Generally speaking, there could be different forms of marketing strategy, but three essential questions should be answered in any form of marketing strategy:
- What are you selling?
- To whom are you selling?
- How are you selling?
Obviously, your product or service is what you are selling and the definition of your target customer answers to whom you are selling. You have already designed your problem-solution-market fit, possibly with many pivots. For early-stage startups, many experts agree that feedback is more important than customers. The faster a startup can resolve customer objections and improve the product according to the market demand, the higher the possibility of achieving success in the long run. So, if you’ve done your homework right, you should already have at least a concept of a market confirmed product. But there still may be major pivots because of the remaining aspect of your marketing strategy—that is, how are you selling—will determine your overall success. If you’ve already tested some communication and distribution channels, you have partially answered the question of how to sell.
More than 87% of the successful startups that I interviewed during my global research on startups fall in one of two categories:
- One portion of the successful startups was focused on development based on raising funds from investors. They had a clear marketing strategy that defined how investments would be used in marketing and what results they expected. But they didn’t just actively pitch their idea and seek the attention of potential investors. They had a plan B, an alternative marketing strategy. Those successful startups had a clear strategy for what they would do if there were no funds raised for some period of time. Waiting was not a strategy. They were ready to implement (and some of them actually implemented) an alternative marketing strategy that didn’t require as much funding as their primary strategy.
- Another portion of the successful startups was bootstrapping. The growth of the startup was dictated by the amount of funds the founders initially had and any additional revenue they could generate. This group of startups didn’t depend on the availability of additional funds. They had more or less clarified their marketing strategy to allow them to increase the speed at which they could grow only if some extra funds became available. The founders took the time to think through the possibilities of getting a grant or credit on favorable conditions, or if a new partner with meaningful funding joined the startup. Scaling faster and then outrunning the competition were the main goals of this alternative strategy.
So we can conclude that there is no difference if you are bootstrapping or fundraising. Having an alternative marketing strategy can increase your chances of success and help foresee possibilities in advance.
Indicate the relationship of your product to the market
Defining the playground for your marketing strategy brings more clarity and simplicity in strategic decisions. As Steve Blank and Bob Dorf (2014) reminded us, there are four possible product-to-market strategies.
- New product to new market—In this scenario, customers don’t yet have an idea about your product and don’t know if they need it, therefore put your main efforts into explaining what problem your product solves and what benefits customers will get from using it. Customer education will be the main focus of your marketing communication. If you have a great communication reach, you might become a leader in this product category, the one who comes to the customer’s mind when a product category is mentioned.
- New product to existing market—Customers are aware of the problem or specific need, but they are accustomed to older solutions. Your marketing communication should be based on comparing your product to your main competitors and explaining what additional value your product delivers, how some features are different, and why your product would be the best choice. Al Ries and Jack Trout (2001) call this strategy a front attack (openly out-competing the market leader) or flank attack (out-competing the market leader by some features or aspects).
- Old product to new market—This is a situation where existing products are used in new ways to solve new problems, satisfy new needs, or to serve new target segments. The main marketing communication task is to stress that your product can be used in another way to solve new problems and satisfy new needs. Old products may already have a good reputation in the existing market and a wise marketer will always try to think how it could be used in the new market. Prepare to explain why your product is better than any new emerging alternative (innovative products and services).
- Old products to existing market—As a rule, there is not much innovation and startup effort in selling old products in existing markets. Startups rarely fall in this category, unless we take fast growth as the main criterion for defining what a startup is. Such a situation might emerge when a business model focused on fast growth is applied: the old product is sold in the existing market and the main marketing efforts are focused on taking the largest share of the market as possible.
Set strategic direction of your growth
Imagine that your target market can be defined as a cube where the volume of the cube shows the total market size. The larger the cube, the larger your market. The cube has three dimensions which indicate the growth possibilities and the overall size of the cube:
- Market penetration indicates how many target customers are already using the product (they might not be using your product, but your competitors)
2. Average purchase size is the average amount of money spent on one purchase
3. The average rate of purchase shows how many times target customer buys the product during the period (for example, per 12 months).
- Multiply the actual value of those three numbers and you’ll know the size of your current market (total sales per year). If you want to find out the size of the potential market, simply multiply the maximum value of all dimensions, and you’ll get an assessment of how large the market could still grow. If there is a big difference between current and potential market size, you should strategically focus your marketing efforts on any of these three dimensions
- Attract new customers who are not using this product yet (if your customer acquisition costs are relatively small)
- Encourage your customers to purchase a product more often (if it is applicable and you have a solid customer base)
- Increase the size of the average purchase; in other words, once the customer decides to buy, try to sell him more (it’s is called up-sell and we’ll talk about it later).
If you see that the current market size is close to its potential (though it’s quite a rare scenario in a startup business case), taking market share from a particular competitor might be your strategic decision. As Figure 30 shows, competitor C has the largest market share (53%), so maybe it would be possible to find a niche where his clients are underserved and to prepare your offer for these clients in order to lure them. It would be a strategic decision to focus your marketing efforts and business growth expectations on competitor C targeting by his particular client group.
