Startup Marketing: Steer Away from Cash-Hungry Tools

This article appeared in the WSJ/The Accelerators on March 25, 2015 https://blogs.wsj.com/accelerators/2015/03/25/katja-gagen-steer-away-from-cash-hungry-tools/

In today’s startup environment, brand-new companies are getting an astonishing amount of interest.Take a look at Wish.com or Jet.com – two nascent businesses that have garnered a huge amount of attention in recent months. What these companies have in common, in addition to well-crafted business plans and great technology and implementation, are powerful marketing efforts that helped bring them to the attention of investors and potential customers (full disclosure: General Catalyst is an investor in Jet).

Of course, both enterprises have the benefit of experienced founders: Yahoo veteran Danny Zhang and Google’s Peter Szulczewski in the case of Wish and, at Jet, Marc Lore, the former CEO of Quidsi, the Diapers.com parent that Amazon acquired back in 2010. Can startups with lesser-known stars also benefit from marketing efforts? That depends, but what self-respecting marketer could say no? Although startups by nature have limited or nonexistent cash flow to feed an active marketing budget, it’s probably a mistake to ignore marketing altogether.

While startups should focus on getting the right team and engineering in place to build a product that customers love, they should also budget some resources to marketing from Day One. If you find that market and product don’t fit, forget about getting the word out. Stop thinking marketing and start thinking about pivoting!

Even without huge budgets, entrepreneurs can build a brand on the cheap if they employ startup-style creativity, innovation and brashness. Jet.com is a prime example. The company emerged from stealth mode in 2014 with an offer of shares of stock to Jet Insiders who referred others to the startup. Using a ranking system, Jet offered more shares to more influential types, with up to 100,000 shares going to the referrer who had the most clout.

A product-based referral program is another way to go. The food delivery startup Blue Apron encouraged subscribers who had received several Blue Apron boxes to give a free box to a friend. A sweet feature of this initiative is that gifters receive no financial or other benefit for the referral. They give the gift simply to do something nice for someone they know. The fact that gifters must receive boxes to qualify substantiates that they understand and like the product. In another example of making marketing part of product features, Dropbox offered users free storage space in exchange for referrals.

Startups should always seek to leverage innovation rather than employing a cash-hungry tool. Think “guerrilla marketing” and take to the streets. Founders and teams should use their personal networks, time and energy to promote the business and brand. Companies in the enterprise space can focus on thought leadership to spread the word. Major chunks of cash are likely better reserved for making a great product.

That doesn’t mean your startup marketing budget is zero — expect to spend something. But spend it wisely and where it will do the most good. Paying a few hundred dollars for ads on potential high-impact social media platforms, where good messages can go viral, is a sensible approach. Remember: startups are early adopters who can afford to experiment. And they should. Pick the next platform where consumers hang out and it can pay off.

Likewise, offbeat gimmicky promotions can yield returns, especially when aimed at customers and influencers, such as bloggers, reviewers and other media types. By all means, have a content strategy in place before any major effort. But it is never too early to begin building relationships with reporters. Even if you don’t have a lot of news and even if your business fails, your relationships will be there when your product — or your next startup — is ready.

Tuning websites to maximize search marketing results should be a no-brainer. Even several dollars a month invested in search engine optimization can build awareness. If you have customers, think about engaging them on Instagram, Facebook and other social media channels; it’s an opportunity to make your site even stickier. Start by asking for a rating of your product or service and enable customers to leave comments via a Facebook plugin. And why not include the ability leave a review on your site, where other customers can comment and vote on its usefulness?

If you can afford paying a few thousand dollars a month, consider retaining a media relations provider. Here’s an inside tip: “free” public relations is not really free. Most press coverage begins with content written and distributed by a paid PR pro. Still, the bang for the buck can be phenomenal if you compare the cost of a modest PR effort with what you’ll pay for large advertising campaigns.

The final answer to whether startups should spend on marketing is, actually, how much should they spend? That’s going to depend on the business concept, its potential for rapid scalability and ultimate size, how much cash is on hand for marketing, how much product development will consume and other factors. But it’s clear that, with skill and luck, effective startup marketing can add several zeros onto the value of the business that is being created.

Ms. Gagen is the VP of marketing at General Catalyst. The company has invested in startups including Jet, Airbnb, Snapchat, Stripe, Warby Parker, Kayak and ClassPass.