We are approaching the end of our series about the most common mistakes that start-ups make. We already identified inadequate scaling as a crucial issue, in our first article, and went deeper into the motivations behind going solo, or – with other words, and a bit more generally – becoming a one-man show, in the second one. We continued with the lack of business planning, which also meant the lack of a business model in some cases, in the third article, which is – unfortunately – not exclusively the issue of the start-up companies. We highlighted the risk of the lack of market intelligence and validation in the fourth article, which has been far more frequent than we originally thought when starting the screening of companies for one of our clients.
In this present article, which is the closing one of this series, we picked a real killer issue. Believe it or not, if we were asked at the beginning of our engagements what we would expect the least to be a problematic field among start-ups, we would have – most probably – voted for this. Why? This is an area which we hear about everywhere, loads of courses are available for beginners and also professionals, such as material to be up-to-date about the most recent developments, novelties, etc. Nevertheless, our experience is rather surprising – in the negative sense. Let us see, why.
5. LACK OF PROPER MARKETING
First of all, we hardly met any entrepreneurs who knew what marketing really meant. Yes, we were at least that much surprised… Nevertheless, after the initial conversations, we became quite confident about what to look for and where… This topic – similarly to the others that we have already presented – is not without extremes, either, so start with one of them.
Lack of marketing. When we say ‘lack of marketing’, we mean that. We meet otherwise talented and enthusiastic entrepreneurs with adequate visions, relatively well-established businesses, and – in some cases – also some strategy, who do not place emphasis on the marketing activity, at all. The maximum they do is to publish articles (every now and then) on LinkedIn, running a blog on their websites, or have some ads here and there, mainly in irrelevant places.
We see this almost everywhere, but probably more frequently in the service sector. We were looking for certain type of businesses, based on a focused search, and we still had hard times to find those, who would otherwise supposed to be visible. It tells a lot. In other cases, we had to spend significant amount of time to understand what the service or the product was about. It is not only because of the professional jargon used, but because of the improper focus, where, e.g. a nicely elaborated website tells everything about the history, the team, the testimonials, etc., but not the product or service and their distinctive features and availability.
Mistargeting. We often hear the general wisdom that ‘you cannot spend enough on marketing’. Some businesses really do spend considerable amounts, proportional to their sales income. Unfortunately, we experience relatively low sales income figures (especially when it comes to year-on year growth), as well, meaning the amount spent does not bring in the desired results. Due to the lack of monitoring and follow-up, it is difficult to say anything about the issue, at first. However, when analysing the details, we usually find that the marketing strategy (if any) is rather mistargeted.
One of the typical mistakes is to focus on a customer group who would certainly take trial periods, free products and services and ready to write positive reviews, but not to spend anything on the up-sell products or services. In addition to this, we find businesses which choose channels to target the desired customers where they are not really present, or if so, not open for such kind of proposals. The negative examples are the more frequent among fintech type of services and platform providers, where there is usually a huge noise due to very similarly looking services, and customers easily feel overwhelmed immediately, instead of becoming curious.
Unclear or missing product or service concept. Although most of the negative examples are related to the advertising and sales issues, we also see problems – from time to time – related to product or service concepts. They tend to give the impression of being either too simple or too complicated for the first glance. In the former case, it may be hard for the potential customer to make difference between the similar looking ones, in the latter, to understand the essence of them.
Customers, nowadays, hardly ever buy products or services just to have them, for their intrinsic values, but rather to solve a problem or gain advantage by the help of them. Consequently, when there is much emphasis on the producer or service provider and their traits, capabilities, results, whatsoever, or even the product or service itself, but the underlying problem, deficiency, however you call it, which may be solved by the help of it, does not come to the face immediately, the customer will most probably be lost. When there is a huge flood of information, the simplest and most straightforward will get through. No matter how valuable or junk the product or service itself is.
Such deficiencies are experienced most frequently where products are combined with services, as a kind of a value-addition. Due to the lack of clear concept, customers – unfortunately – tend to perceive simply an overpriced product as they cannot relate to the added services.
Inadequate pricing strategy. This is an area, where we experience the most problems. All the companies we screened had some level of knowledge about the principles and the underlying methodology, but almost none of them had the sufficient level of it or applied what they otherwise knew. Surprisingly, it is almost as frequent to find generally overpriced products or services as to have underpriced ones. Unfortunately, among the roots of these problems we identified both the lack of market intelligence, or competition analysis, and the missing or wrongly communicated product or service concept. All, besides the insufficient marketing knowledge or the lack of application of the well-known principles.
Pricing problems are experienced everywhere, although we found it a bit more frequent related to services, either as the main business or as an addition to a particular product. Provided that the pricing strategy is linked to the service concept and an outspoken goal is to be distinctive, it is usually the lack of competition analysis – from the customer point of view – what leads to misperception in these companies.
Summary and conclusion. Regardless of the reasons behind the deficiencies related to marketing, it can be really killing for start-ups, even in the short term. Visibility and clear messages to the well-targeted customers are key. Inadequate efforts can be as detrimental as the lack of any. Quantity does not turn into quality when it comes to marketing budgets, either.
Having a proper monitoring arrangement in place is a must, to give an early warning in case of any mistakes or deficiencies. It is important to update the strategy regularly, as customers are also changing. What seems to be proper today may soon be outdated. Understanding the importance of marketing makes a real difference in most of the cases and can be a game changer for the majority of start-ups. Shall you spend on it? Yes. Is it enough to spend as much as you can? No. Less, if spent smartly and targeted well, is more. Like in several other areas of life.
Do you have questions or need some help right now? Feel free to reach out to us.