In 1995, Ralph Grabowski published Who Is Going To Buy The Darn Thing?1
Your project spends one hundred times too little on marketing, he said. The marketing budget should be at least as much as your engineering budget. Why?
Otherwise, no one will buy what you’re selling. Grabowski’s advice: track the Marketing / Engineering Investment Ratio™️ – and make sure it’s greater than 1.
There are ventures where marketing isn’t important. But the stakes – whether financial or social – are usually so high that you should always check: who cares? What quality or capability do people want to buy with their money? Most of the time, those facts are neither obvious nor simple. Not knowing the facts and nuances is a surefire way to blunder.
“Successful companies think of marketing as the essence of strategy, rather than as a sales and advertising [promoting] function.” - Michael Nevin
You have to invest in marketing. But what does Grabowski mean by marketing?
In the article, he clearly differentiates between marketing and sales. Marketing is what happens before or during product engineering – not after. Sales, promotion, and advertising happen once the product is ready.
It’s not pure semantics. In contemporary terms, people call this “market research” instead of marketing. Thirty years later, it still sounds crazy to suggest that a firm should spend as much on market research as product development. But it isn’t. Upfront marketing is high leverage.
You shouldn’t be shy about spending on marketing. Even if you spend a lot, you’ll eventually spend multiples more on sales, promotion, and advertising.
On the one hand, it’s insurance. Upfront marketing gives a clearer estimate of TAM (Total Addressable Market) size, user personas, and users’ willingness to pay. Those facts might inform a decision not to make a product.
On the other hand, it’s sharpening the axe. Market research basically writes the requirements / spec for the product, and informs sales and advertising activities later on.
Because of path dependence, as time goes on, it becomes harder and harder to change things (more on that below).
Marketing is necessary to open new civilizational frontiers (more on that below).
Thorough understanding of a market now enables efficient product development and go-to-market later. Ongoing marketing efforts are better understood as a promotion activity. Caveat to that: in SaaS firms, like in other service businesses, some marketing informs continual efforts to engineer a better user experience or serve adjacent markets.
This reflects the classic tension between efficiency and thoroughness (ETTO), which I’ve written more about here.
Path Dependence
High relative marketing investment is like insurance because of what political economists call path dependence. A key feature of our world is increasing returns – particularly when you stick with something for a long time. For example, as you become a better accountant, you become better compensated. That makes you more likely to continue along that path.
“Path dependence has to mean, if it is to mean anything, that once a country or region has started down a track, the costs of reversal are very high…Perhaps the better metaphor is a tree, rather than a path. From the same trunk, there are many different branches and smaller branches. Although it is possible to turn around or to clamber from one to the other-and essential if the chosen branch dies-the branch on which a climber begins is the one she tends to follow.” – Margaret Levi
Once a firm locks in product design, it becomes really expensive to change. Once a standard proliferates into the built environment, like the 50 ohms standard for electrical wiring, retrofitting costs explode. Going down a dead-end is the most expensive path. From an insurance lens, that’s what upfront marketing helps you avoid.
Consider this much shorter quote by legendary ad man William Bernbach: “A great ad campaign will make a bad product fail faster. It will get more people to know it’s bad.”
Marketing allows you to “fail” a bad product before making it. Perfect never taught anyone, but there are cheap ways to be imperfect, and then there are expensive ways to be imperfect.
Path dependence locks us into costly trajectories, but how does those paths form in the first place?
Field Building as Deep Marketing
At a larger scale, marketing is nearly synonymous with field building. There are interesting technologies, sitting on the periphery, whose inroads to society and the economy aren’t yet paved: genetic rescue, cellular agriculture, zero-knowledge proofs, geothermal energy, autonomous cargo ships, pop-up cities, governance models, new delivery protocols for cancer drugs, etc.
Field building opens technological and civilizational frontiers. It’s deep marketing. Sometimes this is done through mandates, like how the U.S. government made ARPANET users to adopt TCP/IP.
You might assume that the American government’s M/E Ratio™️ was low. Nope. The state created ARPANET – the market for the internet protocol suite was made from scratch.
Field building is driven by a mix of private, public, and hybrid programs. Tech-focused businesses (like those in climate, protocols, computing, and energy) are increasingly planetary. They are solving larger, more complicated problems for more people. Consequently, there are larger, more complicated markets to explore.
The stakes are going up as well. For technologies distributed across the planet, switching costs are enormous. Coordinating the use of alternative energy sources, like nuclear, solar, and geothermal, would have been a heck of lot easier, faster, and more efficient if we marketed and scaled those earlier.
As the potential scale of a given technology grows, it becomes more important to capitalize on early windows of opportunity for upfront marketing. (M/E > 1).
The risk of poor marketing might be as dire as not getting the civilization you want.2
Who will buy the future you’re building?
Recommended by Venkatesh Rao.
Inspired by David Lang.