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They fail because even though the entrepreneur is a world-class developer, he is often not able to validate his product-market fit hypothesis and fails to develop and position his product in a way the market actually needs.
This is where Stalwart Research steps in.
This startup boasts itself as a full-fledged R&D department determined to help startups and MSMEs in extensive research and product development.
Stalwart Research – Startup Review By Feedough
Stalwart Research has positioned itself as a concierge service provider for startups and MSMEs. It helps entrepreneurs who have ideas but require experts to validate it and help them build the product.
Many of you might confuse this business model to be similar to incubators, but it is totally different. Stalwart research works as a dedicated Research and Development (R&D) department for their clients to help them build upon the most desirable products and help them to compete with the big MNCs.
The startup currently provides the following services –
End-to-End E-Commerce solution for Businesses
IoT for MSMEs & Startups, Factory Automation with IoT
Power of Artificial Intelligence using previous data of enterprises for effective growth
Here’s our interview with Abhijeet Vibhandik, representative of Stalwart Research.
What Exactly Is Stalwart Research?
Abhijeet: Stalwart Research operates as a Research and Development Department for MSMEs (Micro Small & Medium scale Enterprises) and Startups. Forte of Stalwart Research is R & D in sectors which falls under the 4th Industrial Revolution.
The company aims to empower MSMEs and startups through extreme Research & Development in the following sectors:
End-to-End E-Commerce solution for Businesses
IoT for MSMEs & Startups, Factory Automation with IoT
Power of Artificial Intelligence using previous data of enterprises for effective growth
Abhijeet: We are currently acting as a Research & Development Department for 4 Startups and 3 MSMEs.
Most of MNCs have their in-house Research & Development (R & D) facilities for Product development and services optimization. But during our survey in Maharashtra, about 87% MSMEs don’t invest in Research and Development of the company. This is a sad reality as well as an opportunity to grow and leverage the potential of MSMEs and Startups.
Hence, by offering our Research & Development services in mentioned sectors, and with a dedicated team and group of experienced advisors, we help companies to grow and achieve realistically high milestones. By introducing R & D in traditionally operating companies, these companies have observed a significant growth in cost reduction in operations, raw materials, risk management, human resources, etc.
The History (How Did It All Start?)
Abhijeet: It all started when we first tried to design a product for ourselves which was inspired by the Robotic Vacuum Cleaner ‘Roomba’. We faced tremendous problems in finding the right solution for designing, optimizing and marketing. A thought of having a scarcity of research resources obviously crossed our minds and by performing market research in the industrial area of Ambad, Satpur, Chakan, Sinnar, and Dindori, we decided that we are going to solve the problem of Research and Development in this country. Further, we are aiming towards solving the financial problems of these MSMEs and Companies.
Why Did You Choose This Niche?
Abhijeet: We have always believed in real life problem solving for society in which we have grown up. While working on our own products, we observed serious problems which MSMEs and Startups have been facing from long time and those are needed to be solved in order to sustain in the longer run. Also, Industrial Area of Ambad, Satpur, Chakan, Sinnar, and Dindori, have more than 10,000 companies combined, which shows the market size and the scope of the R & D services offered to these companies. Hence, by scrutinizing commercial, financial and sustainability factors, we decided to grow in this niche.
Tell Us About Your Team?
Abhijeet: Team size has grown from 1 to 8 in just 1.5 years, full-time members. We also have a total of 7 Advisors who are continuously guiding us in our journey of R & D, these are also key members of Stalwart Research.
What’s The Progress Till Now And What Are You Expecting In Future?
Abhijeet: Research and Development is the heart of any company and setting, optimizing and maintaining a Research and Development dept is not a simple and easy task. Hence, during the time span of 1.5 years, we have been able to successfully manage R & D dept of 7 companies. We are aiming to set up R & D Department in at least 3500 companies till the end of the year 2020.
For expansion, we will also be looking for investors who can see our vision and back us for the expansion and growth of the company.
Feedough’s Take On Stalwart Research
Stalwart Research’s business model looks promising. They’ve capitalized on a problem many startups and MSMEs face. Even we’ve encountered several startups which are in need of R&D experts. The company has started its business in a small market (as a startup should) and is planning to expand taking the feedback from the early adopters.
However, the only doubt we have is how it is going to serve businesses of different niches with limited personnel and resources.
If you’re looking to outsource the R&D department of your startup, Stalwart Research could be fit for you.
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Effective communication is imperative, not just for businesses but for the whole human ecosystem. For business, however, it holds a special place as the one which succeeds in communicating what it has to offer in the most appealing way wins the race.
However, communication is a two-sided process and it isn’t limited to business and its customers. A business has to work on its communication with other parties like employees, partners, Government, etc. in order to sustain in the long run.
Here’s a guide explaining the importance of communication in business.
Importance Of Communication In Business
Business communication can be divided into internal and external communication, both of which are equally important. A business should be able to clearly explain it’s offering, the company policies, and other terms to the customers, clients, employees, and other parties it deals with.
It is crucial to communicate effectively at the time of negotiations to achieve short-term and long-term goals.
Importance of External Communication
External communication is the exchange of information between a business and another person or entity in a company’s external environment. These include customers, potential customers, investors, suppliers, etc.
Communication drives business and marketing strategies. The business builds its brand and sells the offering by communicating its stance. Effective external communication is important as it helps to-
Get The Investment: Effective communication is required between startups and investors to help the company raise money for its products. It needs to convey its value proposition, objectives, and current and future stance properly in its pitch deck to appeal the investors and get the funding they want.
Build The Brand:A brand differentiates the company from other companies selling the same generic product. Effective communication is important to convey the brand message and establish the desired brand positioning in order for a company to stand out in the market.
Sell The Offering: Selling without communication isn’t possible. Both written (labels) and verbal (advertisements) communications are important to convey the intricacies of the offering and sell it to the customers.
Prevent Conflicts: Good communication and declaration of all the terms and conditions between the company and its partners, and the company and its customers prevent conflicts to a large extent.
Build Relations:Customer relationship management thrives on effective communication. Listening to the customers, answering their doubts, and providing the services they want before, during, and after sales build relationships between the two parties.
Promote The Brand And Offering: Brand promotion requires the company to convey the product features, value proposition, and the offers in a way that the target market understands it clearly.
Collect Feedback And Grow: When the brand listens to the suppliers’, investors’, customers’ and other external audience’s grievance and collect feedback, it grows much faster than those brands which don’t.
Importance of Internal Communication
Internal communication is as important as external communication. It aligns the goals and expectations of the internal audience (employees, partners, etc.) with that of the organisation. Effective internal communication is important as it helps to –
Improve Relationships: Good employer-employee communication improves the relationship between the two as both get to understand the expectations and goals of the other party. Similarly, good communication among the partners/shareholders improves their relationships as well.
Enforce Rules: The company can’t enforce the rules without conveying them to the employees and the internal audience. Communication is necessary to let them understand what the company wants from them and how it wants it to be done.
Enhance innovation: A good two-way communication enhances the innovation within the company as the superiors get to communicate and listen to employees’ new ideas and give them feedback on the same. This motivates them as they feel more like a part of the company.
Avoid Conflicts: When everyone communicates their problems and demands, it becomes easier to avoid conflicts and work in a more peaceful way.
Increases Employee Satisfaction: Good internal communication has a psychological effect on the employees as their voices are heard and they get to give their feedback on certain issues. This motivates them to perform in a more efficient way.
Align The Goals: Effective communication also helps in aligning the goals of the employees with the goals of the organisation.
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In earlier times, brands would shoot their communication messages out to the world and hope that if enough people who fall under their target group hear the message, they will respond. For many companies, this ‘spray and pray’ approach worked brilliantly back then.
But now, with immense growth in technology and competition, customers have become more aware, they know what they want, how to get it and they will buy from the brand that best suits their needs. Amongst the clutter, there are high chances your brand may get ignored. Hence, aimless communication will not work efficiently anymore.
Before forming a business or marketing plan, you need to know and understand to whom you are designing the plan for. You have to be cognizant of who your customer is, what do they do, where do they do it, what are their exact needs, what is their personality like, etc.
