Young companies aspiring to enter the market face new challenges, unfamiliar situations and dynamic changes every day. They have to find answers to the following questions: How do we manage to place our products or services successfully in the market? How exactly do we define our market orientation and what measures can we derive from that? In short: How do we build our marketing? And how do marketing activities of young companies differ from those of already established companies?
Marketing definition
The American Marketing Association (AMA) defines marketing as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." [1] In general we can say that marketing wants to show how exchange processes between companies or between companies and private customers arise, and then derive insights from that on how to build these exchange processes. [2]
Quality products and services are best forms of advertising
The basic entrepreneurial idea concept should include a detailed marketing design featuring the support measures and instruments to be used. The core of a good and promising marketing concept is the business idea itself. Marketing concepts should not be only conceived and added in retrospect. Günter Faltin writes: "Your marketing is only as good as your idea allows it to be." [3] According to Faltin, marketing is an integral part of the business concept. The products or services of a young company, its market orientation and communication with all market participants – all together they play a central role for the survival of the young company on the market.
Challenges for start-ups
Young companies are faced with the task of finding marketing tools that are realizable for them. However, the approaches and methods described in reference texts mainly apply to larger, more established companies. [4] But: "A small business is not a little big business." [5] Young companies have different requirements and scopes for action to deal with. Entrepreneurial marketing provides the following challenges for start-ups:
• Scarcity of resources (equity and personnel)
• Negative cash flow, no profits
• Company has no brand
• Dynamic, constantly changing environment
• Little or no established structures and processes
In particular, the scarcity of resources is a limiting factor in the design of an appropriate marketing concept. In addition to that, respectively in contrast to an established brand, young companies cannot rely on experience from the past. [6]
New marketing for new markets
The following example is not exactly a start-up narrative, yet there are parallels: When launching its Red Bull Cola, the Red Bull company was in a very different situation compared to the introduction of its previously launched energy drink: When launched, it was a completely new product. In order to introduce the energy drink, the target group at first had to be made aware of that new product category in a sensitive way. A successful positioning of all downstream product line extensions of Red Bull (such as the Red Bull Cola) was much easier after the energy drink had become popular before. By then the brand was well known among the relevant target group (and beyond). The customers knew what they were getting.
From the beginning on, the communication strategy of Red Bull relied on word-of-mouth advertising and buzz marketing to spread the awareness of the energy drink. Later on, these methods were followed by television commercials, cinema advertising, ads and sponsorship agreements with athletes. Despite the fact that Red Bull surely disposed of a much larger marketing budget than most start-ups do in the beginning of their business, start-ups, however, can still learn from that example what are the goals and tasks of new business marketing. This mainly includes the creation of acceptance for the company and its products or services and the development of brand awareness. [7]
Efficient marketing methods
Because of their limited resources, young companies need to develop an efficient marketing that ideally spreads of its own accord. For example, through word-of-mouth, this leads to attention and notoriety among the relevant target group. Creating visibility on social media platforms, developing innovative guerrilla marketing campaigns – at best these marketing strategies create effects that makes the product "contagious" and thus quickly lead to brand awareness among the target group. [8] The cost of guerrilla actions usually occur only at the time of developing the strategy, the content and when placing it in the selected communication channel(s). After publication, hardly any other costs arise, because the message spreads like a virus within the target group. For this reason, the viral form of advertising is often recommended for young companies with a small marketing budget. [9]
References
[1] AMA 2013
[2] cf. Kalka/Mäßen 2012, p 6
[3] cf. Faltin 2014, pp 44–45
[4] cf. Freiling/Kollmann 2008, p 5
[5] Welsh/White 1981, p 18
[6] cf. Freiling/Kollmann 2008, p 5
[7] cf. Freiling/Kollmann 2008, pp 6–7
[8] cf. Oetting 2008
[9] cf. Hutter/Hoffmann 2013, p 37
AMA (2013): https://www.ama.org/AboutAMA/Pages/Definition-of-Marketing.aspx, (last accessed on 2.10.2014)
Faltin, Günter (2013): Kopf schlägt Kapital. Die ganz andere Art, ein Unternehmen zu gründen. Von der Lust ein Entrepreneur zu sein, München.
Freiling, Jörg/Kollmann, Tobias (Hrsg.) (2008): Entrepreneurial Marketing, Besonderheiten, Aufgaben und Lösungsansätze für Gründungsunternehmen, Wiesbaden.
Hutter, Katharina/Hoffmann, Stefan (2013): Professionelles Guerilla Marketing, Grundlagen-Instrumente-Controlling, Wiesbaden.
Kalka, Regine/Mäßen, Andrea (2012): Marketing, 5. Auflage, Freiburg.
Oetting, Martin (2008): «Viral Marketing», wie funktioniert das eigentlich? http://www.deutsche-startups.de/2008/05/14/viral-marketing-wie-funktioniert-das-eigentlich-gastbeitrag-von-martin-oetting-teil-1/ (last accessed on 8.10.2014)
Welsh, J./White, J. (1981): A Small Business Is Not A Little Big Business, in: Harvard Business Review 1981, 59 (4), pp 18–32.
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