One of the most challenging goals for a startup is attracting and acquiring the proper number of customers to sustain and grow your venture. To gain adequate traction with your target customers, several aspects of your business model must align correctly, especially the customer relations and channel strategies. In an earlier post, I highlighted some customer engagement strategies to address in the business model canvas.
Four areas must be in alignment to optimize your customer engagement efforts:
- Marketing strategies focus on how you get customers to know and want your product and service.
- Sales activities move the customer from interest to actual payment for your product and service.
- Your channel strategies direct how and where you engage your customers throughout the sales cycle, from initial awareness through purchase.
- Customer service activities focus on how you plan to deal with customers throughout the sales cycle, focusing on after buying your product.
For many ventures, all these activities are under the marketing and brand management banner, the systematic planning, implementation, and management of a portfolio of integrated activities intended to attract and retain customers. One of the new venture’s most important strategic activities focuses on acquiring and retaining your target customers. These activities must be implemented and aligned, so your messages and overall interactions with the customers are consistent and reflect your desired brand image. Several documented approaches and tools help you design the optimal marketing mix to ensure proper brand development. One of the more common tools applied by ventures is the “Four Ps” – Product, Price, Promotion, and Place.
The “Four Ps” concept has been around since the 1950s, and there are several variations to the original idea, many adding more “P” elements such as people and process. However, for your startup venture, working with these four elements is a good start. Of course, you can always customize it to your needs as you learn more about your customers and competitors.
As a founder working with these strategic frameworks, I suggest focusing on your initial target customer as a starting point. Similar to developing your initial business model, you should view your interaction with the customer as a transaction with several elements that must work together seamlessly. Once you have generated a transaction that you can repeat with several customers, you can see what it will take to expand your market with new customer segments. Then, as you look towards additional segments, you can revise your strategies to reflect the differences in specific customer needs, context, and desired outcomes.
While each of the four “Ps” is important and must work together, the first P, your product, is the foundational element. The formulation of the “product” mix element is where you determine how you want your initial target customer to view your offer. The focus of this element is on satisfying essential customer needs. Therefore, you must clearly articulate how your product meets the vital customer needs in question. Additionally, you want to demonstrate how your product meets these needs better than current market solutions.
It is important to remember that the value proposition for one customer segment may not be the same for others. Therefore, you should develop a value proposition for each customer segment. So stay focused on your initial target customer and work out how to best articulate the value proposition of your offering to them. The value proposition is a balance between functional, emotional, and economic benefits provided to your customer. This balance can become your venture’s competitive advantage for attracting, keeping, and growing customers. As you position your product in the customer’s mind, a final aspect is providing evidence that the claimed value is accurate. As you will see, startups are not always in the position to provide such proof, and so believability is earned over time.
The best place to start is by spending time defining and positioning your product and service. For this definition, you should focus on your “solution” and the differentiating attributes of your offer. As a start, you should review and update the description of your product found in the “value proposition” section of your business model canvas. From the beginning, you have been working to clearly articulate the product offerings, including how they will solve the customer’s core problem. Now it’s time to ensure that you have clear responses to questions, including :
- What is our offer?
- How does it create value for our customers?
- What are our value proposition and product positioning?
- What do we want our customers to experience?
- What does our brand stand for?
Now you are going to think about it in terms of the optimal messaging for your brand development. First, the essential product messages include attributes critical to solving the customer problem based on what you have learned during your customer discovery. Secondly, how is your product different than existing solutions – your competitors? Here you can communicate the key differentiators, sometimes considered your unique selling proposition (USP). Finally, for investors, you should include the status of your product in terms of its development. Product status may range from minimal viable products to complete product generations.
As part of this effort, you should consider creating a product positioning statement. An effective statement tells the customer what problem you are solving with the product or service. The information should include who the target customer is, the problem to solve, and what value the customer should gain.
A product positioning statement establishes the content and tone for all company communications about your venture’s offer. Your statement should include the following points:
- Telling your customer what problem/service you are solving vs. having them trying to figure it out
- Ask yourself what your product/service provides or solves for your customers, and then tell them
- Focus on value (functional, emotional, & economic benefits)
- Clear messaging on benefits and outcomes
Once you have articulated your product position, you will want to make decisions about your pricing strategy. For marketing purposes, you want to focus on aligning the value created for the customer and price strategy. Additionally, you will outline the methods used to drive revenue (special offers, discounts, payment schedules, credit terms, warranties, etc.).
