Balancing Short-Term ROI and Long-Term Brand Building in Tech Startups
Matt: We have several topics to discuss today, but let's start with the first question. How should brands at different growth stages approach marketing investments?
This is a timely topic. Every year, there are many ways we can spend our money. Teams often argue that their department needs the most funding. But in general, how should brands think about this?
Joon: From a tech industry perspective, many marketers find it challenging to decide how to spend their budget effectively. This isn't because they don't know which marketing channels work. The real difficulty is balancing short-term and long-term results. This balance is crucial because marketers are responsible for driving growth.
It's not just about choosing where to spend, but also about when to expect results.
Marketers need to consider both immediate returns and future impact when making spending decisions. It's not just about choosing where to spend, but also about when to expect results. This approach is especially important because marketers are held accountable for the company's growth.
Profit and loss (P&L) pressures will affect how your spending is judged. In tech startups, there's a big focus on measurable results with a clear return on investment (ROI). However, it's important to step back and consider your company's growth stage.
This is often measured by your market share - whether it's 1%, 5%, or 10%. You need to think about whether your current actions will lead to future success, not just immediate results. It's crucial to balance short-term gains with long-term growth strategies.
From a strategy perspective, it's important to first identify which stage your company is in. The seed stage is when you're still trying to find product-market fit, the growth stage is where you're attracting early adopters and figuring out how to expand, and the scale stage is when you have a significant market share and are aiming to increase your market penetration.
Each stage requires a different approach to marketing and growth strategies. Understanding your current stage will help you make better decisions about where to invest your resources and how to balance short-term gains with long-term growth plans.
Each stage requires a different approach to marketing and growth strategies. Understanding your current stage will help you make better decisions about where to invest your resources and how to balance short-term gains with long-term growth plans.
In the early stages of a startup, it's best to focus on cost-effective marketing that gives you a high ROI. This approach helps you understand if your product is a good fit for the market. These are mainly sales activation channels. And these are generally performance channels like Facebook advertising and Instagram marketing.
These methods are generally good for driving traffic to your product or service and getting early feedback from customers. They allow you to test your product in the market without spending too much money upfront.
For marketing activities that aren't directly tied to performance or easily measured, aim to at least make them shareable. While "viral" is often overused as a term and hard to engineer, the goal is to create content that people want to share have some propensity to share. This can help your message spread widely and create a significant awareness impact, even if it's just a one-time effort.
There are several ways to create shareable content that can help your message spread widely, even if it's just a one-time effort. These include events, Public relations (PR) activities, and online forums.
These methods aren't usually long-term solutions, but they can help you stand out when you're just starting. They make people aware of your brand early on. To keep this awareness going, you'll need more structured approaches later.
A great example is Circles Life, a telecom company in Singapore that launched a few years ago. They created an innovative product that changed the telecom industry by offering plans customers could customise. Their marketing strategy to grab people's attention was quite clever.
They put up billboards with a random brand name, not their own, they had influencers promote these mysterious billboards, and the next night, they "vandalised" their own billboards.
This approach was quite risky, especially in Singapore where vandalism is taken seriously. However, it worked well for them. The media picked up the story, and people started talking about it. This publicity helped spread the word that Circles Life was a new telecom company doing things differently.
While this method was a bit controversial and not the best way to do things, it was very effective. It really made people aware of Circles Life as a new telecom company. This is a good example of how a one-time, attention-grabbing event can help a new startup get noticed and make a big impact with their marketing investment.
After a company gets noticed, it enters the growth stage. This is when it has its first customers and is working on expanding further.
After the seed stage comes the growth stage, where you've secured early adopters and are trying to penetrate deeper into the market. At this point, you need to step back and consider how to grow beyond your current sales activities and touchpoints. The core of your investment—about 80%—should still focus on driving short-term ROI.
However, it's crucial to start planting seeds for long-term growth. This means expanding into mass outreach channels like YouTube, OTT, and PR partnerships. It's time to build your brand story and equity, articulating what you stand for both functionally and emotionally.
At Urban Company, we increased our investment in branding, including out-of-home advertising. We shifted our messaging to focus on convenience and tapped into human insights, rather than just emphasising our affordability and service offerings.
The final phase is the scale stage. At this point, you might realise that your previous strategies are no longer as effective because you haven't invested enough in building your brand.
This is when you need to reassess and consider allocating at least 50% of your budget to forward-looking investments. Focus on driving your brand story and top-of-mind recall, so that when people have a need, they think of you first.
