Don’t Spend Money on Bad Marketing

I was reading Phil Vischer’s account of what killed Big Idea, and found something that reminds me of exactly what Cybiko Inc. did in 2000-2003. Come to think of it, 2001 was a pivotal year for me. I visited China and Hong Kong, I bought a Cybiko and started programming, I bought my first domain name and started doing web development, and I was baptized– all in the same year (if my memory serves). I also suddenly became aware that the world was bigger than California, and I realized the existence of such things as the Pentagon, World Trade Center, White House, politcs, etc. In many ways, it’s like the year my life began. But I digress. I’ll have to write more about that later.

Without further ado, here’s what Phil Vischer said on page 4 of his reflection on what happened to Big Idea.

Between 1998 and 2000 our marketing department grew from 1 person to 30 people. We gave away 400,000 VeggieTales videos at the grand openings of malls and Target stores and took out two-page ads in People magazine to introduce America to the concept of VeggieTales. As a result, our marketing expense grew from $3 million in 1998 to $13 million in 2000. No problem, though, since the team estimated the increased awareness would double our sales within 24 months. 

Except for one thing: The projected sales growth never happened. After 1998’s amazing 7 million video mark, sales actually declined in 1999 and 2000. Our marketing costs exploded, but our sales didn’t. That was a bit of a problem.

I happen to understand this problem particularly well. It’s almost exactly what happened to Cybiko around 2002. They launched a huge marketing campaign with TV commercials, lots of contents, giveaways, referral programs, free Cybikos, free games, free stuff everywhere. It always struck me as being an incredibly stupid idea. There was no way for them to profit. They were hoping that Cybiko’s networking functionality would mean that the few people who got free Cybikos would encourage everyone else to buy Cybikos. That wasn’t the case. Instead, they all got free Cybikos, too. This made the perceived value of a Cybiko drop to zero. Why pay for something that’s free?

There are far better ways to market your product without losing money. Don’t give away your product for free. That should be obvious. Don’t spend money on something that doesn’t return. That should be obvious. You might say there’s no way to predict your ROI. That’s false. You can predict it very well in fact. It just takes more thought. Just look at Google AdWords. You can track your stats in real-time. If you have a product you’re selling online, you can look at the first $10 you spent, and see if you made anything. If you spent $10 and earned $20, then you’re fine. If you spent $10 and didn’t sell anything, then stop doing it and change something. It’s pretty straightforward. But people get blinded by optimistic thinking. They don’t look at the real people who are listening to the pitches and makng the decisions. It’s simpler than you think. But you have the focus on the right thing.

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