One of the most important aspects of the startup journey, is taking the product to market.
Once you identified the problem to solve, designed a solution, created an MVP, took feedback from a pilot batch of customers and incorporated the feedback, what next?
Let us start with the absolute basic of marketing – segmentation, targeting and positioning.
Marketing strategy for startups #1 – STP
While designing the product or the solution, you might have had an idea on who is going to be buying your product or using your services. Now it is time to fine tune it.
First step is to divide the entire universe into homogenous groups of people. The homogeneity could be based on many parameters – age, gender, location, etc. or even factors like things people like or dislike, the way they think, etc. These are known as demographic and psychographic segmentations. There could many more ways of segmentation but let’s stick to these two for simplicity.
Next step is targeting – out of all the segments that you have identified, which one are you going to target i.e. which ones are your customers.
Lets take a simple example to demonstrate these points. Lets say your product is a beauty product for women in the age groups of 30-35. So first we divided the universe based on gender and “targeted” women. Then we divided or “segmented” the universe based on age and chose or targeted the age group of 30-35.
The more detailed you have the targeting, the more effective your marketing will be as we will discuss soon.
Lastly, how do you want to position your product – what do you want the customers to think about when they think of your product.
Lets go back to the beauty product example. You may want your customers to think about glowing skin for example. So that becomes your positioning – whenever they see your product, they should think about glowing skin or vice versa, whenever they need glowing skin, they should think about your product.
The image below (reference: Neil Patel blog) helps explains this concept better. While it says “Social media brand voice”, it is equally true for anything a brand does for its positioning.
Of course, the STP process is far more complicated than described above. You could have different ways to segment the market or universe. You will always be tempted to cater to more than one segment since that would increase the market size. Positioning, with so many players in practically every space, becomes a challenge.
But remember, this is the most important step of any marketing strategy for startups. Anything that a company does, has to be with this customer at the centre. If we are putting in efforts that do not add value to the customer in any way, we are probably not doing it right.
Marketing strategy for startups #2 – PRICE
With that said, let’s move on to the next point critical aspect of marketing – price.
While testing the MVP, you would have taken some feedback not only about the willingness to pay but the pricing in itself. Whether targeted customers prefer paying a one time fee or they like subscriptions for example. While considering the price, it is also important to look at the competition and understand how the offerings differ and thereby is there a possibility to charge a premium or will we have to discount our product.
A lot of brands, once the product is priced, keep running discount schemes. The timing of the discount schemes is also critical. A lot of middle class households in India for example, still purchase a bulk of their monthly groceries in the first week of the month. The reason is simple, the salary cycles are aligned to month ends. They get the salary and use that to buy monthly groceries or FMCG products. So, if you are a player in that space, it might be a good idea to run schemes and discounts during that period to get more customer in your fold. Again, it is critical to understand the behaviour of the customers you are targeting.
Next critical aspect of the marketing plan or the go to market strategy is where are you going to sell your product or service. What channels are you going to use? It is important because every channel comes at a cost, both monetary and time and effort. Again, understanding your customers is crucial – to know where do they usually shop. Do they prefer shopping online or they like to go to a store and make the purchases in the category that you are catering to. If the answer is online, do they prefer brand websites or they use marketplaces like Amazon to buy their products?
Let’s look at some very basic costs that are involved in each. If you want to be on shelves of retailers, you are looking at a fixed monthly “rental” for the shelf and a margin on every sale. Typically, you are also looking a credit period. If you are looking at your website, you are paying fixed costs in terms of monthly hosting charges and payment gateway charges on every transaction. Of course there is a cost of making the website itself. If you are on a marketplace like Amazon, you are paying commissions that vary basis the product category and price. In both the online formats, in all likelihood, you are also paying to get customers to your products.
If you understand the customers well, you can choose to start off with only one channel – save the money and the effort required. Once you have established one of the channels, you can look at expanding your presence on other channels if needed.
Marketing strategy for startups #3 – PROMOTIONS
While discussing the sales channel, we mentioned bringing customer to your product is also a cost which is the next point of discussion – promotions.
