It used to be that hot technology and cool cash nearly guaranteed a startup's success. Not anymore. Many startups are chasing the same problems, and that means they need more than incremental technology and big ideas to make it in today’s competitive environment. They need an executive team that understands marketing. And they need a strong, well-defined positioning strategy to drive business decisions and gain market traction.
Rosemary Remacle, a venture partner with Sevin Rosen Funds, has consulted with Fortune 500 organizations, as well as numerous venture-backed companies on marketing, brand strategy, and business execution. Join us as we discuss marketing and positioning issues in startup companies, and what must be done to ensure their survival and success.
Rosemary, you’ve been quoted as saying “Marketing is often the biggest variable in the success, survival, and valuation of young companies.” Tell us more about this philosophy.
Let me first make a case for this statement. The technology and Internet bubble may have burst, but there’s still a lot of venture capital (VC) money out there — and there are a lot of startups chasing the same problem. In most cases, they’re appealing to the same customer set.
So, how do they differentiate their solution to the problem they’ve identified from all those other venture-backed competitors? That’s the issue, particularly when looking at potential competitors on a global basis. American startups must have a strategy to compete against competitors in the U.S. and in the rest of the world. That’s where marketing makes the difference. Engineers always can make technology work, but it takes marketing talent to clearly identify the markets and customers and the company’s value proposition in those markets, for those customers.
How does this play out on a practical level in a startup?
When the leadership team in a startup has knowledge or experience in marketing, they usually begin with a positioning strategy that in turn drives business decisions and helps define the product, the customer segments to pursue, strategic partnerships required, staffing decisions, and more. While it may be an overstatement to say that positioning drives everything, it certainly is central to the startup’s business strategy.
This doesn’t mean, however, that the positioning can’t be tweaked as the company becomes better informed over time through its market and customer experiences. But if a company doesn’t spend time developing a sound positioning strategy to begin with, it will be all over the map in the first years and find it hard to gain traction in any one market segment.
Many startups create positioning that helps them get investor funding. What kind of an effect does this have on the overall direction of the organization?
A savvy VC can see through a lack of positioning and will do one of two things: It will help resolve associated problems by providing expert direction, or it will dismiss the startup because it is unfocused. But sometimes an investor or board member develops a positioning strategy for the company in his head. This can put company executives in a difficult situation: If their own positioning strategy has not been carefully thought through, they will abandon it and go down a wrong path as they try to please this stakeholder.
This is why it serves a startup best to have a well-defined preliminary positioning strategy early on in order to know where it is headed — and to avoid being swayed by key stakeholders. A strong positioning strategy defines which customers to go after first; that is, customers with the most critical need — those who don’t have to be educated about the importance of the problem and are aware of their need. They only have to be introduced to and educated about the company’s product/solution.
In many startups, management has excellent technical and product expertise, but lacks a marketing perspective. What role should a VC play in educating and strengthening the marketing discipline in an emerging company?
You’re right — too often, marketing is an afterthought. The CEO and directors don’t always understand where marketing fits in the big picture. It’s not intuitive to them to say, “Ah, this sounds like a marketing problem” when things start going wrong — and then get the right talent on the team to address it.
In the end, the CEO and executive team must own marketing. Yet the board can be sensitive to the associated problems — lack of market focus,"‘wrong" customer segment, unclear value proposition, etc. — and push the executives to find solutions and resolve the core marketing problems.
How receptive are startups to such intervention?
It varies. Usually, by the time I get involved, company executives have self-diagnosed the problem; they know that something isn’t quite right and that they don’t have the answers. So, they’re more receptive to external help.
Then follow-up is required to ensure that the positioning strategy developed "sticks" in the company. If the company does take ownership and execute against it, it will not "stick" in the market either! The board should hold the company executives’ feet to the fire and ask what has happened with the positioning strategy and the supporting marketing plan. I believe that regular board-level marketing strategy reviews are a must, especially in the early stages of a company.
Why is lack of accountability such an issue, and what can be done to remedy it?
It has to do with the executives’ ability to understand marketing with a small “m.” The company needs to have a strategic marketing mentality across the entire executive team. It’s so important to have a market-driven person at the executive level who effectively can negotiate with the rest of the executive team and board in the development of a market-focused positioning and marketing strategy. Then, the marketing team, whether internally or externally populated, needs to implement against and link execution to the strategy.
The other priority is to see that marketing and sales are tightly connected. There should be a closed-loop system. A well-constructed and market-focused strategy needs to drive sales efforts; sales needs to track to strategy, once it has been agreed upon.
We often hear overzealous entrepreneurs claim that their product, service, or idea is absolutely unique, with no competitors. How does one assess and analyze the competition, especially in a nascent market where there is not a lot of available data on addressable market segments?
