Branding vs. Marketing in Startups
A reader emailed me with a question from my previous blog post, “What I Learned at Microsoft.” What’s the difference, they wanted to know, between branding and marketing in startups?
Unlike publicly-traded companies like Microsoft, startups undertake branding as a long-term project that ultimately contributes to “enterprise value” upon exit. These projects can live on afterwards or be quickly terminated and assimilated into an acquiring entity. Depending on the nature of the product or service, startups typically assign branding responsibilities to the marketing group, although a founder or CEO can take on this responsibility.
When a startup evolves into an emerging company, the Board of Directors and/or CEO may opt to separate the branding function and either assign it to a person or team or integrate it into the marketing group with shared responsibilities. In the latter option, the Chief Marketing Officer (CMO) or VP of Marketing are typically responsible for the brand. With this arrangement, branding inevitably gets short shrift because marketing remains the priority.
Branding reflects the essence of both the company and its product(s). For example, when I founded Black Duck Software, I named the company “Black Duck” because I wanted an approachable name that could be easily transformed into a verb. I wanted companies to say “{We} needed to get” ‘Black Ducked’, meaning they were certain that no license compliance or security issues found in the company’s software. This branding made the company name an easy, two-word shorthand for:
We examined Company ABC’s source code from the root level to the footer – including all its binaries – in order to find and identify instances of both open source code – especially GPL code – that were out of compliance and malware hidden in the code base.
Even with a healthy strategy driving it, marketing is defined by tactics and, therefore, has a short-term event horizon. Marketing consists of activities, programs and projects like digital marketing campaigns or a Webinar series. These tactics support a strategy like increasing awareness or lead generation. Marketing’s main goal is the “Call to Action” – eliciting a response by the customer to an offer of a white paper, Webinar participation, meeting at a trade show or other content, activity, etc.
Marketing groups seeking to “build their brand” are trying to increase brand equity through a mix of marketing activities – e.g., advertising and PR – leading to sales and brand loyalty over time.
In a startup, brand equity builds over time in stages:
Birth of the Brand – coincides with the founding of the company; creation of a startup’s logo, website look and feel, typeface, and other marketing communications together help establish the brand.
Next, the brand’s identity emerges in deeper ways such as thought (through content) and/or market (through sales) leadership. At this point ARR is beyond $1 million per year.
Then, as product-market fit occurs and grows, the brand is actively and more frequently used in the advertising and marketing mix to generate demand and engender loyalty. This is where a more conscious brand management strategy comes into being, such as the introduction of brand-use guidelines. At this point ARR is approximately $10 million or more per year.
Lastly, advanced brand management and expansive brand identify programs come into place. At this point the company is generating multiple tens of millions of dollars in ARR.
One of the most frequent characteristics of startups and their relation to their brand is that their brand management, identity, and equity-building programs are neither sophisticated nor advanced. This observation typically comes from people who know a lot about branding, especially at advertising, marketing and PR firms.
In truth, most startups under-invest in brand because the tactical parts of marketing more directly drive growth, which is always the highest priority. The perception of brand-building as mainly growing the company name doesn’t easily appeal to the Board of Directors and CEOs as opposed to a series of ABM campaigns designed to generate strong, close-able leads for the salesforce.
Startups should focus more on building brand equity. They should budget accordingly, assign brand management responsibilities to a dedicated marketing headcount early- in the process, and work into the company’s culture that expanding and protecting the brand is just as important as lead gen. This will help address either under-capitalizing or overexposing the brand until a significant brand management program can be put into place with an advertising or marketing firm, or small team inside the company.