Should early-stage start-ups invest in marketing?

Posted on 12 Feb 2024
Updated on 12 Feb 2024
3-minute read

Before Apple became synonymous with innovation, Amazon reshaped retail, and Google became a verb, they were all start-ups. But it wasn’t just their products that transformed these companies into household names… they invested in something 50% of new start-ups overlook: systematic marketing.

RESEARCH OUTPUTS

The challenge

Marketing plays an important role in driving business growth, but it’s even more crucial for start-up firms seeking potential investors. However, undertaking systemic marketing - by which firms use customer data to refine their products, communication techniques and sale strategies - presents a difficult decision: do they risk allocating resources from other, already scarce, areas of the business? Despite the weight of this decision, there is limited understanding of the impact of systemic marketing on a start-up’s success. This research aims to identify the start-ups undertaking systematic marketing – uncovering what prompts them to do so; and the benefits they gain from investing in systematic marketing.

Solution

Researchers from UTS Business School and the Penn State Smeal College of Business developed a simplified blueprint of the way start-up firms navigate marketing and entrepreneurship. The team interviewed start-up founders, investors and consultants – joining this firsthand knowledge with theoretical frameworks for a richer understanding.
Using data from Equidam, a startup valuation website, the research team analysed 693 business-to-business (B2B) and business-to-consumer (B2C) start-up firms. To validate their findings and ensure they didn’t contain any bias, they carried out an additional study – surveying 377 start-ups.

Outcome and impact

This project found that an alarming 50% of early-stage start-ups either don’t opt for marketing, or invest in marketing when it doesn’t yield significant benefits: missing the opportunity to enhance performance. In addition, the researchers found that conducting marketing provides the most benefits to early-stage B2B start-ups, yet those were the start-up firms that were least likely to do so. The findings in this study present evidence-based insights for both business-to-business (B2B) and business-to-consumer (B2C) start-up firms – providing invaluable guidance on when and how to best implement systematic marketing. For investors, this research provides an additional benchmark for assessing the valuation and prospect of a start-up by factoring in their marketing strategies.