When a company says it has no competition, then the real question is this: How are customers solving their problems today? And how is the company going to get customers to deploy and use its product solution? The status quo is the real competition in an early market. If you don’t know how to address that, you’ll have a real problem in changing customers’ minds and getting in the door.
It’s also important to know those 15 to 20
other companies that are addressing the same problem you are. How can
you get people to do things in a different way — your way?
In your opinion, when should startups begin thinking about their customer, channel, and product strategies? What are some of the factors that should be considered while shaping these strategies?
It’s never too early to start thinking about product or channel strategies. Talk to your customers early on — they can help you shape your products and choose your channel partners. Similarly, you need to talk to potential partners about the product — what they want, how to support them, and design programs around this input.
Again, this is why you need to have an experienced strategic marketing mind aboard early on — whether a CEO, VP Marketing, consultant, or board member or some combination of that set. When the product is well into the development cycle, it’s a little late to start product marketing or channel development.
Too many entrepreneurs don’t realize they
are creating more than a product; they’re creating a company. They
need to drive their partners, their people, and the right business input
to make it work.
You advocate the use of positioning as the foundation of brand. What is the connection between the two concepts? How does it play out in a technology organization where the focus may be on the technology rather than the company?
My thesis grew out of my personal impatience with CEOs and boards demanding that their company’s product be branded, now. Upon probing further, it became clear that they understood branding to mean the right value proposition, the right segmentation, and more. This really boils down to positioning — what customer do you go after with which value proposition? What’s the problem being solved? How is your solution better? And all the other core marketing questions.
Positioning and branding are not the same thing; they are tightly linked, however. The proper positioning strategy must be articulated first, and then a brand strategy will flow from the positioning strategy. Companies need to have a conscious understanding of this relationship.
If you don’t have the right positioning strategy, branding is very difficult, if not downright impossible. You may be appealing to the wrong audience. Your brand attributes may be quite different when the right positioning strategy is determined. This means that core positioning needs to be established before beginning the branding process.
As a general rule, if a company is more technologically oriented, less emphasis should be placed on branding early on. Careful positioning of the company and products will establish its place with its stakeholders.
You have extensive experience in marketing and business development in Fortune 500 companies as well as startups. What are the key differences between the two?
There’s a lot more respect for marketing in a larger company. As a function, it’s clearly defined and well funded. But marketing also can be harder in a bigger company because of so many variables; for example, the positioning of one product line may negatively affect another. In a startup, however, you can do what’s right for your market environment and company.
Large companies spend more on customer and product research to understand the problem they are trying to solve. Emerging companies tinker with technology and product ideas, find something interesting, and then try to match it to a problem that needs resolution. Certainly, they try to find a customer problem to solve early on, but they almost always miss on product definition, customer segment identification, value proposition articulation, etc. if left to their own devices too long and without the infusion of strategic marketing thinking.
Rosemary, what would be your advice to startups for continued growth and marketing success?
Recognize your shortcomings when it comes to marketing. Be honest about what you know and don’t know and get some good resources to help. Additionally, make sure the customer’s voice is clearly and strongly heard in the company's planning and strategy process.
Start with the right questions. Where is the biggest need for our product/solution? Which segment do we address first? What is our value proposition for that segment? Which segment will give us a good start to leapfrog into other markets? Answering these questions will help the company create the thoughtful core positioning needed to guide a company to its fullest potential.
that marketing has a place of respect in the company when it has a line
item for research. Make an investment in customer research — not
only the IDC and Forrester “how big is the market” kind of
research, but real one-on-one customer interviews. Focus groups are not
the answer either; they produce the best results when you have
a finished product. Early markets, emerging technologies, disruptive products
are awash with ambiguity.
Rosemary Remacle has led consulting engagements focused on strategies for mainframe/workstation, PC, software, semiconductor, communications, Internet, and e-commerce products and services for clients in the U.S., Europe and Asia. She joined Sevin Rosen Funds as a venture partner in 2000 and has consulted with their portfolio companies on marketing, branding strategy, and execution plans.
Rosemary also works
with organizations outside the SRF portfolio. Over the years, she has
consulted to management teams in such large global corporations as
Hitachi, National Semiconductor, AMD, Sun Microsystems, IBM, SGI, Oracle,
Toshiba, and Hewlett-Packard. Most recently, her consulting efforts have
focused on developing positioning and market-entry strategies and supporting
plans for such venture backed companies as Southampton Photonics, Fuego,
Pharmquest, Neoforma, LightConnect, InnerWireless, BeVocal, NovusEdge, LightPointe,