A startup is a process of finding a sustainable business model, in which the target audience, product functionality, rational and emotional benefits, and communication methods often change. In most cases, a startup is created and developed within a set of hypotheses, so 90% of startups close in the first year of operation, investors and founders lose money, and potential projects are never introduced to the market due to lack of investment.
Can branding help remedy this situation and increase the chances of new projects to survive?
Branding is a process that involves a comprehensive study of the market, consumers, the search for a niche, the formation of product "codes" that can be perceived by the target audience. Already from the definition itself, it is clear that the introduction of branding practices among startups is vital. The problem is that most members of the startup community do not focus on quality work in the field of marketing and branding, believing that the main thing is speed. As a result, the development of a startup is chaotic. Often it comes down to a series of “turns”, after which startups either close (most often), or achieve rapid growth and “skim the cream”, and then are absorbed by interested corporations or disappear from the market.
80% of successful startups at the initial stage of development do not focus on the product as such, but on finding and satisfying user problems. This is the right marketing approach. But at some point he needs branding support. When exactly?
To answer this question, we conducted a little research and identified the stage of startup development at which the founder needs to start investing in branding and designing communications. To achieve this goal, desk research methods were used: analysis of IIDF data and publications in the targeted media and journals, scientific papers. Here are some conclusions.
A startup is a temporary form of organizing a company in search of a scalable business model. The main most typical characteristics of a startup:
- New product or market.
- No brand.
- Lack of money for development and promotion.
- The target and potential audience is unknown.
- The absence of a clearly defined core of the target audience for communication.
- Personnel shortage
The development of this form of organization is intensive and may undergo significant changes until the moment of transformation into a full-fledged business or exit from the market. Such changes represent a pivot (from English - “reversal”) at the stage of the release of the MVP (minimum viable product) and the implementation of the first sales.
Each such “reversal” is already a reason to connect branding technologies. It is important for developers to invest time and resources not only in product functionality, but also in marketing planning. This will help to avoid high losses with an excessive number of "turns", significantly reduce the number of tested audience groups and prepare the basis for brand design at the stage of transformation into a business.
Pivot as an occasion for branding
To prevent the risk of entering and securing a follower competitor in the market, startups use the factor of the speed of development and distribution of the product. The developers proceed from the fact that it is more correct to quickly release the minimum viable version of the product to the market, test the reaction to it, and only then refine the new product to some optimal indicators. As a result, if the first reaction is not encouraging enough, the startup thinks about “pivot”.
But is it right? Perhaps the reason for the sluggish reaction to the novelty is not at all that the product does not suit the market. Perhaps the innovation simply did not have time to achieve "acceptance" of the public.
To understand what is really happening, we should remember that any startup has a life cycle, which can be illustrated by the innovation diffusion model. The Russian startup community prefers to focus on one of the types of this model - E. Rogers' "Innovation Distribution Bell". This model describes five types of potential users of an innovation, from the fastest-growing (innovators) to the most conservative. Each of these groups adapts the novelty at different speeds.
The Rogers model clearly shows that the process of adopting any innovation is gradual, but it does not always help aspiring entrepreneurs understand how to use this scheme in practice. This entails errors in determining the target audience, inefficient investments in communications, depletion of investment funds, and often the termination of the existence of a startup.
In practice, it is useful to supplement it with another model of the startup life cycle, which was presented by the British expert James Gardner. This model shows that the spread of new technologies is a complex process, and demonstrates exactly what tasks arise at each stage of startup development.
At the “growth” stage, the key task of a startup is to attract the first followers. This stage requires creating awareness of the product. It is important for companies to interest potential buyers in what problems this technology helps to solve. How will users distinguish it from the many other new products? Already at this stage, the company will need a strong brand. It will help to "animate" the technology, compare it with products known to people and at the same time add individuality. To take root, innovation must enter life correctly. Therefore, startups need to take into account both the functionality of the product and how it is perceived among people.
After the development of a startup reaches the first peak, the rollback stage begins. During this period, branding tasks change. On the one hand, it is important to properly build anti-crisis communication in order to cope with negative reviews in the media. On the other hand, the question arises of finalizing the product, introducing justified innovations into a technology that is no longer so fresh. But most importantly, the Gardner model helps to understand the key mistake of startups: they rapidly develop when entering the market (the “technological impulse” stage), reach the “peak of inflated expectations”, and then change the strategy.
Every time they change MVPs and test a new hypothesis, startups start their journey again and again with an audience of innovators. This entails a sharp increase in demand for the product and a rapid spread in the market. With the right pricing policy, this stage allows you to skim the cream, but this is not enough for product development. If you follow the model of D. Gardner, now he needs to move to the stage of "positive shift". And if you follow the life cycle model, then to the “growth” stage. For this, communications should be redesigned for a group of followers and an early majority, which, in terms of the specifics of demand, are not at all like innovators.
Moreover, the goal of a business when creating new products is to acquire a loyal audience and the largest market share at the stage of product commodification or entering the mass market. Innovators, on the other hand, have the lowest degree of product loyalty and quickly switch between innovations. If a further strategy for brand development and entry into the mass market is not determined at the stage of startup growth, then it will be forced out of the market by competitors.
Summary
After the stage of formation and the first successful sales, but before the appearance of the first followers among competitors, a startup needs to be branded in order to secure the largest territory in the segment, as well as to increase the level of recognition, awareness of the product of a particular company (a particular brand) and protect against attacks from competitors.
To determine the potential of a product and minimize risks already at the first round of venture investments, it is necessary to conduct a sufficient amount of market and consumer research. This will allow us to formulate a brand platform in the future and effectively invest in communications in order to ensure growth in market share, attract new consumer groups and expand the occupied territory.
Since any innovation successfully introduced to the market will be copied and modified by competitors, speed alone is not enough. The long-term goal of creating any product is a successful entry into the mass market and the passage of a full-fledged product and market life cycle. Therefore, at the stage of formation, it is necessary to create a high-quality brand and design communications for each subsequent stage of product development.
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