Capital (or Intellectual Capital, as we’ve called it in the past) is only increasing in value. We’re already seeing companies licensing OpenAI to create ChatGPT-like capabilities within their websites, products, and communities. We even know one entrepreneur creating a new category of courses for Native Digitals about how to upskill by leveraging ChatGPT.
Once you understand this new flywheel, you’ll see how it’s creating training data every second.
That means AI is not only opening up new revenue streams for companies—it’s changing the way people create.
AI isn’t a tool. AI is a co-creator.
In an interview with Sam Altman, the CEO of OpenAI (the company behind ChatGPT), Lex Fridman and Sam talk about how people are using GPT-4 to do creative work.
“I think this is where we’ll see some of the most impact in the short-term. It’s amazing what people are doing. It’s amazing how this tool, the leverage it’s giving people to do their job or their creative work better and better. It’s super cool.”
Companies and creators are leveraging AI for co-creation for a variety of reasons:
Efficiency & Scalability: AI tools can generate content, ideas, or solutions much faster than humans. That means companies can scale their creative processes and handle a ton more volume than if they were creating solo.
Brainstorming & Innovation: By leveraging AI's data-processing prowess and pattern recognition capabilities, you can see new perspectives and generate different ideas you may have overlooked. This injects a powerful dose of innovation into the creative process. Now, AI is not always the most creative. But you can use the answers it gives to test your thinking, do market research, and help innovate on all three sides of the Magic Triangle.
Personalization & Customization: AI tools are great for analyzing user data and preferences for personalized experiences. When you involve AI as a co-creator, you can create customized content, recommendations, and products that meet the needs of both your Superconsumers and customers.
Enhancing Human Creativity: By offloading repetitive or mundane tasks to AI, you're free to focus on higher-level reflective thinking. This collaboration can enhance your creativity, elevating it to new heights, because you have more time for creative thinking and refining your ideas. As Lex observed, “The smarter and smarter it gets, the more it feels like another human.”
Cost-Effectiveness: Right now, “hiring” an AI tool is more cost-effective than hiring a person. Depending on what you need to be done, it might make sense to use AI tools—which can save you money and help you do more, with less.
Continuous Learning & Improvement: As we're seeing with ChatGPT-4, AI has the ability to learn and improve over time. That means it can analyze feedback and data to refine its answer, becoming more accurate the more you use it.
Leveraging AI as a co-creator, instead of a simple Q&A machine, is an exponential opportunity. Not only does it increase your efficiency, scalability, personalization, and data analysis, but it enhances creativity, elevates the customer experience, and fuels innovation for category and company growth.
For example, let’s say you’re a whiskey wholesaler.
If you create a million dollars worth of whiskey sales data to be used as AI training data, guess what? You know more about whiskey sales than anybody on planet Earth. And by putting an AI capability on top of that information, you empower customers to ask questions and find out what kind of whiskey is right for them, what trends are taking over the industry, how much to buy, and so on. Not only does this help customers, but it also fuels your content. You can leverage AI to analyze this customer data to inform new marketing strategies and create tactical executions like guides, polls, quizzes, social media posts, blogs, emails, courses, and more. This gives you an insurmountable advantage.
At that point, you're (virtually) uncatchable.
You may be wondering, "Sounds great. But does this really work?"
Here's how a few companies are already leveraging AI:
Adobe: The software company announced Adobe Firefly, its collection of generative AI models, and recently added those features to Photoshop through a generative AI tool. This lets you quickly edit almost any part of an image. All you have to do is click on the area you want to change and type in a prompt. (We’ve talked about Adobe possibly committing Category Neglect in the past, but it looks like it’s fighting for its place as Category Queen.)
Discord: The communications platform (popular among gamers) recently announced Cylde, an AI chatbot that uses OpenAI technology and is "ready to hang out with you and your friends." Let's double-click on the Languaging here. It's not just a chatbot tool— it's AI that's "ready to hang out." With Clyde, you can play interactive games, get recommendations, and discover tips, jokes, and other new information. For example, you can say “Recommend a playlist that’s good for late nights” or “Send a GIF to get everyone pumped up.”
Kuki: Developed by Acobot, Kuki is an AI chatbot that's "designed to entertain humans." Kuki interacts with people, answers questions, provides support, and creates a conversational experience for users. In fact, companies use Kuki to engage with their online communities. Again, the Languaging here leans towards co-creator (and even girlfriend, boyfriend, spouse, or partner). "I'm an always-on AI here to talk, listen, and hang out whenever you need."
What we’re seeing in AI today is only the beginning. The more companies use it, the more valuable it becomes. This is why it’s crucial to start working it into your business and marketing strategy—and skyrocket your flywheel’s velocity.
But before you get it spinning, you want to set up a strong foundation for your community.
