The challenge. As a startup, how can you persuade established companies to buy the product that you're still building? That was the question facing Marko Savic, chief executive officer and co-founder of Waterloo, Ont.-based FunnelCake, in the spring of 2015.
FunnelCake provides analytics for marketing teams to enhance their ability to influence sales. With seven years as a digital marketer under his belt, Mr. Savic understood the market well, but he also knew that selling an emerging product to established companies would be a challenge. How could he convince potential customers that FunnelCake could provide a useful solution?
The background. The inspiration for FunnelCake came from Mr. Savic's work in digital marketing. He was frustrated that there was no easy way for business-to-business (B2B) marketing teams to track the relative effectiveness of their online marketing campaigns.
FunnelCake's customers – the sellers – have to reach their own customers – the buyers – through different marketing campaigns, involving digital ads, social media, webinars, e-mails, and in-person interactions. A seller needs to know which people in buyer companies become aware of their company through which campaigns and how the campaigns translate into sales. The goal is to get the right people from the buying company into the "sales funnel" and track the seller's marketing and
In the summer of 2014, while still at his day job, Mr. Savic started talking with digital marketing teams to learn more about the challenges they face. "I interviewed 150 B2B marketing teams and 94 per cent of them used only basic tools, like Excel, to analyze their data. Typically, they downloaded data from different marketing platforms into spreadsheets and spent hours trying to make sense of it," he recounts.
Convinced that he could do better, he spent the next nine months talking with marketers to validate his ideas and persuading Andrew Lawton, a co-worker, to join him as the technical co-founder. Together, they quit their day jobs and started working on FunnelCake's technology in the spring of 2015. A priority from Day 1 was sticking close to their customer and developing a solution that was easy to use, easy to understand, quick to set up and provided data that marketing teams could act on.
The solution. There are three aspects to the way in which FunnelCake's founders are building a system that is customer-centric. First, they have leveraged Mr. Savic's experience in the industry. This experience – combined with information gained through the interviews – has been essential in guiding them to develop a workable solution in a complicated market.
Mr. Savic says that "you really have to be hands-on in this industry in order to see where the value lies." There are many players: the individual searching the net on their computer, the teams in buyer organizations, marketing and sales teams in seller organizations, and numerous companies collecting information about people's online behaviour and passing it on to the advertisers. It is critically important to understand how the whole system of players works together. Without in-depth industry knowledge, he would not have been able to understand how he could add value.
Second, FunnelCake has focused on the target market that would be quick to get its value proposition. It is very difficult to convince organizations that they have a problem you can solve for them. Although they may see the problem, if you have to point it out to them, there is rarely any urgency for them to take steps to solve it.
Mr. Savic explains that the FunnelCake target market consists of digital technology companies that have 100 to 1,000 employees. "They already know they have a problem and have even put together Band-aid solutions. And they are very receptive to moving beyond homegrown spreadsheets to a more systematic approach that is easy to use and provides actionable metrics." He says these companies are big enough to have the budget to pay for a solution, but they are not so complex that they need their own customized solution.
Third, once FunnelCake's founders understood whom they should target, they established a customer advisory board to get timely feedback as they develop their product. The board meets every two weeks and involves eight executives from companies that are in their target market. Mr. Savic believes that having this board is the reason why they've been able to bring value to their early customers so quickly: "Board members give us feedback on what's useful, allow us us test the platform with their company's live data, and help us prioritize the roadmap for development."
Results. It is difficult for a startup to gain traction with established companies, but the combination of industry experience, a focused target market and a customer advisory board has been beneficial for FunnelCake. In its first six months, FunnelCake has acquired seven paying customers, in Ontario and San Francisco, and is engaged in 10 pilot projects.
With this rapid traction, FunnelCake has recently been accepted into Communitech's Rev accelerator, a six-month program focused on helping companies build their sales capabilities. FunnelCake is now looking to bring on five employees in the next three months and will be formally launching its product in 2016.
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.