Startup marketing strategy: 6 approaches every founder needs to know
Startup marketing strategy: 6 approaches every founder needs to know
26 July 2018
Not all startups are operating in the same market landscape. Each has its own unique challenges, and therefore what’s worked for one startup marketing strategy may not work for another.
In order to choose the correct strategic approach for your startup marketing strategy, you must first understand the market landscape in which you operate. For example are there any other companies offering similar products?
One of the best ways to do this is with Porters Five Forces. When used properly, this can be a very effective marketing tool. Porters Five Forces helps companies map out the entire market landscape. It covers 5 areas.
This analyses how easy it is going to be for suppliers to increase their prices. By having more suppliers to choose from it will be easier to switch to a cheaper alternative if prices begin to rise. However, if your supplier choices are limited and you have fewer options, the supplier will have more power and control over raising its prices – as a result, this would likely impact on your own pricing and profit margin. Defining and securing key resources and suppliers in the early stages of your business could have a huge impact on your startup’s success.
2. Buyer Power
This looks at how easy it is for customers to drive down prices. Typically, you’ll have more power and flexibility with pricing the larger your market size and the larger the demand for your product. Likewise, if there are only a handful of buyers in your market they often have much more control over pricing conditions.
3. Threat of Substitution
How easy is it for your customers to find another way to get what you’re offering to that of a competitor? The easier it is, the less power and chance of success you will have. Work out how many competitors you have, how their pricing and quality compare to yours, and finally what kind of profit margin they are making. This will help you determine if they can afford to lower their costs in the near future.
4. The Threat of New Entry
First of all, identify how easy or difficult it is for new competitors to enter your market. The easier it is for new competitors to join your marketplace, the harder it will be for you to make a profit. Typically, a business in the service industry suffers a lot from the threat of new entries. If you’re an accountant, it’s pretty easy and relatively low cost to set yourself up as an independent trader (all you need is a logo, website and a business card). However, if you’re selling a hi-tech product that requires millions of pounds in development the threat of a new entrant into the market is much lower.
5. Competitive Rivalry
This examines your current competition in the marketplace. It helps you work out how many competitors you have and whether their products or services are as good as yours. If they are, it’s important to consider how you will establish a strong competitive advantage over them, so your buyers don’t go elsewhere. This could be a range of things such as your product, your brand or your pricing.
Once you’ve understood the market landscape, you’re ready to consider the impact your particular situation may have on how you approach your startup marketing strategy.
6 Startup Marketing Strategy Ideas
Below are 6 different startup marketing strategies for various market situations that will help you understand how to market a startup business.
With a Monopoly market, there is only one producer for the whole market. Monopoly products are unique and there are no substitutes for them. Entry into this marketplace by competitors is almost impossible due to certain barriers like legal protection (patterns or copyrights) and high costs. Given these characteristics, the monopoly has complete control over the price. If you’re a challenger business thinking about entering this type of market, it might be worth considering a guerrilla marketing strategy. It’s cheaper than traditional marketing methods, and it overshadows big budgets with creativity and original thinking. Try and target a niche market that is small enough that it doesn’t turn your competitors head, but large enough for you to maintain a sustainable business.
2.Competitive Monopoly Market
This type of market is competitive with a large number of producers offering products or services that are similar, but not exactly the same. Typically, they are differentiated by brand or perceived quality. Think about toothpaste, there are many different varieties; tooth whitening, enamel protection, tartar control, cavity protection, sensitive. All toothpaste is very similar with slight differences, but these slight differences give the producer a small amount of market power that has the ability to sway customers. If you are entering this market, consider finding a different benefit that is important to a large enough group of target customers and then finds a way of communicating it. Another effective marketing strategy for startup businesses or new product launches in a competitive monopoly market could be targeting multiple segments with different value propositions.
3. Oligopoly Market
An Oligopolistic market is dominated by a small number of producers with a large amount of control. There are a few barriers to entry as typically the costs are high. The product can be identical (eg. Oil) or differentiated (eg. Cars or Mobile Phones), but the important part of an Oligopolistic market is that there are few enough producers that each one has a large chunk of the market, this means that any producer can have a huge effect on what happens in the market, making everyone mutually interdependent. For example, Apple and Samsung are both hugely affected whenever a new phone is released, and both companies constantly compete to have the very best technology. An effective marketing strategy for startups looking to compete in an oligopolistic market would be to use a guerrilla marketing strategy or a flank attack strategy. Find an area where your competition is yet to establish a strong position and adjust your product offering just enough so you can capitalise on this market segment.
4. Multi-sided Market
This is often the case with apps that connect one group of people to another e.g tradespeople and homeowners, therapists and service users etc. It can sometimes lead to a chicken and egg situation – you need both to make your idea successful. You’ll, therefore, need a differentiated strategy for each user type and must provide a great value proposition to each of them.
5. New Product, Existing Market
When you’re considering bringing a new product to an existing market you’re usually competing on product features and performance. In order to be successful, you’ll first need to consider your customer’s current situation. Perhaps they’re looking for particular features or benefits that the current solutions don’t provide and you do, or perhaps they are frustrated by the customer service of the existing providers. You’ll only know this with some market research, try not to make assumptions. Next, you should consider your values and the things that make your solution unique, this will form the basis of your marketing communication. Finally, consider timescales – introducing a new product to an existing market can take time, and may not achieve instant results. Consider how long can you survive with your current assets, perhaps you need some investment in order to run your business in the short term while you establish yourself.
6. New Product, New Market
When you’re planning on creating a new market be prepared to spend a lot of time, money and energy on educating your target customers. You are entering the unknown, so identifying what’s important to your customer and making them believe in your vision is essential. Before you decide on breaking into a new market consider what makes your product so unique that customers will buy and use it. Why would they buy your product instead of something similar they’ve used previously that they already know and trust? Research businesses from similar markets related to your product – they could be very helpful for targeting new customers because you could use their existing users. Timescales and meticulous planning are crucial when targeting a new market because introducing your product and educating customers can be a lengthy and expensive process. A financial forecast might seem overwhelming but, if done properly, it will help get your business off the ground and prepare you for when cash is likely to run short.
One of the biggest mistakes startups make is trying to be all things to all people, but it’s impossible to please everyone. The best-case scenario in this situation would leave your company as a mediocre provider of average offerings. The most successful startups are more focused and choose a targeted group of customers where they can be the best provider.
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