In the post-daily deals era, everyone’s more conscientious about customer acquisition costs. And to entrepreneurs’ credit, most startups have gotten pretty good in finding and attracting customers with the highest lifetime value for the lowest possible cost. Remembering the lessons of Boo and Pets.com, VCs have also gotten savvier in assessing startups with an economically viable customer funnel. And with a lot of great content available online for free, founders have no excuse in not getting up to speed on cost-effective online marketing.
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While most of the content out there emphasize the analytical side of customer acquisition (most founders are engineers and “growth hackers” after all), founders need to also take a deeper look at strategic partnerships — deals with (often) bigger companies, influencers, and industry associations that create win-win solutions for both parties.
This requires a crash course in the art of dealmaking. If growth hacking were more analytical, empirical and scientific, then strategic partnerships require a lot of networking, alliance-building, negotiating, and nurturing relationships — skill sets that don’t come natural to the average engineer. Here I’ll focus on strategic partnerships for marketing, sales, distribution and brand building purposes.
Though my company, AVA, acquires users at an average of US$1.50 online with customers transacting at a US$100 basket size, a significant part of our marketing and brand building efforts are driven not by digital channels, but by strategic partnerships with banks, retailers, and mobile companies. At AVA, building these partnerships have allowed us to save up to US$250,000 in direct market expenses, while providing exceptional brand and PR value to our partners. With angel funding of less than US$500,000, that was huge for AVA. These partnerships allowed us to help break a Guinness World Record, launch collaborations with trusted celebrities, and offer automatic, 0 percent interest installment payments for expensive products.
Most importantly, it’s helped build trust in the AVA brand. We’re at a crossing-the-chasm phase in Southeast Asian e-commerce: though the early adopters have been accustomed to buying online, e-commerce still has yet to make the jump into the mainstream. As a result, online retail sales account for less than 5 percent of total retail across ASEAN markets. The crucial ingredient is broadening trust. And a great way to build consumer trust is to halo off established brands and the positive social signal of working with them.
Of course, It’d be disingenuous to say we planned all this from the start at AVA. We made many mistakes along the way. We’re fortunate to be backed by Globe Telecom’s Kickstart Ventures, and thus have access to the telco’s marketing infrastructure and the broader Ayala Corporation of which Globe is a part. Kickstart’s thesis is that the Globe + Ayala network can help build new Filipino tech startups get off the ground.
We’re still learning as we go along, but here are the most important lessons experience has taught us:
Define the industry that gets you distribution on day one. This sounds straightforward, but can actually get confusing when faced with a myriad of choices. When we were first beginning to scale our marketing for AVA, we had a choice between partnering with BDO, one of the biggest banks in the country or the organizers of Philippine Fashion Week. Due to our limited resources, we could only go with one. Fashion Week seemed like an intuitive choice — we’re a design brand after all. But we realized that building trust was a more crucial objective. This was the time when there were a lot of scams in the local daily deal space, so we needed to differentiate ourself from the rest. As a result, we felt it was more effective to build trust if our users knew we had a partnership with a bank. That early deal — where we offered generous discounts exclusive to BDO cardholders — resulted in growing our base by 50 percent.
Navigate the organization to find out who has the most to gain from a deal. In 2012, the Glorietta mall in the Makati financial district underwent a massive renovation. With the local retail scene getting more competitive, we knew the mall’s marketing team wanted an awesome way of relaunching the new mall. The idea we brought to them was simple and crazy: let’s break the Guinness Record for the world’s biggest fashion show, which at the time was held by Japan at 1900+ models walking the runway. Glorietta would stage the show in the mall and get merchants to provide the clothes, while AVA would lead the online marketing and livestream the actual show. For three weeks, we ran an online crowdsourced contest where AVA users post photos of themselves and the people that get the highest daily votes get to walk the runway and become part of local fashion history. The result was phenomenal: we broke the record with 2,255 models and made it to the front page of newspapers the following day. AVA users got to be a model for a night and cheered by their friends, an experiential treat we couldn’t replicate online.
How did we initiate contact with the Glorietta marketing team in the first place? It certainly helped that our angel investor, Nix Nolledo, had a prior working relationship with Glorietta management. He helped open the doors and facilitate the relationship. The lesson here isn’t just about finding the right big idea, but having the organizational awareness to put it in front of the right decision maker who can champion it in the company.
Boil down the value proposition to a simple heuristic. As a startup, you’ll have zero brand recognition. This can get in the way of dealmaking as people make assumptions on what you can and can’t do. In those days, we often got compared to others. So the heuristic we often use is while competitors like Zalora are the online mass market department store or thrift shops, AVA is the online destination for high end speciality retail.
That simple distinction made it easier for people to visualize our brand positioning.
Read part two of this post here.
This guest post by AVA Online Group Chairman and CEO Oliver Segovia originally appeared on e27, a Burn Media publishing partner.
