Entrepreneur

There are very roughly speaking two things in business: Overhead and Profit. Businesses want to minimize overhead and increase profit. So, if you cut overhead in the right way and proper amount, you could increase profit.

Startups optimize over time but start out hemorrhaging money until they get their shit together.

Wantrepreneurs are often product-obsessed lunatics, so that may be tough to puzzle out.

Look no further than Patron and Beats. Also any product that you can only do so much product development, like Supreme or Luxury eyeglasses, or luxury anything really. At some point, people won’t pay more for better quality but they will for vanity, which is the main point of marketing outside of step 1 awareness.

With some exceptions, and within reason, every dollar spent in marketing will give you higher ROI and lower risk than every dollar spent on product development.

You make up for a mediocre product with good marketing. You can spend all the money in the world on product but at some point you get diminishing returns. Look at every super hero movie they have more $$ than brains to spend on the product and yet the movies are still subpar.

Marketing is about exposure per $ so you can get a lot of eye balls to help sell through the mediocre product.

This has been the most helpful thread I’ve seen in a long time. It really is a marketing centric world. I think any budget should be 70% marketing, 30% product.

Balancing act between top quality and marketability. Obviously sales dynamic change with the improvement of the product, but it’s not an exponential gain. However.. with marketing it’s all a function of spending X to gain Y, it’s a very direct formula. Look at coca cola, red bull, etc, you could argue their product is bad, even could kill you, but marketing here balances it out, crappiest of product with the biggest marketing budgets.

In order to have money to spend on product building, you need people to spend money.

If people don’t buy your product. It doesn’t matter what % you’re spending on marketing vs product. You’re going bankrupt.

If the best product always won, we would have never used VHS.

Quick buck vs LT view.

But really there shouldn’t be a total trade off. I’m an ex ceo and ex cro and have to admit, the game has changed in my world (b2b tech). Now the buyer wants to do their research, deal with experts not BDRs, and they want to have confidence they’re partnering with the right providers. There’s also a trend in “build it yourself” given how efficiently and well companies can build technology.

If I have to rationalize dollars, I take the long view and try to be scientific about each penny, like yield management in the airline business. Instead of butts in seats and maximizing yield, we do that with investment allocations for outcomes. To be fully complete you need to incorporate the non financial “soft” things like reputation, brand, how it affects hiring, you name it.

But in practice most companies are weak and the people at then just don’t want to get fired.

The reality is as long as the packaging looks good, the product can be subpar.

There’s always time to make it better, but it’s not a necessity if its profitable.

It’d be nice to have the complete product that performs amazingly in the beginning, but more often than not that feedback loop is necessary to improve it.

It’s an interesting catch 22. If its a good enough product then you don’t need to market it, is true to a degree. If we replace the word market with getting users / testers, then the feedback loop requirement is met & not only will the product improve but it’ll not need excess marketing.

No point in having product sit on shelves. If you’ve got an okay product, then invest in marketing to move it!! It’s that simple.

I see this all the time working in the eCommerce sector. And tbh the only way to truly fail is to go to either side of the extreme.

Saw a startup basically do 90% on development to make a sick product. They thought "build it and they will come" and that couldn't be farther from the truth. Ran out of budget to sell & market, so they ended up having to be acquired by another company for pennies on the dollar who did have the gunpowder for marketing.

Then you have the private label brands or companies who just barely "make" a product, but they already have a celebrity partnership lined up and all this elaborate marketing. That will appear to work right out of the gate, but since the product tends to be bad or nothing new it will fizzle out with no repeat sales.

Every brand I worked with who succeeded was somewhere between the two.

They are selling you a dream. That’s why. Doesn’t matter what the product is. And we are stupid enough to keep falling for it.

A better question is, why are we like this. They wouldn’t do it otherwise. Let’s get philosophical on this bitch.

because distribution, not product is king. If you build it, they will not come

A good product isn’t enough to make a sale. And once made, each incremental sale costs almost nothing. In their case probably has recurring revenue for online activity.

They think they’ll make more profit by spending more money in those areas.

From working in large companies there are a few things, 1: marketing is easy to spend on and always gets results (or vague results that appear to be helping) vs product development is expensive and doesn't always work out with a lot of sunk cost risk 2: people that run marketing tend to be very personable as they are sales people. They tend to do a better job selling to leadership that they need more budget. 3: marketing is easily hired out to 3rd party contractors who can do the whole marketing plan for you without much employee involvement. Whereas product development requires you to be really effective at running your company, team cohesion, vision, etc.

In the case of Activision, it seems they have been challenged with development for years now so they doubled down on the part that was easy for them to execute, as they struggled to retain talent and develop product.

You can have the most functional product in the world but if you cant sell it its worth nothing

Yyyeeepp... None of them were taught that customer retention is a lot cheaper than just marketing to new people and then disappointing the new people.

And beyond that it's a huge waste. Think of all the HP printers that are in the landfill right now that worked for a year and then clogged.

Marketing is more directly measurable. Or at least they believe it to be. Also selling something that has already proven itself instead of making something new is less risky.

Everything in the corporate world is about profit. These companies have studied the situation very closely, and if they believed that spending on better, or more expensive, ingredients would lead to an increase in profits, they wouldn't hesitate to put the money into that direction.

What they have figured out is that money spent on marketing does more than just sell the specific product, it also builds and/or reinforces the overall brand. By creating a brand that consumers learn to trust, it helps them sell products that may be far removed from the actual advertised product.

For instance, Annhauser-Busch spends zillions on Miller Beer, but by reinforcing the brand through marketing/ advertising, if a staunch Miller consumer decides he wants to start buying a cheaper beer, or he wants to cut calories by switching to a Lite beer, he is more likely to stay within the A-B family of products before switching to a whole other brand.

TLDR: sales > product.

It's taken me a long time to learn this.

Sell a Product that People 'Need'. Product Quality is secondary if the product is considered a 'Need'.

Legacy companies have this issue of not investing enough in R&D and then they wake up and their products are irrelevant (BlackBerry, Razor phones). They keep doing what works until it doesn’t

You’re talking about gaming. Completely different beast.