Either find the benchmark conversion rate in the industry or make an assumption. According to Buffer, conversion of 2% is most common for SaaS in the marketing niche.
It’s well-known that every single startup begins with a ton of enthusiasm, a clear vision, a detailed roadmap, and of course a team of seasoned experts with knowledge in everything they need to perfectly execute the plan.
… just kidding. Nope, they don’t. You know it, we know it, everyone knows it: most startups never make a dent out of their huge plans, and over 90% of them cease to exist very quickly.
Let’s dive into the reasons why startups fail. Together we will discover solutions to the problems most of them encounter, and analyze the highest-performing tools & techniques that derive success. From conducting research and competitor analysis to defining and improving key metrics and entering new markets.
Only 10% of startups succeed. The failure to build a strong marketing foundation is one of the main obstacles to growth and scaling. This in turn translates into a flawed MVP and wasted funds.
Most founders lack understanding about how a UVP should be formed, where to look for it, and how to do proof-of-concept before spending too much. Building a sustainable and stable marketing foundation from the very beginning is the only right way to avoid failure.
Сontent marketing, which is a key part of the marketing foundation, is more cost-effective, costing up to 41% less than paid marketing for the same results!
To get vital information on what your target audience needs the most, as well as how to reach your potential customers and communicate with them, you need to conduct Competitor Research. Among other things – get a hold of their backlinks profile – it can tell you a lot more than you may think.
The Go-To-Market strategy is detrimental to your success. Think UVP, pricing, cost structure, and traffic sources. In this guide, we break down Uber and Tinder to look at their tactics and see whether any Digital business can do the same to a high degree of success. Last but not least, having a unique Marketing Proposition might be THE thing to propel your early growth.
We’re living in a very fast-developing world where 137,000 new companies are founded each day. Almost the same number of them collapses within one year of operations.
This information can be perceived from both a negative and positive perspective.
The high number of new businesses created each day demonstrates that there are unlimited opportunities, abilities, and resources available for modern entrepreneurs. Anyone can build up any product they want to change certain industries, countries, and even the world. All you need are aspiring ideas, particular knowledge, and access to the web. The only decisive factor is the founder’s choice.
On the other hand, the high failure rate of startups during the first year, which is now 90%, directly points to the fact that entrepreneurship may be complicated and challenging. Selecting the right product concept, building up a business around it, and then performing effective startup marketing… It’s much more difficult than using other unlimited opportunities of the 21st century: trying new food, traveling to a new country, or making an attempt at a new sport.
Again, only 10% of startups succeed within the first year. Of the remaining 90%, 36% of startups fail in their second year. 44% of startups collapse in their third year.
By learning from the mistakes of failing startups, we can increase results and become part of the 10% that is successful. This is the main remedy to increase overall success. This is what the best startup manual to build a sustainable and profitable business would be focused on.
What is the reason for such a high collapse rate?
After conducting research, I found the answer.
The main business founders’ obstacle that limits growth, scalability, and endangers overall sustainability of their business is failing in building a Marketing Foundation for their young businesses at the beginning. Because of this, they design a wrong UVP and develop a useless product.
Consequently, young founders create products that hardly find demand in their markets. It makes the process of marketing startups almost impossible.
While working as a startup marketing consultant with seven founders of tech startups and auditing their digital strategy, marketing costs, and performance, I identified an interesting behavioral pattern.
In most cases, it turns out that startups are launched by tech-oriented people who don’t have understanding, expertise, or experience in marketing. I mean founders that just have their own personal or business problem(s), and they want to develop some kind of a solution(s) to them. Having the technical expertise, these professionals know their way around developing a complex product without losses in quality, but usually, it’s not enough to create a successful and self-sustaining company.
These founders don’t perform any market research or competitor analysis at the beginning of a startup’s life. There is an illusion of research, which stems from the fact that these guys have worked in the industry for some time. Though, in the real world, the fact that they worked in a specific industry can come out even worse for them than simply a lack of knowledge, because they think they know a lot, which is not always true.
They just don’t understand that without making relevant conclusions before the start of the product development, it’s almost impossible to design a winning Unique Value Proposition (UVP). Therefore, most technically-oriented founders create a Minimum Viable Product based on their guesswork as they believe the world would love their product to the same extent they do.
