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Entrepreneurship 3: Growth Strategies

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University of Pennsylvania

Entrepreneurship 3: Growth Strategies

761 ratings

Course 3 of 5 in the Specialization Entrepreneurship

Start-ups are designed to grow quickly, but successful start-ups grow smart. This course is designed to provide you with an understanding of the essential elements of successful scaling, including an overview of demand generation, customer acquisition, adoption, diffusion and forecasting demand. You’ll also learn how to market effectively using best practices of digital marketing, social media, PR, SEO, and pricing. Finally, you’ll cover the nuts and bolts of building a sales process, partnerships and supply relationships, and examine the crucial components of attracting, developing and retaining talent. By the end of this course, you’ll have an outline of an expansion strategy for your idea or enterprise, and also be ready for Entrepreneurship 4: Financing and Profitability

From the lesson

Module 2: Marketing and PR

In this module, you'll explore the strategies modern start-ups use to get the word out about new products and services. You'll learn the three primary modes of digital marketing (owned, paid, and earned), and when and how these media options can be utilized by a start-up. You'll also learn how to harness the powers of social media, search engine optimization (SEO), “sponsored” search engine results, display ads and social ads. Finally, you'll understand how to leverage free media and assess the pros and cons of engaging PR firms. By the end of this module, you'll be able to develop digital marketing and pr strategies for your enterprise.

Digital Marketing7:59

Social Media14:43

Digital Advertising19:07

Meet the Instructors

Kartik Hosanagar
Professor
Wharton School
Lori Rosenkopf
Vice Dean and Director, Wharton Undergraduate Division
Simon and Midge Palley Professor of Management
David Hsu
Richard A. Sapp Professor of Management
The Wharton School
Laura Huang
Assistant Professor
Management
Ethan Mollick
Associate Professor
Associate Professor of Management- Wharton School
David Bell
Xinmei Zhang and Yongge Dai Professor, Professor of Marketing
Marketing
Karl T. Ulrich
Vice Dean of Entrepreneurship and Innovation
The Wharton School

I'm Karl Ulrich.

I'm a professor at the Wharton School.

This session is on public relations, also known as PR.

I want to start with a story.

In 2004, I started a company with a group of MBA students, and

the group of MBA students is shown here.

And we started a company called Terrapass.

And the basic idea behind Terrapass was that you as the owner of a car

could enroll as a member in a collective we called Terrapass.

And then what would happen is Terrapass on your behalf would buy enough

clean energy to offset the fossil fuel consumption of your car.

So for about $70 or $80 a year, you could become a member of Terrapass.

And Terrapass effectively would buy, for instance,

enough wind power that it would displace the amount of fossil fuel

that you would use in your car driving over the course of a year.

And in that way you could remediate the environmental impact of driving your car.

That was the idea behind Terrapass.

Now just explaining that idea is hard.

And in fact, it's somewhat of an arcane business concept.

But we started it as a class project and by the end of the semester,

we were able to attract several hundred actual paying customers.

And we thought we might actually have a business.

And so we set out to found a company and

to see if we can grow the Terrapass business.

Now the business sort of went along organically,

gaining a few customers every week, until one day this happened and

we saw a tremendous spike in the sales on our website.

Now what happened that day?

What happened that day was that an article appeared in Wired magazine

entitled SUV Redemption Sticker.

And it was a one page article in Wired magazine

that described the Terrapass concept.

And wrote up the idea that you could redeem your pollution

of an SUV of driving a sport utility vehicle by buying a Terrapass and

by applying a Terrapass sticker to your vehicle.

Now never mind that the article got a few things wrong.

Never mind that it wasn't exactly the positioning we wanted for our new company.

It caused a huge spike in demand for

our product, and it dwarfed anything else we'd tried.

In fact, we had tried a whole variety of other ways to attract customers and

this one action, one publication by one journalist at one magazine,

caused that huge spike in demand.

That's what we call PR.

Now the name is a little funny because the name PR refers to public relations.

But what we really mean by PR is unpaid editorial coverage in media outlets.

And historically that has meant broadcast media and wide-scale print media,

so television, radio, blogs, magazines, newspapers, and so forth.

Now the huge advantage of PR

is that there are no direct cost as you face in advertising.

In advertising you pay for an audience.

With PR you don't pay directly for that editorial coverage.

It's nominally free.

Secondly, it's highly credible.

So when Wired magazine writes an editorial piece about Terrapass, somehow that's much

more credible, and I think rightly so, to the potential customer

than if they were to see an advertisement in Wired magazine by Terrapass.

Third, you have instant reach.

So because your content appears in a media outlet with an existing audience,

you're able to automatically reach that large existing audience, and

that's also a huge advantage.

And lastly, you have very high engagement with the target of the media.

Think about this, if somebody spends the time to read an editorial article,

read a piece of content in a magazine, they might engage for 20 minutes.

Compare that to the two seconds or less

that they'll give to an advertisement that appears in the pages of that magazine.

So those are the reasons that PR is fantastically useful

as a key tool for an entrepreneur in growing his or her business.

