How do you market a tech start-up?

By Alan Gleeson on June 18th, 2012

Creating awareness for a fledgling tech business is not easy, especially if you are creating a new product or service category where you also have to educate the market. The job is even harder if your business model is one where the “lifetime value” (LTV) of the offering is measured in the low hundreds rather than the thousands of pounds.

A modest LTV means an even more modest customer acquisition cost (CAC) is required; and this has implications for your business model, marketing and sales strategies – not least in that it precludes the use of field sales and major marketing campaigns, because they’re too expensive. As a result, entrepreneurs have to look elsewhere when seeking to drive awareness and sales.

Using social media as a means to market is often touted as a panacea for the conundrum of achieving a low enough CAC to ensure the business model is profitable. But is social media as effective a means to generate awareness and demand as people claim?

The number of social media applications and services continues to grow at an ever-quickening pace, the most prominent brands synonymous with it including the likes of Facebook, Twitter, WordPress, YouTube and now Pinterest. One appealing feature of using social media is that these channels can be tested at low cost to assess which represent the best fit for your particular needs.

Having recently launched marketing initiatives promoting their advertising products, Facebook and Twitter are aggressively targeting this market with special offers and promotions. However, the efficacy of these as viable marketing platforms varies greatly depending on a number of factors including, the nature of your business and the demographics of your target audience.

While Twitter is a powerful tool, I believe that the advertising model at the core of its business is deeply flawed. As an avid user I have yet to “engage” with a paid-for advert (or ‘‘promoted tweet”, as they call it). Based in the UK, I find more US promoted tweets than UK ones appearing in my timeline. Relevance is a rarity.

As access from mobile devices continues to grow, engagement with Twitter adverts will be even less frequent, in part because the user tends to scroll quickly through the tweets, many users simply ignore adverts, and also because the display “real estate” is too small to display compelling ad content. In a way, how Twitter chief executive Dick Costolo thinks their current platform is inherently suited to mobile defies logic.

The other advertising products offered by Twitter are even less appealing. With the Twitter search product, I find two major problems. As a user, I find myself using Google to find people on Twitter, and as a prospective advertiser I find the volume is simply not there when searching for specific terms. I am sure my findings are not unique.

Similarly, “building a follower base” using a promoted account (another Twitter advertising product) strikes me as a complete waste of money for the majority of businesses. Does Twitter verify if the new follower is real? Where is the evidence that paying for a new Twitter follower represents a good return on investment for a small business?

My recommendation to tech entrepreneurs considering Twitter as an advertising medium is simple. Stick with the free version, and use Twitter to build trust, to communicate with existing customers, as well as to provide relevant content to your followers. And use it to gain ideas regarding new ways to engage with your audience.

The other dominant social media platform, Facebook, is a good medium with which to build a relationship with an audience, but it also offers limited appeal as a paid display advertising medium for entrepreneurs. A recent Reuters/Ipsos poll claimed that, “Four out of five Facebook users have never bought a product or service as a result of advertising or comments on the social network site”.

General Motors has allegedly decided to stop advertising on Facebook after deciding that paid ads on the site had little impact on consumers’ car purchases. However, this view prompted a firm rebuttal from comScore (of whom Facebook is said to be a client) with the presentation of research that found Facebook fans “had significantly higher percentages of purchasing,” according to Andrew Lipsman, comScore’s VP of industry analysis. “It proves Facebook earned-media and advertising are driving purchase behavior.”

While Facebook does offer advertisers some rich data including sex, location, age, marital status and so on, which works well for bigger consumer brands, its ability to offer opportunities for smaller tech businesses is limited. From the consumer side, I again feel that users are increasingly ignoring adverts on side panels as they focus on the core activity they are trying to perform on the page.

My recommendation is similar to that of Twitter. I would definitely create a presence on Facebook and use it as a means to engender trust, to build relationships, and to communicate with customers and prospects. And depending on your industry there may well be some paid opportunities (an oft-cited example is when a user changes their status to “engaged”).

For now, though, I would steer clear of paid offerings until they offer a truly compelling product for smaller and medium businesses. Instead, the following strategies represent some of the more powerful demand-generation activities that should be considered by new businesses:

Concentrate on building a really great product. I make no apologies for making what seems like an obvious statement. There are too many new products and services that are simply… “OK”. The gains on existing products and services they are intended to supplant are not compelling enough to drive adoption. Similarly, the importance of having a strong, design-led focus from day one has never been as strong.

Create remarkable content. Most entrepreneurs understand the importance of using content to target an audience and to build relationships. The easy thing to do is to simply add a WordPress blog as a Search Engine Optimization (SEO) play, in the hope that the content will secure an organic listing for relevant keywords and will attract prospects.

But the internet is littered with poor quality blogs hosting lowbrow content and negligible engagement. Content needs to be consistently remarkable, so readers find it truly beneficial and worthy of sharing, which will help secure the inbound links that play such an important role in securing premium organic placement. Compelling content will also help establish you as an authority in your field and help build the trust that will help to drive conversions over time. It is also a great low-cost strategy to deploy if you operate in a niche area.

Advertising on Google AdWords affords tech entrepreneurs a great opportunity to create awareness and to generate conversions. The power of the medium is clear. Firstly, purchase intent is readily discernible from the “search intent” of the user. At one end of the funnel, you can target generic terms that indicate the user is in consideration mode, while at the other end you can aggressively target users in buy mode who are searching for specific products or brands. Hence advertisers can really hone in on a small set of converting terms as a means to promote their services to qualified leads.

Secondly, it enables entrepreneurs to tightly manage their budgets so they can ensure that marketing spend is commensurate with return.

Finally, the use of Google is synonymous with searching for solutions, be they paid or otherwise, to the needs we have, not about media diverting you away from what you are trying to do.

Build strong relationships. People buy from people, and one strength of the technology community is that there is a very high bias of early adopters willing to try out new products and services. It is a buoyant community in the UK and one in which a small number of influential writers and bloggers can promote your offering to a very focused audience from which to build.

Word of mouth can also play a powerful part in helping you gain early traction with these key influencers. And while some relationships can be established online, there is no substitute for getting out networking. A growing number of events ranging from LeWeb London to London Web Summit to regular Meetups offer tech entrepreneurs the ability to nurture and cement real relationships in person.

These gatherings also offering unparalleled access to a range of people, from prospective investors, to journalists, to industry players like Pearson looking to collaborate and partner with emerging players.

In summary, I am essentially advocating a bootstrapping approach.

Perhaps the ongoing deferral of a Twitter IPO relates to the ongoing monetisation challenges it faces. And the ongoing Facebook share price decline may relate in part to the challenges it faces in driving advertising revenue growth from the millions of small and medium businesses who currently use Google as their primary marketing channel.

But while I am not in favour of the paid-for offerings from Twitter or Facebook, they can be tested at low cost and may prove effective for a small number of industries. By testing the various options, you can quickly work out which works best for you.