Startup Cos. Look to Print, PR

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Launch Pad, a consulting firm that helps high-tech startups develop marketing strategies, recently asked 31 new business-to-business and infrastructure Internet companies where they are spending their marketing dollars.

The results, published in "Marketing Budgets: What Technology Startups are Spending," revealed that print advertising and public relations were the top priorities, while promotions and loyalty programs were afterthoughts.

When asked to identify their greatest challenges, marketers said generating awareness was the toughest (30 percent), followed by hiring good people (17 percent) and establishing trust (17 percent).

To build this awareness, companies looked to print advertising, as 21.1 percent of their budget was spent on these offline ads. Public relations was the second-largest spend at 15.9 percent. Trade shows followed at 12.8 percent, online advertising at 7.2 percent, direct mail at 6.5 percent and Web site design at 4.9 percent. Promotions and loyalty combined for only 3.3 percent of their marketing spend.

When looking at the results of their campaigns, the respondents said they wished they had spent more on public relations (25 percent), print advertising (20 percent), their Web site (16 percent) and direct mail (16 percent).

"I'm surprised they spent as much on print advertising and wanted to spend more," said Shelley Harrison, founder/CEO of Launch Pad, San Francisco. "However, based on how hard it's been to find a public relations agency, it shouldn't be surprising that so many companies really wanted to spend more money on public relations. They felt that was the best thing or the best place where they should be spending more."

The four most cost-effective methods of marketing are the corporate Web site (rated 5.7 out of a possible seven), public relations (5.2), e-mail marketing (4.7) and direct mail (4.6). "They said the corporate Web site was far and away the most cost-effective thing they did," Harrison said. "This is great news for graphic designers."

The top two categories on which the respondents said they overspent were trade shows and online advertising. "People hate to go to trade shows but never have the [guts] to turn them down," Harrison said.

The average projected marketing budget at a startup was $4.5 million, an average of 25 percent of a company's expenses.

Marketing spending increased as additional funds were raised. Companies spent an average of 7 percent of their seed funds on marketing, 16 percent of their first round and 25 percent of their second round.

Overall, marketing budgets were not as ridiculous as they had been, according to Harrison. "People woke up," she said. "Instead of spending $1.5 million on something, they're spending $750,000. These companies, in their infancy, realized that they need to focus on very targeted marketing."

Survey participants included FireClick, PrimeStreet and Zbox. It was conducted in the second quarter.

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