Startups Spend More on Marketing
By Jonathan Angel

October 17, 2001

Despite the economic conditions they now face, technology startups have increased their marketing spending from an average of $2.2 million in 2000 to $2.8 million in 2001. So says San Francisco consulting firm, Launch Pad, which interviewed more than 30 executives for its annual study, "Marketing expenditures for technology startups."

The study also noted, however, that marketing spending -- as a fraction of total expenditures -- fell to 15 percent in 2001, from 20 percent in 2000. Companies have cut back on mass marketing efforts in favor of smaller, more targeted programs, the report says. For example, online advertising investments fell by 72 percent and print advertising programs by about 44 percent. But direct marketing programs increased an average of 300 percent for online and 150 percent for off-line.

The Launch Pad study, performed in conjunction with Hill and Knowlton company Blanc & Otus, is intended to "provide a barometer for executive management, investors, marketing personnel and their service providers."

"We found last year's survey resonated so strongly that many high-tech companies adjusted their marketing budgets after the report came out," says Shelley Harrison, founder and CEO of Launch Pad. "While we do not recommend any marketing department use these findings as their budget template, there are important trends and lessons to be learned from survivors of the recent downturn."

Successful marketing departments, adds Harrison, are using programs with quick, measurable returns in terms of sales prospects or revenue. Gone are the expensive long-term brand-building activities. Instead, companies have turned to targeted, measurable lead-generation programs.

"The key points made in this report are absolutely correct, especially the overspending on mind-share-building programs that lack clear objectives," says Craig Patterson, president of J. Walter Thompson Technology Communications Group. "We have always argued that the true measure of brand strength is marketshare, not mind share."

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