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The Hierarchy of Startup Marketing Needs

6 Nov

For emerging businesses, it’s often difficult to know where to start with marketing. With finite resources, entrepreneurs need to focus on the things that will have the biggest impact at each stage of the business. Since marketing includes so many different types of tasks and activities — from researching customer needs to building demand — it can be challenging to find the right place to start.

While every business is different, it is helpful to think about marketing as a series of distinct activities with a proper sequence. The first thing to think about — getting your product right — is the precursor to everything else you’ll do. The most aspirational stages such as building broad awareness and love for your brand require all the other parts of your business and business model to be working well.

Hierachy_startup_marketing_needs

I think about the sequence or hierarchy of startup marketing needs as a simple pyramid with the essential marketing activities on the bottom and the aspirational activities on top. As entrepreneurs go up the pyramid, the marketing components become more expensive and more complex and return on investment becomes increasingly difficult to measure.

The pyramid has seven layers starting with a product foundation and building up to brand love. Here are a few thoughts on each of the levels of the marketing pyramid:

Product — You can’t build a great brand with a mediocre product. Marketing requires making promises to potential users and customers. If the product doesn’t live up to expectations, nothing else matters. Get the product right first before even thinking about investing in other marketing activities. Read more here.

Personality — The world is full of perfectly functional products that nobody cares about. The most successful products have personality: they are interesting, engaging, and likeable. They find their voice. They define what is special about the way they serve their customers and use their mission and values as a filter for product design and communication. They are willing to take a stand and fight for what matters to them and their customers. For more, read this classic blog post on Minimum Viable Personality.

ExperienceSo you have a product and personality, it’s now time to take the next step and make sure that every interaction with customers is as good an experience as it can possibly be. Great customer experiences are carefully crafted and orchestrated and — increasingly — this is the job of the CMO.

Experience is different for every company but almost always requires coordination across multiple people and disciplines. You may need to think through the purchase experience, the way you interact with customers, the experience of opening product packaging, the way that people reach you for questions,  or how customers  get help when something goes wrong. You’ll need to think about the way you communicate with customers, the way you thank customer for their business, the way that you train employees to create as consistent an experience as possible. It’s the visual identity that you use to make sure company or product and all of your communications recognizable.

DemandDemand drives sales which drives revenue and profits which are the lifeblood of any business. For this reason, too many entrepreneurs  jump first into demand generation before thinking about product, personality, and experience. This is almost always mistake.

For most businesses, the quality of the product, personality, and experience determine the economics of demand generation. If you product is differentiated, compelling, and enjoyable than your cost of acquisition will be lower. When you acquire a customer they will be more likely to refer their friends or colleagues. Good things will happen.

While there are a near infinite number of methods to generate demand, management of demand generation really comes down to a few metrics and techniques. The starting point for demand generation is to set a targeted cost per acquired customer (or product sale) based on the financial model of the business. The next step is to test — to try as many methods and messages and designs and to measure the results. The best demand generation methods are scalable and able to deliver large numbers of  acquired customers at the targeted price.

Demand generation is where many companies begin to invest significant resources on marketing as part of their business model.  The more revenue and profits marketing programs are able to drive, the more smart businesses are willing to spend.

Credibility — For people to trust a new product, company, or approach, they need a reason to believe. It’s marketing’s job to help potential customers understand why their offering is better than other alternatives that a business or consumer might consider.

In consumer categories, credibility may come from expert opinions, celebrity associations, exclusive distribution arrangements, or relationships with other businesses that people trust, among other options. In the seventies, for example, Trident’s claim  that “four out of five dentists surveyed recommend sugarless gums for their patients who chew gum” provided credibility for their saccharine-sweetened gum. Sporting gear manufactures relationships with prominent athletes and teams provided similar credibility for their products. For many business-oriented and technical products, credibility often comes from commissioned research, surveys, white papers, awards, or benchmark reports that help people understand the value of the offering.

Credibility comes next in the pyramid because it’s the first step towards broad awareness. To engage people who are less likely to be early adopters of your product or service, you’ll need to be able to demonstrate credibility.

Awareness — For people to choose your product or service to solve a problem or meet a need, they need to know that your solution exists.

