What type of Advertising suits your Startup?
Getting your advertising right to get your product, pricing and positioning right.
Leo Burnett, the founder of the global advertising company once said, 'The sole purpose of business is service, reports Times of India. The sole purpose of advertising is explaining the service which business renders.' But, what if your business cannot afford to explain what it does? Does not advertising mean limiting customer acquisition? Should marketing be an essential part of a startup budget? In a world where even unicorn startups like Flipkart and Snapdeal have not turned profitable, but are spending crores on advertising, it is difficult being a startup that cannot advertise. Yet, that is the hard road most startups have to trudge through.
A road made difficult by several investors losing interest in funding startups, evident by the low number of funding rounds this year. While doomsayers are predicting a startup bust on the lines of the dotcom bust of 1990s, advertising spend by startups is only expected to grow. According to TAM Adex, the startup boom has added 2000 new advertisers this year. So, when Snapdeal announces a Rs 200 crore marketing campaign, how are other startups supposed to behave?
Can it be counterproductive?
While ecommerce companies are intent on grabbing the biggest slice of the market, thus pushing profitability down the priority list, some startups like Chumbak have chosen to grow slowly but steadily. "To not advertise was a conscious strategy. For a long time, our products spoke for themselves, which helped us grow. Word of mouth was sufficient for us as we focussed on turning our stores profitable. Maybe Chumbak would have been bigger if I had spent on advertising, but the question is, would it have been profitable?" asks Vivek Prabhakar, cofounder, Chumbak. It is hard to resist the lure of mass advertising - the chance of reaching millions of consumers at the same time, connecting with them and building a brand recall. However, it could spell disaster if done too soon. Many startups pivot their business model in the initial months or some even after years in operation. Snapdeal itself pivoted from being a deals platform to an ecommerce company two years after its launch.
Spending part of very essential funding on advertising during the initial journey of a startup when the product or the business model has not been proven might not only prove to be a massive waste, but counterproductive. "Initially you are looking to get the first thousand customers on board and not millions. It is not advisable to go for mass advertising because the product has not yet been proven. You could be destroyed in one shot. No startup can recover from a mass failure like that," agrees Saurabh Uboweja, founder and CEO of Brands of Desire. Lack of funds and more importantly, lack of product validation are the reasons many startups skip mass marketing and focus on digital or direct marketing. Digital advertising may still be in the nascent stages, but it surely helps in experimentation and validation of the product during the initial months.
This is the very reason that the founders of FindMyStay, a reverse bidding platform for hotels decided to choose direct marketing. Taking the fiasco of Housing.com as a cautionary tale, Khetrapal insists that the startup would rather focus on ensuring adequate inventory before stretching the scale. "Print is an expensive medium and so is television. If you do not have sufficient budget for it, you might as well not spend. It could backfire when we do not have enough hotels on board. Housing.com is a good example of that. We need to grow in a strategic manner and achieve that certain critical mass before we got for ATL (above the line) marketing. One advertisement is not going to give ROI (return on investment)," says Rohit Khetrapal, cofounder of FindMyStay. While limitations like these stop many from investing money on mass advertising, there are some startups who would rather not advertise. "We do not believe in advertising. We are a marketing company ourselves and we want to ensure that our merchants see us a channel that they can rely on. We target customers through digital marketing, yet ninety percent of our traffic comes through referral. Our marketing budget is zero and we prefer to go grow inorganically," shares founder of Crownit, a discovery and cash back startup.
While for consumer facing businesses, advertising is an essential which can only be delayed and not ignored; it is a different story for B2B startups. While niche advertising mediums are available for the segment, yet the impact of referrals is far greater and far more desired. Cyber security startup Lucideus, which provided end -to- end security for RBI's recently launched Unified Payments I (UPI) platform, claims to have spent nothing on marketing of its startup. "We have never felt the need to market ourselves. We invested that money into getting the right talent and improving our technology. This is the only reason why a small company like ours can boast of the clientele we have. These days, CEOs and CXOs of big companies are all connected over Whatsapp groups so if you do a good job, you can be assured of getting good clients," explains Saket Modi, cofounder and CEO of Lucideus. The startup counts companies like ICICI Bank, HDFC Bank, Cairn India, Taco Bell, Spice Jet, among its clients.
Then again startups operating in niche segments like fintech have a different need - a need that is difficult to fulfil on a mass advertising platform. Educating consumers on the whys and how's of a fintech product requires more support than what ATL can provide. For instance, Faircent, a peer-to-peer lending startup claims to have been growing at a rate of 30-40% without the support of ATL. "This kind of product requires a lot of education which can only come through content. So from a marketing point of view, we did a lot of earned and owned media. Advertising is the last piece of marketing - you need to get your product, pricing and positioning right first. But, if someone starts a war, we will be part of it," says Rajat Gandhi, founder and CEO of Faircent.