What Is Customer Profiling?
Customer profiling is the process of identifying and describing integrated profiles of your ideal customers, segmented based on different variables, namely demographic, geographic, psychographic, behavioural, RFM (Recency, Frequency, Monetary), as well as other personalised dimensions that help you to address the right kind of audience for selling your product/service.
Customer profiles, also referred to as buyer personas, are specific customer types created from an understanding of your company’s general target audience and they represent the typical users of your product/service.
Elements Of A Customer Profile
Before compiling your customer avatar, let’s look at the essential information you need to include in the customer profile.
Demographics: First begin with describing the name, age, gender, race/ethnicity of your customer.
Socio-economics: This includes your customer’s highest level of education, their current occupation, income range per month and household structure. The household description should consist of the family makeup, whether they are single, married, have kids, single with kids or living with a partner, etc.
Geographic: The geographic location should encompass your customer’s hometown, their current residential location and what characterizes the neighbourhood, town or area they live in.
Psychographic: Once the demographics are clear, identify the psychographics, that is your customer’s behaviours and beliefs, including their personality, hobbies, interests, lifestyle, values. This can also include their worries, fears, hopes and dreams, which will assist you in understanding how your business can help with that.
Behavioural: Define what influences your customer’s buying decisions, in terms of their product choice, price factor or promotions; whether the influence is external or internal; what motivates them to make the purchase and why.
Recency- How recently has your customer made a purchase
Frequency- How often has your customer made the purchase
Monetary Value- How much money does your customer spend on the purchase
(Note: Every customer profile does not necessarily have all of the above information. You may use what is required depending on your company type or marketing objectives.)
Customer Profiling Examples
Your customer profile can either be one cumulated sketch of the user persona that represents the ideal consumer of your brand or it can be a customised profile based on the kind of business you’re running.
Several profiles can be made if you are a company that has various products and services to offer or if there is more than one problem that you can solve. It depends on the type of your company. An ideal customer profile is made for customised products/services or for just defining a model representative customer that best fits in your target audience.
Here are some customer profiling examples to help you create your own.
Customer Profile for a home/kitchen appliances company
In this buyer persona example, you can get a good idea of who Kristina is by learning about her background, buying habits and her priorities. Accordingly, you can draft your communication message that will reach her more efficiently.
Customer Profile for Salon/Hair products
Your persona can be short and sweet as long as it includes the essential information. This example has the basic description of the kind of person Olivia is, what her pain points are, hence how you can promote your service effectively and through what channels will your message get through the right way, thus solving her problem.
Customer Profile for a Coffee shop/ Restaurant/ Cafe
This description explains how your brand can associate with Amy’s life. It explains her personality in-depth, with an insight into her daily life and her struggles, and as a brand, how can you help her. If you ever get stuck creating your ideal profile, visualizing a day of their life can give you more clarity.
Customer Profile for a Clothing/ Accessories Company
This is a more personality based example. If your brand has a niche audience, getting an insight into their lifestyle and mindset can help you design your ideas and strategies more accurately.
Customised Customer Profile for a Wedding Planning agency
With a plethora of options available, people now demand something unique, custom, tailor-made and that which is more personal to them. If you’re a brand that specializes in customized products/services, you need to pay attention to details, understand exactly what your customer has envisioned and deliver meticulously.
B2B Customer Profile for a Digital Marketing agency
If you’re a B2B company, focusing on your ideal customer profile will allow you to figure out who you should be targeting, be able to identify and attract high-quality leads, increase sales and customer lifetime value and may even get more referrals. The better you know your client, the better services you can provide to accommodate their needs.
Customer profiling is a key tool for understanding your audience accurately and increasing the performance and efficiency of your advertisements and promotional activities.
Customers are your greatest asset. It is crucial to enhance their experience and boost the relevancy of your message. Insights gained from doing customer profiling exercise will yield to product upgrades and maximum customer satisfaction.
So try creating your own customer profile for your brand and look for any empty spaces your company can fill in. It might even help you come up with new promotional ideas which will be more target-oriented.
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Every startup dreams of becoming a unicorn (a startup having a valuation of at least $1 billion). But what after that? Is it the end? Or is there another milestone the startup needs to achieve to get the ultimate success?
Well, with the ever-increasing additions to the existing unicorn club, a new goal needed to be set; a new goal which separated the best performing unicorns from average ones.
This gave the rise to the concept of decacorn.
What Is A Decacorn?
A decacorn is a startup company which has a current valuation of over $10 billion.
According to CBInsights, there are currently 18 decacorns in the world, with 10 being from the USA. Toutiao (Bytedance), a Chinese digital media/AI company is at the top of the list with the current valuation of $75 billion. It is followed by Uber with a valuation of $72 billion.
What is Toutiao? Who is Bytedance? Discover the most popular Chinese content company. - YouTube
Decorns are the evolved versions of unicorns. What separates them isn’t just the funding. It’s the unique business model (probably because they are the pioneers), the revenue model, and the growth rate. They’ve received such investments and have a post-money valuation of over $10 billion because they’ve shown the world an incredible growth rate that the others couldn’t. Here’s the list of all the decacorns in the world.
ML & AI based media content developer
On-demand cab aggregator + delivery
On-demand cab aggregator
Shared workspaces provider
Electronic cigarette manufacturer
Online marketplace and hospitality service
Online payment processing for internet businesses
Aerospace manufacturer and space transportation services company
Video game and software development company
On-demand cab aggregator
Medical research and development for tissue-level regeneration
Large scale data centres owner, operator, and developer.
Big data analytics
Unmanned aerial vehicles (drones) manufacturer
On-demand transportation, food delivery, logistics, payment, and daily services
SMB and Enterprise ERP software cloud products for industries
One97 Communications (PayTM)
e-wallet, payments bank, and online marketplace
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Ever wondered what phenomenon results in you thinking of Coke or Pepsi whenever you are asked which soft drink you’d want?
What makes that one brand to flood your thoughts whenever someone asks you an unprompted question about its category or niche?
This is brand awareness and no, it isn’t created automatically.
Companies spend millions to embed their brands in the customers’ minds. Many have even been successful in becoming a verb in our daily vocabulary. We don’t book a taxi; we book an Uber. Don’t believe us on this? Google it to find out.
Brand awareness is the first step to positioning your brand. It’s a continuous process which not only helps in getting more customers but also brings back existing customers to buy more.
Here’s a guide to help you understand what brand awareness really is, what are its types, and how you can measure and increase it.
What Is Brand Awareness?
Brand awareness is the extent to which a brand is recognised by the target group and is associated with a product or product category.
It’s the customer consciousness of the brand when he–
Witnesses the brand along with other brands while shopping,
Talks to his friends regarding the product category,
Reads or hears the brand’s ad,
Reads or hears about the brand’s news, etc.
Buys the brand’s products,
Has other encounters with the brand or the product category.
Brand awareness is the first stage to strategically influence the customer’s decision-making process. Companies spend millions just to make their customers aware of their brands.
But, it’s still a metric that can’t be perfectly measured, and having awareness doesn’t always mean that people will buy your brand’s products. Nevertheless, brand awareness holds a lot of importance for companies, especially new ones.
Why Is Brand Awareness Important?
It is a proven fact that customers prefer known brands over unknown ones. Brand awareness is that first step to make the brand known. But the importance of brand awareness doesn’t end there. It is like a diamond, the more you polish, the more it’ll shine.
It Creates Perception
Brand awareness spreads through channels like referrals, PR, news, social media, etc. If it goes as planned by the company, it creates a positive perception in the minds of the customers.
Suppose a friend told you about a Japanese restaurant where he had a wonderful experience. Even if you don’t go to the restaurant, there are chances you’ll recommend it positively to anyone who takes your suggestions on Japanese restaurants.
It Fosters Trust
Brand awareness fosters trust. When you see people interacting with a brand and having a good experience, it builds your trust in that brand even if you haven’t tried it yet.
Suppose you visit a third world country and encounter three different restaurants; two being local restaurants and one being McDonald’s. There’s a high possibility that you’ll go for McDonald’s even if you haven’t eaten there in your country. It’s just because you know about the brand and trust its hygiene practices.
