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October 8, 2012

I was spending some time with an MIT senior who is very involved with the startup community and has spent some time working at venture funded companies.  We were chatting a bit about marketing for early stage companies.  How important is it?  Who does it well? Does it even matter? Etc.

She asked a pretty simple question: “What is marketing for a startup, really?”

I was a bit struck by the simplicity of the question. But I think marketing is one of those disciplines that is a bit of a black box to startup founders who come from more of an engineering background.  I’ve heard founders think about marketing both as something that doesn’t really matter (since all that matters is the product) or something that matters a lot and requires hiring a fancy CMO or VP Marketing.

I disagree with both of these paths, but that’s for another post.  In a nutshell, here is the basic way I think about marketing for startups.

First, I think of marketing as a funnel.  It can be a very basic funnel, but you can drill down to much more specific sub-components of the funnel.  At the highest level, I see it as: Awareness –> Conversion –> Raving Fans.  A couple examples on each:

Awareness: How people first hear about your company

  • For startups, this usually means referral from an existing user, PR, or ways that the product talks about itself (eg: “posted by Instagram” on Facebook)
  • A big part of awareness to me is crisp positioning. Potential users need to “get it” right away. You’ll spend 30 minutes reading about each great feature of a new apple product.  But you’ll only spend 10 seconds trying to understand a new no-name product that someone tells you about
  • Product impacts awareness, which seems strange given that awareness happens before trial.
  • The challenge for startups is how to great broad awareness with limited resources.  When Gillette launches a new razor, they spend millions to make sure that in short time, every male knows about it. As a startup, you have to focus on cheap awareness channels and get the most value out of your efforts/dollars.  This usually means focusing on a narrow user segment that has a particularly strong need for your product, and expanding from there.

Conversion: Getting people who are aware to take action

  • Most of the stuff on startup marketing is about this part.  Getting people to hit your webpage, try your product, come back and engage, and ultimately pay. There are tons of great resources on this on the web.  David Skok’s blog, for example, is one of the best for SAAS marketing.
  • But, I think optimizing conversion can be a red herring for early stage companies early on.  Some of our fascination with conversion stems from the desire to analyze and measure stuff.  But without enough traffic, testing conversion is meaningless.  It’s fun to optimize conversion because it’s concrete and rewarding.  But be mindful about whether this effort is a big rock or small rock.

Raving Fans: Getting customers to love you and be evangelists

  • The best marketing is customer success.  That’s why I think it’s incredibly important that the functions of product and marketing not be thought of as two silos.  The job is not done when you’ve gotten someone to pay.  It is done when you have delighted a customer to the point that they can’t help but tell others about you.
  • You want to make it really easy for customers to evangelize for you. Referral links need to work really well, and incentives should feel win-win. Again, the value proposition needs to be very crisp, and easy.  That’s why it’s often best for startups to deliver simple services with discreet value propositions even at the expense of being fully featured.
  • This is why “swiss army knife” products rarely work. You hopefully create a raving fan by being an amazing scalpel for a particular problem.  Then, that person will tell everyone else who needs a scalpel that you are a great solution.  Then, the person who hears the same recommendation 3-5 times, will finally give you a try.  That’s much harder to do if you are trying to be all things for all people.

So, that’s marketing as a funnel.  Next, I think of marketing as understanding your customers.  And I mean really understanding them.  It’s not a box to check – let’s do 10 customer interviews and we’re done.  It a continuous process that goes very deep.  That’s why most early stage companies find success when the founders are solving problems that stem from authentic experiences.

A big part of understanding your customers is understanding customer segmentation.  For an early stage company, the most important goal is creating raving fans out of some market segment.  And when you are starting, narrowly defining your target segment is ok.  VC’s may beat you up about “how big is that market”, but you have a much better chance of success by winning a narrow segment first and broadening vs. taking a shotgun to the entire market.  That’s why I always cringe when I see companies talk about their customers as “everyone that is computer literate, ages 25-60 with incomes over $50K”.  That is not segmentation.

Third, I think of marketing as a cycle that evolves.  It’s neither a machine that you build and then set and forget, nor is it a black box of unfocused activities. Very early on, you might focus quite broadly on driving awareness in a bunch of customer segments to see what sticks. You may later choose to go very very narrow with your marketing once you’ve got a hunch that a particular segment is promising. You might also lean in on one or two tactics that really work to drive low cost customers to your service.  But over time, that channel my change, dry up, or get expensive, so you need to always be experimenting with new channels and tactics.  You need to have the instrumentation to keep a pulse on your marketing machine and know what’s going on.  But you have to continuously experiment and be creative at the same time.

It’s also both a macro and micro cycle.  Even at the level of individual marketing campaigns, the cycle of hypothesis, testing, measurement, and iteration happens.  And for internet based businesses, this is happening faster and faster.  This is why, often, classically trained marketers at large consumer products companies struggle greatly when they start competing in internet businesses.  The cycles of iteration are so much faster, and your resources so much more constrained.

So, that’s it from a high level.

1. Marketing is a funnel of awareness –> conversion –> raving fans

2. Marketing is about understanding your customers deeply

3. Marketing is cycle that constantly evolves

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