Each situation is individual and your strategic decision regarding business growth should be well reasoned. You can set your goals to increase all dimensions of the market cube and even target particular client, but be aware: the more targets you have, the harder it is to hit them.
Write down your main marketing strategy in seven sentences
As J.C. Levinson (2007) suggests, guerrilla marketers create a strategy in seven simple sentences. If you are just an early stage startup, there is no need for a comprehensive marketing plan that lists projected goals in great detail for the next five years. Today, the guerrillas know what it takes to win with their marketing and they win with a very high margin. These seven sentences can make or break your marketing strategy, so always keep them in your mind and top of mind:
- The purpose of your marketing. This is the introduction to your seven sentence strategy where you should describe what exactly you want your potential customer to do. All your marketing strategy should be directed towards that goal— to encourage the customer to perform an action you want. If your marketing’s sole purpose is to create awareness of some kind global issue, it’s a bad goal, because it leads nowhere. A slightly better example of your marketing purpose would be to generate traffic to your business website in order to gain visitors and potential sales. But maybe you also want to increase the number of phone calls, trial downloads, or free or paid signups? Just name it and be specific: what exactly you want the customer to do?
- How you will achieve this purpose. This is going to provide a quick outline of the way you intend to achieve this purpose. How will you accomplish your targeted goals? What makes your product or service more desirable compared to others? It is well known that people buy benefits, not features. This sentence should explain what your product or service does that sets it apart from the others and makes it a benefit to your client/customer (remember the positioning statement which we have already discussed).
- Your target market. This should be self-explanatory, but some people forget to think about this part of their marketing. A generalization isn’t going to get you the same benefits as a pinpoint accurate description of your target market. Casting a fishing rod into an ocean without any research on the area could get you a few bites, but knowing a specific area with fish that love the bait you’re using could get you hundreds of bites.
- The marketing weapon you will use. This should be a short list of whatever marketing tools you’ll use. General ideas are good, but again, targeted ideas are great. Remember that you should always think about what can and will work the best for your business.
- Your niche, your position, and what you stand for. The niche is pretty close to your target market but slightly different. The position you talk about is geared towards explaining why your product or service is needed and what your company stands for. If you’re a plumber, it’s obvious that your market is the plumbing industry, but your niche may be the elderly who are too weak to fix the problems themselves.
- The identity of your business. There could be many things that your startup stands for but remember that an identity and your image are two completely different things. The image of your company is an outsider’s impression about you and your startup. Your identity is what you’re known for and what you want people to remember about you. Identity is described just in few words that represent your core values and explain what you stand for.
- Your budget. If you are just starting a business, you should budget only a specific amount of money for the initial stage and then foresee how your marketing will be funded from the revenue it brings in. Generally, most small businesses will allocate a specific percentage of their budget and will hold true to it. Your budget can be anywhere from 3% to 50% (or even more) depending on how much money you want to put into it and how good you estimate your ROI (return on investment) to be. Typically, when startups choose growth instead of profit and they spend more than they earn. Such scalable startups as Airbnb and Uber share gift coupons to boost the enrollment of new users in new markets: they encourage current users to invite their friends by giving a gift (meaningful discount or voucher sometimes $10—20 value). It’s obvious that AirBnB and Uber get a negative income stream with this type of activity (they spend more than they earn), but that’s a strategic decision. They take a loss in the short term expecting to earn profit later because the average customer lifetime value is much greater than the cost of the gift. We’ll talk more about sticky, viral and paid growth engines a bit later.
I would love to be able to share an example of a marketing strategy of a real case startup that I met during my journey of writing this book. But most companies consider their marketing strategy as too sensitive to be publically shared. Therefore, let me share my own strategy with you. While writing this book and having so many personal interviews with startups, it was suggested that I create a series of online video courses for startups. These courses would help startup founders build their profitable and scalable business faster by effectively aligning marketing activities.
What I’ve learned through my own practice and through my interviews is that the best way to keep this seven-point strategy alive is to keep it in one paragraph and keep it in front of you every day.
Define your alternative marketing strategy in seven sentences
If you just finished writing down your main marketing strategy, I’d suggest you take a break and have a cup of tea or coffee or a nice walk in the fresh air. After your break, review your marketing strategy and share it with your colleagues, mentors, or at least some friends to get an external opinion. Once you feel comfortable with your marketing strategy, prepare your possible alternative strategy.
If we continue with the example of my online courses, the marketing strategy could look like the one in Table 38. It is built on the assumption that for most startups, the price ($997 $2,999) might be too expensive. So what could I do if the market experiment proves the assumption to be true, but I still want to market the course to startups? I made one major change (individual consulting and mentoring were removed) that allowed us to alter the penetration strategy. As a result, I also had to adjust the other elements of the marketing strategy.
As we have already discussed, if you are fundraising, it would be wise to have an effective marketing strategy in case the fundraising takes much longer than you expected. If you are bootstrapping, turn on your creativity and think what strategy you could employ for faster growth if you had more resources (money, time, skills).
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