It Creates A Network
If planned well, awareness spreads like wildfire. The brand becomes a topic of discussion and it creates a network which can be used to further spread the information.
For example, TikTok never advertised itself. Its users spread awareness through its videos and through word-of-mouth as well.
It Creates Association
When done right, brand awareness results in an association. This association comes in two types –
where people think of the brand when they encounter the product category.
where they use the brand name to convey the product category.
While the second feat is really hard to achieve, many companies like Google, Xerox, Band-Aid, etc. have been successful in achieving it.
It Builds Brand Equity
The more people are aware of a brand, the more valuable it becomes. This is the concept behind brand equity. Brand equity is the value of the brand as a separate asset. It makes a generic offering to stand out just because it is offered by a certain brand.
Brand awareness builds the perceived value of the brand.
Types Of Brand Awareness
Brand awareness can be categorized into three types depending upon the perceived importance of the brand by the target group.
Knowing about the types of brand awareness is of utmost importance for marketers as the current and future marketing strategies are designed according to the current awareness of the brand among its target market.
The three types of brand awareness are –
Brand Recognition: Brand recognition is when the customer can recognise the brand and differentiate it from other brands when he comes into contact with it. This type of brand awareness doesn’t require the customer to recall the name. It just focuses on whether the customer can recognise it when it is presented at the point-of-sale or when he witnesses the visual packaging.
Brand Recall: Brand recall is a spontaneous recall of the brand from memory when the customer is prompted by the product category. Most users can’t recall more than 3-5 brand names. It is affected by both individual and brand factors like education level, usage, marketing strategies used by the company, etc. These brands form a part of the evoked set of the customer.
Top-Of-Mind Awareness: Top-of-mind awareness is a set of 3 brands which the customer always purchases. This is the consideration set of the customer. Getting the brand into this consideration set is the ultimate goal of every marketer.
How To Build (And Increase) Brand Awareness
Brand awareness is built by establishing a relationship with the customer where his interests are put on the top. Focus your brand awareness strategy in a way where your offering fulfils his needs without much of an effort from his side.
Focus On The Product
A strong brand awareness strategy revolves around a strong product. Make sure you are fulfilling your customers’ needs without him putting much of an effort.
Focus on creating a value proposition that’s unique, attractive, and is something that forces the customer to share voluntarily.
Whatsapp, for example, built a free instant messaging application in 2009 when most of the target audience used to communicate through paid text messages. This free IM made them share the product with all of their friends without WhatsApp forcing them to.
Focus On The Positioning And Personality
Positioning matters. Different brands use smart positioning strategies to increase their brand awareness. They might position themselves as a premium product in a market full of daily-use products, or an economic product in the market full of premium products.
Look for a desirable but unexplored positioning which could be capitalized to increase your brand awareness.
A perfect example of building brand awareness with the help of positioning and personality is Apple. The company positioned itself as the most premium brand anyone can opt for in the smartphone industry. This created a cult following which acted as evangelists of the brand and spread the brand message.
Provide Something For Free (But Keep It Limited)
Free spreads like wildfire. It isn’t just an indicator of price. It’s a very powerful emotional trigger that’s often so irresistible that it makes people try anything that’s offered at no cost, no matter if they want it or not.
Offering something for free is one of the best ways to increase brand awareness. But, when it’s mixed with the scarcity principle, the impact doubles. Provide something for free but keep it limited to increase the impact as it creates a sense of urgency and makes your customers think your offering to be more valuable than the one which is in abundance.
App sumo became a multi-million-dollar startup just by capitalizing on these two strategies.
Partner With Famous Brands
A good way to establish brand awareness is to let other famous brands talk about you to their audience. Partner with established brands; by brands we mean companies, influencers, celebrities, etc. who have good followership.
Facebook used this strategy and partnered with many niche influencers to increase the awareness of its recently launched product – Facebook Watch.
Use Social Media (a lot)
It’s hard for your target audience to get to know you unless you meet them where they are. Use social media and capitalize on the trends to establish an image among your target audience.
Behave like a person and not a robot, create posts which your users like to see and interact with, offer them rewards for sharing, and use social media to spread your brand message.
Durex is a perfect example of a company which uses social media to increase its brand awareness.
Use A Mix Of Inbound & Outbound Marketing
No doubt, advertising is a really good way to increase the awareness of the brand. However, it is a push technique and not everyone forms a positive perspective of the brand because of the advertisements and other forms of outbound marketing.
This is where inbound marketing steps in. Inbound Marketing is a pull marketing technique which uses non-intrusive and targeted strategies like content marketing, social media marketing, event marketing, and search engine optimization etc. to create brand awareness, attract potential clients, and convert them into leads and actual customers.
Use a mix of inbound and outbound marketing to get the best results. Running ads while having a blog which focuses on search engine traffic could be a great strategy to start with.
Make It Easy To Share
There are times when you can leave the awareness job to your existing customers. Just look into their habits and capitalize on what they need. Many eCommerce applications have a handy ‘share this product with friends’ or ‘ask for a recommendation from friends’ options which lets their customers share the products they are interested in. This, in turn, increases brand awareness as more people get to know about your offerings from the people they trust in.
Give Incentive To Spread The Brand
Starting a referral program or investing in an affiliate strategy is a good idea most of the times. Such strategies delegate the work of spreading brand awareness to other people usually at a lower cost than it would have incurred if you would have done it yourself. Moreover, referrals have more convincing power than your advertisements.
Set up an enticing referral program where your existing customers get something of value when they refer your brand or product to someone else. Similarly, providing good commission rates attract many talented affiliates who have good followership.
Besides this, other incentives like offering a no-ad version if the user shares the brand, giving him extra lives in a game, and providing special discounts if he gets more users on board, etc. can also be used to increase brand awareness.
How To Measure Brand Awareness
As we mentioned before, brand awareness cannot be fully measured. But you can still review the activities and collect some data to support your strategies and form new ones. Here are a few ways to measure if your brand awareness strategies are working or not.
The best way to measure your brand awareness is to reach out to the target group and ask questions about your brand. You can either outsource it to the expert or conduct it yourself either through direct contact or with the help of online tools like SurveyMonkey, Google Forms, etc.
Traffic & Analytics
Traffic can be a great measure of brand awareness. Use analytics to find out where do you get the most traffic from. Your brand awareness strategies are considered to be working well if you get most of your traffic either directly (people typing your URL and visiting your website), through referrals (other websites mentioning your brand and/or linking to you), or through social shares (Facebook, Twitter, Pinterest, etc.).
Use tools like Google Analytics, Semrush, Ahrefs, etc. to analyse your progress.
Google alerts is a good way to get notified whenever someone mentions your brand. It is a free brand awareness measurement tool which emails you every time your brand name gets mentioned on a website.
Social Mentions & Shares
Organic social mentions and shares are also a good measure of awareness. Many tools like Buzzsumo, Twitcount, etc. can help you measure social mentions and shares.
An organic increase in the number of social media followers is also a result of good brand awareness. It is a reflection of how many people are aware of the brand and want to socialize with it.
Earned Media Analysis
Earned media is essentially word of mouth and promotion of the brand done voluntarily by third parties like news channels, influencers, people belonging to the target group, and others.
A good public relations company can help you in capitalizing on and measuring brand awareness through earned media.
Brand Awareness Examples
Here are two companies which use creative means to build and increase their brand awareness.
The company has started capitalizing on the never-lasting Burger King vs McDonald’s war to increase its brand awareness. It recently launched an ‘unhappy meal’ to poke fun at McDonald’s happy meal and to contribute to the mental health awareness month.
Durex steals the show when it comes to raising awareness through social media. The company capitalizes on the present trends and creates shareable creatives which the target audience love to interact with.
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Today, we can’t deny that startups have found a special space in the business ecosystem. They have become such an important part that our daily vocabulary is now full of startup-related words like venture capital, seed funding, venture capitalists, aggregator, etc.
The point is, people assume that everyone understand these startup lingos…which is not the case most of the times.
If you found this article on a search engine, chances are that you’ve encountered venture capital in any of your conversations but never fully understood the core concepts behind it, how it is different from angel investment, and who exactly is a venture capitalist, etc.
