March 11, 2019

David Kirk’s blog: When Marketing Doesn’t Work

There are many reasons why marketing doesn’t work. This article is about why marketing doesn’t work when it is too early in the evolution of a new product/market opportunity.

Early in the development of all new products and markets, marketing is sometimes ineffective because potential buyers don’t yet understand the business benefits the new technology brings. This early period requires a focus on market-making. You could also call this the period of ‘marketing a future industry’ or ‘marketing a latent opportunity’.

Software-as-a-Service and the cloud in the early days is a good example. I remember many companies struggling to sell SaaS products 10-15 years ago because potential customers had to learn what the cloud was, and what its benefits were, before they could understand the benefits of SaaS. These early companies had to make a market not only for SaaS but for cloud services too.

As always in the process of engaging customers, the focus has to be on the benefits for the customer, not the whizz-bang amazing technology that has been developed. In the case of SaaS, for example, the customer benefits are not primarily in the functionality of the software, but in the payment model and in the inherent networked nature of the product.

The revenue and cost benefits of the payment model are delivered by the combination of the SaaS product and the cloud-based infrastructure services. On the cost side, the SaaS subscription model reduces the up-front costs of in-perpetuity licences and turns a fixed licence cost into a variable cost. Cloud based infrastructure services reduce and variablise infrastructure costs. On the revenue side, internet-delivered software allows for new partnerships with new connected channel partners and the delivery of new functionality created by real-time online networking.

However, in the early stages of new technologies and new markets, pitching these benefits to potential customers has a low hit rate and is therefore expensive per customer added. Building understanding in industry opinion-leaders is needed to “make the market” in the new technology. Conferences, interviews and explanations in industry trade magazines, interest group blogs, content marketing and relentless use of social and other channels by company leaders is needed.

The disadvantage of making a whole market, as opposed to marketing a particular product, is you make the market for others as well. But if you have a great product and you are early – which you will be if you are making the market – the opportunity is yours to lose. You shouldn’t be afraid to explain to others how they can make money from the opportunity you see. As more jump in they too will contribute to making the market, and as that occurs you will be ready to move on to spending money on marketing to customers who now understand the opportunity.