Every business needs a way to tell its customers about its products and services. Those marketing channels differ from one business to another and can change as the business grows. And just like everything else in business, marketing needs an investment. In the earliest stages of a startup, this investment is usually best spent developing a product customers need.
Imagine that you have just developed two brand new products. Product one has great signs of possible product-market fit based on customer interviews and the validation experiments data. Yet, you have no marketing budget for it. Product two is not validated at all, but you have a big marketing budget for it. Which product would you bet on?
Most experienced founders would bet on product one because if product two doesn’t solve a problem, marketing will not save it.
Investments in marketing activities are a growth amplifier, while the real growth driver is product-market fit. If there is no product-market fit, there is simply nothing to amplify. Trying to market a business without product-market fit is like trying to build a house without a foundation.
In fact, investing in marketing too early in your startup’s life cycle is a way to scale prematurely, which according to the Startup Genome project is the biggest startup killer.
One of today’s biggest tech companies that managed to find early-stage growth without a significant marketing investment is Dropbox. The early version of Dropbox had a strong product-market fit, and the founding team noticed that they are growing organically because of word of mouth and a simple tutorial video that demonstrated the value proposition of the solution.
With their video going viral, they created a referral program to incentivize their users and boost word of mouth further. As a result, they managed to grow 3900% in 15 months.
Segment, the customer data platform, is a great B2B example of the importance of product-market fit. The founding team raised close to $600 thousand after participating in Y Combinator in 2011. Yet, after more than a year of building and attempting to realize two different ideas (ClassMetric—a tool to be used by students during a lecture, and segment.io—an analytics tool focused on segmentation), the team had spent almost all of their capital and had nothing to show for it.
That’s when they decided to test if analytics.js, a very simple user data library that they had built during their work on segment.io, could become a business of its own. They created a landing page with an email signup form and posted it on Hacker News. This simple test generated more user interest in a few days than the team had been able to generate by spending half a million dollars and more than a year of work on their previous ideas.
In summary, while marketing is essential for every business, it is important for early-stage startups to validate their ideas and to make sure they have good indications for product-market fit and a working business model where investments in marketing can be used to boost a needed solution, not push an undesired product into people’s hands.
Currently, Dropbox is spending upwards of $80 million per year on advertising. Yet, this wasn’t necessary for their early startup days when they were able to grow rapidly only with a referral program.
Finally, note that marketing is one of those terms that have different meanings for different people. For most people, marketing investment is synonymous with spending for promotional purposes, which is what is focused on in this article. Yet, in theory, the full marketing mix includes product, place, price, and promotion. With this definition, practically all startups make some kind of marketing investment simply because the product is a part of the mix.
This article originally appeared on Forbes.