Well, here’s a guide answering all your questions.
What is Venture Capital?
Venture Capital is the funding investors provide to the high-growth potential startups in exchange for equity in the company.
In a simple context, venture capital is provided to startups (not any new company) which are growing at a remarkable rate and are in need of money to sustain that growth. The investor, in return, demands equity or an ownership stake in the company.
An example of this exchange would be a venture capitalist providing $100,000 to help the startup grow and in return taking a 10% stake in the company.
What Is A Venture Capitalist?
A venture capitalist is a professional investor [firm] who funds early-stage startups in exchange for an equity stake.
Venture capitalists are usually formed as limited partnerships where the partners invest in the VC funds. These partners are usually categorized into two types – the Limited Partners (LPs) and General Partners (GPs).
The limited partners are institutional investors which provide money to the fund, like university endowments, pension funds, insurance companies and other big corporates and high net-worth individuals.
The general partners (GPs) are active investors who make the decisions on where, how, and how much to invest. They are usually industry veterans with business, research, and entrepreneurial experiences who have a sound knowledge of their niche and the startup ecosystem.
Since their money is on the stake, VCs also provide guidance and direction to the companies they invest in and take an active part in the decision-making process too.
However, contrary to the usual belief, VCs don’t usually fund companies that have just started. As a matter of fact, less than 1% of companies receive venture capital. Moreover, raising venture capital is a lengthy and stressful process and involves a lot of examinations from the investors’ side.
But entrepreneurs still go to the VCs. Why, you ask?
Why Do VCs Exist?
A question that must have crossed your mind is why do VCs exist? Can’t startups go to the banks or financial institutions to fund their ideas and early-stage companies?
Venture capital’s niche exists because banks are not willing to take risks funding early-stage startups (of which 9 out of 10 fail). Even if they do, they do it with high interest rates and only to the extent of the hard assets against which they can secure the loan.
Now, SBA loans do exist. But while they might be good for small businesses, startups often require a lot of funding as they plan to disrupt the whole industry.
This need resulted in an all-new niche where people (angel investors), corporates, and even financial institutions invest money in promising ventures, help them grow, and make profits by exiting with most profits.
How Venture Capital Works?
Startups raise venture capital in instalments known as venture rounds. These venture rounds sum up the types of venture capital that exists.
Pre-Seed Funding: It is required to validate the product hypothesis and build an MVP. Usually, not much investment is required at this stage and almost no venture capitalist invest during the pre-seed funding phase unless it’s one of their partners’ venture.
Seed Funding: Once the hypothesis related to the product-market fit is validated, entrepreneurs look for seed funding. This investment is used to set-up the company, build the actual product, and start full-fledged operations. Most venture capitalists stay away from seed funding as most of the financial needs of the companies at this stage (usually between $500,000 and $2 million) are met by fundings from angel investors (high-net-worth individuals) or banks. Moreover, they don’t invest in companies during the seed stage as startups have a high risk of failing during this stage.
Series A-F: Once the startup starts receiving traction in the form of the number of users, revenue, views, or other KPIs, it becomes ready to raise a series A funding to grow and expand. This is where most of the venture capitalists come in. Series A round is followed by 5 more rounds. However, according to CB Insights, only 48% of the companies go for a second round of the funding (after the seed round), and only 15% of the companies go for a Series C round.
According to HBR, around 80% of the venture capital goes into the infrastructure required to grow the startup. This includes expense investments (manufacturing, marketing, and sales) and the balance sheet (providing fixed assets and working capital).
Even though venture capital is an important investment for the startups, it really isn’t a long-term investment from the venture capitalist’s point of view. Their plan is to invest in the company’s growth until the time it reaches sufficient size and is credible enough to be sold to a corporation or any other party.
In simple terms, they buy a stake, nurture it till it becomes profitable, and exit it as soon as they can.
Venture Capital Process
While the venture capital process is very complex and works a bit differently for different VC firms, we’ve tried to break it down into six steps which start with them getting the offer to invest and end with them exiting the company.
An investment deal can originate in various ways. Either the entrepreneur contacts the firm directly, or the partners get to witness the startup in competitions, meetups, news, or become a customer themselves; or the deal can originate in the form of a referral by business partners, parent organisations, friends etc.
This stage involves the screening of all the proposed investment deals. The projects are screened based on several factors like industry, market scope, disruption, size of the investment, geographical location, stage of financing, elevator pitch, etc.
The most promising projects reach the next stage which involves a more detailed evaluation.
Once the potential projects are chosen from the lot, the evaluation begins.
This stage involves a lot of effort from both the parties. The entrepreneurs are asked to present the past and present data and future predictions and the VC firm tries to validate it by consulting partners and industry experts.
In the evaluation stage, the VCs not only evaluate the product’s capacity but also the team’s capacity to meet the proposed claims. The project passes this stage only if they feel that the goals are attainable and the team has relevant skills, competence, ability, and experience to make it happen.
Risk management is also done to evaluate the ROI by keeping the forecasted risks alongside.
Terms & Valuation Negotiation
Once the evaluation is complete, the investment terms and valuation are negotiated. Valuation is of critical importance to both the parties as it decides the stake of the investor in the company.
Valuation is divided into two segments – pre-money valuation and post-money valuation. The pre-money valuation is the agreed-on value of the company before the investment is made and post-money valuation is the valuation after the investment is made.
Suppose the parties agree on a (pre-money) valuation of $40M and the investor pitches in $20M, the post-money valuation will be $60 million and the investor’s stake in the company will be 1/3 or 33.34%, at the closing of the financing.
There’s no one right formula to decide the valuation of the company and both the parties have their say during the negotiation. The entrepreneur tries to keep the valuation as high as possible while the investor tries to keep it low to have a higher stake.
The valuation along with other terms are included in a term sheet developed by the VC. Here are some other elements that are included in the term sheet–
Option Pools: It’s a pool of stocks reserved for employees or future employees of the startup.
Liquidation Preference: It is a kind of safety net for the investors which gives them preference to get some money back in the case of the startup failing. In simple terms, at the time of the liquidation, the investors or other preferred stockholders get back up to a percentage (usually 100% or 1x) of the amount they invested in the company before any other common stockholder gets anything. Of course, no one gets anything if all the money is lost.
Participation Rights: Participating right or participating preferred favours the investors more. It is a type of liquidation preference where the investor gets 1x of his investment back but also gets his proportional share of any cash that remains after that. For example, say a venture capitalist with preferred stock has $1M liquidation preference with participation rights and owns 20% of the cap table. Suppose the company sells for $10M. He gets back the $1M as his preferred stock as well as the 20% of the remaining $9M, which comes out to be $1.8M, because he had participation rights. This leaves $6.2M to be divided between common shareholders and the founders.
Dividends: The terms related to dividends (cumulative, non-cumulative, and anti-dilution rights) are also decided in the term sheet.
Board of Directors: The entry of the venture capitalist makes it somewhat obligatory for the entrepreneurs to define the board of directors usually with one seat appointed to the investor.
Investor Rights: This section discusses the various rights the investor will be able to exercise in the company. Lawyers intervention is necessary to understand this section.
Founder Vesting: This section of the VC term sheet is designed in a way to keep the founders engaged with the company for the longest time. A vesting schedule is developed where the founders’ stock becomes subject to vesting based on continued employment and becomes earned usually after four years.
Post Investment Activities
Once the terms are accepted and the deal is finalised, the venture capitalist becomes a part of the company and takes up certain roles and duties. The firm also uses its contacts, partnerships, and experience to help the company grow.
However, most of the VCs don’t take an actual part in the day-to-day working of the company and only intervene when the company deviates from the set goal or at the time of a financial crisis.
That being said, the firm’s representative does become a part of the company’s board of directors.
VC makes money by exiting the companies with most profits. It becomes a part of the company only to help it grow and increase the value of its shares.
An exit plan is when, how, and to whom the VC will sell its shares to minimize losses and maximise profits. It may exit through an IPO, acquisition by another company, stock buyback, or other ways.
Venture Capital Advantages And Disadvantages
It’s true that investments cannot be denied in most startups. But they have their own costs too, especially in the case of venture capital where millions are on stake.
