Of all the startup businesses launched in the world, only about 8% survive. There are many opportunities to “die”: uninteresting product, money waste, poor team, lack of investors attention. But one of the serious reasons for the failure is digital marketing mistakes or a complete lack of marketing, says Donatas Jonikas, a professor at Klaipeda University and digital marketing expert.
After analyzing more than a hundred unsuccessful startups, CB Insights identified the most common reasons for their failure. Their list is below in the infographic. As you can see, 14% of startups blame their failure on poor digital marketing. And this is more than every 10th!
In such circumstances, creation of a good marketing strategy is vital for a startup. However, what are the “pitfalls” to watch out for, so that your digital marketing (or lack thereof) doesn’t "drag you to the bottom" - let's figure it out.
1. Think about marketing after a product is created
One of the most common and at the same time the most costly mistakes that a startup can make. Startups seem to forget about the obvious risk of creating a product that no one will buy. They spend time, effort and money, having no idea who and how will buy their product and whether anyone will at all.
Many founders of startups, especially technological ones, believe that the most difficult thing is to create an innovative product. There is some truth to this, but is it enough for success? Of course, it is important to create a quality product, but if it is not in demand by users, this is all a waste of time, effort and money. Many people think that digital marketing and PR are just communication tools that should be connected at the time the product is ready and the first investments are made at the Seed and Stage A.
Solution: In fact, digital marketing and PR-strategy should be worked out at the stage of startup initiation. After all, starting a project without knowledge of the market, target audience and its segments basically a disaster as it is. Use tools like digital marketing, exhibitions, conferences, and media publications. Strategies may not be final, but should include a general plan of action. Over time, in any case, you will encounter the need to inject money into digital marketing and PR. Therefore, these tools are fully connected already at the stage of product launch.
2. Ignoring competitors
Even if the solution is completely innovative and there are no direct competitors yet, do not relax. They will have to educate the consumer and actually build a niche in which a competitor can come at any moment.
If you already have rivals, create competitive advantages. Perhaps the most common mistake of technological projects is to copy competitors without unique differences and delay the release of the product. The market is growing organically. In practice, it works something like this: there are only three players, but while the fourth competitor is starting up, he is no longer the fourth, but the ninth - several companies simultaneously saw the prospects for the segment.
In general, there are two serious threats:
- the product is not yet needed by the market (customers solve the problem in another way)
- the product occupies its niche (soon it will be copied or an alternative will be offered).
If the product helps to solve an existing problem, then it is worth considering how customers solved or ignored it before you appeared - this is an indirect competition, which is often overlooked.
Solution: Be sure to study the market, create a portrait of a potential customer and of course check your idea. It makes sense to use specialized solutions such as Canvas by Peter Thompson. For more information on the list of useful solutions, see our article 10½ True Tips for Startup Success in 2019.
3. Invalid Digital Marketing Budgeting
If you are targeting a large market, you will probably need a large budget to convey to your audience your unique value proposition. Nevertheless, you should not fall into despair: not all digital marketing tools need a lot of money. Before investing in a startup, any rational investor will check if there is significant traction. Investors need evidence that the business model is viable and solid. This cannot be proven without marketing results.
This is natural if you do not want to spend a huge amount of money on digital marketing at the initial stage. But you can plan and run marketing experiments to:
- find out if your offer meets the needs of the market;
- check your sales channels and get data on a possible growth engine;
- then you can prepare a comprehensive digital marketing plan with the calculation of potential profit;
- look for investors to ask for the funds necessary to implement the marketing plan.
There are two polar approaches, and both are wrong. The first is a misinterpretation of the principle of “growth hacking”. But the hope of a sharp growth can lead to a quick and thoughtless drain of investor money for intensive promotion and leave the company without money and without customers. There was no growth, the money was over, the startup closed.
The second approach with the wrong budgeting is to use only free promotion methods. No matter how brilliant a startup is, promotion cannot be made without advertising investments.
Solution: Distribute the budget wisely and consult experienced professionals for advice. After that, do a few short advertising campaigns on small budgets to test different tools e.g. social media marketing, affiliate marketing etc. This approach will save you from "draining the budget" for one or two specific tools. In addition to advertising, be sure to use crowdfunding platforms, such as Kickstarter, and resources such as Angelist, Crunchbase.
4. Lack of market verification
Often, startups refuse to do market research and alpha testing and launch open beta testing at the same time as a large-scale digital marketing campaign. But, ironically, it’s after this t critical flaws are usually discovered in the product. According to Professor Jonikas, more than 40% of startups that try to solve really serious problems and create exceptional value do not conduct market testing or do it wrong. For example, it’s not enough to get information from the buyer about whether he likes the product or not. You need to find out if he will buy a product or make a pre-order. You will never pass market testing until you receive money from customers.
Solution: Do not neglect market research. If you don’t have the opportunity to spend money on a full-fledged research, gather at least a focus group or conduct several interviews to get feedback from real users. They will let you know what makes the product interesting and what is definitely missing. Only after this can the first pilot advertising campaigns be planned. A thorough analysis of the target audience is very important and nothing will demonstrate the reaction of users in the market better than the MVP. Read more on this topic in the article How to create quality MVP for Startup.
5. Focus on investors, not users
Too often, startups focus on shows and pitches of their ideas instead of proving the existing growth potential and their business concept in real conditions. Unfortunately, some investors encourage this behavior, favoring vivid startups. It’s okay to desire investors’ approval - investors give money, they have network of acquaintances, quick solutions. But all this will only make sense if you have a valuable and proven offer.
Solution: Prioritize correctly and do not forget who you are creating your product for. If your client is happy, much will follow automatically, including investors who will knock on your door with offers.
6. Lack of foundation for growth and scalability
There is another common problem, which is that the project does not initially lay the opportunity for further development, adding new functionality, etc. Growth is important and this is exactly what you should focus on. The ideal solution in this case would be to hire a separate employee whose main task will be to ensure the growth of the startup.
In addition, many startups would like to receive help in the form of growth hacking. Growth hacking is a strategy when every business solution is focused exclusively on growth. However, a large number of startups are ready to spend their energy and resources on growth hacking without checking the value of their offer (which is fraught with the danger we mentioned above). Only about 20% of startups develop cross- and up-sales strategies. This means that the remaining 80% of startups had no idea what they would do with potential customers, even if the growth hacking was successful.
Solution: Most startups are looking to grow, but only a few have a well-prepared foundation for this. Before you head for rapid development, make sure that:
- your niche is not too narrow, and the product may be interesting for different segments
- you’ve developed a proven sales strategy
- you’ve developed plans for further work with potential clients
Of course, in addition to digital marketing, in the process of developing startups, there are many other important points. All of them are inextricably linked and the mistake made in developing the strategy - general and marketing, can lead to the collapse of the whole promotion. To avoid potential mistakes and succeed read other materials of our blog, for example, this one.