Shift towards "pull" media rather than "push" media—instead of just pushing out ads, create more content, engage more influencers, and develop ambassador programs to encourage organic conversations about your brand. This approach will help you scale further and maintain a foundation of mass-reach touchpoints like YouTube or TV to sustain awareness.
Aligning Marketing with Business Goals
Matt: There's so much to unpack there. I agree, especially for marketing startups and growing companies. It's important to balance short-term and long-term goals. You need to invest in both areas.
For startups, there's a lot of pressure to grow fast. You need to focus on both building your brand and getting immediate results. You can't just do one or the other.
What's your advice on how to split resources between brand building and getting quick results? For a new startup, can you give a percentage or some tips on how to balance these two?
Joon: The balance between brand building and quick sales depends on your company's stage. For stable companies, it should be about 60% brand-building and 40% sales activities. In the early stages, it's more like 80-90% focused on sales.
The challenge is managing the transition between these stages. To make this transition, it's crucial for marketers to understand the company's finances. You need to know how to read a profit and loss statement. Prove that you're as committed to profitable growth as they are.
This approach is especially important in tech startups, where marketing is often seen as just a cost. By understanding the finances and the company's direction, you can have better conversations about marketing strategies.
Consider questions like: When do we need to show results? Are we focusing on cutting costs or growing revenue? Use marketing as a tool to address these goals. Discuss how much you can grow the business, or how cutting costs might slow growth. These insights will help you have productive discussions with company leaders about marketing investments.
Consider questions like: When do we need to show results? Are we focusing on cutting costs or growing revenue? Use marketing as a tool to address these goals. Discuss how much you can grow the business, or how cutting costs might slow growth. These insights will help you have productive discussions with company leaders about marketing investments.
You need to know when results are expected and how the company plans to achieve them. Are we trying to cut costs or increase sales? Having clear answers to these questions is important.
Then, you can use marketing to help achieve these goals. You can discuss how much the business could grow, or how cutting costs might slow down growth. All of this information will help you have good conversations about investing in marketing.
Setting Expectations and Creating Financial Plans for Marketing Investments
Matt: We’d like to know how to justify investments that have both short-term and long-term benefits. Can you give us some real-world examples or advice?
Joon: The most important thing, which I learned through trial and error, is to set the right expectations with these people. To set expectations, you need to create simple financial plans that everyone can understand. When you're talking to the finance team, it's all about numbers and goals.
To set expectations, you need to create simple financial plans that everyone can understand. When you're talking to the finance team, it's all about numbers and goals.
Your financial plan should show that if we keep investing only for quick results via sales activation channels, our growth will slow down after about 6 to 12 months. This helps everyone see why we need to think about mid to long-term investments too.
Your financial model needs clear, believable assumptions. There's solid research behind this. In any marketing and media approach, there's always a point where spending more money on a touch point doesn't bring in more sales, or it becomes too expensive to rely on the same investment touchpoint.
This becomes clearer as you grow. For example, if you spend 100k one month on a performance channel and 200k the next, you'll eventually see that you're not getting as much return on your investment. This can vary depending on your product and market, but it's a common trend.
Get comfortable with creating models that show this trend. Demonstrate that while your current approach might work for this quarter or financial year, it won't be effective in the long run. If you don't change your strategy, your business could face serious problems in the next 6-12 months.
Your team needs to understand and agree with this. Then, when you suggest focusing on longer term brand building, be prepared to explain it clearly and relate in process metrics like awareness and consideration to business growth. You need to show them realistic timelines for when they can expect to see results.
Explain that in the first few months, they might not see improvements in traffic, sales, or other key metrics. But ask for three to four months, and you'll start to see some positive signs. Be honest that it's not easy and requires some faith.
There are many examples from different markets and industries to support this approach. A great example is Airbnb in 2021-2022. They changed their strategy from focusing heavily on search results and performance to building their overall brand.
They still talked about their product and features, but in a more relatable way instead of just trying to be at the top of search results. This change clearly improved their profits, showing that the approach works.
There are successful examples across different industries that you can use to show how this approach can work within a year. Ask for three to four months, and you'll start to see some metrics improving. To support this, set up other ways to measure progress.
These measurements don't have to be just sales or order numbers. You can look at things like social media share of voice, brand sentiments, or even free tools like Google search results.
Keep sharing updates on these metrics to show that things are moving forward. The big results will come later, but it's important to show that there's measurable progress happening now. The challenge is in making the transition and helping everyone feel comfortable with the change.