Advantages of Venture Capital
Growth Opportunities: The influx of new capital brings many new growth opportunities along and gives the chance to the business to explore new markets and improve the operations.
Business Expertise: Besides financial backing, VCs also bring in business expertise and a different perspective. They use their experience to provide guidance and consultation and help the company make better decisions and manage effectively.
Additional Resources: VCs also lend their resources to help their new partners when it comes to critical areas like taxes, finance, personnel matters, etc.
Connections: VCs that join the company’s board usually have a lot of connections which eventually helps the company in the long run.
Disadvantages of Venture Capital
Loss of control: With the VC joining as a director of the company, the founders lose a substantial amount of control as they held previously. They now have to consult the person before taking long term decisions.
Dilution Of Ownership: The ownership stake also reduces as a proportion of the shares are given to the VC in exchange for the investment.
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Be it to sustain your education, or to support a non-profit organization, or to aid a cancer patient, or give your contribution to a big cause. Money is a big deal.
What if I tell you that fetching money for any of these causes, amongst a lot of others, isn’t as huge a task as it used to be? What if I tell you that all you need for soliciting these funds is to create a page on a crowdfunding site like GoFundMe?!
Apart from aiding numerous victims and helping multiple people realize their dreams by enabling them to solicit funds, these crowdfunding platforms also earn profits and sustain themselves through their innovative business models.
Let’s take a look into the business model and working of the leading name in crowdfunding, GoFundMe.
What Is GoFundMe?
GoFundMe is the world’s largest free fundraising and crowdfunding online platform that lets people raise money for events, be it gathering donations for a cancer-stricken family member or soliciting funds to pay for college tuition. With more than 50 million donors, the platform has successfully raised over $6 billion till now.
The company is based in Redwood City and was formed by Brad Damphousse and Andrew Ballester in May 2010 with the aim of allowing users to create their own page to raise money.
GoFundMe Business Model
Initially started with a for-profit crowdfunding business model, GoFundMe shifted to a non-profit donation-based business model in 2017 after receiving feedback from the users which suggested (and demanded) all of the money to go to the cause.
Earlier, the company used to charge a certain percentage commission from the amount raised on personal campaigns. Since this wasn’t good for the brand’s image, the company decided to shift its priorities and move to a model where it survives with donations (just like Wikipedia)
But what makes this business model worth to ponder about is that according to GoFundMe’s CEO, Rob Solomon, the just donations are good enough to keep the business profitable.
How Gofundme Works?
GoFundMe can be tagged as a marketplace for crowdfunding campaigns which connects two segments –
People Who Require Funds
Anyone who wishes to raise funds for any cause, be it personal or public, can create a campaign on GoFundMe and promote it to receive donations. GoFundMe does not use any kind of All Or Nothing algorithm, which means any amount of donation made to a campaign goes to the campaign generator’s account.
You can create a campaign on GoFundMe for any of the following causes:
Here’s how you can start your own campaign on GoFundMe:-
To begin with, you have to sign up with GoFundMe with either your e-mail or your Facebook account. The actual procedure begins after this. Fundraisers can have up to 5 active campaigns on one account at a time.
After signing up, you are asked to give details about your campaign, choose the category under which your campaign lies, mention who are you raising funds for, whether you will be fundraising individually or as a team and finally, the goal of donations you expect/ aim to receive.
Up next, you have to add a cover picture (or video) which describes your campaign and the cause behind your call for funds.
The next step includes writing your entire story. This should preferably be open and descriptive and include a bit about who you are, what you’re raising funds for, and how the money will be spent.
Finally, you have to share your campaign so that it reaches the maximum amount of people and can attract major donations. Facebook, e-mail or any other personal connectivity will help share the campaign and make it successful.
Here is an example of an ongoing fundraising campaign on GoFundMe:
People Who Are Willing To Help By Sending Donations
Donors can choose the campaign they want to support and can donate whatever amount they wish to. GoFundMe has a specially assigned Trust & Safety Team which ensures that all campaigns and donations are protected under the GoFundMe Guarantee.
All they have to do is to provide their details to the site by filling the following form and are eligible to donate after successful completion of the form.
How Does GoFundMe Make Money?
Before 2017, the company used to take 5 percent of donations raised on its platform, along with ~2.9 percent payment-processing fee collected on each donation, and an additional 30 cents for every donation.
In the present date, everything else rests the same, apart from the company’s decision of 0 percent platform fee that applies to personal campaigns started in US dollars, Canadian dollars, British pounds, and most major European countries. (The business model remains the same commission-based model in some countries like Denmark)
This means that each penny donated on the platform goes only to the fundraiser. In place of the fixed 5 percent cut, the company will instead rely on optional tips to generate revenues from these campaigns according to which, donors are presented with a voluntary option at the end of a transaction to send a few extra dollars to the site.
For personal campaigns in the following countries, GoFundMe is a free platform:-
The United Kingdom
However, the site charges a standard transaction fee to cover credit card processing and the safe transfer of funds. For all campaigns, industry-standard transaction fees apply and vary depending on the country that the campaign was created in.
Here are examples of the 2 fee structures charged by GoFundMe in different countries:
2.9% + $0.30 per donation
2.65% (25% VAT & Transaction) +kr1.80 per donation
Future Of GoFundMe?
GoFundMe’s business model might seem a bit new to the ears, but it is efficient and up to the expectations of the creators. The company has had a lot of successful campaigns all over these years.
Here are a few of the most successful GoFundMe campaigns along with the huge amounts of money they’ve raised:
Support Victims of Pulse Shooting: $7,854,290
Support Victims of Pulse Shooting: $7,854,290
The Official Sacred Stone Camp: $3,133,910
March for Our Lives: $3,586,650
Veterans for Standing Rock: $1,155,660
Tree of Life Synagogue Victims: $1,181,758
Save Benny and Josh: $1,249,490
MATW Africa Project with Ali Banat: $1,204,532
Houses For Rohingya Refugees: $2,105,210
Launched in 2010, GoFundMe has become a go-to community for more than 70 million donors.
Seeing the success of GoFundMe in 2018 (even after editions in the business model), it can be said that the GoFundMe business model is a sustainable one, and the company has a bright future for itself.
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“Check these cool headphones out, the bass is crazy!”
“Oh, the food there is so delicious! I’m gonna tweet about this restaurant!”
Humans naturally tend to share their experiences with their close ones. Whether it’s about how a brand made them feel or it’s about how a product made their life easier, we all like to share the joy with those who can relate to our feelings.
How many times did you actually get convinced to try or purchase a product just because your best friend or family member recommended or bragged about it to you? If you can recall, it must have happened quite a lot of times.
According to a Nielsen study, 92% of consumers believe in suggestions from friends and family above all other forms of advertising. Hence, a brand is no longer what we tell the customer it is. It is what customers tell each other it is.
Let’s dive further into the world of referrals and understand how it can help your business grow.
What Is Referral Marketing?
Referral Marketing, often associated with the term word-of-mouth marketing, is a form of promotion where an organization encourages its existing customers to refer its offerings to their friends, family and other acquaintances.
Contrary to mass advertising, the goal of referral marketing is to be more personal and create a bond with the customers so as to turn them into a volunteer marketing army.
It’s a simple concept- a person (referrer) trusts a product and refers it to you not just because he wants you to try it but because he’ll be getting some additional benefits from the company, and you (referee) purchases or considers purchasing the product because it was vouched for by someone you trust.
Plainly put, referral marketing is consciously encouraging your customers to tell their friends about you. If people like your product/service, they will listen to you. But if they trust you, they will talk about you. The purpose of Referral marketing, thus, is to create a customer who creates more customers.
Why Use Referral Marketing?
In today’s technologically driven world, referral marketing has created for itself a great scope for reaching out to prospects, as opposed to traditional forms of advertising.
People have become smart. As a company, they won’t take your word for buying your product because they think you’re only trying to sell and make business. They trust “real people’s” opinions more. They want to be cautious not to get “conned”.
But that’s not in your hand. What is in your control is getting those “real people” to endorse your product and convince your prospects on your behalf.
