A Better Budget Philosophy For Early Stage Marketing

With a combined 30 years of experience across about 1,000 early-stage clients in many industries, we have observed a few patterns of success when it comes to marketing budgets and priorities.

The most important thing to know is that 1) you’re definitely underfunding marketing and 2) you should be underfunding marketing in the earliest stages of your venture. If you discard the budget-first framing from the question, you will make far better strategic marketing decisions.

For that reason, we recommend identifying your mission-critical marketing priorities. You have to ruthlessly prioritize 1) which marketing activities are essential at this stage for your business and then 2) determine which essential activities you can actually afford to fund properly.

The reason for this is simple: product is everything at seed stage. As the business grows, it's rare that product iterations or incremental feature additions will drive growth as effectively as increased investment in the right marketing mix or a world-class sales operation. Once you have established product-market fit, the focus of the business necessarily shifts to sales and marketing.

But the bigger lesson in all of this is that the most successful clients underfunded marketing as a whole but never underfunded their mission-critical marketing priorities. If your website has to sign up users and collect payments, for example, it would be insane to underfund web design, copy writing, analytics instrumentation, and search engine marketing. But what does it mean to “underfund” those priorities? That’s where it’s important to take a longer view of your marketing program.

Budgeting for Accretive Marketing ROI

Virtually every early stage marketing budget is underfunded, primarily because many functions and "departments" in the company are underfunded in the early stages. So the question should be: "Is the marketing budget underfunded relative to some standard at this stage?" We argue that underfunding, within this context, means you don’t invest enough time or money to execute at the level necessary to reach your marketing goals. This usually happens when a company tries to do too much marketing with too little funding, which dilutes everything in the program to the point that everything yields marginal ROI at best.

Here's a simple example: If you’re just trying to close five pilot customers while you raise a seed round, a DIY website will almost certainly suffice; and you are therefore not underfunding an essential marketing activity. But if you're selling a new device direct to consumers, you're going to need a more robust website tied into a variety of systems for payments, CRM, analytics, and more. You can hack something together, but it's almost certainly going to create an underwhelming brand impression from copy to design, and you're probably not going to get the analytics you need to identify bottlenecks in the buyer's journey, all while your customer experience remains barebones.

Where this all gets tricky is in the staging and evolution of priorities over time. Continuing with the seed-stage website example, a DIY website option may suffice when you are raising a seed round; it could be wildly insufficient as a foundation when you get to the Series-A stage and need to rapidly scale your customer-acquisition efforts.

You then have a choice — you can either invest a little heavier in the website at seed stage to make the next iteration an easier lift at Series A, or you can minimize your investment in the seed-stage website to reduce the amount of waste/rework incurred when you start building the Series A.

From a philosophical standpoint, we have observed that clients who invest heavier in essential, foundational marketing priorities in the early stages scale faster from Series A to B to C. Foundational priorities typically include branding, messaging, content and collateral. The reason isn’t that surprising, but it’s an important lesson in marketing in the attention-economy era:

The best early-stage marketing programs are usually accretive – they look like a bunch of small wins added up over time instead of a “shock and awe” marketing campaign. If that DIY seed-stage website isn’t delivering meaningful business value, then your upgrade to the Series-A website starts at ground zero instead of being built upon a prior win. The longer you wait to establish a foundation, and the longer it takes you to start stacking small wins, the larger the marketing deficit you will create for later stages, when sales and marketing become the primary drivers of growth.

Some might argue that they can fund a more ambitious marketing program, and that an accretive marketing program is not aggressive enough. That may be true, but in our experience, it rarely pans out. More often than not, the company fails to deliver on the early, aspirational hype, and permanently damages their credibility. Magic Leap is a great example of a company that invested heavily in flashy, high-end marketing right out of the gate. They were pre-product. The hype turned to backlash, and everything spiraled from there. They survived it, but even after they pivoted and gained real momentum, they were still being described, fairly or unfairly, as a "flop."

If you're bought into the accretive strategy, but wondering what your top marketing priorities should be at your current stage, there's no one-size-fits-all answer out there. One of the best ways to figure it out is to identify patterns of success in comparable ventures. That's a conversation we'd be happy to have with you, drawing upon our deep experience with many different clients, markets and growth stages.

Send us a note at hello@lahaisefassi.com and we'll find a convenient time to chat.