Pedal to the Metal: Marketing and the Race Toward Valuation
Working with many venture capital groups and their healthcare-focused portfolio companies, we know the pressure for scale and the imperative to increase valuation. For years, savvy C-suite leaders have recognized the role of strategic marketing in exit strategy; yet the full potential of marketing to drive valuation is only just now emerging.
This blog outlines three common growth strategies that we see, and how marketing can specifically support each growth strategy to drive higher valuation. For any approach to be successful, it’s essential to achieve a radical level of transparency and collaboration across a company’s C-suite, marketing leadership, and agency. When that occurs, the lead marketer and agency can focus on the most impactful activities driving strategic growth in the short- and the long-term.
New Market Entry
In most cases, a company’s valuation takes market demand into account – which includes both the size and the growth trajectory of your total addressable market. This is crucial as companies evaluate where to place their bets. Indeed, entering new segments can improve valuation even before you’ve signed your first deal.
It’s wise to enter via a single focused market and make sure you’ve nailed product fit and strategy in that market first. Don’t start by spreading yourself thinly across all possible segments, but once you have some successes under your belt, take the next step to evaluate your next market segment to attack. Teladoc offers a great example through its expansion from serving health plans and employers into also serving health systems and targeting the direct-to-consumer channel.
- There are roughly 5,000 hospitals in the United States, and approximately 1,500 real customer opportunities once you take into account affiliations and M&A activity.
- Consider the 230,000 physician practices across all 50 states – 60% of which are still independent, but consolidating by the moment.
- The top 25 health plans account for about two-thirds of people covered by health insurance.
- 63% of employers are self-insured, meaning they’re on the hook for healthcare costs.
Smart marketing work at this stage solves addresses two business imperatives: understanding the buying priorities of the new customer segment, and targeting messaging and channels to effectively reach them. To accomplish that, marketers should focus their efforts on three initial steps:
- Focused market research
- Positioning development for new personas (buyers and influencers)
- Content and digital strategy to reach this new audience set
Product or Solution Additions
While new market entry is crucial for full scaling, many companies also seek growth by expanding the set of services or products offered to an existing market. Take a look at the EHR industry today; many of the market leaders began with a focused clinical documentation offering, and are now offering complex suites of population health, analytics, and patient engagement. Yet most of them are still focused exclusively on the provider segment.
If your company is taking this approach, marketers need to quickly take action around brand and product positioning. More likely than not, your company’s positioning originated with a focus on your first niche offering. But if you’re expanding, the pressure is on to establish a brand narrative that encapsulates a wider breadth of offerings, with a brand architecture and set of product narratives that map up to the big picture.
Within this growth strategy, job #1 for marketers should be protecting and growing brand equity. Focus on building relationships with internal product teams and aligning with your executive team to establish:
- Brand strategy and corporate narrative
- Brand architecture and product hierarchy
- Messaging by product and audience
Of course, customer growth is the obvious and ongoing imperative. Indeed, every customer contract increases valuation, even those still in negotiation. Your leadership team is in constant dialogue with investors around this, and we see heavy pressure on marketing teams to deliver an abundance of leads for quick sales conversions. And if you’ve done the due diligence on the right content and channels to reach this audience, then generating the right leads is very achievable.
Unfortunately, many organizations press the gas pedal on lead generation with emerging segments that aren’t fully understood, decision-makers that haven’t been pressure-tested, and outdated messaging. In this scenario, no matter what paid spend or PR efforts you put against it, you’re not going to get the ROI you want.
Pushing back on aggressive lead expectations can be difficult, so we recommend taking a step back and asking why. For example:
- What’s the revenue goal for the year? How many deals are required to hit that goal?
- What market are we prioritizing? What percentage of that market is an early adopter that’s ready for our solution?
- What’s the expected sales cycle? Do our prospects already have budget allocated to our type of solution, or do we need to educate them on the need and arm them to make the budget ask?
By quantifying the ask, marketers can get closer to the core of business strategy, and build credibility on alignment to growth goals. With your positioning and brand narrative in place, you will be the one leading the measurable growth of the organization. For those strategically engaged marketers, we often see them engaged in:
- Marketing and channel planning
- Audience-based content development
- CRM platform and marketing automation alignment
New market entry, product expansion, and customer growth are all viable pathways to increased scale and valuation, and each should be carefully considered in the context of business planning and marketing strategy. Tailored marketing around each is essential to get to the next stage of funding or exit.
For growth to be realized, the C-suite, marketing leadership, and agencies must all be aligned on what we’re trying to accomplish.