Let's start with training on cats - namely, we will figure out what marketing is and how exactly startup marketing differs from any other business.
What is 'digital marketing'
So, you have (or will have) a product. This product can be used by certain people - your potential customers. All activities aimed at connecting your product and your potential customers are marketing.
In other words, the task of marketing is to let people who can find your product useful know about it.
You can use analog or digital channels for your marketing (for example, a billboard, a flyer, a business card, VS advertising on Yandex, a website, a Facebook page). When you use digital channels to attract potential customers, you are engaged in digital marketing.
Wikipedia gives the following definition: “Digital marketing (digital marketing, digital marketing) is the marketing of products or services using digital technologies, mainly on the Internet, but also including mobile phones, display ads and any other digital media.” Given the current boom in digital transformation in business, we can safely assume that most, if not all marketing activities, will become digital very soon.
Digital marketing can be divided into subgroups depending on the communication channels that you use to contact your potential client: social media marketing, search engine optimization, content marketing, mailing lists and marketing automation, and so on.
What is a marketing strategy?
Startup marketing strategy includes several main aspects:
- Product Marketing (product marketing) - it includes all marketing activities aimed at:
- understanding of market conditions, landscape, and opportunities;
- development and improvement of the product that customers need;
- a plan for entering the market (a plan of marketing campaigns that will cause your customers to discover your product).
- Business marketing - supporting materials and marketing activities necessary to attract investors, business partners and mentors. For example, creating a presentation for investors or a PR publication in the press.
- Internal marketing - it includes the actions and tools necessary for your business idea, vision and values to be widely accepted and used by your rapidly growing team. It also includes actions to make your company look attractive to your current and potential employees.
How are startups special?
The difference between a startup and any other business is its main goal. A business usually seeks stable, long-term profitability, and a startup is focused on rapid growth and intends to become a large company relatively quickly.
In addition to basic business principles, a startup’s marketing strategy should follow two rules:
- It should adhere to the lean methodology ( lean startup is a business development methodology whose goal is to shorten product development cycles and quickly detect the viability of the proposed business model). In short, it all comes down to a simple three-step program: build - measure - improve. When working on your marketing strategy, keep this approach in mind.
- Marketing campaigns should easily scale - when choosing a strategy for attracting customers, channel and actions, keep this in mind first.
For example, if your sales funnel includes a one-on-one meeting with your potential customer, and your goal is to add 1,000 customers every month, this means that your team must conduct at least 1000 additional conversations per month. You can replace this meeting with something else - for example, webinars.
Most startup founders (especially those whose expertise is in the technical fields) do not do marketing at all until they get through at least the first round of financing.
This explains why the lack of demand in the market is the main cause of startup failures , and the third is the wrong team. Therefore, we consider startup marketing as part of a business strategy, and not just a way to spend money on advertising.
With the cats finished - we delve into the details.
Marketing Costs, Metrics, and Key Performance Indicators (KPIs)
Conditionally, your marketing budget can be divided into 3 main groups: expenses for the actual marketing itself, employee salaries and opportunity costs.
Marketing expenses include all expenses that you spend on marketing (advertising, marketing tools, expenses for events, etc.), as well as expenses on discounts and free products that you give away as advertising.
Salary is the money you pay your marketing team. This includes: salary and other deductions related to it (usually the largest share of expenses, plus it is the most difficult to reduce), as well as payment for consultants (payments to agencies or mentors / consultants).
I recommend a conservative approach when hiring people, especially at an early stage, as the only way to adjust your salary costs is to fire someone or cut his / her salary, which can negatively affect the mood of your entire team.
Finally, opportunity costs. Each time you work on marketing tasks yourself or ask someone from your team to do this work, you spend time that you can spend on something else. For example, when your developer adjusts the speed of a website to improve SEO, he doesn’t work on the new feature that your customers want.
Opportunity costs are difficult to calculate, but it is important to remember them.
Now metrics and KPI. Remember lean methodology: build - measure - improve? Take some time to figure out how to measure your marketing efforts.
The key to successful startup marketing is finding channels that will lead leads and customers at an affordable cost to you; a prerequisite - these channels must be scaled.
Therefore, when testing your channels, you need to keep in mind at least the following indicators:
- CPA (cost per acquisition) - how much will it cost to attract one client through a certain channel
- Customer’s lifetime value or LTV (lifetime value) - the total profit of the company received from one client for the entire time of cooperation with him, acquired through this channel,
- Channel volume and its growth potential (how many customers can you get through this channel and what additional costs you need to scale) - this is necessary in order to determine what to focus on first
- Profit (LTV / number of users - CPA) - what is the final business result for this channel. The channel with the highest profit will be your main marketing goal.