3 Considerations When Creating A Niche, Superconsumer-Driven Community
Building a community is more than creating a space, inviting your email list, and pushing your products.
Yes, digital communities are a great way to monetize your products and/or services. But it can (and should be) much more than that. It's a way to help people. That's because niche communities are the perfect place to share frameworks, teach people something new, and create a space where everyone feels comfortable building new connections.
If you're going to design a niche digital community, you'll want to follow a few steps:
1. Build a real business.
Many community creators are afraid to charge for their content, so they end up giving everything away for free.
But if you want to increase your odds of success as a Category Designer and an entrepreneur, you have to build a real business. That means creating a product that gives value and people want to pay for it. As our friend Joe Pine (the Godfather of Experience) teaches, “You know you have a valuable, differentiated experience when people pay you for it.”
You can have a free version or trial. But in the end, you must also have a premium product.
In terms of networks and apps, look at innovative business models—not just the traditional free product with ads.
Gina, our friend who’s building Mighty Networks, has wise words about this: “Never enter a market where you haven't sort of sat down and asked, ‘What do the incumbents in this market do? And how do we go line by line to create a 180-degree polar opposite business experience?’ Because I think that's the only way that you can start to even live to fight another day.”
(And if you're a writer struggling to make money, you'll want to check out what we've written about the different business models writers can use to monetize.)
2. Make the community the product.
In other words, the ability to bring people together to learn, connect, and build relationships with each other is a product in and of itself. If you can introduce like-minded people to each other, that's something they’ll pay you for. To start creating your community as its own product, you can use this simple roadmap:
Identify a problem in your category
Build an audience around your ideas about that problem by creating content
Create a conference or space for open discussion with the audience
Create a community with interested people and engage with them
Release a product for your community and watch it take off
This concept, known as Community-Led Growth, has worked especially well for creator-driven companies, like Figma, Miro, and Notion.
3. Focus on what you know and love.
Play to your strengths, and hire the right people to do the rest.
Said differently, don't go build technology that you’ve never built before. You can easily blow tens, hundreds, and millions of dollars on custom software when you have no idea what you’re doing. Instead, focus on finding your niche, building an audience, and making sure you own the relationship with your customers.
Prioritize what you know, what you care about, and what you're passionate about.
For example, if you are good at coaching people on how to scale their businesses, focus on that. And if you're ready to build an app, but have never done it before, pay someone to do it. Don't waste your time and money trying to create it yourself. (This is why we collaborate with a network of legendary designers, editors, writers, and audio engineers at Category Pirates. We know we're not the best at designing book covers or creating audiobooks. So, we find people who are.)
But remember: No one will care about your community, or your customer relationships, as much as you do.
This is especially true if you're a missionary founder. Your community is a way to share your POV with people, who will then share it with their worlds. And, ultimately, this can help you create the future you envision for your category and company.
To see if your community provides new and different value to the world, rate it using the Category Design Scorecard.
If you've never heard of this category design framework, check out our Category Design Scorecard mini-book to see how we developed it and how it works.
We'll quickly jolt your memory:
Category POV: Does your community have a clear “Point of View” of the category? It’s important to note this should not be expressed as the “challenges” unique to a brand or company, but rather a fundamental problem to the entire category itself.
Future Category Reimagined & Without Compromise: Does the community cast a compelling future—free of these fundamental problems, compromises, and trade-offs inherent to the category?
Radically Different Offer + Business Model: How does this new community get delivered to the customer, both through a breakthrough product/service/offer, but also through a breakthrough business model?
Data Flywheel: Does the community generate data about customer/consumer demand/preferences that creates a unique opportunity and advantage to anticipate the future of consumer demand and any category shifts?
Depth & Degree of Customer Outcomes: Does the community generate satisfied/ecstatic customers/consumers? Are they so happy and satisfied they gladly evangelize the product/service to others?
If you're unsure about these answers or how your customers feel about you and your community, you need to find out.
Send out a survey. Ask for testimonials. Request reviews. Conduct one-on-one interviews with your most engaged Supers. Do whatever it takes to figure out what outcomes you're driving and whether or not they'd recommend your business or invite people to join your community.
Without this information, you’ll be building on unstable ground.
And even if you have the most innovative building materials imaginable, your foundation will eventually crumble. You don’t know what your community needs. So, you won't be able to meet their needs—and people who don’t get their needs met won't stick around for long.
Without a sustainable, WOM-driving community, you might as well be building your category, company, and community on loosely-packed, liquefaction-prone ground.
But if you take the time to find and build on solid ground, your foundation can be worth millions.
For those interested, there’s a whole series on Category Priates - you can sign up here.
And thanks for reading this week’s edition of Customer Futures. If you’ve enjoyed it, and want to learn more about the future of Personal AI, digital customer relationships and customer engagement, then why not subscribe: