How Marketing & Advertising are parts of the product
acquisition costs vs production costs
The line about Product Market Fit goes a little like, “build something people want, and it will grow huge organically with no paid marketing or advertising costs.”
But let’s look through this lens at a few iconic products.
Apple MacBook Pro
Coca Cola
Tesla
If you’re reading this newsletter, chances are (84.2% to be exact, based on my device type data) that you’re using either a MacBook Pro or an iPhone.
I don’t know about you, but I feel cool when I use my MacBook. It makes me feel like a bougie tech worker, especially compared to my ugly ThinkPad that I was forced to use at my past banking/finance jobs.
I put stickers on the back. It tells a story of the company I work at, the vacations I’ve been on, and the techy events I have attended. These stickers don’t just reflect the story that I am telling the world - they are a physical manifestation of the story I tell myself about the product.
Maybe when it very first came out, there were some major technical advancements that came along with the MacBook Pro, but this simply isn’t true anymore.
Any design or technical advantages that it might have definitely aren’t worth the drastically larger price tag that’s associated with it.
For most of my career, I have attributed this to premium pricing strategy & brand equity. People think that higher-cost goods are worth more money, and Apple has invested a large number of dollars in advertising.
I recently realized that “premium pricing strategy” and “brand equity” don’t even begin to paint the complete picture.
The story that I tell myself about my MacBook is part of the product.
One of my favorite frameworks for growth is AAER. Acquisition, Activation, Engagement, Retention. Most product roadmaps can usually be broken down into features that affect one of these core levers, maybe throwing revenue/margin into the mix.
The story that users tell themselves about our product is a major factor across all of these core levers.
We like to lump marketing & advertising into “GTM” or “acquisition” costs in our financial statements, but it affects so much more than just our signups. It impacts how likely they are to become fully activated, how often they use the product, and how likely they are to churn.
I love to compare old-school consumer companies with tech startups because so often, it highlights pieces of marketing we seem to have forgotten.
Coca-Cola has known about the impacts of advertising & marketing on AAER since before growth marketers had even begun dreaming of the framework.
If you’re like me and a fan of coke, you likely tell yourself a pretty positive story about the beverage. I tell myself I like the flavor more than almost any other cola, even when that is likely impossible with the variety in today’s beverage choices.
I tell myself it’s a cold treat on a hot day; even more than that, I have the beginning of an emotional reaction just looking at an image of coke.
This reaction I have to Coca-Cola could be lumped into “brand equity,” that by being advertised to for my entire life, I have positive brand associations, which leads to me choosing coke more often (E for Engagement) than another unbranded or unfamiliar product and being willing to pay a premium.
It’s more than that, though. The story I tell myself about Coca-Cola is the most major part of their product.
It’s not the can, it’s not the drink inside, but it’s the story about Coca-Cola that is told through their marketing & advertising efforts, which are the primary forces driving their product’s AAER metrics.
Let’s apply this concept to a product that doesn’t spend a lot of advertising.
Tesla makes great electric cars. If my MacBook Pro made me feel cool, driving a Tesla would definitely make me feel cool.
It’s a car made for rich techies who care about the environment, technology, and want to drive around a status symbol. They don’t spend a ton of money on advertising, but the product is still built around an extremely powerful story.
Silicon Valley tech entrepreneur Elon Musk takes on the big fuel-guzzling conventional car industry with a self-driving sports car (but it can’t actually self-drive yet) that can save the planet and make all of your friends jealous.
It’s a great car, especially when it first came out. It’s not that great though.
A quick Google search for “best electric cars 2022” puts the Tesla Model Y in 3rd place. The key thing is that I had to Google it. After switching tabs back to my Substack to continue writing this sentence, I can’t even remember the names of the other two cars that ranked above Tesla.
The product of Tesla isn’t just beautiful electric sports cars; it’s the story we tell ourselves about them.
I think this is something that at least I myself am guilty of, especially when it comes to modern forms of digital marketing. I have tricked my brain into thinking that when I am managing a marketing budget, I am building a money printer, putting in $1, and getting out $3.
The reality is that marketing & advertising isn’t about cold, heartless ROI. We’re crafting stories that are told through channels, and these stories don’t just drive acquisition for our product but are a core part of the product itself, impacting every major lever of growth.
Without the stories that our users tell themselves, all we’re left with is incredible technology that no one cares about.