Lets break this into little parts to understand better. Firstly, you are going to put in efforts to build your brand. These efforts or marketing spends are not meant for immediate sales but over a period of time, build a strong brand with the intended positioning in the minds of the consumers. Typically, you would talk about the story behind the brand, how is it helping it customers, what kind of facilities and technologies does it have, etc. and not so much about the benefits of a particular product or what kind of discounts are you running. The next level is where you get into specific products and talk about the features, USPs, benefits etc. Lastly, you talk of discounts or offers to make sure the customers get enticed and buy your product.
Now the question is, how and where are you going to communicate these with the customers? Of course, the first major deciding factor is your sales channel – whether it is offline or online or a mix of both. If you are only going to be selling online, what platform do you use to run your ads. Do you also use the traditional media like TV or newspapers?
For example, if you product is targeted towards the say 50+ year olds, you might be better off spending money on Youtube as against Instagram. Within YouTube, you might want to look at news and devotional channels. You might also want to look at some regional content on television or newspapers.
Also as mentioned earlier, you might want use to discounts at the right time to convert customers. You might also want to make use of big events (moment marketing) to create a message aligning with your brand to garner some more eyeballs.
Marketing strategy for startups #4 – DIGITAL MARKETING
Since digital marketing is something that most brands are forced to resort to these days, let us also talk about a couple of important concepts of promotions in the digital space. One would broadly divide the entire space in three very broad buckets:
- Social media marketing (SMM) – Using social media to promote to products.
Starting with creating your profiles on the relevant platforms to posting content leading to paid promotions i.e. running ads of these platforms.
2) Search engine marketing (SEM) – When one searches using relevant keywords on a search engine like Google, you can “bid” to show your ads on the search results page
3) Search engine optimisation (SEO) – Your website organically (without paying) appears on the search engine results page for a particular set of keywords relevant to your product or brand.
So while you work out on all these parameters, the ultimate objective is to get a sale at the desirable price point. While you would know most of your cost elements and thereby be able to set a price, the one element that is usually seen as a “silent killer” is the customer acquisition cost or CAC.
Why is it so difficult to predict the customer acquisition cost? Especially when you are starting off, you would not know how the market is going to respond to your product. So, while you might think getting shelf space at a big retailer will ensure the product might fly off the shelf, in reality the sales are slow. On the other hand, you might think you have nailed the customer profile and with the creatives you have, you are going to sell a tonne of your product when you start running digital ads, but the reality is different.
Lets consider both these examples and how can they impact your business. Lets say your initial estimation was that you will have to spend Rs. 100/- to sell a product that is worth Rs. 500/-. That is a 20% cost of customer acquisition. You interact with the retailer next to your office to place the product. He is going to charge you Rs. 5,000/- as rent for the shelf space (which can fit 100 units) and a 30% margin. So, either you stay at Rs. 500/- of MRP, hopefully sell all 100 units and spend Rs. 200/- on CAC or 40% (150 as 30% of MRP an 50/unit on the shelf space rent) or you go back and increase price to at least be breakeven at the risk of not being able to sell everything. What could be worse is that even at the MRP of Rs. 500/-, not everything gets sold further increasing the CAC (since the shelf space rent remains fixed). Looking at these numbers, you decide to explore SMM and SEM. You are going to run ads, which are largely based on a pay-per-click model. So whenever someone clicks on your ad, you get charged. Most social media platforms give an estimate on how many views and clicks will you get for a given daily budget. But the conversion or the final sale of the product depends on many factors like the ad creative, the target audience, the website functionalities, ease of navigation and payment, the actual product details, etc. Looking at so many factors, it becomes impossible to predict an accurate CAC. Surely, over time, you will learn more about the customers and creatives and refine your strategies to bring down the CAC. Referrals and repeat purchases will also drive your CAC down but to what extent remains not entirely predictable.
This is one area where most startups fail – either by overestimating the market pull or by underestimating these cost elements. With the ever increasing competition, it is critical to factor in figures that are possibly higher than the actual to sustain operations for a longer period of time.
If all these elements of the marketing or go-to-market strategy seem overwhelming, get in touch with our team to help you with the same. Whether you are a tech-startup, product based startup or in the services industry, we will be more than happy to assess your business for free and work with you to make sure your go-to-market strategy is spot on.