Why Marketing Can Break A Start-Up Company
Copyright (c) 2010 Cynthia Kocialski
Today's investors are not interested in funding start-ups that don't know how, where, and to whom to sell their products or services. Start-ups need a marketing plan. What is marketing and how does it relate to business development and sales? Marketing is not sales. Marketing tells people about your product, service, and company early and often. Marketing generates demand and sales leads.
Marketing and business development start before any sales efforts can begin. Business development identifies new markets in which to sell the product and develops partnerships. Sales teams reach out to those leads and convert them into paying customers. Depending on the product or service, marketing efforts can start up to 12 months before the product is available to the market for purchase.
Early marketing strategies often center on creating awareness as well as lead generation. Creating awareness for the product and the company before, during, and after the development process ensures the sales and revenue plans can be attained. These relationships and leads enable the sales team to make deals and capture revenue after the product is available. People buy what's most familiar to them, but marketing is not free nor is it inexpensive. If you survey publicly traded companies, you'll find sales and marketing expenses are typically 1.5 to 2 times that of research and development expenses.
All products solve a problem for someone somewhere. It's important to answer the following questions and to build a compelling story line. Why would a customer buy the product? Why wouldn't a customer simply continue doing what they do today? Why would a customer buy from your startup instead of one of your competitors? What compels your customer to buy now and not wait? The first step in answering these questions is to identify the people who are the most desperate to solve this problem. Focus on customers who absolutely must have the product. The second step is to find as many places as possible where you can access these customers and build awareness.
The marketing plan, like every aspect of a business plan, is based on assumptions. Reaching out to the customers is vital because a start-up needs to prove or disprove customer assumptions as soon as possible. Before jumping into a full blown product development and marketing effort, it's important to make sure the problem is real and customers are urgently seeking a solution.
The initial marketing effort focuses on gaining a better understanding of the customers and their needs, planting the seeds to build customer relationships, and beginning a pre-launch awareness program. It is not the go-to-market plan. It is a search plan. It means knowing how customers conduct their business and how the product or service can add value to their business model. It also includes knowing your customers' habits and media preferences. This feedback is critical to refine and prioritize product features as well as gain insight into the correct pricing model. Early customer discussions will facilitate long-term relationships. Customers like to provide feedback. You may speak with customers in a market segment that may not be pursued at all.
The basics of a marketing plan include the objectives, the definition of the product or service, the customer profile, a description of the competitors, an action plan and market launch including budgets and resources required, pricing, and progress tracking. The marketing mix refers to the familiar acronyms of the 4Ps, 7Ps, and 4Cs. Initially, the more important marketing mix elements are promotion strategy and pricing. Pricing and lifetime cost of ownership are always top of list of customer considerations. Marketing plans with no more detail than the common terminology of going viral, using social networking, monetizing websites with ads, and offering free trials - with not much more than those vague terms as a strategy - will not win investors over. Would you buy a house sight unseen from the listing description - 4 bedrooms, 3 baths, 2-car garage, colonial on a large lot? So why would an investor fund a company with little notion of how to attract paying customers?
The 80/20 rule applies to most everything, and marketing is no exception. It needs to concentrate on the 80% of profit and 80% of the volume that will come from 20% of the customers or 20% of the product offering.
The plan needs to use multiple channels to get your message across to your customers, usually during a phased approach. Building pre-launch awareness for the product doesn't require you to reveal your company's solution; you can engage the audience by talking about the problem and showcasing use cases that demonstrate the severity and specifics of the problem. News releases, articles in industry publications, blogs, tradeshows, conferences, and speaking engagements are some low cost and simple ways to gain exposure for an early-stage startup.
There is always competition. The two biggest competitors are continuing a "business as usual" approach, in which case, you have to give the customer an irresistible reason to change the way they do something today, and in-house development or the DIY approach.
Marketing interacts with customers to prep the market for the product before it has even completed development. It should not be an afterthought. Investors want a founding start-up team to include both technical development and marketing. Ultimately, what the customer needs and is willing to pay for rules a start-up; marketing is the spyglass into the customer's perspective.
About the Author
Cynthia Kocialski has founded three companies and has been actively involved in more than 25 hi-tech start-ups. Cynthia has worked in start-ups for the past 15 years. She held various positions at IBM and Matrox Electronics. She is a graduate of the University of Rochester and the University of Virginia. Cynthia writes a blog on about her experiences in high tech start-ups, http://www.cynthiakocialski.com/blog .
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