One satisfied customer not only gets profit to your business but they also bring friends with them, leading to more conversions right there! That could be more than $10,000 worth of advertising.
It comes with the best part- opportunity to convert these potential buyers into loyal customers increasing lifetime value and retention rate of the referred leads.
Referral marketing is making your customer a walking advertisement, thus growing your business substantially. Within the buyer’s journey, referrals are one of the most effective types of lead generation. They are your most important source of demand.
Referral Marketing vs. Influencer Marketing vs. Affiliate Marketing
People often mistake referral marketing to be a part of or equivalent to influencer marketing or affiliate marketing, but in reality, all three of them are totally different marketing strategies.
Referral marketing is when you offer your existing customers a benefit to encourage them to refer your product to their friends, family, and other acquaintances.
Influencer Marketing is a practice where you partner with influencers who have a considerable number of followers to promote your brand or a product. They may or may not be your existing customers.
Affiliate marketing is when you partner with businesses and individuals to promote your product and offer commission for every sale or lead brought by them.
Referral Marketing Strategies- Best Practices
Referral marketing today has picked up great heights in terms of associations, experience and engagement. Big brands are no longer just using a few customers to convince other prospects to buy their products, but they are going out of their way to get people talking about them worldwide.
They’re not just creating buzz, they are gaining eyeballs which make people go, “Wow! That’s brilliant! Even I get something in return?”. This wow factor is exactly what makes them talk about your brand and share their experience with others.
Here are some examples of referral programs that companies use as part of their referral marketing strategies:
Special/Premium Rewards For Referrals – Tesla
Tesla, the electric car company, has been innovating its referral programs throughout the years to reflect its growing customer base.
Originally, they offered $1000 to refer a friend, but have since changed their strategies by giving Tesla owners who refer to multiple people a chance to redeem even better prizes, such as exclusive vehicle parts (performance wheels, power batteries, signature wall connectors, etc.).
The company also offers free supercharging, free Model S or Model X, a chance to win a Founders Series Model Y, and a Founders Roadster signed by Elon Musk and Franz von Holzhausen. Other rewards include invitations to exclusive parties and the opportunity to purchase other special edition products.
Dual-Incentive referral programs – Wish
The concept of two-sided incentives has grown as more and more companies have started implementing in-app referral programs to not just boost app downloads and increase reach, but also to create a win-win situation for both the advocate and the referee.
Wish is an e-commerce company where small businesses and manufacturers can sell goods directly to the consumers. The brand has recently integrated ‘refer a friend’ feature in their android version where it has used the “Give and Get up to 50% off” dual-incentive strategy.
Giving cash or cash equivalent credits is an ultimate referral marketing strategy.
Ebates is one of the most popular cashback portals using the cashback shopping strategy where it offers $25 to you and $10 to your friend after he makes a $25+ purchase through the portal.
Free gifts/ Incentives -Uber
Uber has used referrals consistently since the beginning and their referral program is one of the most powerful engines that continues to drive growth for the company.
The brand uses two referral strategies — one for the drivers and one for the customers; offering free rides to riders who refer Uber to other riders and cash benefits and rebates up to $2,250 to drivers who refer other drivers.
Prezi lets you share your unique Prezi Classic Referral Link with your friends. When three people click on your link and sign up for Prezi Classic, you will get a 3-month upgrade for free. There is no limit to the number of times you can go through this process.
Game Upgrades – WOW
Referral programs have proved to be a perfect fit in almost every type of mobile game; be it ad-supported, freemium or premium.
Devoted players will go out of their way to achieve and unlock new features, get rid of the advertisements, or unlock the premium features even if it were for a few days. They prefer inviting friends, rather than making a purchase.
Blizzard, the team behind World Of Warcraft, executed a splendid customer referral program which allows you to bring in new players to the game and getting a number of in-game benefits in return. Apart from that, when you refer a friend, you’re given special permission to go on quests with other online players at different levels than you.
Discounts – Leesa
Discounts are a typical part of referral programs. It is crucial for brands to make discount referrals more interesting and shareable.
Leesa is a mattress company whose referral program gives the referred friends $75 off a mattress and the advocates $50 in cash. They also have a “giving back” program where they donate 1 mattress for every ten sold.
How To Utilize And Execute Referral Marketing Strategies?
Improve the product?
Yes. But also focus on how you can improve the experience.
If you build a great experience, customers tell each other about that. One person has the potential to reach out to hundreds if not thousands of people with just one post online.
Implement an enticing and easy-to-understand referral program: Provide valuable incentives and exceptional services by your team. Make the process of referring and getting referred simple and easy for your customers to use.
Educate your users: Providing an overview of how the referral program works and educating your users can help the user make a referral easily and also help their friends through the signing up process.
Focus on shareability: Your product/service or even your promotional content or the experience you give your customers should make them want to share it with others.
Influencers: If you have money to invest, get an influencer on board whose audience matches with your target group and make them endorse your referral program.
Online reviews: Positive reviews from satisfied customers work well too. Buyers trust these reviews because they’re coming from someone who has used and experienced the product personally.
Think out of the box. There is no limit to creativity and innovation. Whatever you do, make sure it is heard and talked about positively. Word-of-mouth is very powerful. In order to keep up with the evolving times, it is crucial for companies to at least consider developing referral marketing strategies. It’s a vital tool to not just increase your audience and customer base, but also leverage brand loyalty.
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How can you target a specific audience or age group to present information about your services to potential consumers, or promote or sell your products without the need for an advertising media? How can you ensure that potential consumers will be interested in what your business has to offer?
This can be achieved via direct marketing.
What Is Direct Marketing?
Direct marketing is a marketing strategy where returning and potential customers are contacted directly by the brand, instead of having an indirect medium between them.
It is called ‘direct marketing’ because it generally eliminates the need for a middleman such as a retailer. The results of a direct marketing campaign are immediately measurable because your business can track how many customers have positively responded to you.
Direct marketing largely relies on the individual distribution of a sales pitch to their consumers and potential customers, personally. Door-to-door salesmen, promotional telephone calls, SMS, emails, kiosks, hand-out brochures and coupons are among the more popular methods used in direct marketing.
Types of Direct Marketing
There is a range of types of direct marketing techniques that you can implement in order to reach your target audience. Here are some types of direct marketing listed:
Face-to-Face Marketing- This is one of the oldest forms of direct marketing. Authorised sales representatives are employed to meet prospects directly. The goal of each representative is to reach out to these prospects, convert them into profitable consumers and thus promote the business of your organization.
Door-to-Door Marketing- Door-to-Door sales (D2D) are another form of face-to-face marketing. It simply means that your sales representative is participating in door-to-door prospective, which indicates a system of direct contact with your targeted audience. Rather than relying on any other kind of marketing, a D2D salesman goes from one place to another, engaging prospects in a conversation about the products and services you offer implementing various compliance techniques with the intention of doing business with them.
Kiosk Marketing- Public places that get a lot of crowds are always full of opportunities to gain people’s attention towards your business. Representatives stationed at kiosks in these places such as shopping malls can directly talk to potential customers by catching their eyes with your products and services.
Leaflet Handouts- This type of direct marketing involves handing out leaflets to the targeted audience that contain printed information about the products and services you offer, giving your potential customers the option to contact you, should they decide to make a purchase. Leaflets are sometimes also handed out at kiosks, to encourage a more positive engagement from your prospects. These leaflets may also sometimes contain offers and coupon codes that are redeemable for only a limited amount of time, thereby enticing your prospects further into making a purchase from you.
Telemarketing- The process of contacting your prospects individually and trying to get them interested in purchasing what your business has to offer has rapidly grown in the past few years. Representatives at call-centres contact a list of people who would be interested in your product and inform them the perks and advantages of making the purchase. This technique is often used by AT&T and Vodafone to inform both existing and potential consumers about the services they offer.
Email Marketing: With the widespread usage of the internet, businesses have inclined towards sending emails to contact their prospects directly. This technique is called cold emailing and if used with a proper strategy has a really good conversion rate.
Targeted Advertisements: Internet has opened the gates to yet another form of direct marketing – Targeted Advertisements. Almost every activity a user perform over the internet is recorded in the form of a cookie or other data. This data along with the user’s demographics is used by advertisers to target personalised ads to him directly. An example of targeted advertisements is remarketing where user witnesses the advertisements of the products he abandoned while visiting an eCommerce website.
