Plan On Your Launch/Startup Being LESS Efficient

When you start up a new business or launch a new product/line/service/project, as it's only the start, you don't have a big budget, and you really need to get things up and running, and some revenue coming in, before you can commit to stronger levels of marketing expense. Right?

Wrong.

Businesses should plan on their early phases (or launch of a new product/project) being LESS efficient for marketing ROI, rather than magically ultra-cost-effective.

Here's what I mean: in startups and small businesses, especially with a stated "lean" approach to things, the management usually (and quite rationally) want:
a) maximum results (ASAP)
b) minimum cost

Furthermore the expenditure on advertising and marketing generally need to be predictable, safety-limited, short-term-reviewable, non-commitment-requiring, simple to manage... and able to provide data and results that are proof of concept for further planning.

The problem is, this is not how building awareness and building sales usually work.

Unless you have very good reason to think you can achieve BIG results with SMALL expenditure then this is just magical thinking, not proper business planning or marketing strategy.

Here is what a fellow marketer recently wrote hopefully in a startup business plan I helped to review:

"This is a start-up business so initial marketing spend will need to reflect the fact that turnover needs to be generated before heavy investment. "

My harsh-but-true feedback was to rephrase this to:

"This is a start-up business so initial marketing spend will need to reflect the fact that heavy investment needs to be applied up front in order to generate turnover"

 Automobile starter motor and its rotor

A car's starter motor: in energy terms it's costly and inefficient... but you need it to get up and running.

Engine Starting

Picture launch marketing as the starter motor for the engine of your business. Your business needs to have a certain level of turnover to be in a normal running state where you keep going with significant help from the inertial effect of returning customers and customer referrals. When you are in normal running mode, you still invest in marketing, but you do that to add new customers (advertising: throttle) to offset loss of existing customers and produce net growth. Normal, ongoing marketing is not the same as launch marketing, because you are already moving.

A business cannot just hop from zero to smooth running... especially because in the majority of cases with new businesses or new  launches within a business, you have absolutely no proof that this whole conversion/sales/revenue model is going to work in your current version of it, let alone whether your chosen marketing tactics will be sustainable for generating those sales.

You need marketing activity - the starter motor - to "turn over" the engine and get through this phase into something like normal running. Assuming you need at least a minimum of experimentation to see what version of your offer and product/service works well, and what marketing brings you the right effects (price, product, promotion, and place...?)  -- then you will also need a corresponding length of time (+resources) to produce the traffic and sales to work on. And throughout such experimental starting phases your marketing will almost certainly NOT produce a return on investment and NOT be anywhere near as efficient as it eventually could be.

Therefore you must expect startup and launch marketing to be costly and inefficient when measured only on their own strengths.

The ROI value of the startup/launch marketing is that it gets you running rather than failing: taken in this way it is indeed quite valuable 🙂

In more straightforward terms, you aim to recoup the inefficient cost of the launch phase over the initial profit period of what you are launching: so a longer term view will give you a better picture of what you are investing in. On a business level you also need to be prepared to invest in launching things that completely and utterly fail, use up a lot of money, and get cut off. You try to average out a success rate across multiple experiments so as an organization you can take these risks. But that is something for another article.

Here I am just saying, don't under-resource your marketing launch so it is designed to fail. This is not the good type of failure, aka fail faster, learn and improve. The bad type of failure is that the structure of your experiment made it impossible to succeed in any situation, even if the idea and potential profit were actually excellent if given the chance.

symbolic picture of a match being held to a fuse which runs to a bomb, but in the middle before the fire gets there we have the caption - Forget it this is not working

Under-resourcing startup/launch marketing campaigns is equivalent to giving up early before you even have a chance to see if your business idea works.

Don't Stall On PPC

The effect is just the same with PPC campaigns: if you expect instant ROI as soon as you turn it on, or apply insufficient budget to acquire enough clicks for meaningful data and conversions, then you will sputter and stop. You will look at the click budget versus the results and turn it all off saying it doesn't work. It may indeed be true that it is not working or will never work out -- but unless you have bought enough clicks and tested with enough basic variables over a reasonable timeframe and reasonable targeting variations, you won't confidently be able to say what part of it is not working out.

If you do apply enough throttle to a PPC campaign (or on a more general scale to your launch marketing) the most likely situation is that you WILL acquire the conversions/sales that you want, just not in the quantity and efficiency you wanted. But this is a great position to be in because you have proof of concept, some actual conversions/sales to work with, and the basic structure of the marketing campaigns that produced the result. Now your job becomes about learning from the customers, testing and optimizing more on the campaigns, and tightening up on the cost/efficiency.

Exceptions

The exception to my argument here -- and one which startup managers have to determine whether they are implicitly hoping is true in their case -- is where you have OTHER low-cost methods of jump-starting your traffic and sales.

These might be:

  • large reliable streams of organic traffic (congrats on that if true)
  • large pre-existing audience such as in your newsletter or social media -- and you are launching something they will respond to
  • human sales networks
  • offline fame (such as being a well-known brand or personality, where you can basically say "X is launched" and people want to take a look)

If you said "viral", that is not a predictable tactic: things that are genuinely "viral" online are either unpredictably (and often unexplainably) lucky, OR they take advantage of the above network/fame effects, OR (as often in the case of deliberate "viral marketing") the visibility is given a large boost by -- you guessed it -- large advertising budgets. It is incredibly rare for any viral success, which is also part of someone's commercial business offering, to be cheap or free.

Advice

  1. When planning budgets for your startup business or launch within that business... do plan to have a budget for marketing 🙂
  2. Determine your conversions/sales count targets
  3. Working back from your conversion/sales target, set down assumptions about conversion rates, allowing you to see the required amount of traffic/clicks
  4. Set down assumptions about cost of this traffic (e.g. PPC cpc but not limited to that), allowing you to estimate a marketing cost to reach your conversions/sales goal
  5. Create variations on your budget with more pessimistic (realistic) settings for conversion rate and traffic cost: take the pessimistic scenario as your launch marketing cost
  6. Don't expect the cost of this marketing to connect with ROI immediately: the question is whether you can afford to launch this right now, and how you evaluate the probability of success in getting sales to a more normal partially-self-sustaining level

Ford Model T Engine Diagram

Remember: to start an engine, you need to crank it, and this is hard work.
It doesn't work at all if you don't apply enough force or give up too easily.
Image: Pagé 1917 Model T Ford Car Figure 16
By Victor Wilfred Pagé [Public domain], via Wikimedia Commons

TL;DR

Budget a lot more than you thought for startup and launch marketing.

Failure to apply adequate resources is a more common cause of startup/launch failure than the quality of the idea or the market itself.

Don't do budgeting which implies that your startup and launch marketing produce instant, self-fuelling, bootstrapping return on investment.


Thank you for reading this article by George Baily of KnowledgePower Digital Marketing -- PPC and strategy consultant.