Now unfortunately, there are two negatives to PR.

The first is, that it's very hard to scale it reliably or easily.

You can't just turn on money and expect to have PR happen.

And a closely related negative is that it's relatively unpredictable.

So you can put in resources, you can do your best to build a PR campaign, and

you might not get results or you might not get them when you think you'll get them.

And furthermore,

you don't have direct control over how the content actually appears.

So on balance, the pros drastically outweigh the cons.

Nevertheless, it's unfortunately not something you can just scale

automatically, and you do have to deal with some intrinsic uncertainty.

Now, there are three main benefits to having PR, to state the obvious.

The first is direct customer awareness.

Those targets of the media, who read your content or

who view your content or who view editorial content that mentions you,

become aware of your product, and that's typically your goal.

And so that's the primary benefit, is that direct customer awareness.

But almost as important, mentions in the media and

the resulting documentation on the Internet feeds other media.

It feeds both professional media, that is, other journalists who are looking for

content and who find initial ideas for

that content online, but it also feeds social media.

So the fact that you appear in an article in a magazine or online often becomes

the subject of Facebook posts, LinkedIn posts, WeChat posts, Twitter posts.

And so it serves as fuel for social media, that is, for nonprofessional media.

And then the last reason it's so valuable is for

search engine optimization and organic search on the Internet.

Having your content published online increases the domain authority

of your own web properties to the extent that those publications linked to you.

And it enhances the reputation of your brand and your products and

your domain from the perspective of search engines.

So for those three reasons, direct customer awareness, feed in other media,

and search engine optimization, PR is tremendously valuable.

Let me make a few comments about PR, and about caveats and

issues that you need to consider as you think about PR and your PR strategy.

The first is that there's a kind of a media food chain out there,

meaning there are some media outlets that are much more valuable than others.

And then there a lot of less valuable media outlets that feed

on the output of the high-prestige media outlets.

So at the very top of the food chain are publications like the New York Times,

the Financial Times, the Wall Street Journal.

These are media outlets with tremendous credibility in the minds of the public and

tremendously large subscription bases.

Maybe more important than their direct subscription bases are the fact that

all the smaller media outlets follow the top of the food chain.

And if something appears in the New York Times,

it will either be directly syndicated in other sites, or

other journalists and content authors will contact you

because they want to cover things that were covered first in the New York Times.

Next on the food chain are influential bloggers on the Internet,

influential and authoritative Internet-only publications.

A good example of this would be the Huffington Post.

Blogs that appear on the Huffington Post are viewed as highly credible,

highly influential.

Next down would be Internet sites like product review sites,

magazines that do product reviews, that so-called curate new products or

services, that build awareness for new companies in the broader readership.

They're sort of next on the food chain.

And the very bottom of the food chain would be what I would call the click

bait websites, that is, the websites that are out there on the Internet

whose primary purpose is to attract people who are searching for

search terms and to get them to click on advertising.

Those in general are not too valuable for you.

They're the very bottom of the media food chain.

The second point I want to make about

PR is that if you put yourself in the perspective of the journalist,

what the journalist most cares about is that the story is interesting.

The journalist is looking for readers, and the journalist wants his or

her readers to be highly engaged and interested.

So let me give you an example.

I recently became aware of a startup called Sword & Plough.

The founder of Sword & Plough is Emily Nunez Cavness.

And Emily is an active duty military officer in

the US Army who has served in Afghanistan.

And what Sword & Plough does is takes extra

product that's used in US military, so typically extra fabric

that would be use to produce military apparel and military gear.

And Sword & Plough turns that surplus fabric into consumer goods,

into apparel and bags.

Thus the name Sword & Plough, which refers to the biblical reference of turning

swords into ploughshares, or turning military uses into domestic uses.

Now what's more interesting than a story about an active

duty woman in the US Army who served in Afghanistan,

who's looking for a way to take surplus military fabric and

turn it into consumer goods and who has founded a company called Sword & Plough?

That is an irresistible story for a journalist, because it has an interesting

narrative flow, it has an unexpected twist to it, and it has this integration

of the concept of the business Sword & Plough and the background of the founder.

The story is intrinsically interesting, and

Emily is going to have a much easier time getting PR than someone who is selling

enterprise software that's incrementally better than the existing

products out there and who doesn't have such a similarly engaging story.

The next point I want to talk about is PR firms.

I think the knee-jerk reaction of most people when they think about PR is that

they need to hire a PR professional, and there are many such professionals.

But I want to just alert you to the reality of that.

First of all, PR firms are quite expensive, and

they work on retainer typically.

So a small company would typically expect to pay between $5,000 and

$10,000 US per month to retain a PR firm.

That typically makes that cost somewhat prohibitive for a new startup.

And so using a PR firm often has to wait until you've

got sustainable revenues and/or venture capital funding.

What you're buying with a PR firm is relationships.

You're buying a relationship that the PR professional already has with journalists.

And that PR professional will essentially use that trusted relationship to introduce

your company to the media outlets that are likely to be most receptive to the story.