Mind that while working hard on the product without an essential understanding of the demand, you are also failing to prepare the corresponding strategy and infrastructure for marketing. It holds you back from showing your product to the right people – your target audience – at the right time to get valuable customer feedback. When in fact, it’s essential for product design. As a result, your product fails to get traction and achieve the product-market fit in time, which then potentially leads to bankruptcy and the collapse of your company.
Here is a life-cycle of such a startup:
Unwillingness to deal with marketing basics prevents startups from building a strong and sustainable MARKETING FOUNDATION. It’s a MUST for any startup to find its clients and become a profitable business. It is a basis for lean startup marketing.
Starting to walk a long way without a strong marketing foundation for your startup sounds absurd. Doesn’t it? Especially if it means failure within a year time!
Building a winning marketing foundation does not require significant unnatural efforts.
It simply implies following a checklist of things to be done at the beginning of your entrepreneurial marathon.
These things will not only help your startup survive during the first year of its existence but will also boost your startup marketing and sales results. Let’s get down to business.
Before you start building a house, you need to establish a solid substructure. And everything must be done in the right sequence. A successful digital marketing strategy for a startup follows that same principle.
A startup marketing foundation requires founders to analyze the demand and form a UVP that is so necessary for building a desired and needed product, not for them personally, but for other people.
Also, a marketing foundation demands you accurately define a startup’s success, measure a company’s performance, and execute all necessary activities for grabbing the attention of the target audience and getting people to love your product while spending less on the startup marketing budget. It establishes the right communication with the user base for valuable feedback. Eventually, one of the main foundation’s outcomes is the reduction of spendings by facilitation of marketing KPIs.
For example, content marketing, which is a key part of the marketing foundation, is more cost-effective, costing up to 41% less than paid marketing.
Before you get involved in marketing your startup, make sure you have the following fields covered to build your marketing fundamentals.
There are three main steps involved in fundamental market research. If you made them and found positive answers to your questions, you can move forward with the development of your marketing foundation and product UVP.
On top of everything, you have to make sure that people experience a problem you have and need your solution to it. In other words, there must be a market for your product.
Let’s consider an example of this educational marketing blog by RGray.
Its main goal is to educate people on marketing by translating our experience and real working marketing cases of our clients. It’s needed to build brand awareness around the RGray brand that in the future may bring us talented employees and powerful partners.
Google is a place where the global crowd searches for something if it’s needed. Right?
To start my demand research on marketing education, I go to Ahrefs and type the keyword “Marketing 101” as I assume it’s a term or parent keyword consolidating the educational needs on the web.
Here is the result.
I see that there are 3.7k people in the US (Search Volume) and 5.4k around the world (Global Volume) who have googled this query. It shows that there’s a market for our FREE marketing education through this blog.
Moreover, Keyword Difficulty (KD) – 8 – points out that the competitive environment isn’t stiff.
Keyword difficulty levels breakdown:
The existence of a relatively big market for a single word related to marketing education signifies that I can move forward with my product (educational blog on marketing) and build my marketing foundation for it.
Despite the positive research results, analyzing only one keyword is not enough. Neither for conducting the demand analysis nor for creating and performing subsequent content marketing. For that reason, I have to build a semantic core – a list of keywords that I will use in content marketing for the next 6 months. It is a vital part of the marketing foundation for any developing business. The reason is that I will create article topics based on the keywords from my semantic core. Besides, I will be promoting my educational materials using these keywords for the next year.
So, I go to the similarly-named parent topic (marketing 101) of the query to analyze related keywords.
As we can see, the overall Search Volume is good enough – more than 40k per month (only for the US) and if we exclude “what is marketing”, the average KD is also ~8, which is good. So, I will take the 50-150 keywords with the best ratio KD vs Volume (i.e. “Digital marketing for dummies”) to form my semantic core.
Focus on high-volume keywords alone. The semantic core should contain keywords from 10 to 5-10k in search volume, and there should be a higher number of low-volume keywords.
There are two reasons for that:
Getting back to my semantic core, the average KD 8 signifies that I can easily reach TOP 10 Search Results educating people on marketing with little effort and spending a relatively small amount of time ( ) on the content production and minor link-building.
