The myth of spending “zero” on marketing
The instigation for this post was this recent Twitter spat between some of us in the fintech world. Well, not a spat… a debate. Actually, not a debate… just a frank exchange of views. (wink emoji)
The exchange concerns an increasingly popular trend in the startup space, especially in fintech: the fabled zero marketing spend.
Now your immediate reaction is probably that this is a niche topic only relevant to startup nerds. Agreed! Let’s plunge in.
When you’re an entrepreneur, cutting through lies is as natural to you as breathing. It comes with the territory. You train yourself pretty fast when amazing partnership opportunities and similar tempting offers drop like straight fire into your inbox a few hundred times a day.
So, as an entrepreneur, you chuckle when you see a company saying they spend nothing on acquiring customers.
For most consumers, that’s an entirely different situation. The narrative of a company not spending on marketing is appealing. Imagine that! The product is THAT GOOD.
Journalists, happy to have an interview with a cool, VC-backed startup and not about to ruin it with rigorous analysis or tough questions, take the message at face value and amplify it.
The truth is there’s no such thing as zero marketing budget. At least not for companies with any degree of success.
Everything you do related to identifying, understanding, reaching, converting, activating, retaining (the list goes on…) your customers is marketing.
The salaries you pay your marketing team — that’s budget.
When you tweeted about your amazing product or how cool your team was earlier today, that was marketing, and it incurred a cost. At a minimum, it incurred the opportunity cost of doing something else that could have furthered your goals.
Even the interview with the starry-eyed journalist where you boasted about your zero marketing spend. Organised indirectly or directly by a PR unit. Yep.
And let’s not forget the massive indirect marketing cost of selling or distributing a product at lower than cost. That’s the big one.
At this point you might say,
“Viktor, you’re just being a pedant — when these companies say that they spend zero on marketing, they don’t mean it literally. They just mean they don’t have big expensive TV campaigns and billboards. And they don’t! What does it matter?”
Why the myth matters
First off, in the hazy, dreamy world of startups, bullshit is inherently dangerous. It begets more bullshit. And that’s the road that leads to overhype: revolutionary blood testing companies with kits that don’t work or $300 juicers. Those aren’t on the same level as an overconfident PR story, but they come from the same ‘fake it till you make it’ impulse.
Secondly, it’s more than hyperbole, it’s genuinely misleading as to the fundamental identity of many companies.
When I joined Google in 2005, it was a startup that had only one meaningful product, its search engine, and that product was based on a very deep technological insight that made it unique. It had near-free, instantaneous distribution and required close to no marketing.
With the commoditisation of cutting edge technology (think e.g. cloud, AI, machine learning), it’s unlikely your product will succeed purely through extremely deep technological insights (if it does, more power to you, and I’d love to learn more about what you are doing).
New UK challenger banks popping up like super-friendly mushrooms gives us a good insight into the technology sophistication behind them. Almost every piece of the stack is commoditised — much like ride-sharing companies. The most valuable differentiator they have is their brand awareness and their loyal base. That does not cost zero.
Their very existence and future growth depends on cutting through the noise, battling the market for mind share and consumer attention. It’s awareness and sentiment i.e. a marketing problem.
And again like ridesharing companies, the truly revolutionary aspect of a lot of these companies is a willingness to take huge losses to build a customer base and work out how to (whether you can) profitably monetise them later. Basically, a promotional discount campaign turned into a business model.
When you push out a story claiming a zero marketing budget, you’re perpetuating an extremely blurry perception of that model and the context of your business.
So yes. Let’s drive down marketing costs. Let’s be savvy and efficient and work with what we have. But let’s not say it’s zero. We’re better than nothing.
