When should startups start advertising?

The concept is clear, the logistics are set, HR is in place and the funding is just about right, what stops startups in India from going ahead with marketing and advertising? Is it the funding, or the human capital, or the channel expenditure? Or is the ‘right time’ to advertise a completely subjective question to ask a startup in today’s time? With popular startups scooping millions of dollars in funding and spending millions on advertising, novel startups seem to be tempted and setting a quick course of action when it comes to promotion. Is that the right way to go? Industry Experts comment: Harish Bijoor, Chief Executive Officer of brand and business strategy Harish Bijoor Consults feels that only when the startup is convinced about the durability of the offering and has vetted the product should they start advertising. They should first test the offering thoroughly and get a feedback from the customers as well as gain customer loyalty.

“These days, startups which have got investments are burning money to gain popularity and look better among peers via branding and marketing activities. I feel they should stay away from those temptations in the beginning of their journey.”

Bijoor also feels that social media and digital are the ways by which one should start promoting the offering, as it is a low-cost platform for advertising and marketing. “Social media can also be used by many startups to test waters initially, get the consumer feedback and then proceed to the next channel. Post social, a tech-startup should start with B2B platforms and then gradually move on to larger mediums,” he adds.

Is it only about testing the waters?

Hitesh Chawla, Founder and CEO of SilverPush, a startup that develops cross-device tracking software for user tracking and targeted advertising, states that tech companies especially startups in India need to be up on their toes when it comes to marketing and advertising, right from the time of inception of concepts.

“Startups should explore and make optimum use of different platforms available today. They can start the process of awareness building using direct mailers, educating their TA via product video demonstrations and eventually using client testimonials and use cases in order to sell their services at scale along with credibility.”

Chawla claims that direct marketing emailers, social platforms and corporate website have been tried and tested and have stood out as reliable mediums to drive queries and generate interest amongst clients and users.

From an investor’s perspective

Anil Chhikara, Principal at Jaarvis Accelerator, a business startup accelerator in India, looking for entrepreneurial teams with big ideas to offers mentorship driven accelerator program has a different view. He states that the marketing strategy and channels depend on whether the tech startup is B2B or B2C focused. “In B2B enterprise startups, the sale is done to businesses and the benefit a product or service offers is paramount in convincing the customer to buy or not. The marketing strategy here is more focused on positioning and pushing the product to its target audience,” he says.

“The best strategy then becomes being present or visible in places where the target customers or influencers are present — trade shows, conferences, industry events etc. The timing to start marketing is aligned with launch of the product or service. In B2C, the brand becomes more important than the product and takes longer to build.”

Chhikara believes that in today’s digital world, social media plays a big role, besides the usual media channels. As building brand takes time, it usually can be started before even the products or service is launched. A TAM Media Research report from 2015 stated that the top 50 e-commerce startups in the country spent about INR 1,200 crore ($1.5 billion approx) on television advertising in three months during the Indian festive season. Does this give a kick to other startups to raise more and spend more?

B2B or B2C, value is the proposition?

Anand Kumar Jaiswal, Associate Professor of Marketing and Chairperson – Centre for Retailing, Indian Institute of Management, Ahmedabad (IIMA) does not agree with the same. He states that the time that a startup should start advertising is a subjective issue and depends on many factors. Reiterating what Chhikara stated, Jaiswal also believes that timely advertising may actually be critical for a B2C startup. If the offering is being directly sold to the consumer, then one needs to spend in mass marketing and advertising. Whereas, a B2B startup should focus more on relationship building, in some cases advertising too, but in a limited manner. Hence, tech startups in a B2B environment can delay advertising initially, as relationships indirectly will drive the promotional part.

“It is about how good is the startup’s value proposition, its USP, and how protected is that? Sometimes a startup can have an interesting idea, or innovation, or technology, which invariably attracts customers. In that case, advertising can be delayed but that too if the idea is patent protected, so that nobody can copy or steal. Those kinds of startups have some advantage of gradually acquiring customers and scaling up. But sometimes there may be an idea that has to be taken to the market quickly for a first mover’s advantage, in that case advertising is important, to acquire customers at the earliest.”

Jaiswal also feels that when it comes to how much cash or VC funding the startup has; there is always a conflict. “Startups don’t want to burn a lot of money unless they are sure about the return. Advertising always contributes to building brand equity and about building a long-term message. At that time, the amount of cash or resources one has, comes into play,” he comments.

“It is about a strong value proposition vis-a-vis criticality of advertising and gives an example of Airbnb and Uber, who had unique ideas — did not spend on advertising initially. Hence, a distinct value proposition helped reduce advertising or delay it initially.”

Word of mouth works, but niche startups don’t fit in

Sreedhar Prasad, Partner, Internet Business & Startups, KPMG in India, says that when there is a customer acquisition angle involved, there are two ways of looking at it. There are a lot of startups that have grown significantly with word of mouth publicity, these are companies like FreshMenu where people who have used the product have referred and started telling their colleagues to use it. “I feel startups catering to primary needs — like food — can afford to start advertising a little late, but startups that are catering to aspirational needs — like shopping — need to start advertising from day one, or else nobody would come to know of their existence,” he adds.

“What we have seen so far is that word of mouth will work for a clear need-based service. For example an edu-tech software or a startup like food-tech have figured out a way to solve the need based issues of everyday people. They are able to spread strong positive propaganda through word of mouth and gain popularity in the first 4-5 months, without spending on advertising much. Those companies can afford to start a little later as compared to startups into e-commerce.”

Prasad states that startups ask for money from VCs because they want to grow — more customer acquisition, or they want to invest — for capacity to produce. “When investor money comes in, advertising is an automatic choice, because investor money means you have to grow faster. I wouldn’t corrupt the thought that investor money will lead to advertising immediately, rather it should be that the right kind of product should find the right kind of advertising and timing for the same,” he appends. Hence, the takeaway is that startups focused on basic needs can rely on positive propaganda and word of mouth before they spend huge amounts for advertising. But if the startup is not into that area and is into educating the customer or is catering to an aspirational need, then it needs to advertise. When it comes to tech-startups offering core technology products, they need to find the right customer and need to spend money for customer acquisition. The more niche a startup becomes the more difficult it is to find the right customer. Avlesh Singh, Co-Founder and CEO of Webengage has his own take on the issue. He says, “There is no one advice that applies to you or your startup. Your company and product are different than mine. Most importantly, you and I are not the same human being — we have different priorities, perspectives, skills and network. So, whatever I did to get my company to this stage doesn’t necessarily apply to you. You can do it much quicker and in a much much better way.” Webengage is a multi-channel user engagement platform that enables online businesses to personalize engagement with their users across mobile, web, and email.