The Importance of Marketing to the Success of a Start-up

Want Start-up Funding? Get a Marketing Plan

March 4, 2010

Start-ups need a marketing plan because these days investors are not interested in funding companies that don’t know how, where and to whom to sell their product or service. 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. Business development seeks to identify new markets to apply and sell your product, and seeks to develop partners. Sales reaches out to those leads, searches for potential customers, and converts them into paying customers. Marketing and business development start before any sales efforts can begin. A vague plan for marketing will not win over investors these days. I’ve heard many marketing plans with no more details than common terminology of going viral, using social networking, and offering free trials with not much more than those terms as a marketing strategy. Would you buy a house sight unseen from the listing description of it – 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?

In the early stage, marketing activities often center on creating awareness as well as lead generation. Creating awareness and familiarity for the product and the company before, during, and after the development process ensures the sales strategy and revenue plan can be attained. These sales leads enable the sales team to make the deals and capture the revenue after the product is available. Marketing efforts can start up to 12 months before the product is generally available to the market for purchase.

All products solve a problem for someone somewhere. The first steps is identify the people who are the most desperate to solve this problem. Focus on customers who absolutely must-have your product. The second step is to brainstorm to find as many places where you can access these customers and build awareness among their communities. Marketing requires planning and execution discipline – prioritizing the approaches, trying new avenues to reach the target market, tracking progress, and so on. One of the biggest mistakes in a start-up is the technical founder who is trying to do both the product development and the marketing. It doesn’t work. The technical developer is usually an introvert, who prefers to be in the office hacking code and the marketing person is an extrovert, who just wants to be out of the office, talking to people, searching for new opportunities and deals. Finding a strong technologist and marketer in the same person is as likely as Nobel Prize winning scientist also winning an Olympic gold medal.

Marketing is not free nor is it inexpensive. The right marketing plan is often or should be a significant part of the budget for a start up and should be included in any discussion related to funding and sales revenue. If you survey publicly traded companies, you’ll find that sales and marketing expenses are typically 1.5 to 2 times research and development expenses. It’s rare for a start-up to fail because the company couldn’t produce the technology. Investors often consider marketing and sales to be the first stumbling point. A consequence of startups being on shoestring budget is that the marketing and initial sales effort is often assigned to a single person. A startup needs a seasoned marketing person. But a good, experienced marketing person knows that investors consider marketing to be the first big hurdle and won’t join a startup unless they know they can succeed with the product. They don’t want to be a scapegoat and they don’t want a failure on their resume.

A second mistake I’ve seen is when a startup realizes they need a marketing plan to get funded or they need to respond to pressure from their investors so they hire a marketing consultant to write THE PLAN. But they don’t hire anyone to execute the plan. Times passes and then they eventually hire the first marketing person. Now, the investors may be holding the startup accountable for the milestones set forth in the marketing plan. The new marketing person may not agree with the marketing plan and may want to modify or completely re-do the plan. Not to mention, how can product development create the right product for the customers without feedback from the customers. The startup is in a quagmire.

Marketing interacts with the customers to prep the market for the product before its even completed development. It should not be an afterthought. Ultimately, what the customer needs and is willing to pay for rules a startup and marketing is the spyglass into the customer’s perspective.