I personally wouldn't bother with the cut-rate PR services out there.

There are some cheap plans that maybe will charge you a few hundred dollars

per month.

But I think in this case you do get what you pay for.

Those firms are likely just going to send a lot of junk email to media lists,

and you're not likely to get a great response in terms of the quality of

the outlets where they reside on the media food chain.

Now the exception to that would be in some cases you can find a solo practitioner,

perhaps someone who's gone out on his or her own after leaving an established PR

firm, who is scrappy and resourceful and would perhaps welcome a retainer

of a few thousand dollars a month from a startup in order to build a portfolio.

That might work out for you.

But by and large, I think most startups, particularly in the early stages,

are going to end up having to do the PR on their own.

Now the good news is that doing the PR on your own isn't an entirely bad thing.

And I want to just give you my own experience as a radio host.

So I've had the somewhat unusual experience of both trying to pitch PR

stories to journalist as an entrepreneur and being myself a journalist as a radio

host on an entrepreneurship show that we broadcast on Wharton Business Radio.

But as a radio host, I would estimate that I get around five to ten

email messages per day pitching me on hosts or guests for that radio show.

And mine's a relatively small radio show, airs once a week on

the Wharton Business Radio Station, and I still get five a day.

Now I'll just tell you, as a host, I pretty much just delete

every one of them without giving it more than two seconds of attention.

And why is that?

Because those emails are obviously form letter.

They're obviously prewritten, they're too long, they don't emphasize

why I would care and why I might be interested, and they're not personalized.

So you as a founder, you as a key player in the entrepreneurial venture,

are actually in a pretty good position to reach out to radio hosts,

to journalists, and others because you're going to be very authentic.

You're going to right a short email, you're going to make it authentic,

you're going to emphasize what's interesting about the story,

and you're going to personalize it to the recipient of the email.

That reaching out directly by the principals, I think,

by the entrepreneur or by the principals in the business, is likely to get a much

better response than a form letter sent out to thousands of potential journalists.

I want to just comment for a minute on the use of stunts in PR,

and by stunt I mean doing something

that's designed specifically to get attention in the media.

One of the most famous stunts ever conducted by an entrepreneur was conducted

by my friend and Wharton alumnus Josh Kopelman who was the founder of Half.com.

And he had the idea of getting a small town in Oregon,

which I believe was called Halfway, Oregon, to get that town

to change its name to Half.com, Oregon.

He managed to do that by going to the school board and

agreeing to buy the town some computing equipment in exchange for

their temporarily changing their name from Halfway, Oregon to Half.com, Oregon.

That action garnered Half.com tremendous media attention,

including articles at the very top of the media food chain.

That's an example of a stunt.

Now stunts, when they work, can work fantastically well.

But they don't always work.

So when we started Terrapass, the team tried to do a stunt.

We went to the governor of California, who at the time was Arnold Schwarzenegger, and

we challenged Arnold to buy a Terapass for his fleet of Hummers.

Now if you'll recall, the Hummer is a very high fuel consumption

off-road vehicle, repurposed military vehicle, repurposed for street use.

It gets terrible fuel economy.

We challenged Arnold Schwarzenegger to buy a Terrapass to mitigate

the environmental impact of his Hummers, and we did it very publicly.

We issued a press release,

we put it on our website, we wrote letters to the governor's office.

It was not well received, it didn't really ever get traction, and the staff and

media in the governor's office were not really amused with our challenge.

So in that case, it was an attempt at a stunt that didn't really work out.

So my view on stunts is they might be worth a try.

There are low-probability kinds of events.

When they work, they can work fantastically well.

So let me just wrap up with some practical suggestions.

The first thing you should think about is what's interesting, different, and

newsworthy about your company or even about you.

And then to emphasize your personal story,

accentuate what's interesting about your journey,

about where the idea came from, about how you developed your new product or service.

What is newsworthy, what's personal,

what is likely to be interesting to a journalist's audience?

Then I would focus on the very top of the media food chain.

In particular, I'd focus on high-quality leads, and

then I would connect personally.

I think it works very well for

you as the entrepreneur to send a personal email to the target journalist and

write a very short email that makes the case for why your story is newsworthy.

Now you can focus on the top of the food chain, and

that's, I think, the way to approach PR.

But there's one subtlety, which is in addition to focusing directly on,

say, the New York Times reporters, you can also focus on

where those reporters go to get their story leads.

And often those reporters will stay current with edgy blogs and

Internet media that are out looking for really interesting newsworthy

things that are happening in the world of product services and entrepreneurship.

And if you can get mentioned in one of those blogs, often a mainstream

reporter at the top of the food chain will go and pick up the story.

And so focus both directly on those journalists at the top of the media

food chain as well as the sources where those reporters are likely to be

looking for what's new and newsworthy.

And lastly, sure, when you can afford it, it probably makes sense to use a PR firm.

But recognize that it's probably going to require budgeting between $5,000 and

$10,000 US per month as a retainer in order to get the quality of PR

firm that's going to deliver practical and valuable results.

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