The first step to building awareness is clearly defining the audience that you need to reach. The narrower the audience, the easier (and cheaper) it will be to grow awareness. For a useful pharmaceutical that requires a prescription, it should be easier to get thousands of doctors to prescribe the product than to get millions of patients to request prescriptions. If you are selling auto insurance, you probably only want to reach people who own or drive cars.

Once you define your audience, there are many ways to build awareness. In the strongest businesses, awareness grows naturally and virally as your customers naturally interact with potential customers. Unfortunately, few businesses are lucky to have these dynamics. Other businesses need to invest to get their message out through advertising, public relations, social media or through the development of programs that encourage customers to recruit other customers.

Unlike demand generation techniques which typically focus purely on return on investment, many types of awareness investments are more difficult (but not impossible) to measure.

For consumer businesses, building broad awareness for a product requires strong execution on all of the levels of the hierarchy plus sustained investment in building awareness over time. In 2013, for example, 9 companies spent more than $2B each on U.S. advertising.

Brand Love — This is where every business wants to be: to have their product or services broadly known and loved by the people they target. Typically, it takes perfect execution on all of the above marketing elements to achieve brand love.

To get to brand love, you need to start my measuring every element of the customer experience. Using a tool like Net Promoter Score which looks at high likely a customer is to recommend your product or service.

But measurement isn’t enough to be great. You’ll need to get it right at every level of the pyramid including a great product, personality, a memorable product experience, and broad awareness in the markets that you care about.

 

SMS: The Only Effective Digital Communication Channel?

26 Jul

In 2012, we’re living in an era of ignorable information.

According to a study by Mogreet, 88% of emails are never opened, 84% of Facebook news feed items aren’t viewed, and 71% of tweets are ignored. But there is one digital communication channel that almost always gets attention: SMS. An amazing 98% of SMS and MMS messages are opened and read by recipients.

Here are some other interesting statistics on SMS:

– There are 234 million mobile device users in the U.S. with access to SMS capabilities vs. 161 million Facebook users, 28 million Google+ users, and 18.7 million Pinterest users.

– 174 million Americans text daily. That’s 74% of people with mobile devices. In comparison, 91 million people use Facebook daily (57% of users) and just 2.8 million use Pinterest daily (15% of users).

– Every day, 6.4 billion text messages are sent in the U.S. During the same period of time, 3.2B Facebook “Likes” are awarded and 300M new Facebook photos are uploaded.

– While 58% of users login to Facebook daily and 57% of people check email fewer than 4 times per day, mobile phone users look at their phone an incredible average of 150 times per day. That’s roughly every 7 minutes during waking hours.

For marketers, the prominence of SMS shouldn’t be ignored. While the rules for sending SMS are very different than for other communication channels, SMS and other phone application notification methods are an increasingly important communication channel. While these statistics focus on SMS messages, other application-specific notifications are equally as effective at delivering messages and updates to mobile phone users.

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New Research: Only 40% of Your Marketing Budget is Wasted

2 Jun

Yes. Yes. Yes. We’ve all heard too many times the old adage that 50% of all marketing budgets are wasted. But now there is good news: new research shows that only 40% of the average marketing budget is wasted.

According to Advertising Age, new research concludes that “despite six years of obsessive investment in big data, marketing-mix models and other analytic tools, marketers are getting worse, not better, at directing their dollars.”

The research, included in a new book by Rex Briggs, argues that marketers focus too much on driving awareness and not enough on driving advocacy. In a world of social media, it’s never been more important to drive advocacy.

It also asserts that most modern media mix models do not reflect the complexity of the modern media world. As a result, advertisers over-invest in TV and price promotion and systematically underinvest in  social media. Recent analysis by Mary Meeker also suggests that this may be true: that print advertising in particular receives too much spend while social and mobile receive too little.

According to the analysis, “the underinvestment he finds in social media doesn’t broadly extend to digital. Since 2006, return on investment from branded-content efforts has skyrocketed, even as ROI from digital advertising has been flat to slightly down, despite a steady drop in digital ad prices. A big reason for the latter two trends has been publishers placing more ads and clutter on web pages, which he said has increased revenue per page but eroded impact and CPMs.”

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