- Aug 10, 2014
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GOOD READ:
There were two types of blowbacks. One was - well, heck, this is just a $100 refundable down payment - most people will never buy it. Which is irrelevant really, and also untrue. A hotel chain counts its future revenues the same way - future bookings - even though they're based on prior reservations with zero down payment.
And it's also untrue because the Tesla Model 3 was launched the same way in 2017, with a press conference where $14 billion of pre-orders came in right after zero ads spend. And much of that converted and is still to convert. Tesla does some $25 billion in revenues today, two years later, with about $16 billion of that coming from the Model 3.
The second blowback was - to the effect of "why can't people understand that you need a budget to advertise, Tesla is a unique, special case - it's all the Musk mystique" and so on. Somewhat expected from people who make their living trying to spend a lot of money. And again both of those defenses aren't true either.
Marketing seems to have become a profession where your stature is directly proportional to your ad spend. I've heard this in a conversation actually: "He just manages an ad budget of X. I spend 5 times that." It was said in a way to imply that the gent in question was somehow 5 times more talented or senior to the other 'weakling'. To me, it made him 1/5th the person he claimed to be.
Because I think the opposite is true. One's job as a marketer is not to spend the most amount of money. It is, instead, to spend the least amount of money to get the largest amount of results. The job is NOT to make Newscorp or Bennett, Coleman & Co. rich. It is to make your firm rich. The more you spend, typically the more inefficient a marketer you are. As I've said elsewhere, your competence as a marketer is usually inversely proportional to your ad spend.
But we are in a perverted system where you're rewarded for inefficiency and incompetence. Headhunters for VP Marketing posts go around looking for someone who has managed a $100 million budget, as though that's the pre-qualification to take on an even more inefficient role of managing an even larger ad spend while being paid still more for it.
It's perverted because one's earnings as an ad firm or a media buyer are typically proportional to how much one spends - and not on how much one earns for the client. You've heard of that famous '15% commission'. Though that 15% number has trended down over time, it's still the dominant way to gauge how much ad firms are paid.
In fact the 'agency' in 'ad agency' originates from the fact that the firm was an agent of the media house, getting a commission for ad spends. And not an agent for the marketer as you might think. True story. Even in today's world seemingly driven by fee-based structures, the fees are benchmarked to ad spends - as though you need to be paid more to spend more money. You should be paid less to do so, actually.
While the advertising and marketing services business hasn't kept pace with change, the world of business has leaped ahead.
Which brings us back to Tesla and the truck. My point wasn't about the efficacy or lack of it in the social media marketing or digital ad buying or TV commercials.
My point was that today's incredible global digital network of connections and social platforms ensures that a remark-worthy product needs no advertising. If you have a product worth talking about, there's a network of 4 billion people who can get to hear of it without you spending a dime. And you'd be a fool to let go of this opportunity - in fact, I will suggest that if you don't already do it, that you change your entire model of business to account for it.
As a sidelight, the platforms themselves hate this - Facebook would rather your message NOT go viral - and instead be pumped through its pipes with a dollop of your cash behind it. But, as we've discussed before, you're not here to make Mr. Zuckerberg rich.
This is not what you will hear from the MNC ad firms though. They want you to spend on Facebook, Twitter, LinkedIn, and assorted TV channels. Their plans to you will seemingly justify why large spends on those platforms are necessary for your survival and success. The reason is clear - because when you follow the money, they work for those firms and not for you. Their perks and under-the-table-commissions that you know little about - and these are legion in the business - are aligned with how much they make for the ad-driven media companies. And not how much they make for you.
The solution is not just to change your ad firm, though that will help. The solution is to change your thinking, your way of working.
If, as an operating principle, you refuse to accept mediocre or undifferentiated products and offerings to market, but instead focus on creating remark-worthy ones, then you will spend less and earn more.
And this differentiation is not really about price. Remember, most of the e-com firms finally died out because all they were doing was spending lots of money on ads to talk about how little they were earning by discounting their products. That double whammy killed them.
And as to the second allegation here that only Elon Musk can pull it off because he's gifted and special, well, that's not true either.
Steve Jobs' focus was on the remark-worthy products. And iPhones 1 through 4 did extraordinarily well, with lines around the block to buy them on the day of release. But his successor Tim Cook's focus has been on 'just-about-OK' products. And the lines have grown shorter and then completely disappeared. Their ad spends have gone up. Their margins are down. Now an iPhone is no longer the special thing it used to be, it's just another phone.
The WhatsApp story is again, legendary. The company which was sold for $21 billion had just 50-odd people. Forget zero ad spend. They had zero marketing people. And I bet you can't name some mystical CEO with a special aura who founded it.
Red Bull barely advertises, yet it's able to sell a 200 ml drink for around $1.30. While a Coca-Cola, that spends a lot on celebs and ads, has to sell a 330 ml drink for $0.30. Even Red Bull's rival, Monster has to sell 500 ml for the same $1.30 to compete. And even with Coke's support, it's still 1/3rd the size of the leader. Given the cost of goods is about the same, who do you think makes more money?