In the world of startups, it is difficult to determine even these basic indicators due to lack or complete lack of data; in this case, start measuring this data today, and in time you will get a clear picture.
Startup Marketing Strategy
As mentioned earlier, marketing should be part of your startup’s overall business strategy, preferably from day one. To ensure that business and marketing are aligned, follow these steps when developing a marketing strategy.
Find out everything you can about the market, users, potential competitors and companies that have tried to solve this problem before.
At the earliest stage, your focus should be on marketing research. Investing in this work now can save you from a headache later. The more you learn about the market, users, and potential direct and indirect competitors, the better you can create a product or service.
It might seem like an overkill to research the market when you don't even have MVP. My experience shows that it’s better to find out now what your future users need than after you have spent hundreds of hours and your retirement savings on creating a product that no one wants.
State WHY you create this product (what problem you solve).
Define the values and goals of your business, understand what connects you and your customers , and formulate your USP (unique selling proposition) - an explanation of why people should love your product and buy it from you.
Make sure that your company uses a strategic approach to communications - you are aimed at the right people, know their values, pain points and indicators of success and speak their language.
At this stage, you need to think about the basics of branding - to develop a logo, slogan, company style guide, etc. All these elements are needed to communicate with your customers at the level of sensations, to create trust and commitment to your name, to your brand.
Plan your marketing activities.
Following the principle of 'lean methodology', I divide all types of marketing activities into three groups: product development, channel search and brand management.
Product Development:
At the first stage, you are focused on the product, and your marketing too. The easiest way to attract customers is to use a product that you have already created. How to do it:
- Invest time and resources in the quality of your product. Listen to your users, their problems and suggestions, and improve the product to such an extent that admired people will begin to share it with other people. Conduct alpha, beta and other tests, user research, usability tests, and so on.
- Invest time in SEO, referrals and viral marketing.
- Focus on the sales funnel and conversion optimization at every stage - traffic quality, landing pages, website, mobile app, etc.
- Any advertising in which you participate should be at a very basic level - let your first users disseminate information through social networks, referral programs, beta invitations, free trial versions and other methods of creating excitement.
- Another important area of marketing efforts here is the creation and development of materials for investors.
At this stage, your marketing budget should consist mainly of development costs (opportunity costs), and growth should depend on the product.
Channel Search:
- At the second stage, you begin to invest in the development of customer acquisition channels that can be scaled up by adding only additional marketing costs (without significantly increasing labor costs).
- Such channels can be paid search traffic (google ads, yandex.direct, etc.), mailing lists and marketing automation, online advertising.
- What should happen at this stage: for each channel, you need to test different settings, texts and creatives, as well as other possible variables, to find out if you can attract a client within your KPI for CPA. Then analyze the overall results by channels / targeting / creative, paying attention to LTV and profit from customers acquired in this way, and first invest your money in the most profitable channels.
- After you have tested your paid scalable channels, and you already know what you should focus on, it makes sense to hire someone in the company to manage this specific channel (s) on an ongoing basis.
Brand management:
- This group includes the most expensive, least scalable, and time-consuming marketing activities. They need to be dealt with when all the previous points have already been completed.
- This includes: content marketing, community management, PR, image advertising, etc.
- Such marketing activities are required in the relatively late stages of startup development, when the marketing team is already hired and the company has the resources to further increase the marketing budget; they require a lot of work and take a lot of time.
This classification is a generalization, not a universal rule. You should always pay attention to the characteristics of the market and the behavior of the target audience in order to develop your own right strategy.
Some aspects of marketing that you should pay attention to
Each startup is different from the others and needs its own strategy; however, there are several practically universal marketing tools that have proven their effectiveness over and over again.
- User experience - the very first and most important step to promote your product product is carefully thought-out UX solutions that provide an easy and understandable way to work with your product.
- Referral programs - when people like something, they tend to share it with other people. Make it convenient for them to do this; moreover, if you find a way to properly motivate your customers to share information about your product, the results may surprise you.
- SEO (including voice!) - The level of trust in Google sometimes reaches the point of absurdity. We look there for recipes, psychological advice, instructions for events and for the repair of our cars. Make sure that when people search for something about the problem that you are solving for them, your name appears in the search results.
- Email is the easiest, cheapest, but also the most 'underutilized' tool in marketing.
- Viral marketing is a complex process, but it brings excellent results if you come up with the right idea and how to spread it. To succeed in this, the main thing is to find an excellent creative team for your viral campaign.
