The power of marketing for startups
About 90% of startups fail and 10% fail within the first year.
The funny aspect is that this failure rate maintains almost the same across all industries, meaning there might have been some internal reasons behind the fact.
What are startups and why a high failure rate?
Startups are businesses that want to disrupt industries and change the world—and do it all at scale. Startup founders dream of giving society something it needs but hasn’t created yet—generating eye-popping valuations that lead to an initial public offering (IPO) and an astronomical return on investment.
It is common to see among the startup pitches, discussions related to exponential growth and innovation. The growth usually is supported by the technology used, providing leverage; and innovation by the adoption of new techniques, testing new products or markets. Although, disrupting industries at scale is not an easy task.
According to CBInsights, the number one reason why startups fail is due to misreading market demand — this is found in 42% of cases. Other notable cases of failure are a weak founding team (23%) and being beat by competition (19%). Other major reasons for startup failures (at least 10% or above) are pricing/cost issues, user-unfriendly products, poor marketing, and product mistiming.
How marketing can make a difference in startups’ reality?
Market demand, competitors analysis, price definition, and product strategy are all marketing expertises!
Most people attribute marketing to only advertising strategies, however, it is much more than that. The marketing objective is composed of a set of activities that increase brand authority and generate sales demand.
Let’s see how marketing can contribute to the reasons stated above:
- Market demand: demand is defined as the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time. A good marketing team while analyzing market demand has the responsibility to ask themselves and propose answers for the following questions:
- What is my target audience? Besides them, who are other possible buyers? (consumers)
- Who are my competitors? How are they offering their products? (competitors)
- Where are they? Where should I be for them to find me? (channels)
- Competitors analysis: there are several tools that marketers use to analyze competitors, and it is wrong to think that identifying competitors is the only thing needed. A good competitor analysis is composed by:
- Competitors identification
- Calculation of market share (yours and per competitor based on your market)
- Analysis of your strengths and weaknesses
- Identification of strengths and weaknesses of your competition
- Identification of your strengths that overcome weaknesses of your competitor (your differentiation).
To support a competitors analysis, marketers use tools such as:
- Price definition: price depends on so many variables, some tangible and others intangible. Marketers are trained to identify the variables necessary to set the correct price for each product or service. If you price it too low, depending on how the strategy is executed, people might not see value in your product. Otherwise, if you price too high, you might lose possible buyers.
Some insights about pricing strategies:
– Variable and fixed costs must be taken into account.
– A clear revenue and contribution margin also must be included in the calculation.
– Competitors analysis is needed for differentiation and communication strategies.
- Product strategy: most startups offer a scalable product using technology as their base. Two important terms to support user-friendly are UX and UI, user experience, and user interface (respectively). Both techniques involve customer relationship and design, which as 2 aspects that marketers specialize in.
It is true that startups that do not invest in marketing are faded to be part of the 90% (failure of startups) statistics mentioned in the beginning. The role of marketing became a must for businesses to grow and maintain a sustainable operation.
Every startup that wants to succeed must invest in marketing, and better if focused on 3 main focuses: branding, growth, and analytics!
Brand = take care of your image and know how to position yourself in a vast market!
Growth = generate leads, increase demands.
Analytics = control and monitor everything for more effective strategies.
How would you evaluate your startup based on these 3 focuses?
Get in touch with me for more insights about brand, growth, and analytics!