Advantages Of Direct Marketing
A good direct marketing campaign focuses on promoting and selling to your prospective customers by:
Helping you build a better relationship with both returning and new customers by contacting them directly.
Testing the appeal of your products and services and getting direct feedback from your target audience, which can also be used to improve the products and services you offer.
Helping you understand which marketing technique could be a better way to reach out to your target audience directly in order to do business with them.
Providing your customers with any compelling content that they could share with other potential customers.
Providing a positive boost in sales by gaining loyal customers for your business.
Direct Marketing Strategies
A well-planned direct marketing campaign can help you reach your ideal customers. Strategizing your direct marketing techniques can help you amass wider and more loyal support from your prospects.
360-Degree Approach- Just like any other marketing strategy, including a 360-degree approach to your direct marketing strategy and using all the available marketing mediums to convey the marketing message makes the communication more effective.
Segmenting The Target Market- Using lists of targeted prospects so that promotional messages can be sent only to those who would most likely be interested in the services you offer is an effective direct marketing strategy. This can be done by collecting information via surveys, or sometimes also monitoring your regular customers’ behaviours.
Personalized Messages – Although the number of sales pitches delivered can be massive, inserting the recipient’s name or location at a prominent place in the message adds a nice personal touch which can attract your potential customers.
Increasing Customer Loyalty- Since direct marketing allows you to directly contact your customers, it also allows you to build a good relationship with your existing and potential customers. Combine direct marketing techniques with customer loyalty strategies to build better customer relationships.
Testing Products and Sales Performance- Direct marketing allows you to directly test products and customers’ feedbacks to them. Each time you run a direct marketing campaign for your business, it is important to monitor the reviews and ratings from your customers in order to improve any future direct marketing campaigns.
Harnessing The Power Of The Internet- Direct marketing isn’t limited to the offline world anymore. Your target market is already on the internet. Using emails, retargeting, Facebook ads and Google ads to reach to the target audience directly gets more results.
Call To Action Marketing- The call-to-action (CTA) is one of the most common features across all forms of direct marketing today. The audience you target can easily know more about the services you offer by calling you on a toll-free number or clicking the link in an email promotion you sent them.
Direct Marketing Example: AT&T
AT&T invested vast direct marketing resources in order to be able to communicate the messages to their consumers and prospects in a relevant manner. One of the ways they sought to tackle this was via their direct marketing program called the AT&T Opportunity Calling® Program, which was launched in the year 1984 in an effort to provide information regarding their offering.
The program focused on contacting people and providing them value to them by recognizing their different needs and responding accordingly. One of the main reasons why Opportunity Calling was so successful was because AT&T rewarded their new customers for their patronage with exciting personalized offers and discounts.
Direct marketing is based on the opportunity to communicate with your prospects and customers directly, which also allows you to build a close relationship with them. And while the goal of direct marketing is to increase awareness and educate the markets about the products and services you offer, the major focus is on persuading your prospects to make a purchase directly, without the involvement of a third party.
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“Guess what, my day just got made – I received this fabulous cold email!”
…said no person ever.
Whether you’re a new SaaS startup looking for corporate clients to sign on or a content writer pitching your skills to magazines, cold emailing is a crucial part of getting your business up and running. It can be the most disheartening thing in the world to keep sending out emails and getting no response, but you keep on doing it.
Because you have to.
Let’s get the harsh truth out of the way — Your prospective clients aren’t interested in your emails.
Your clients are likely busy people with jobs and responsibilities, and getting yet another cold email in an already-full inbox is not their idea of a mood-booster.
It is possible to score meetings, close deals and land contracts with cold emails.
And no matter how fancy you get with social media, cold emailing done right remains the best way to get real leads that convert into real sales.
Interested in nailing the art of the cold email? We’ve put together the perfect guide for you.
What Is Cold Emailing?
A cold email is simply an email sent to a potential customer with whom you currently don’t have any connection.
It’s less intrusive than a cold call, in that you’re allowing your client to read your email at a time of his or her choosing.
But in every other way, it’s like a one-on-one conversation.
A cold email is typically sent from one business to another with the purpose of starting a conversation. While the underlying objective is usually to make a sale or some other form of conversion, it could also be a request for assistance – to ask for an introduction to someone else, for instance, or to pitch an article for publication in the recipient’s blog/magazine.
Is Cold Emailing The Same As Spam?
The biggest question people ask in the context of cold emailing is – “Is it spam?”
It might surprise you to know that cold email is actually the opposite of spam.
Spam, that bane of mailboxes, has some common features.
It has a generic sales message.
It uses a fake name.
It has a misleading subject line.
It doesn’t include the sender’s contact information.
It always has a commercial motive.
These stand in direct contrast to the features of a cold email.
It has a specific message tailored to the recipient.
It uses a real name.
The subject line is accurate.
It always includes the sender’s contact information.
It may not necessarily have a commercial motive.
A spam mail is basically a mass email sent without taking the recipient into account. A cold email, on the other hand, is designed specifically with the recipient in mind.
How To Craft The Perfect Cold Email
You could have the best writing skills in the world, but it won’t get you anywhere unless you have a solid list of leads to send your emails to. Sales representatives call this prospecting – which is essentially the act of seeking out new customers for your business.
Prospecting can be tough given that businesses often start with no existing leads or contacts – 40% of sales representatives say, in fact, that it’s the hardest part of their job.
We’ve got you covered, though! Read on to know about targeting and segmenting (the two elements of prospecting), as well as some solid tips on crafting the perfect cold email.
This is the first part of prospecting, in which you build up a lead list of potential clients with whom you are likelier to close deals. Rather than trawling through your team’s LinkedIn profiles for possible names, however, use these tried-and-tested tips to build your list.
Use tools to help you find relevant contacts and companies. Tools like LinkedIn Sales Navigator help you build lists based on specified criteria, and also get you the email addresses of the leads.
Find the prospects your competitors are targeting. These prospects already have an interest in the type of product you offer, and they’re also interacting with your competitors. Tools like Smart Lead List can help you reach out to these prospects and make your own pitch to them.
Search for companies that use a specific technology. For instance, if you’re targeting companies that use Hootsuite, use tools like SimilarTech or WhatRuns to find companies using Hootsuite.
This is the part where you divide your overall lead list into segments based on industry, geography, job title, mutual contacts etc. Segmented email campaigns have a whopping 100.95% click-through rate (CTR) than non-segmented campaigns, so there’s a clear reason for you to give this step due attention.
Now that you have your leads segmented and in place, it’s time to start writing your emails!
Like any good piece of writing, cold emails should go through at least a couple of drafts before you send them out. Take your time with composing something that is brief, outlines a clear value for the customer and lets them know how to reach you. Keep the following best practices in mind when you are composing your emails.
Use a crisp, accurate subject line – 47% of emails are opened or ignored based on their subject line – so make sure you pick a good one. The best email subject lines are short, crisp and eye-catching – for instance, “2x your inbound leads like XYZ Company”. Generic subject lines such as “Can you chat?” get ignored 98 out of 100 times, so avoid them. Above all, don’t use misleading subject lines of the sort that go ‘YOU’VE JUST WON A FREE IPAD!!!!’ They’re a one-way ticket to your recipient’s block list.
Personalise as much as you can –While this might be a little tough if you’re emailing a mass list, you should at the very least address the client by their first name. Personalised emails have a 29% higher open rate and a 41% higher click-through rate, so take the time and compose a mail as though you’re talking directly to John, Sarah or whoever your client is.
Keep your personal information for the signature – Nothing ticks off a potential client as much as receiving yet another email that goes ‘Hi, I’m John from XYZ Company’. That’s clearly a sales pitch opening, and your email will end up in the junk folder faster than you can say ‘hold on’. Instead, create a smart, professional-looking email signature with your name, company, designation, phone number and a photo. That way you can free up the body of the email for your message – and you can show the recipient that you’re a real person and not a spam bot!