It's the same with coffee. You may gripe about Starbucks charging $4 for a cup of coffee. But you go there regularly, and pay the price for it every time. And no ad they ran convinced you to do it.
Business after business, industry after industry, is now led by brands that spend next to nothing on advertising. Because they built remark-worthy products. Those products didn't come from some founder's mystique. They came from a process that gets them to do this reliably, time after time.
We can talk about this process some other time. Till then, there's an easy test of a remark-worthy product or offer: do you honestly think a stranger in a bar who is in the target group will mention it to another? If the answer's no, try again.
Which brings me to an equally simple test for a social media post and why most of them don't work - will you, the client, ever share it on your own timeline? If you won't, then why would you expect the disinterested public to?
Back to business. While Tesla rules electric cars, Red Bull rules energy drinks and Starbucks rules coffee, the dominance is even more apparent in digital offerings.
Gmail doesn't advertise, but it is the dominant email brand. Google has 92% of the world's search market while spending nothing. YouTube, another Google brand has 90%+ of video with no ads for themselves. Twitter has, golly gosh, a 100% market share and we've never seen an ad for it.
All of this dominance has little to do with the number of social media followers one has or the number of years one has taken to build a brand. To take an example, Tata Motors took 74 years to grow to $10 billion in revenues, not counting Jaguar Land Rover. While Musk's company Tesla is just 16 years old (one-fifth of Tata Motors' age) and currently at $25 billion in revenues.
While Ratan Tata has an impressive 8 million followers on Twitter, he can't move his product as Musk can. Because having followers on social isn't enough - you need to have something remark-worthy to say there. And the problem isn't Tata Motors' tweets, it is that the cars themselves aren't really worth anyone tweeting about.
That's why Tata Motors has spent billions in ads pushing its mostly mediocre products, on its way to $10 billion a year, while Tesla has spent zero in ads on its way to $25 billion a year.
This isn't frou-frou influencer reach metrics. This is real money we're talking about.
The traditional rules of marketing have changed.
Sure you can choose to build an unremarkable product and pay a lot of money to a bunch of media magnates to advertise it. This is the old way, and it increasingly gets you nowhere.
Or, there's a different way, and it can get you to the top. It's your call.
Source: https://www.linkedin.com/pulse/105-...tLEJKOy6iz3dtMyT0KMUGsIJ-n3lOMg45AbjJ65RvMPhs
There were two types of blowbacks. One was - well, heck, this is just a $100 refundable down payment - most people will never buy it. Which is irrelevant really, and also untrue. A hotel chain counts its future revenues the same way - future bookings - even though they're based on prior reservations with zero down payment.
And it's also untrue because the Tesla Model 3 was launched the same way in 2017, with a press conference where $14 billion of pre-orders came in right after zero ads spend. And much of that converted and is still to convert. Tesla does some $25 billion in revenues today, two years later, with about $16 billion of that coming from the Model 3.
The second blowback was - to the effect of "why can't people understand that you need a budget to advertise, Tesla is a unique, special case - it's all the Musk mystique" and so on. Somewhat expected from people who make their living trying to spend a lot of money. And again both of those defenses aren't true either.
Marketing seems to have become a profession where your stature is directly proportional to your ad spend. I've heard this in a conversation actually: "He just manages an ad budget of X. I spend 5 times that." It was said in a way to imply that the gent in question was somehow 5 times more talented or senior to the other 'weakling'. To me, it made him 1/5th the person he claimed to be.
Because I think the opposite is true. One's job as a marketer is not to spend the most amount of money. It is, instead, to spend the least amount of money to get the largest amount of results. The job is NOT to make Newscorp or Bennett, Coleman & Co. rich. It is to make your firm rich. The more you spend, typically the more inefficient a marketer you are. As I've said elsewhere, your competence as a marketer is usually inversely proportional to your ad spend.
But we are in a perverted system where you're rewarded for inefficiency and incompetence. Headhunters for VP Marketing posts go around looking for someone who has managed a $100 million budget, as though that's the pre-qualification to take on an even more inefficient role of managing an even larger ad spend while being paid still more for it.
It's perverted because one's earnings as an ad firm or a media buyer are typically proportional to how much one spends - and not on how much one earns for the client. You've heard of that famous '15% commission'. Though that 15% number has trended down over time, it's still the dominant way to gauge how much ad firms are paid.
In fact the 'agency' in 'ad agency' originates from the fact that the firm was an agent of the media house, getting a commission for ad spends. And not an agent for the marketer as you might think. True story. Even in today's world seemingly driven by fee-based structures, the fees are benchmarked to ad spends - as though you need to be paid more to spend more money. You should be paid less to do so, actually.
While the advertising and marketing services business hasn't kept pace with change, the world of business has leaped ahead.