The most critical question to answer is what the value of your product or service is to the customer? While customers may have concerns about price, they assess the cost to them with the importance of solving the problem. Are you clearly articulating the benefits of your offering relative to the price? These customer concerns are the primary reason we encourage new venture creators to quantify customer problems and expected gains (value/benefits) during discovery. The more you can quantify your benefits, the more the customer will understand the direct impact when they use your product. Most customers will accept your pricing if they correctly perceive your product’s value.
As with the product section, make sure that you clarify how your product is different from your competitors. Make sure that the differentiators warrant any price differences. Part of your messaging should address the value gained as compared to competing products. This information will help customers accept price differences.
The other portion of your pricing strategy will focus on specifics of special offers, discount practices, payment methods and schedules, warranties, and the like. Innovative ways of payments or competitive warranties can help support your pricing and overall marketing message.
Early strategists first viewed this element of the marketing mix focusing on the point of sale, usually a physical location. Today, we think more about access to the customer throughout all points of engagement, from initial awareness to post-sales service.
As a starting point, you should identify all the points of engagement you will have throughout the product sales and life cycle.
The sales cycle starts with the moment that the customer learns that your solution exists. This cycle continues through any customer inquiries about the product and other interactions with you or company representatives until the final sale when the customer pays you. So at what points does your customer engage the company before the final deal? Where are these pre-sale touch points? Online? Physical location? Both?
Once you determine the pre-sale touch points, you can look to what you believe will be the frequency of engagement post-sale. For example, will there be a formal follow-up post-sale to check on customer satisfaction? How do you plan to respond to any questions or concerns the customer may have about the product? How long do you expect the customer to use the product before it requires replacement, upgrading, or other product sales opportunities?
Mapping out all these engagement points is a vital part of determining your placement strategy. But, of course, access is more than just timing; it is also about the method.
Another essential element of your channel strategy is understanding the optimal “place” to engage your customer throughout the sales and product life cycles. Today’s customers are used to having access to products and services when and where they want them. This experience has led to the trend towards multi-channel access, with physical and online access converging at different points of the customers’ life cycle. One typical example of multi-channel access is ordering a product online and picking it up at a local store. In this case, the business is reaching the customer early in the process online and then providing an option to visit the local store. For the customer, this provides quick access to the product. It also creates another customer touchpoint for the company, creating awareness and opportunities to purchase other products.
While many startups think about this final element as the core of their marketing strategy, it is crucial to understand the other Ps before deciding on your promotional approach. In the other three areas, you have defined the problem that your product solves and what value it creates for the customer. Additionally, you have evaluated how much the customer values an effective solution. Finally, you have identified all the potential customer touch points throughout the customer life cycle. Now, your focus is on the optimal way to educate and engage your target customer to move them from initial awareness to purchase.
With the above knowledge, you can begin to prioritize your promotional activities based on predicted traction and sales funnel rates. This knowledge is the basis of your go-to-market plan. The core principles to apply include:
- Understand how and where your customers consume information in the market, how do they “hear, see, & buy.”
- Find out “what has worked” in your market or industry…what are the key metrics
- Prioritize channels and programs
- Test to see how the channels and programs perform
- Minimize expense until a channel is proven
- Build your “Pro-forma” plan based on industry metrics, tests, and hypothesis
- Understand the implications of a multi-sided market
- Factor “get/keep/grow” into your program from the beginning
As a first step, it is essential to know all the promotional options available to you. There are numerous approaches that you can apply to engage and educate your target customer. You can divide promotional tactics into digital or traditional. Examples of digital vehicles include search engine optimization, social media advertising & influencer strategies, content marketing, and email newsletters. Several traditional approaches are helpful for startups, including speaking events, earned media & publicity, and brand ambassadors.
Once you have reviewed the optional promotional tactics, you should plan to test the top two to three options to see which ones effectively reach your target customer. One suggestion is to start with the one approach that you think will be the most effective and run an experiment for a short period. Then, depending on the result, begin to phase in the second option to see how it adds to reaching your customers. It is advisable to set goals during these experiments, how many customers you will get, how many will take some action, and hopefully the number of sales (conversions) generated.
Digital marketing techniques can test many aspects of the product or service before committing the business entirely to one path. For example, you can test specific value proposition elements and what attracts potential customers via digital advertising. Additionally, you can assess the impact of different pricing strategies and price levels with landing pages, surveys, or A/B testing. Even the features of the product itself can be determined using crowdsourced data.
Again, startups have limited resources for marketing, so these phased-in experiments will help discover the best promotional tactics without using up all your marketing funds.
In my next post, we will continue our journey exploring how to build a solid go-to-market strategy as a startup. Topics for the next post include customer acquisition, and sales funnel strategies.
For more on this subject and other entrepreneurship topics, get a copy of Patterns of Entrepreneurship Management, 6th Edition.
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