Afterward, being ranked TOP 10 by Google, my website will receive a pretty high number of target organic traffic, which is free and one of the highest quality. I guess hanging at the 10th position will provide me with 8% of the overall traffic ~ 4k unique visitors only from the US, and there are also other countries. Not bad. It would be enough for testing the product, getting customer feedback, and even getting first customers.
To make the best product on the market, as well as to build a winning marketing strategy, identify the competitors first and then analyze their strengths and weaknesses.
To find competitors, analyze the Search Engine Result Page (SERP) for target keywords. This will result with all the similar websites and organizations providing UVP.
Let’s get back to “Marketing 101” and our mission of educating people. Here are my competitors by the “marketing 101” keyword in SERP of Google Search.
If we look at SERP in Ahrefs, there are also 7 competitors out of 10 results. But the data is more informative and represented conveniently.
Let’s move deeper. MagImpact, a digital marketing company, is using the same strategy as I do for RGray. Their website and a web page optimized for the “marketing 101” keyword have relatively weak stats (Learn more about website stats in the 8th section). And they have 688 organic visitors solely from this keyword. Cool.
What other tactics do they apply for their overall digital marketing?
Using the approach represented above, I form a competitor list to conduct a deeper analysis of their marketing channels, communication strategy, funnel, and of course marketing tactics they use for successful implementation of their marketing strategy.
Demand for your product, getting free target users from Organic Sources, and identification of the competitors are obligatory elements for a young startup not to finish in the 90% of startups collapsing within the first year.
By conducting competitor research, vital information on what the target audience needs is attained. Also it teaches how to reach potential customers and communicate with them.
Start by analyzing your direct and indirect competitors using several marketing tools for external analysis of their marketing channels. In this regard, SimilarWeb will help analyze the overall performance of competitors’ websites. It utilizes a variety of variables like Monthly Unique Visitors (MUV), Bounce Rate (BR), Time Spent on Site (TSS), etc.
This displays a competitor’s traffic distribution among countries and channels: what are the main sources of getting new customers for competitors? (Email, Organic Source, Paid Traffic, Social Media, etc.). In other words, it depicts the summary of Google Analytics data of competitors. It shows which of the competitors’ marketing channels should be examined in depth.
It’s a good starting point for startup founders and a young team to understand the directions for further, deeper analysis of competitors’ digital marketing strategy. Additionally, it shows which communication strategy, marketing tactics, and sales funnel they use to facilitate conversions vital to their business model’s success.
More importantly, this kind of analysis allows discovering the target audience and then exploring it as deeply as possible to better understand their obvious and hidden needs.
All of it is needed to create a relevant Unique Value Proposition that is the basis of building a successful product.
2.2. What do you lose without competitor analysis?
Spending much more resources on testing your hypothesis from scratch. The application of the trial-and-error method is relevant as a pioneer. Remember, smart people learn from the mistakes of others and get in the 10% of winners category.
The hypothesis that is based on data has more chances to succeed than the one which is not.
Time is extremely valuable for a startup having significant burn rates, especially for those that have not gotten market fit yet. Without market and competitor analysis, you will spend extra time on things that may not work. Eventually, it can break a company.
Success is different for every business, especially for digital ones. For Startup A, success might be 1000 new signups per month while Startup B considers success as $100,000 in revenue per month. Whatever the vision of success, it’s defined vigorously and at the very beginning. Everyone in the company should know the definition of its success and should work towards it.
Here is a hint. For example, the main success metrics for a SaaS business are the following:
Formulate a digital marketing strategy for the startup aimed at the attainment of the determined goals. All of the elements of digital marketing strategy should be based on data gathered during the deep analysis of demand and competitors. For instance, getting 1000 signups per month.
Either find the benchmark conversion rate in the industry or make an assumption. According to Buffer, conversion of 2% is most common for SaaS in the marketing niche.
Select the competitors that have a high amount of traffic (Monthly Unique Visitors) coming to their website and a low Bounce Rate (BR).
Analyze the marketing tactics they have used to understand their mistakes first, and then build a startup marketing plan by taking the best working tactics and modifying/adapting them.
