Digital marketing is critical. Most of us know that, but do we know why? Why is it that some companies grow quickly and for a very long time while others die a fast or slow death? What are the conditions under which companies thrive? In this post, I took a look at some published studies on why companies (namely, startups) failed. Here’s what was found.
Of the top 10 reasons why companies fail, my numbers show that roughly 8 or 9 of the reasons are market or marketing related. For example:
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Working on a problem that isn’t actually a problem for a very large set of potential customers, and getting this wrong kills the company. This is a market problem.
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Not figuring out pricing, or if you are a freemium or not slows you down is a market and marketing problem.
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Not getting to a point where you acquire qualified customers that don’t cost you more than you can afford is a marketing problem.
I could go on an on, but instead will pick apart some findings.
According to a 2018 CB Insights analysis of 101 startup postmortems – companies that failed – here’s the ranked list as to why those companies failed:
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No market need (42%)
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Ran out of cash (29%)
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Not the right team (23%)
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Got outcompeted (19%)
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Pricing / cost issues (18%)
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User unfriendly product (17%)
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Product without a business model (17%)
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Poor marketing (14%)
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Ignore customers (14%)
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Product mistimed (13%)
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Lose focus (13%)
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Disharmony among team / investors (13%)
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Pivot gone bad (10%)
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Lack passion (9%)
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Failed Geographic Expansion (9%)
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No financing / investor interest (8%)
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Legal challenges (8%)
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Didn’t use network (8%)
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Burn out (8%)
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Failure to pivot (7%)
For another point of context, Paul Graham, the famous founder of startup incubator Y Combinator wrote back in 2006 about why startups fail.
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Single Founder
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Bad Location
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Marginal Niche
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Derivative Idea
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Obstinacy
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Hiring Bad Programmer
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Choosing the Wrong Platform
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Slowness in Launching
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Launching Too Early
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Having No Specific User in Mind
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Raising Too Little Money
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Spending Too Much
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Raising Too Much Money
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Poor Investor Management
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Sacrificing Users to (Supposed) Profit
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Not Wanting to Get Your Hands Dirty
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Fights Between Founders
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A Half-Hearted Effort
Look at both of these lists. How many of these reasons for failure have something to do with marketing? 28!
28 out of 38.
Put differently:
A whopping 74% of failures had something to do with marketing and growth!
This isn’t meant to scare you, but it should bring to attention just how important the marketing and market related component of startup growth is. If your company doesn’t get the marketing based components of running the business in order, the chances that the business will fail dramatically go up.
Let’s look at something else. How many of the challenges above speak to the actual product? Not many! It’s worth pointing out that there are terrible products that have resulted in wildly successful products (think about early Facebook or Twitter releases). But it’s rare that wildly successful startups are built without a core growth foundation, and digital marketing plays a critical role in that.
Ok…scary…how do we address this?
The good news is that you’re probably already aware of the importance of marketing within your company. If you have a growth team – amazing! You’re part of the bleeding edge of companies who are embracing a full lifecycle, cross functional team of folks attacking key growth opportunities within the company.
And if you aren’t quite there yet, that’s ok. Just make sure you cover all of your marketing bases, and get started on a multi channel set of goal-based initiatives.
Here’s an additional short list of things to consider:
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It likely is taking multiple touch points on multiple channels before your users move through the journey. Focusing too much on customer acquisition and not enough on activation can really throw things out of balance – and burn through your marketing budget quickly. Make sure you look at every channel and every campaign type and run experiments with small budgets across each channel to ensure you don’t miss any opportunities.
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Take a deep look at the balance between your paid and organic growth. If you are driving 90% of your acquisition from paid channels, something is very wrong. You cannot scale with that model forever. Dig into what’s happening on the organic side, and come up with a list of ways you can drive more growth from doing things that are free.
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Make sure you have the right team and right structure in place. I strongly recommend building a growth team if you don’t have one. I did a quick post on roles here. It’s easier than you think, and the growth team doesn’t have to be full time employees.
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Experiment. A lot. And expect to fail. I’ve written about what I call the “step functions” of growth extensively, and did a webinar about growth marketing and product management that you may enjoy here.
The ideal digital marketing team is composed of a few key roles:
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Paid digital marketers. Someone or a few people who own all things paid. If you have a $50k or less monthly budget, you likely can have one person own this. Once you get above this number, you will probably need a couple or few folks running paid. It may make sense for individuals to focus on key channels – like someone owning Google, someone owning Facebook, another owning Twitter & Quora, and another owning LinkedIn – if you are at scale. Experiment with teams and composition as you’ll need multiple iterations to get it right.
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Organic marketers. This includes SEO people, content strategy people, and partnership experts. This also includes supporting roles like content writers. This team is responsible for driving free traffic to the site, and will likely spend a great deal of their time on writing content, sharing content socially, and adding value to the partner community.
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Activation marketer. Or a growth person. This person is responsible for getting users to take the intended action you want them to take. Activation is a post-acquisition activity, so this person will likely own things like email capture, email marketing, and more.
You’ll also want folks owning referral marketing, which is technically part of organic, and you’ll also perhaps have someone working on out of home marketing (OOH) – if you have this role, then you probably have a robust team and large budget already.
That’s it for now – reach out to me if you want to learn more about how I’d approach marketing at your company. I’m always happy to help out in the digital marketing space! Just hit my home page to learn more.
Craig