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EVIDENCE FROM FINLAND
CRITICAL ASSESSMENT OF
VALUE PROPOSITIONS AND
MARKETING OF TECHNOLOGY
STARTUPS
Joni Salminen
Turku School of Economics
José Teixeira
Turku School of Economics
Key concepts
• Startup is a young (0-2y) business organization
aiming at high growth and scaling of business
(adapted from Blank, 2008; Ries, 2010).
• Value proposition refers to the benefits offered by a
firm to its customers through goods or services
(Anderson, Narus, & Van Rossum, 2006).
• Pitch is a short presentation of the startup. For
example, meetings with investors in startup events
are typically short, and startups quickly need to
create a positive first impression.
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Summary of study
1. We interviewed 21 technology startups in a
conference “Slush 2011” in Helsinki, Finland.
2. Startups were asked questions relating to marketing
challenges, specifically target market (customers),
market research, and revenue models.
3. Value propositions were gathered from short
introductions (“pitch”) given by the founder or
representative of each startup.
4. We discuss various marketing challenges of early-
stage technology startups and conclude by
proposing more attention to the formulation of
value propositions not only to communicate more
efficiently but also to clarify business goals.
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Questions asked
1. Who is your customer? (What is the startup’s
target market?)
2. How do you make sure that you have correctly
understood the need of the customer for your
product? (Has the startup done market research?)
3. How do you make money? (What is the startup’s
revenue model?)
4. What is your biggest challenge at the moment?
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About the 21 startups
• use Internet as a part of service delivery
• international growth orientation (only 1 focusing
on Finnish market)
• first customer acquisition: 1) pilot organization, 2)
other startups (personal contacts)
• most were B2B; all B2C offer a free version of
product
• customers risk being ”basically everyone”, and
biggest challenge ”getting users”
– weakness in positioning
– marketing communications, value propositions
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Main findings
• apparent issues in targeting, positioning, branding
– visible in value propositions measured by pitches
– ”could you give me an example of a real person
using the product?” (tangibilize)
– confusion about marketing concept?
• tendency for ”build it and they will come”
• strategy of ”value stuffing”
potential HAZARDS for survival
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How startups perceive marketing?
Additionally, we observed the word “marketing” raised
controversial reactions, so that: 1) many founders
seemed to narrow the concept to either advertising
or sales when talking about marketing efforts. This
confusion limits the usefulness of marketing function,
and is counterproductive because startups often
associate negative attitudes towards advertising.
“we are not doing marketing, we are doing sales”
Further, 2) founders primarily understood marketing as a
separate process that would be integrated after the
product development; not as a parallel process that
could be applied alongside the product development.
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POINTERS FOR FUTURE
RESEARCH
What else did we learn?
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Platform problem and solution
To create market exchange, both groups need their own
value propositions and need to be convinced on the utility of
the platform (Evans, 2003). Since the startup is in fact a
market maker (i.e. the market does not exist ex ante), it has to
find a way to attract enough consumers interested in brand
offerings; the more it has brand offerings, the more potential
utility it offers to consumers and vice versa. However, without
either party the platform remains worthless. Doligalski (2010)
asserts the dilemma can be tackled by offering free services
to the first party (e.g. consumers) while charging the other one
(e.g. brands).
Another approach planned by one startup was gamification;
while the consumer plays a mobile game on the go, the
applications records data on road bumps which the startup uses
to analyze road conditions, later selling this information to any
interested parties. In this case, the user needs not to actively
contribute into data collection apart from playing the game.
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Why no customer service focus?
Brand building or customer service as a competitive
advantage was not explicitly mentioned by the
interviewed startups. This is in line with Kim’s (2004)
finding that a paid software product with high-quality
service is a rare combination. Exactly for this reason it
could provide a competitive advantage if compatibility
with customer preferences is found. The perception of
the authors is that a boost in branding and service
dimensions is an obvious point of improvement for many
early-stage technology startups.
Think Zappos!
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“Is the mission of a startup to change the
world or make money?”
these goals are not always aligned, so that the startup
may have to make a tradeoff between improving
people’s lives (social startups) and engaging into more
profitable activities (business startups).
e.g. solving the problems of handicapped could be less
feasible from business perspective than solving problems
of e.g. bankers) while in fact the impact to customer‟s life
(“good done”) would be higher.
This division was also notable in the participating
startups: some were clearly business oriented and had a
direct route to monetizing their product, whereas others
were more focused on solving the actual customer
problem and less focused on creating business.
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Limitations
• small sample does not allow empirical generalizability
• interviewed startups operate in different type of
markets (e.g. business vs. consumer; leisure vs.
productivity) and use different business models,
leading to many different combinations (selection
bias, including and excluding)
• differences in “early stage maturity” are not good for
all aspects of comparisons (but then again are for
others)
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