Okay riddle me this why do big companies save on product but increase spending on marketing and admin?
I was reading though Blizzard-Activision financial statement and saw how they increased spending on both sales and marketing and admin by more than twice what they increased spending on product development.
This is coming Ib the wake of the flop on their newesr CoD game. The same thing is happening for Creative assenbly and the total war franchise. Way to much time spend on milking the product and not enough on making a good product.
It seem to be something that mostly happens when the companies think they cant grow anymore. They live on past glory while they slowly tank the product.
However this really seems like a bad strategy. We have seen that with games like BG3, but it also seem to be the goals with stratgies like content marketing.
You’re talking about gaming. Completely different beast.
Look no further than Patron and Beats. Also any product that you can only do so much product development, like Supreme or Luxury eyeglasses, or luxury anything really. At some point, people won’t pay more for better quality but they will for vanity, which is the main point of marketing outside of step 1 awareness.
With some exceptions, and within reason, every dollar spent in marketing will give you higher ROI and lower risk than every dollar spent on product development.
Marketing has guaranteed outreach, and means you are already selling something/have something to sell. Product development is exactly that. Business is in sales, not development.
You make up for a mediocre product with good marketing. You can spend all the money in the world on product but at some point you get diminishing returns. Look at every super hero movie they have more $$ than brains to spend on the product and yet the movies are still subpar.
Marketing is about exposure per $ so you can get a lot of eye balls to help sell through the mediocre product.
This has been the most helpful thread I’ve seen in a long time. It really is a marketing centric world. I think any budget should be 70% marketing, 30% product.
Balancing act between top quality and marketability. Obviously sales dynamic change with the improvement of the product, but it’s not an exponential gain. However… with marketing it’s all a function of spending X to gain Y, it’s a very direct formula. Look at coca cola, red bull, etc, you could argue their product is bad, even could kill you, but marketing here balances it out, crappiest of product with the biggest marketing budgets.
In order to have money to spend on product building, you need people to spend money.
If people don’t buy your product. It doesn’t matter what % you’re spending on marketing vs product. You’re going bankrupt.
If the best product always won, we would have never used VHS.
Quick buck vs LT view.
But really there shouldn’t be a total trade off. I’m an ex ceo and ex cro and have to admit, the game has changed in my world (b2b tech). Now the buyer wants to do their research, deal with experts not BDRs, and they want to have confidence they’re partnering with the right providers. There’s also a trend in “build it yourself” given how efficiently and well companies can build technology.
If I have to rationalize dollars, I take the long view and try to be scientific about each penny, like yield management in the airline business. Instead of butts in seats and maximizing yield, we do that with investment allocations for outcomes. To be fully complete you need to incorporate the non financial “soft” things like reputation, brand, how it affects hiring, you name it.
But in practice most companies are weak and the people at then just don’t want to get fired.
The reality is as long as the packaging looks good, the product can be subpar.
There’s always time to make it better, but it’s not a necessity if its profitable.
It’d be nice to have the complete product that performs amazingly in the beginning, but more often than not that feedback loop is necessary to improve it.
It’s an interesting catch 22. If its a good enough product then you don’t need to market it, is true to a degree. If we replace the word market with getting users / testers, then the feedback loop requirement is met & not only will the product improve but it’ll not need excess marketing.
No point in having product sit on shelves. If you’ve got an okay product, then invest in marketing to move it!! It’s that simple.
I see this all the time working in the eCommerce sector. And tbh the only way to truly fail is to go to either side of the extreme.
Saw a startup basically do 90% on development to make a sick product. They thought “build it and they will come” and that couldn’t be farther from the truth. Ran out of budget to sell & market, so they ended up having to be acquired by another company for pennies on the dollar who did have the gunpowder for marketing.
Then you have the private label brands or companies who just barely “make” a product, but they already have a celebrity partnership lined up and all this elaborate marketing. That will appear to work right out of the gate, but since the product tends to be bad or nothing new it will fizzle out with no repeat sales.
Every brand I worked with who succeeded was somewhere between the two.
They are selling you a dream. That’s why. Doesn’t matter what the product is. And we are stupid enough to keep falling for it.
A better question is, why are we like this. They wouldn’t do it otherwise. Let’s get philosophical on this bitch.
because distribution, not product is king. If you build it, they will not come
A good product isn’t enough to make a sale. And once made, each incremental sale costs almost nothing. In their case probably has recurring revenue for online activity.
They think they’ll make more profit by spending more money in those areas.