Implement those tactics and analyze how it impacts your success;
At the same time, don’t stop tracking the performance and updates of your competitors.
Build a logic chain from what competitors have done to accomplish the goal of getting 1000 signups. Analyze the results they have in terms of activity in social networks, traffic going to their website, time spent on a website, etc.
Here is an example.
This shows the design of an overall marketing funnel for a startup – a system that will incentivize the target audience to perform actions detrimental to success.
Also, should outline activities and tactics performed to facilitate the resulting conversion at each stage of the marketing funnel.
Here are examples of marketing tactics to use at different stages of a digital marketing funnel:
Please note, each of these tactics couldn’t be successfully implemented without getting the 3 mentioned parts of the digital marketing foundation:
– Competitor Research;
– Keyword Research & Semantic Core;
– Digital Strategy to accomplish Defined Success.
Undoubtedly, without a defined success and strategy of how to achieve it, a startup will just burn cash on ineffective marketing hypotheses in a chaotic manner. It may significantly reduce chances to survive during the first year of a startup.
Less growth means less revenue, less team morale, and less time.
When it comes to the launch of a product or service, an entrepreneur should meticulously think through each detail of the process not to fail in bringing an outstanding product to end-users. This will guarantee the maximum attention possible of the target audience, ensure subsequent virality and most importantly, retain enough users. This approach is vital to ensure the maximum ROI and effectiveness of the money and efforts invested in the process. To achieve this, a startup founder must develop an appropriate Go-To-Market (GTM) strategy.
Each side of the strategy should be properly and deeply addressed.
In this Ebook we address startup marketing foundations and marketing fundamentals. This section of the white paper focuses on the sides of GTM strategy that are crucial for marketing success and spending optimization. A more comprehensive list of sections and requirements to GTM strategy is found in this Go-to-Market Strategy Template.
Primarily, as a basis for entering a new market, a startup founder must clearly define a customer segment and market for his particular product or service. The combination of these two variables should provide his GTM strategy with an unfair advantage and virtuous cycles.
Building a Buyer Persona
While developing a GTM strategy and honing its customer acquisition process, research and determine who will be the best buyer of the product. For instance, a student, husband, IT manager, a member of the C-suite,… Converting each of the mentioned groups is completely different, and there are many more groups to build a full list. To do this properly I’d recommend to take the data gathered during the demand research (Section 1) and to develop clear buyer personas for each segment of target audience. Use this Hubspot template not to miss something. Then, decide on whom to target to achieve maximum virality and reduce CAC for the whole campaign as much as possible.
Next, choose a particular region(s) to start a campaign and answer the question “what is the simplest way to enter a foreign market?”. It’s better to test hypotheses on a small scale and target cheap regions first. This avoids the risk of overspending in case value propositions or marketing tactics aren’t perceived positively by the market and the conversion rate is very low. For example, the main marketing variables forming the budget, including CPM, CPC, CPL, and CAC would be much higher in the UK and US than in Brazil, Spain, Ukraine, or Russia.
Finally, if your initial hypotheses work, efforts can gradually be scaled and eventually the focus can be moved to other customer segments and regions.
Example (Facebook & Tinder):
Facebook and Tinder, examples of the most popular startup Unicorns in history, applied the collegiate system. This system gathers a rich group of target users that provide the foundation of their audience, the initial mass. The growth of users increased the number of users in certain regions, which eventually reduced their Customer Acquisition Cost for the whole GTM campaign.
In other words, these tech giants first focused their marketing efforts on a particular group to get initial traction: students. There are a few reasons for that:
They’re a relatively cheap audience for targeting and converting into buyers
Due to their active lifestyle, students are the best fuel for affiliate networks based on word-of-mouth advertising
They’re the generation of people who will form the basis for society in several years => Again, this signifies their high payment capacity in the future
Tinder focused on sororities as part of their initial traction campaign. Once a number of the targeted sororities began to use the Tinder App, word-of-mouth among the sorority and house network of the same campus or college took over. As a result it increased the availability and accessibility of prospective matches among the users existing in any given geolocation.
As soon as Tinder gained a big enough user-base, the app’s adoption started to gradually increase due to the network impact. More and more users joined the platform for dating, making the app more popular and in turn it became extremely famous.
