I do a lot of work with startups and hear a variation of this surprisingly often:
“We’ve budgeted very little for marketing because our product is gonna sell itself.”
I’m always taken aback. And it signifies a complacency that’s proved commercially fatal for the business every time.
Of course, entrepreneurs need bucket loads of commitment and self-belief to get a new venture off the ground and keep pushing forward. And, if a product is truly revolutionary – a COVID-19 cure would be a great example right now – then it will fly off the shelves with little effort behind it.
But this is rare. And excessive optimism that’s not balanced by an pragmatic view of market realities is likely to lead not only to crushing disappointment but to bad business decisions – with underinvestment in marketing top of the list.
Painful example
In the spirit of sharing lessons from failures as well as successes, one of our recent projects provides a painful example.
My colleague and I met the startup’s CEO and one of his major investors in a hotel coffee lounge. They explained their new venture, which they’d been planning and raising funds for over a period of three years.
They seemed quite organised. Their enthusiasm was infectious.
But then the investor said:
“The moment word gets out, our sales are going to explode.”
… illustrating the forthcoming explosion with expansive hand motions.
He wasn’t alone in this view. The CEO’s priority wasn’t to promote the business to drive sales. It was to contain public excitement about their venture to ensure customer demand stayed manageable.
Our role, he explained, was more likely to be to set expectations on how many orders they could handle at a time than to drum up interest.
For this reason, they wanted to start small: launching in a low-key way in a single geographical area. And, of course, their first-year budget “allowed very little for marketing” after that.
Mindful of coming across as wet blankets, we said that – in our experience – it was highly unusual for any new business to ‘explode’ … that an excess of orders was a rare problem most startups would kill to have … and that they really ought to budget far more for marketing.
But their view was unchanged. And – such was their confidence – I began to think perhaps they knew something we didn’t.
But no ….
Unfortunately for them, that wasn’t the case.
We gave the low-key launch in a limited area our best shot and it went well, in low-key, limited way. The “very little” budgeted for subsequent marketing meant very little subsequent marketing. And the company foundered before it ever got going.
Their business plan forecast 7,000 customers by the end of month three. They got just 18 – most of these the directors’ families and friends.
And the business sank further from there.
So, while determination and self-belief are vital, as this stark example shows, entrepreneurs need to balance these qualities with a strong dose of reality, to market test the viability of their business idea and to stay open to external advice.
Oh, and – unless you’ve found a cure for COVID-19 – budget meaningfully for marketing if you’d like anyone to buy your products.
See more on our work for small businesses and startups.