- Micro-influence (micro-influencers) - almost every business requires building relationships. The more you invest in building deep ties with your brand advocates, the easier it will be for you to increase awareness of your product in the future.
Marketing team: hiring, outsourcing or a hybrid?
Delegation is one of the most important skills for startup founders. But whom and when should you hire? Hire people on your team, look for an agency / freelancer, or use a hybrid model?
In my experience, the hybrid model gives the best result, but, again, each case is individual.
Hiring
Advantages: your director / marketing manager will have a deep understanding of the product and the business as a whole; They are closely connected with the management, therefore they quickly respond to news and changes of the company.
Disadvantages: even if you hire someone who does a very good job, he / she will still have areas of knowledge where knowledge will be limited; your team cannot scale quickly; hiring requires operating expenses such as management, equipment and office space.
Outsourcing
Advantages: with outsourcing the team it’s quite easy to control expenses - you can quickly increase and decrease the budget; For each task or channel, you can select a separate contractor, thus working with experts in each field.
Disadvantages: an external team needs a briefing and constant updates; ongoing communications are more complicated than with hired employees. They are good for regular marketing campaigns and ongoing operations, for example - for managing contextual advertising, but not ideal for general marketing strategy and management.
Hybrid
In this case, you have a team of permanent employees who is responsible for tools and communications with agencies and freelancers (general strategy, style guide, briefs, article plans, target audience and persons, etc.). Your internal team also controls the timing, budget and ensures the quality of marketing activities.
At the same time, you hire external experts for specific tasks and channels; Depending on the situation in the business, you can increase and decrease your marketing by adjusting budgets for external agencies and contractors.
Marketing budget
Salary expenses
The table below shows the salaries in Seattle, WA (where I live) for various marketing positions.
These figures include: base salary, total expenses (base salary plus annual bonuses and benefits, expenses for social and medical services, paid leave for 18 days and medical expenses) - per year and per hour.
When exploring the salary market in your region, you can roughly imagine the adequate cost of contract work or the hourly work of a specialist of the level you need if you do not already have a budget for hiring.
* based on data from glassdoor.com, March 2019
Budget planning
In accordance with the cost structure given above, you can plan your marketing budget, keeping in mind the 3 main types of your marketing costs: development costs (opportunity costs), marketing expenses and payroll.
At the very early stage, I do not recommend hiring marketers, as wages are that part of the marketing budget that is difficult to change. When deciding to hire, compare your costs with those of contractors - especially at an early stage; contractors are cheaper on average.
At the same time, you need at least one person in your team who understands the product, knows the market conditions and is an expert in the field of marketing, communications and customer relations. If you do not have such a person, invest in finding a consultant or mentor who will help you develop a marketing strategy and help delegate some marketing activities to freelancers or contractors.
When testing your channels, it’s useful to set aside time and budget in advance for experimenting with each channel in order to try different targeting, creative, text, and so on. Keep in mind that sometimes it takes a lot of time and A / B testing to come up with Facebook ads or choose the best display ad. Bids and, consequently, the price per conversion can sometimes be reduced by 10-20 times, optimizing various parameters. Plan at least 3-6 months of ongoing investment for each channel.
For a part of brand management marketing, budgeting is very difficult to predict. Each case is individual. Some startups gain fame in a natural way by attracting a famous team member or investor, or by working on a popular issue; others should invest in building relationships with influential people and journalists, creating quality content, and buying expensive ad placements.
Key points of the article
- Marketing is not only advertising, but also user research, understanding of market conditions and creating a great product. Invest in a marketing strategy from day one.
- When marketing a startup, stick to Lean Methodology - “build, measure, scale”
- To do this, start by understanding your marketing costs, indicators and KPIs - CAC, LTV, profit.
- Using your metrics, look for channels to attract customers that scale and suit you at a cost.
- Focus your efforts on product development and scalable channels until you have exhausted all the possibilities; then go on to branding and content marketing, as these methods require large budgets and cannot scale.
- Marketing tools that have proven themselves: UX, referrals, SEO, email, viral marketing, micro-influences.
- Hiring: You must have an expert who knows your business, understands the product and can help you determine your marketing strategy as early as possible. It can be your co-founder, someone you hire, or your mentor.
- Hiring: Use your contractors to complete other tasks until you find out for sure that you need someone to manage a specific activity, and then hire that person on the team.
- When planning your marketing budget, remember that each paid channel will require time and money for tests and experiments. I recommend budgeting from 3 to 6 months of work with each paid channel.