Buzz vs. Value: Why Private Equity Marketing is Hard to Get Right.

June 6, 2024

Marketing is essential to any business strategy and plays a pivotal role in achieving success. Whether a startup, well-established company, or private equity firm, effective marketing is crucial for growth and profitability. However, when it comes to organic value creation, the approach significantly differs from that of a traditional marketing agency. 

When your portfolio companies are looking for an agency to work with  – we’d recommend one that specializes in organic growth, GTM, or even brand strategy – depending on the maturity of their marketing program. Steer clear of the more commonplace (or single channel) firms that work further down the funnel, like content marketing, SEO, digital marketing, or PR. These will have a tendency to deliver more prescriptive programs that rely heavily on junior staffers to execute, and rarely roll up to broader business strategy. 

Understanding Organic Value Creation

Private equity firms provide capital to businesses in exchange for ownership stakes. They help companies grow, optimize their operations, and ultimately increase their value. Organic value creation is a specialized form of marketing tailored to the unique needs and goals of private equity-owned businesses.

At a high level, the comparison breaks down into length of planning/vision, depth of metrics being tracked and optimized around and knowledge base/mindset that the agency team will focus on.

1. Emphasis on Value Creation

One of the fundamental differences between organic value creation and traditional marketing is the primary objective. A traditional marketing agency will focus primarily on generating 1) awareness and 2) short term results at all costs. This often manifests itself with vanity metrics, poor lead quality and declining lead quantities. Organic value creation uses a combination of marketing, GTM, operations and sales that synchronize to drive more meaningful growth and ultimately value. 

Private equity firms invest in companies with the intention of increasing their value over time, which may involve a multi-year strategy. Marketing efforts are aligned with this objective, emphasizing sustainable growth and profitability.

2. Horizontal vs. Vertical Expertise

Private Equity portfolios often are industry-focused. The tendency would be to bring in organic value creation professionals that possess the same industry focus. While this is helpful on a number of levels, there are different ways to look at this.

Strategy should be driven by data and insights, not established norms. Mid-market portfolio companies, especially in more legacy sectors like manufacturing or healthcare, have a tendency to stick to these norms too long – as holding periods evaporate rapidly. Basing a marketing strategy on listening, learning & rapidly iterating is absolutely essential. This hinges on not only a digital, data and operational-centric approach, but also a more dynamic growth mindset.

Where industry experience becomes critical is in content production. Experts who have a deep understanding of the nuances and details of a particular audience will dramatically improve engagement rates, lead quality, and ultimately growth development. 

More traditional agencies will build fully customized plans for each company account they win – and while that sounds like a good idea, it can get expensive and difficult to manage for the PE firm. Some operating partners don’t even have visibility into the marketing strategy of their portcos. 

Organic value creation professionals will help a private equity firm work through economies of scale while identifying opportunities to prescribe proven playbooks and programs right away to employ with portfolios.

3. Strategic Alignment with Business Goals

With organic value creation, there is a strong emphasis on aligning GTM with the broader business goals of the portfolio company. This alignment ensures that marketing efforts contribute directly to the company’s growth, operational improvements, and overall success. An organic value creation firm will build marketing programs that focus on:

  • Revenue
  • Pipeline progression
  • EBITDA influence
  • Valuation growth

Traditional marketing agencies are more apt to be short sighted in looking at vanity metrics, lead conversion rates and cost per, most likely without a view into the CRM. As a result, these vendors burn through fees quickly as the ROI gets lost in metrics that aren’t telling the real story.

4. Flexibility and Adaptability

Private equity-owned businesses often undergo significant changes, such as mergers, acquisitions, or operational restructuring. Marketers must be able to pivot their strategies to accommodate these changes and ensure that marketing efforts continue to support the evolving business model. 

Traditional agencies typically report to marketing leadership, and may not face the same level of dynamic change in their client portfolios. That marketing leadership is often starting from a difficult spot, having to scratch and claw for marketing budget while proving ROI instead of concentrating entirely on growth and momentum. This has a trickle effect with agencies as most of their work is meant to impress CEOs on their behalf. Their clients’ needs are typically more tactical, which leads to more routine work and results. Organic value creation would instead challenge virtually everything related to GTM – simplifying tactics and minimizing budgets – essentially the opposite of what traditional marketing agencies deliver. 

While both forms of marketing share common principles, the unique demands of private equity make organic value creation a distinct field that demands a specialized skill set and approach. By understanding these differences, businesses can make informed decisions when seeking marketing support in the context of private equity ownership.

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