.. is actually in “meatspace”.
Why? Because this wisdom that always holds good: it’s when you deliver that counts.
The future of “digital”…
Reply
Tag Archives: strategy
Start-ups do not need a marketing budget, or do they?
Two deservedly well-regarded investors, Fred Wilson and Brad Feld, have written about why they think start-ups do not need a marketing budget. Both are deliberately a little controversial. Fred Wilson writes, for instance, that: “I believe that marketing is what you do when your product or service sucks or when you make so much profit on every marginal customer that it would be crazy to not spend a bit of that profit acquiring more of them (Coke, Zynga, Bud, Viagra)“. Brad Feld says that “every time I hear the word “marketing” I throw up a little in my mouth“.
Par for the course for the intertubes, the nuance is lost. Take a look at the reactions on those two posts, and you will see people agreeing with the top-line idea they seem to see: start-ups do not need marketing budgets.
Which is patently not what Fred Wilson and Brad Feld are saying. For instance, later in his post, Fred Wilson goes on to say: “Early in a startup, product decisions should be hunch driven. Later on, product decisions should be data driven”. … Clearly people like that rule. Here’s another. Early in a startup you need to acquire your customers for free. Later on, you can spend on customer acquisition“. And Brad Feld goes on to say: “When I think off (sic) all of the companies in our portfolio that are growing like crazy, they all spend money on marketing. However, it’s driven by an obsessive focus on the customer and the product, rather than a “marketing budget” or “marketing initiative.””.
My view on the matter? Every business, no matter what stage of life it may be, needs marketing. And all marketing costs money. It is smart to budget for it. Smarter still to ensure you deliver what you promise.
In its essence, marketing is no more than:
a. promoting your product/ service,
b. to a group of people who either need it or are amenable to be convinced they need it, and
c. who have the ability to pay for the product/ service.
Ben Casnocha and I are in agreement when he says good marketing is good, bad marketing is bad. What is bad marketing then? “Bad marketing” could simply be if any of the above three elements is missing, or if any or more of the following is true:
a. you don’t have a product/ service properly defined and developed,
b. the audience has or knows no need for it, despite all your efforts to persuade them otherwise,
c. the audience cannot pay for it which means you are talking to the wrong people,
d. You get the attention of the right people, who can afford to pay, but you fail to deliver.
Fred Wilson’s examples are all about how to use the web to market your offering. The internet is but one channel to promote one’s product/ service; it is seductive because it is perceived as “free”. In the end, nothing is free, including the time one spends on the web. So it is smart to have a budget or notional cost allocated to the time you cannot spend writing code or checking the air-tightness of the fruit juice bottle you plan to sell. Especially crucial for a start-up that is promising something but nobody has seen it yet.
Fred Wilson points out that he is only referring to consumer internet companies and not those that may sell to enterprises. I add another rider to it. There is a vast world out there where people do not spend their time online 24X7 as some of us do. These people are buying real things whether influenced by friends and family, or by a coupon in print media, or a promotion in their local bazaar. Such influence does not come for free. Smart companies and their investors plan for those costs.
So why bother with that marketing budget, if what John Wanamaker says is indeed true: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half”? Replace advertising with sales, or with marketing, or with hiring and you will know that this is no more than a thumb rule. A rule that says we cannot predict how some of our spend will yield or not yield expected results. Some adverts just won’t work; some networking contacts one develops will never yield a tuppence of business; some promotions or give-aways in a mall will be just people seeking freebies and nothing more. But each of these activities need real or notional money to be spent. If there is no headline item in the business plan, it may come from cannibalising some other headline spend. That is hardly clever.
We can however increase the probability of a desirable outcome if we prioritise our activities and focus, just as Brad Feld says, on the customer and the product.
A Passage To India (2010 ed) and the other R-word
When EM Forster wrote A Passage To India, the Indo-British relationship was one of the ruler and the ruled, of imbalances in power. Things are different now in 2010. Britain lags behind and grapples with an economic crisis of monstrous proportions, while India’s economic growth gallops along at 8.5%.
Naturally, all eyes are on David Cameron and his 90-strong high-powered ministerial and CEO delegation to India, billed as a “jobs tour” to which Cameron is bringing a “spirit of humility“. The delegation led by Mr Cameron confirms how India remains, despite all its frustrations, a potentially strategic customer, partner, supplier and sometimes a competitor to British businesses. As such India’s growth has direct implications for British business, as we in Britain seek growth markets and profits to deal with the continued chill in our home economy.
Earlier this week, the Financial Times, in its editorial, argues that India needs to go for stronger growth (registration required). Among other points, the FT argues for improved infrastructure and productivity, liberalisation in retail sector, furthering liberalisation in the banking sector, and investment in basic health and education.
