A venture's first strategic marketing focus should not be end-user
customers or, in fact, the commercial marketplace at all. Especially for
launch-stage companies, the first critical marketing issue is not cozying up to
end-user customers. The first critical issue is being able to
market the venture opportunity to appropriate sources of funding for the
company itself. The most
appropriate initial funding source may be employees, family and friends,
angel investors, the Ben
Franklin Technology Center, a
venture capital fund, a
corporate partner, a licensee,
or some combination of these. Given the fact that "walking around money" is
usually scarce for entrepreneurs, it is surprising that companies often pursue
funding from sources that clearly represent a mis-match. For example, it is well
understood that banks are not in the business of providing equity-type funding
at all and that banks generally do not provide loans to very small companies
with very short histories, limited assets, and slender cash-flow. For a young
company, its first challenge is to identify the types of funding sources that
match its situation and then to market specifically to potential funders in
Entrepreneurs may rationalize any
funding arrangement that allows them to proceed by believing that any problems
(A) will lie in the future and (B) can always be fixed by (take your choice) (1)
eventual positive cash-flow, (2) attracting more funding, and/or (3) landing a
big customer or achieving a major technical breakthrough. Here's an alternative
viewpoint: until a company can assemble an appropriate funding program, perhaps
the marketplace itself is trying to give the entrepreneur an important message.
If a company tries to compete with inadequate resources or with resources that
do not match its situation, the result may be worse than delaying implementation
long enough to work out this issue.
In the commercial marketplace, before you can be effective in marketing to
targeted end-user customers, you should
market the company itself.
Young ventures, especially brand-new companies, often overlook the fact that the
marketplace has never heard of the company and that this can truly make a
difference. Many young entrepreneurial companies offer strongly competitive
product performance, features, and pricing that are meaningful to prospects. But
they feel at a strong competitive disadvantage due to their company's
relatively small size or its newness.
An entrepreneur recently talked to me
about this issue and reminded me of the time-tested marketing adage: "If you
can't fix it, feature it!" He wasn't the least bit defensive or apologetic about
his company's situation; he actually took pride in it. To provide comfort for
targeted prospects, he markets his company at the outset of the marketing
message. He pointed out that newness,
and the pioneering spirit are
positive marketing messages. In western business culture, it is
well-accepted that these values are more likely to be found in smaller, younger,
less traditionally structured companies. As Pop-Eye existentially observed, "I
yam what I yam." So is a young venture. No sense in disguising that fact (it
doesn't work). Or in apologizing for it. As noted above, that is throwing away
the chance to claim "newness" and entrepreneurial agility as assets.
In addition, it can be helpful for
young ventures to use a "buddy system" in approaching the market. Smaller
entrepreneurial companies can often be useful (and welcome) partners for larger,
better established (and well-recognized) companies. Sometimes the relationship
can be formal (as in a corporate development or co-marketing partnership) and
sometimes the relationship can be informal (for instance, when key individuals
serve together on a trade or industry committee). Sometimes the relationship can
be merely the result of a straight commercial transaction ("although you
probably haven't heard of our company before, I am proud to tell you that one of
our early customers is GE/L.L. Bean/IBM/NIH" etc.).
Brand names are effective validators. If
your company's name is not yet recognized, you can often derive benefit from
your key accounts. By taking advantage of such relationships, many small
growth-oriented companies have leveraged their marketing programs and have
gained entrιe to prospects that they could not have reached by themselves.
Once your company is being effectively positioned in its marketplace, if your
marketing program isn't specifically designed to
fulfill the objectives of your current sales program,
the whole effort is virtually worthless. Tough info, huh? Too often, young
innovative companies put lots of faith in the inherent (and, they believe,
self-evident) attractiveness of their products or service offerings. Such
companies have an eerie anticipation that the functionality of their products or
services will be recognized and appreciated by potential customers. Now if this
were actually true, just think how many more companies would be around to
celebrate their fifth birthdays. The fact is that many young companies with
superior products just don't make it in the competitive market environment.
This should be a lesson to companies that are now in the pre-launch or early
Synergistic Selling: 3 Pillars
Selling Is Problem Solving
When a company offers a functional,
attractive product with meaningful features that are competitively priced, why
would its marketing program fail to generate actual sales? One answer is that
prospects and customers do not care directly about the functionality of
products. Prospects and customers care about benefits. And, more
specifically, prospects and customers have to go past the benefits to deal with
of those benefits in their own organization.
In terms of marketing, the world's
most important radio station is WII-FM. Why? Because the call-letters stand for
"What's-In-It-For-Me?" the central question that any prospect or customer will
be dealing with (whether consciously or unconsciously) while receiving your
company's marketing message. The entrepreneur must address this question while,
at the same time, providing a marketing message that (1) helps inappropriate
prospects take themselves out of consideration (dealing with inappropriate
prospects costs money and wastes valuable time), (2) prepares true prospects to
be receptive to the sales message they will eventually get from you, and (3)
leads them directly into the selling cycle. Take a look at your own company's
situation. Are all of these issues being addressed by your marketing? Is the
process designed to cause this to happen? If you were to make modifications to
improve the effectiveness of your program, what would you change? Why? Look at
companies that are clearly succeeding. What do they appear to be doing right?
How could you apply some of their techniques to your own company?
Your "exit strategy"
is actually a marketing issue. Right at the outset, it's important to understand
(and be able to explain) how you (and, more importantly, your funders) can get
"out." Given your expectation that your company grows and prospers, if you
cannot yet describe which type of purchasers would eventually want to buy into
it (or acquire it outright), you have a marketing issue. Dealing with this issue
should influence the way you organize your young company, the type of funding
you go after, and the way you operate the company to get it positioned for that
ultimate exit opportunity.
Remember that the objective behind a
venture is to create not just products but a company which is itself
valuable. And ultimately to be able to realize the value of the company itself.
Effective marketing results don't just happen. They must be carefully planned in
To Win: 3 Strategies
peculiar "1/2" Marketing Issue
Who says that there is a marketing opportunity in the first place? In the
venture fund where I am involved, one of the four criteria for investing in a
portfolio company involves the basic market opportunity for that company.
Specifically, we look for companies involved in markets where the size of the
significant. There have to be "enough" total customers for a given company
to gain a share which will prove to be meaningful in its own right. It is
equally important that the company be in a market that is growing.
Obviously, it is much more difficult to create a successful venture in a
stagnant or a contracting market. Finally, it is critical that the market
structure be compatible with the entry of a new, initially smaller
competitor. Markets that are locked up for whatever reason mean that
young companies will, in general, have far greater difficulty in reaching and
signing up customers.
Some eager entrepreneurs launch a new
venture without actually talking with a single prospective customer or with
anyone else who might be truly knowledgeable about the characteristics of the
market in question. A niche market is not necessarily a marketing opportunity.
The issue is
Looking over its portfolio, one
venture fund analyzed the characteristics of companies that had become
successful. In all but one case, the
of every successful company had previously "carried a bag" (i.e., had had
experience in actually calling on prospects and customers). And in all
but one case, the CEO of every successful company had actually called on
deal-targeted companies as a basis for creating the company's business plan
and its marketing program. The information and candid
feedback that can be provided by prospective customers is invaluable. Access
may be easier than you might imagine. Yes, sometimes even
before you have either a product to sell or even have formed the company.
Virginia G. Bonker
230 Lackawanna Dr.
Andover, N J 07821-4113
Tel 973 426-1767 Fax 973 426-0224
5700 Kennett Pike
Wilmington, DE 19807-1312
Tel 302 426-0981 Fax 302 426-0982