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A strong marketing strategy is essential to the success of any business. Yet for startups, this could be a matter of sink or swim. In the initial years of establishing profitability, the founders need to be confident that their marketing strategy will, eventually, result in paying customers which enables business growth. As an angel investor, how can you effectively review different startup marketing plans to ensure their viability? Below, we offer some insights from our angel investor network at Bure Valley Group. We hope you enjoy this content. To find out more about our investment opportunities, visit our portfolio page here. To enquire regarding our latest projects and funding, you can reach us via:
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Check the marketing goals
An experienced angel investor will quickly be able to discern whether a startup’s marketing goal is realistic or not. Do the founders expect to dominate their market quickly, for instance, or are they aware of the hurdles they face as a “new entrant”? It helps if the marketing goals can be evaluated using a systematic approach such as the SMART system. In particular, are the goals specific, measurable and time-bound? For instance, perhaps the founders have set a marketing goal of: “Achieve 2,000 website visitors per month from different traffic sources – mainly email and organic search – within 12 months, together with a 5% conversion rate”. This is a far better goal than “get more customers”. You can get a sense of its feasibility through analysis such as checking the competitive SEO landscape that the startup faces, comparable volumes of website traffic amongst their rivals and their likely conversion rates.
Check the strategic options
Broadly speaking, there are four main marketing strategies available to businesses. They can opt for market penetration, which involves selling more products/services to their check target market. The second option is product development – i.e. selling different products to the existing market. A third approach is market development, which sees the business selling its current product suite to a new market. Finally, option four is diversification – that is, offering entirely new products/services to a completely new market.
Normally, a startup will be committed to the first option. As a new entrant to a given market, the natural course is to increase penetration into it – gaining greater market share and customers. Yet, eventually, the startup may need to pivot into one of the other three routes. How feasible is it for the startup to potentially do this, given the current competitive landscape? For a software startup, it may be easier to develop new digital products for a new market (if desired) than, say, a vegan restaurant to pivot into a different cuisine for another customer base.
Check the target buyer
Do the startup founders have a clear sense of their ideal customer, their “pain points” and how they can address them with their solutions? A good indicator is that the startup has a record of clear “buyer personas” – that is, descriptive profiles of the target customer including their main demographics and psychographics. Looking at these buyer personas, can you confidently say that they exist and in what numbers? How many other companies might compete over them both now and in the future? If the startup founders have a clear idea of who they want to target and how to reach them, then this is a positive sign.
Check the sustainable competitive advantage
What sets the startup apart from competitors? Why should customers depart from established, trusted brands in the marketplace in favour of the startup – and remain with them? Here, the investor needs to be confident of the startup’s sustainable competitive advantage. These are the unique assets or qualities of the business which allow it to outperform competitors – not just now but also, plausibly, far into the future. Of course, pricing is one area where a business may seek to compete. Yet this is a difficult advantage to sustain for a startup. Rather, startups are likely to have greater mileage through specialisation – e.g. offering a niche product/service to a niche market. For instance, a software company could focus on solutions for sales managers in the financial services sector. This helps to build the startup’s brand and reputation, too.
Check the tactics
With the goals, marketing plan and other key assets in place, how will the startup specifically target its customers? Which tactics will be used to facilitate the strategy? For instance, if a startup intends to achieve greater market penetration for its e-commerce platform, then which digital channels might it use to drive traffic to the website and generate conversions? Here, a possible set of tactics might include Google Ads, social media ads and organic search (SEO). Yet what kind of potential do each of these channels hold out to the marketing strategy? For certain channels, it might be that expectations do not match the reality. Here, it can be a good sign if the startup has an in-house marketing specialist to advise them – or, a reputable agency which can offer specialist knowledge and experience in the startup’s sector/market.
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