All valid points indeed.
A fundamental requirement to enable such business is that businesspersons from both countries are able to travel to meet with each other, and not just on high profile trade delegations. Not least because both the UK and India are nations thriving on the back of the SME sector and their chief executives rarely get to join ministerial trade delegations.
Travel between India and the UK is hamstrung: by the increasingly onerous requirements for an Indian to obtain a British visa in India, and by the sheer volume of visa applications being made by British persons in the UK for travel to India. One area ripe for quick and major reform in both countries is enablement of business travel.
In doing so, the other R-word – reciprocity – is as important as any reform. It would not be remiss of Mr Cameron’s and Dr Singh’s governments to take bold steps to make it easier for British and Indian businesses to travel, and then to trade and collaborate.
Starting with a mutually cooperative visa regime. One that makes it easier for British businesses to find their passage to India in the modern times.
Other links:
Nitin Pai writes: Cameron comes with a different mindset
BBC’s Economics editor Stephanie Flanders: Osborne in India
Dean Nelson on the whys and the what-fors of Indo-British links
Whose data are they anyway?
What a difference two days make!
First, T-Mobile in the UK informed the Information Commissioner’s Office that some of its own rogue employees had sold on the firm’s contract customer data to third parties. These third parties then ring the contract customers just before their contract expiry to offer deals that may or may not be kosher, or the best deals on the market.
So exactly what data might a mobile network operator hold on a contract customer? These data include the customer’s name, address, date of birth, and bank account details or credit card details for collecting bills. A credit check is also run before contracts can be agreed. While the identity of the said “third party” is unclear, there is of course no compensation for any mishaps. So much for our famed data protection code that prevents more things from happening than it enables!
A day later, Iceland’s deCODE Genetics filed for asset protection under Chapter 11. The firm’s customer testimonials include one from Dorrit Mousaieff, Iceland’s first lady. The firm offered personalized DNA testing through its deCODEme website too.
Under Chapter 11, deCODE is now looking to sell its assets. These “assets” include the genetic data of 140,000 Icelanders. And DNA samples of an undisclosed number of customers, their identification details, possibly the reports of the analyses conducted on the DNA samples. All held under contracts which prevent the sharing of the data or the information with third parties such as insurers etc. But will that hold when one contracting party goes bust? Who is the custodian of that contract? Who will uphold it and what recourse exists for customers whose DNA and data are hanging in the balance?
Meanwhile, it was reported that a credit card processor in Spain was being investigated for enabling a major credit card scam. The scam has affected over 100,000 cards in Germany. While their credit card contracts protect them against fraud, someone will end up paying for it. Depending on where the PCI-DSS compromise is found and how the liability is established, any or more of the players in the payment value chain – the issuer, the acquirer, the processor, the retailer or the customer – may end up suffering the real monetary loss.
Note the commonalities? All three industries are highly regulated but so different from one another that one may be tempted to ignore any possibilities of transposed learnings. Two major themes emerge:
- These incidents point to some of the many complex challenges that unite otherwise disparate, highly regulated businesses: customer data ownership, data security, privacy breaches, liability, recourse and compensation.
- They also illustrate while human beings – employees, third parties, contractors, service providers – remain the weakest link in data protection, the more fundamental questions are often missed. These could be related to the business’s survival and how regulatory complexity may mean that resolving data breaches is not really straightforward.
As a large number of consumers sit in limbo in fear of their data falling into the wrong hands, it has to be asked: When the custodians fail, who protects the consumer?
These test cases will all provide fascinating insight and may well set the precedent. Not least set the stage for the essential reform to remove all the unnecessary information that businesses insist on collecting from customers, when they have no way to guarantee the security of the data.
Four For Friday (11)
This occasional series of good readings from around the web covers the themes of strategy, technology, investment and regulation. This week’s picks include: the broader business environment, enterprise collaboration and social media, how to pick a co-founder and some humour.
Jeff Jarvis argues that the future of business is in ecosystems (link via @Syamant) Rupert Murdoch does not think so, of course. But I don’t think Google is worried much. Although I really think this element of selective curation to comply with people’s wish to be excluded from Google’s indexing could be a slippery slope for Google whose line always has been “It’s the algorithm, stupid”. What do you think?
Enterprise usage of Twitter is apparently up 250% in 6 months, reports Mashable. My recent conversations suggest the trend is on the up in the most conservative of sectors and companies. What about your firm and your sector? Of course, another perspective is about growing security concerns. The full report can be found here.
VentureHacks’s Naval’s spot-on note on How To Pick A Co-founder. Some basic but essential advice.
And for a chuckle, via @MarcusduSautoy, on Newton, Leibniz, Calculus and derivatives:
Newton and Leibniz (Copyright: XKCD)