With the success of companies like Uber and Slack, it would seem like there is no better time for startups. While this is true in many respects, especially in the Silicon Valley where venture capital is flowing (helping startups to scale quickly), the truth is that most startups are barely able to survive.
Having a good product is an essential requirement for the startup to become successful, but not the only requirement.
According to a Harvard Business School study, approximately 75 percent of startups with venture funding will eventually fail.
Of course, most startups fail because of their incapability to attract new customers and retain them. While there are so many different types of startups, there are a few common reasons, why a customer won’t buy their product even if it is great.
Unlike most established companies, startups do not have defined business goals and processes. There is no established process to handle talent, operations, and finance. Most startups have a very limited cash cushion. Also, when the company is new, there is no customer base.
With so many things to worry about, product quality is often not up to the mark in the initial phase. When companies are in the founding phase, customer support is far from their number one priority.
The customers may hesitate to buy from startups, as the processes are uncertain and the company may shut down any minute. Even if the product may be valuable to them, why will they trust something that has no demonstrated success?
2. Not the Right Fit
“Tackling problems that are interesting to solve rather than those that serve a market need was cited as the #1 reason for failure, noted in 42% of cases”
Customers are fine without your product. Just buying your product is not going to make their quarter more profitable. They may have strategic initiatives to improvise the functional areas over the year. But, they can only make so many changes over a year.
- If a product is solving their problem and meeting their strategic initiatives, they may be interested. But, They may not have the urgency or the budget to adapt it in a particular time frame. Any change takes up a lot of resources and time, prior to and post implementation.
- If your decision maker is happy with what they currently use, why will they use their budget to buy another solution, that is completely unknown?
- The customer has a choice to shortlist one out of 9 competing products. Even if the product is great, winning the customer’s attention has become like winning a lottery.
- Your product may be great, but not solving their top problem. All the C level executives have some extra budget, provided your product is addressing their main headache.
3. Lack of A Defined Marketing Strategy
A startup may have a very innovative product with a great pool of talent working on it. But, how are the customers supposed to find out? Marketing is one of the most important aspects of a product. It generates the initial few leads, that can be narrowed down and nurtured by the sales team.
Assigning Marketing work to the wrong people
With the restricted cash flow and lack of resources, startups often overlook the marketing aspect. Sometimes, they spend their limited resources on marketing strategies, with no substantial ROI. It is often seen that there is no dedicated team to own the marketing responsibilities.
In some of the startups, the founders and CEO’s do the marketing themselves. Everyone does a bit of marketing along with their core responsibilities, but no one is constantly on it. While the technical team may know the product very well, their career goal may not be to create social media posts.
Why should they be expected to work on something that is not their expertise or passion? In such cases, the marketing efforts are neither consistent nor engaging and gradually withdrawn.
Hiring Marketing Professionals and Solely Depending on them
However, the owners should know something about marketing before hiring someone to take over.
There is no one size that fits all. Not the same old strategies may work for all business models. The owners can experiment with the strategies, and be aware of the most appropriate one. Here are some examples:
- Outbound Emails: Hyper personalizing your subject lines and emails for a highly targetted audience can be rewarding. If your product solves their problem 10x better than others, and if your email reaches the decision maker, does that strategy work?
- Social Selling: Have the discussions on Quora, generated any positive response?
- Content Writing: A valuable blog can grow your online visibility and network. Was the owner able to write some valuable blogs and generate at least a few inbound leads?
- Event Networking: Attending local meetups and connecting on LinkedIn can be a great marketing strategy. Has attending a meetup, helped capture any good leads?
- Public Relations: Can you get some great PR marketing that leads to even one customer?
- Sponsored Ads and Posts: Do you have insights, suggesting the success of a sponsored campaign? Can you prove if the campaign worked in converting leads?
- Social Media Marketing: Social Media is an incredible platform to influence people to try your product. Have your posts been just one-sided or have they engaged any curious visitors?
If an owner can answer positively about any of the above strategies, then he is ready to hire a Marketing Director.
While an experienced marketing professional can be an asset, it is important that they come on board with an open mind, without any fixed ideas.
4. Inadequate Sales Team
Salespeople are the link between the product and the customers. Selling for a startup is very different from selling an established brand. In this case, it is a whole new concept that needs to be explained. Even a minor mistake can ruin the reputation before it’s even established.
People hate to be sold to and they couldn’t care less about your product. The standard, “my product is so awesome,” outbound random email to 500 leads is a recipe to failure. Connecting with your leads on LinkedIn and spamming them with cold messages may not help either.
It is crucial, how salespeople score relevant leads and customize their value proposition. Inability to identify the right fit is one of the common reasons why startups fail.
Hiring salespeople, who understand the product and are compassionate to be trained is essential.
Often, startups hire freelancers or commission only salespeople, who do not have the motivation necessary to master the product. For them, you are one of their clients and not the number one priority.
A lot of the startups don’t even have a benchmark to evaluate their sales performance.
5. Impractical pricing
Some of the products may be too expensive for the economic buyers. When you are a startup, introducing a new concept, your goal should be to display the value of your product, relative to the price.
Customers may resist the high prices for something that is not proven. The first few customers can be your initial client base and also help you refine your market fit. So, it’s essential to have an attractive pricing strategy, especially in the early phase.
Sometimes the companies may genuinely not have the budget to spend on something new. But, if the decision maker is frustrated with the current solution and if your product is within their range, they may be able to get you in.
People love free stuff. Strategies such as Beta Testing, Free Trial or Freemium can help in providing the experience. The idea is to get the potential customers comfortable with your product, who may buy it eventually.
“… even the best slogans, ads, landing pages, PR campaigns, etc., will fall down if they are not supported by the experience people have when they hit our site, when they sign up for an account, when they first begin using the product and when they start using it day in, day out.”
How would you build a user base, if your users have no idea about what your product is and how does it work?
Startups are already taking a risk in the first place. If there was no risk, there is no reason why others haven’t done it before.
- A product is not considered great till its solves a problem in a 10x better way.
- A startup may be competing with the established players and is not ahead of the game. There are more chances of winning if you are amongst the first two startups to discover the product need.
- The market conditions and customer needs change rapidly. By the time your product is out, someone else may be offering a more attractive product.
It is critical to stay on the top of trends and constantly evaluate the market conditions. A good way to stay updated is to speak with people in your target audience. Constantly altering the user interface, based on market research is something a lot of startups miss.
In Marc Andreessen’s blog, he wrote: “The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.” But, “In a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter — you’re going to fail.”
To get their first few customers, startups shouldn’t stress over launching the most robust and feature-focused solution. Rather, they should deliver a satisfactory product, fast.
This post originally appeared on Medium