Which brings us back to Tesla and the truck. My point wasn't about the efficacy or lack of it in the social media marketing or digital ad buying or TV commercials.
My point was that today's incredible global digital network of connections and social platforms ensures that a remark-worthy product needs no advertising. If you have a product worth talking about, there's a network of 4 billion people who can get to hear of it without you spending a dime. And you'd be a fool to let go of this opportunity - in fact, I will suggest that if you don't already do it, that you change your entire model of business to account for it.
As a sidelight, the platforms themselves hate this - Facebook would rather your message NOT go viral - and instead be pumped through its pipes with a dollop of your cash behind it. But, as we've discussed before, you're not here to make Mr. Zuckerberg rich.
This is not what you will hear from the MNC ad firms though. They want you to spend on Facebook, Twitter, LinkedIn, and assorted TV channels. Their plans to you will seemingly justify why large spends on those platforms are necessary for your survival and success. The reason is clear - because when you follow the money, they work for those firms and not for you. Their perks and under-the-table-commissions that you know little about - and these are legion in the business - are aligned with how much they make for the ad-driven media companies. And not how much they make for you.
The solution is not just to change your ad firm, though that will help. The solution is to change your thinking, your way of working.
If, as an operating principle, you refuse to accept mediocre or undifferentiated products and offerings to market, but instead focus on creating remark-worthy ones, then you will spend less and earn more.
And this differentiation is not really about price. Remember, most of the e-com firms finally died out because all they were doing was spending lots of money on ads to talk about how little they were earning by discounting their products. That double whammy killed them.
And as to the second allegation here that only Elon Musk can pull it off because he's gifted and special, well, that's not true either.
Steve Jobs' focus was on the remark-worthy products. And iPhones 1 through 4 did extraordinarily well, with lines around the block to buy them on the day of release. But his successor Tim Cook's focus has been on 'just-about-OK' products. And the lines have grown shorter and then completely disappeared. Their ad spends have gone up. Their margins are down. Now an iPhone is no longer the special thing it used to be, it's just another phone.
The WhatsApp story is again, legendary. The company which was sold for $21 billion had just 50-odd people. Forget zero ad spend. They had zero marketing people. And I bet you can't name some mystical CEO with a special aura who founded it.
Red Bull barely advertises, yet it's able to sell a 200 ml drink for around $1.30. While a Coca-Cola, that spends a lot on celebs and ads, has to sell a 330 ml drink for $0.30. Even Red Bull's rival, Monster has to sell 500 ml for the same $1.30 to compete. And even with Coke's support, it's still 1/3rd the size of the leader. Given the cost of goods is about the same, who do you think makes more money?
It's the same with coffee. You may gripe about Starbucks charging $4 for a cup of coffee. But you go there regularly, and pay the price for it every time. And no ad they ran convinced you to do it.
Business after business, industry after industry, is now led by brands that spend next to nothing on advertising. Because they built remark-worthy products. Those products didn't come from some founder's mystique. They came from a process that gets them to do this reliably, time after time.
We can talk about this process some other time. Till then, there's an easy test of a remark-worthy product or offer: do you honestly think a stranger in a bar who is in the target group will mention it to another? If the answer's no, try again.
Which brings me to an equally simple test for a social media post and why most of them don't work - will you, the client, ever share it on your own timeline? If you won't, then why would you expect the disinterested public to?
Back to business. While Tesla rules electric cars, Red Bull rules energy drinks and Starbucks rules coffee, the dominance is even more apparent in digital offerings.
Gmail doesn't advertise, but it is the dominant email brand. Google has 92% of the world's search market while spending nothing. YouTube, another Google brand has 90%+ of video with no ads for themselves. Twitter has, golly gosh, a 100% market share and we've never seen an ad for it.
All of this dominance has little to do with the number of social media followers one has or the number of years one has taken to build a brand. To take an example, Tata Motors took 74 years to grow to $10 billion in revenues, not counting Jaguar Land Rover. While Musk's company Tesla is just 16 years old (one-fifth of Tata Motors' age) and currently at $25 billion in revenues.
While Ratan Tata has an impressive 8 million followers on Twitter, he can't move his product as Musk can. Because having followers on social isn't enough - you need to have something remark-worthy to say there. And the problem isn't Tata Motors' tweets, it is that the cars themselves aren't really worth anyone tweeting about.
That's why Tata Motors has spent billions in ads pushing its mostly mediocre products, on its way to $10 billion a year, while Tesla has spent zero in ads on its way to $25 billion a year.
This isn't frou-frou influencer reach metrics. This is real money we're talking about.
The traditional rules of marketing have changed.
Sure you can choose to build an unremarkable product and pay a lot of money to a bunch of media magnates to advertise it. This is the old way, and it increasingly gets you nowhere.
Or, there's a different way, and it can get you to the top. It's your call.
Source: https://www.linkedin.com/pulse/105-...tLEJKOy6iz3dtMyT0KMUGsIJ-n3lOMg45AbjJ65RvMPhs
