Startup Branding-Should a start-up undertake paid branding?

It is a chicken-egg decision - publicity first or traction first. It is not easy.

Brand identity is a critical component of a startup's marketing strategy. Customers will not "feel" consistent if a company lacks a clear identity. The message will be muddled and difficult to disseminate. Startups should, without a doubt, invest in brand identity.

The answer to that question can be answered in three parts: The benefits of paid branding, the risks involved in paid startup branding, and deciding what to do. The benefits to a start-up can be several.

More brand recognition, a more attractive proposition, more opportunities to raise capital, and a more attractive target for a merger or acquisition. The risks are primarily in the fact that it can arouse negative sentiment from customers.

Why Startup Branding is Important?

When a start-up begins to create a brand for a smaller business, paid branding can be a valuable option.But the question is: does a start-up need to pay for brand recognition? The answer is yes, startup marketing can play a vital role in early growth.

Startup Branding brings you to the forefront of people's minds and allows them to recognise your existence. It raises your visibility not only among customers but also among investors and stakeholders. Branding gives your startup the value it deserves and distinguishes it from the competition.

A shaving cream company, Newbee, commenced its premier product. Soon it started facing hardships in an already overcrowded market. Market leaders were MNC with deep pockets and distribution penetration, backed by inducing advertisement on TV and print. MNCs have comfortably built an impregnable brand in the mind of individual males.

Source- Failory

Newbee analyzed to its happiness that MNCs have not made a huge impact in saloons and therefore started focus only there. Soon it had its distribution chain. Volume increased and variable cost started decreasing.

With cost leadership, Newbee found a new lease of life and invested in production enhancement. Soon it could reduce its cost further down, enticing even the MNCs to get contract manufacturing from it.

Newbee had the scale, quality products, and knowledge of variable quality for its customers. It was the world's largest producer of shaving cream. However, it still had one problem. Its margins were low.

Now, with high revenue and disposable profits, it thought of undertaking brand building and started advertising. It also increased the prices of its product to offset marketing costs. Did it succeed?

Yes, it did and the balance lies in the balance in pricing of its own product versus the competitor, even when both are resorting to brand building. It is, in fact, advantageous to NewBee that they are able to keep prices low, with the same level of margins as competitors, due to lower costs. Here in this illustrative story, Newbee has been able to wipe off its competitor from manufacturing.

Things to keep in mind for startup branding

Startup Branding strategies is a costly proposition. Still, many start-ups these days undertake brand building very early, as they get hot money very soon in the cycle and investors are in great hurry to create that hype to increase the valuation, enabling them to exit with huge positive returns.

Source- rubygarage.org

Ideal period of this cycle of investment-hype-customer acquisition-growth-exit is 3 to 5 years. In this case, should a startup undertake paid branding? If yes, what stage should it undertake it?

Consider the cases of amazon, makemytrip, flipkart, yatra, via, redbus amongst many others, who built their product, refined it well over time and then undertook paid branding.

While housing.com, ola, quikr, olx are some examples which jumped to market with huge marketing budgets from an early stage. All the former have painstakingly built their product, distribution, logistics and focused on self-sustainability to create revenue first.

They approached the investors for growth-stage funding and therefore pressure was diluted for big bang marketing. While later companies got the seed /early stage funding and had the compulsion to generate market valuations quickly.

It is no brainer that market valuation is more hype than reality, now or in the dot-com era. Profit is not the leading criterion like in case of amazon or flipkart. It has the potential to generate business in the future that leads all the way.

It reminds stories of the era, when most companies going for IPO, would build a healthy order book, possibly from friendly companies, and go bust soon after the subscription, swindling many small time investors who would have no means to know what happened.

When Startup branding is to target increased valuation and not sustenance, one must be wary.

In the case of Newbee, it resorted to paid branding for the startup branding strategies once it attained substantial competitive advantage, else the chances of return over investment reduced exponentially.

Ashish Jain

Writer mentors entrepreneurs