Tinder applied the same strategy as Uber, Facebook, and Belly to establish the market balance. But instead of being based on geographical areas like in Uber’s case, Tinder utilized a collegiate system to drive the fuel supply and network density.
As the next important stage of formulation of your product GTM strategy, you should focus on the product or service to be offered. It means a particular business benefit(s) it brings for the intended group of target customers in selected regions.
Above all, a startup team should do its best to formulate its product value proposition. Without, any marketing campaign will fail. When the UVP is defined, it’s easy to come up with various features, bonuses, and ad creatives for customers that may facilitate the virality of a campaign and user growth.
Why is it important?
By understanding and formulating the VP it can be translated into the marketing of a company or brand, and eventually be understood by customers easily.
The product value proposition should perfectly solve the existing problem on the market. It should be formulated in 1-3 sentences. Over time, it should become as short as possible. But at the same time, it must be accurate, unique, and outstanding.
Example: Here is the value proposition of our client and partner, Influx – a platform for promotion, analysis, and management of Instagram accounts.
To accomplish marketing and business goals, a company must determine a pricing strategy that will be suitable for its operational and functional conditions. Along with that, it must fit the audience. Decide on whether it should be subscription-based pricing, lifetime payment, or maybe something else.
The subscription model, for instance, continues to grow in popularity. It’s used by tech companiesor by marketing agencies providing services. It’s a winning model as it’s the most convenient one for both users and businesses.
Drawing on a survey by McKinsey & Company, 46% of global customers have already been paying for online streaming services, and 15% have already subscribed to e-commerce services within one year.
The most popular subscription-based pricing models are Freemium and Razorblade.
a) The Freemium model is perfectly exemplified by Grammarly, one of the most effective and convenient services for real-time editing of texts. Freemium means that the company provides the basic functionality of its platform for FREE, to anyone. Its main target audience is students, who on average have relatively low buying power. The platform also has advanced features that are available for paid users only. As Grammarly provides a service of the highest quality that brings a lot of value to people, Freemium ensures the stable influx of new relatively FREE customers. Then, the company processes the FREE users and converts the most satisfied of them to paid users. Lead generation is an advantage, but your product must rock.
b) The Razorblade model is exemplified by Microsoft. It doesn’t make money on the sale of its Xbox One X game console even at an average price of $499, but it gets about $7 out of each $60 video game. In 2016, Xbox was actively used by 48 million people. In this case, users face very small barriers to purchasing an Xbox and joining its ecosystem. But if a person is inside, he/she most probably buys at least 2-3 games. Smart strategy, right?
Selecting a pricing model based on the business model, product, customer market, and peoples’ buying habits is the main takeaway.
Finally, the icing on the cake for a GTM strategy is the creation of a marketing and promotion strategy for the product in selected markets.
Ultimately, an effective GTM strategy typically sketches out what distribution and marketing channels will be used to reach the target market. The GTM marketing channels may include:
A startup marketing team should come up with a unique marketing offer for customers.Something that grabs the attention of people and encourages them to try the product ASAP and eventually share it with their friends, colleagues, and relatives.
The launch and subsequent presence of a product through marketing channels must be accompanied by an additional value/offer for people to encourage them to try the product and share their experience with friends and relatives.
The globally applied winning tools for providing special offers are the following:
Example: Remember Uber’s special offer for penetrating new markets? It includes a complex multi-level affiliate system for users, as well as unique working opportunities for drivers. It has played a key role in Uber’s GTM success.
The main takeaway from this section is: to survive within the first year, a startup has to find working strategies and optimal ways to get traction. Create a regular influx of users and then product-market fit.
You need to develop a precise Go-to-Market Strategy for the successful launch of a product. The formulation of a Value Proposition, the identification of target customer market, the selection of appropriate pricing model, and development of working marketing promotion strategy are all crucial.
Here’s what you need to remember: if you don’t develop an appropriate Go To Market Strategy, you’re up for a big loss. Particularly, on these fronts:
Before jumping into the marketing side of things, consult on a GTM strategy with the right people. This might prevent the endeavour from falling off a marketing budget cliff and potentially save the future business :).