Keep it short – Please, now is not the time to show off how beautifully you can craft sentences. Get to the point and say what you need to say if you want any chance at converting this lead. If you really must give your recipient a virtual tour of your business, include it as an attached brochure or video clip that he or she can open at their leisure.
Include a specific request – Do you want the client to share his or her phone number for a talk? Ask for it and suggest a date and time for a call. Are you looking for their response in a survey? Say so and include the link to the survey. Do you need the contact details of other leads from them? Ask for it. All too often cold emails get so caught up in formalities and explanations that the client ends up missing the point. Include your request in a clear, direct and polite manner, and cut the fluff out.
When To Send Your Cold Email
You’ve targeted and segmented like a pro and crafted a cold email that’s a work of art…and it never gets opened.
It could, of course, have been deleted or ignored – however, one major reason cold emails don’t get opened is that they were sent at the wrong time. While people do tend to check their email off and on throughout the day, there are certain times at which you’re likelier to get a response. Based on an analysis by LeadCandy, here are the best times to send out your emails.
In North America:
Weekdays – 6:00AM-6: 30 AM PST
Weekends – 5:00PM-7: 00 PM PST
On all days – 10:30 AM-11:30 AM, 2:30 PM-3:30 PM, 8:00 PM-9:00 PM IST
Schedule your emails to be sent out within this window and see whether there’s a noticeable uptick in open rates. You should, of course, experiment around these time frames and see what’s working best for you.
Following Up On A Cold Email
This can be as nerve-wracking (or even more so) than the process of sending the original email. Questions commonly asked include – how far apart should I send follow-ups? What do I write in a follow-up email? Should I even follow up in the first place?
We’ll answer the first question right away – yes, of course, you should follow up! Around 80% of cold emails need 5 follow-ups after the initial email, so there’s no question of giving up after just one try. It’s quite likely that the recipient overlooked your email the first time or simply forgot about it. A follow-up also acts as a gentle nudge that shows the recipient that you’re interested in hearing from them.
There are a few things you should keep in mind when planning a follow-up email.
Include an opt-out option – First off, give your recipient the option to not hear back from you. Instead of using the ‘unsubscribe’ button, which comes off as a little cold, add a line towards the end of your email that goes something like “Please let me know if you are not the right person to contact for this.” That way, you don’t bother someone with emails they don’t want, and you can devote more time to searching for the right leads.
Keep the tone conversational – Don’t add accusatory sentences like ‘You didn’t respond to my last mail’. Keep it friendly and casual. For instance, you could say ‘Just thought I’d check in again to see whether you had a chance to go through the offering I shared with you last week’. Follow-up emails shouldn’t be information-heavy at all – they’re designed to act as a nudge, not to be a new sales pitch.
Send follow-ups a week apart – Daily follow-ups are annoying, intrusive and highly likely to get you blocked. Allow a reasonable amount of time to elapse before you send a second email. A week is usually good enough to allow for your recipient to get back to you. In case the first follow-up doesn’t elicit an answer, you can send a second one a week later.
Consider sending a final ‘thank you’ email – If a fifth or even a sixth follow-up doesn’t get you a response, it’s likely your recipient isn’t interested in what you have to offer. A good way to sign off is by sending an email that thanks them for their time and informs them that they won’t be receiving any further emails from your end. Always include your contact information in such a mail, so that the recipient can reach you if he or she has a change of heart.
There’s a reason cold emailing is so tough to get right. You can’t just pick a strategy and assume it will work! It’s critical to test each and every email campaign you plan so as to maximise your chances of making it work. Keep the following tips in mind when you’re testing your next campaign.
Preview and proof your content – Your email may look a certain way when you’re drafting it and a different way in the recipient’s inbox. Make sure you preview each email to check that the alignments, picture sizes, spacing and other elements are exactly right.
Test on multiple email accounts – Send your email to test accounts on Gmail, Hotmail, Yahoo and other mail servers to see whether it appears optimally on each of them.
Make sure your content is mobile-optimised – Most people check their mail on their phones while on the go, so make sure all your content loads easily on a mobile screen.
A/B test each aspect of your email – Sometimes little things like your font size or call-to-action can make all the difference, so remember to A/B test for everything! Have a sample size of at least 200 for each version so that your results are statistically significant. Some of the things you can test for include font, link formatting, colours, button sizes, date/time of delivery etc.
Our Favourite Tools
Cold emailing doesn’t have to be a game of darts! There are plenty of tools available to help you out with different stages of your email campaign – pick the ones that make the most sense to your needs.
Lemlist – This is your go-to if you’re less than confident about crafting your own emails. With conversational templates that suit different business requirements, Lemlist can help you set up personalised campaigns in minutes.
LeadCandy – This tool helps you obtain contact details for your prospects. Once you’ve uploaded your contact list as a .csv file, LeadCandy will extract details such as their work and personal emails, designations, job titles etc.
Grammarly – Your word processor’s spellcheck may identify spelling and basic grammar mistakes, but there are several complex errors that creep into our sentences without us noticing. Grammarly does the trick with its advanced grammar analysis.
Mailshake – This tool helps you automate your emailing process based on the time window during which your emails are likeliest to be read.
NeverBounce – This handy tool helps you weed out any inaccurate email addresses on your lead list so that your bounce rate stays low. A bounce rate above 8% could get you flagged as a spammer, so this is a useful tool to have on hand.
CrystalKnows – This is a nifty app that assesses a contact’s communication styles and lets you personalise your email content even further.
Some Cold Emailing Best Practices
We’ve curated handy tips and tricks from some of the best cold emailing practitioners out there, and, here’s what they have to say.
Don’t use your primary domain – Despite your best efforts, your recipients could mark your cold emails as spam. Too many of these cases and your domain could get flagged as spam, which would cause even non-cold emails to bounce. Instead, purchase a handful of domains related to your primary domain and use them for your cold emailing campaigns. In addition, avoid using .com domains as they are the likeliest to be marked as spam.
Don’t use too many images – Most spammers send out emails heavy in images because they can sneak links into the pictures. Such emails, therefore, are likely to be sent straight to spam. MailChimp recommends that you aim for an 80:20 text to images ratio.
G-Suite is your best bet for cold emailing – G Suite allows you to create email addresses based on the domains you purchased and send them out to cold emailing prospects. They’re also pretty strict about you sending out emails ‘like a human’, so stick to the daily limit of 200 emails per day if you want to avoid getting blocked as spam.
Pace out the emails you send – Don’t get over-excited and send out emails in a blast – the more emails you send out at one go, the greater the risk of getting flagged as spam. Revise your email platform’s settings to pace out your sending rate to about one email every 20-30 seconds. You can also use tools like Yesware that do the job for you.
Cold Email Examples To Learn From
Ultimate guides notwithstanding, the best way to learn is from real-life examples. While there are millions of mediocre or cringe-worthy cold emails sent out every day, some individuals have honed their cold emailing craft to master-level. Have a look at some cold emails that generated major business from their recipients by checking all the right boxes.
The one that nailed a contract worth $3000
Too often, businesses underestimate the power of giving value to their clients for free. And sure, it requires extra effort and may not always yield results. On the other hand, it’s also likely to earn you major deals with high-profile clients, like this email did:
This short but powerful email does all the right things:
It establishes that the sender is an existing customer of the client.
It mentions a major competing brand.
It provides social proof of the sender’s work.
It includes a distinct offer value for the client in the form of a demo.
It closes with a direct question, heightening his chance of getting a response.
The next time you’re emailing a big-league prospect, try devoting some extra time to create something especially for them. It’s bound to earn you at least a call-back.
The one that scored 1.5x more meetings than personal introductions
When you’re selling a product that requires installation to be demonstrated, it can be tough to nail meetings. But craft an email that’s personalised to solve one recipient’s problem and you’re well on your way to success. Take this email, for instance, about a debugging technology:
This message sets itself apart in several ways:
It gets to the point right away with a short introduction about what the brand does.
It links the recipient to the Scala-focused webpage as the recipient is a user of Scala.
It mentions the recipient’s existing projects, demonstrating awareness about what the recipient does.
Lesson to be learnt – write an email that shows how you can provide a solution specifically for your recipient. That way, they have a concrete reason to call you back.