As published in the Mint on Sunday on October 8, 2017
The internet can be a giant laboratory where you hypothesize, validate, change direction and generate revenue, all while you build and evolve your product
Research, build, promote, sell, repeat. That has been the norm in business for decades. But today, the internet is scrambling that order. Products are being sold before they are built. Selling and research can be conflated. Customers promote a company’s products, more than the company does. Marketing is built into the very products being promoted. Let’s take a look at some examples in this topsy-turvy, Alice-in-Wonderland world.
Sell before you build
Kickstarter, the crowdfunding website, helps you find customers for products that don’t exist. If you have a product idea, but lack capital and customers, Kickstarter gets you both. Your project is funded by your first customers, who buy your product in advance. They also form a community of early, or should I say, prenatal adopters, committing to your baby while still in the womb, who are invested in your product’s success and give you feedback along the way. Kickstarter says it has provided nearly $2.9 billion of funding and advance sales in this manner.
This sort of back-to-front thinking on the internet has influenced the non-digital realm as well. Flintobox , an early learning start-up based in Chennai, provides a complete education curriculum to pre-schools. When its service was first conceived, the team’s initial step was not to create the curriculum, or even conduct research on its target customers. Instead, it placed a tiny ad in a regional newspaper, costing all of Rs5,000, for its non-existent product. The responses to its promotion, and subsequent advance sales, gave it a bit of capital, but, more significantly, a healthy dose of confidence that a market existed for its proposition. (Disclosure: The writer is an investor in Flintobox.)
Market research serves as an inexpensive proxy for the most important questions in business. What should my product be? Who will buy it? Will they pay, and how much? But a proxy is not the real thing. No matter what customers say they intend, no one can accurately predict their actions at the moment of truth, when asked to reach for their wallets.
Selling before building is all about mitigating risk, by not taking on extensive product development, marketing and hiring before understanding which customers resonate with your value proposition and how that proposition should evolve before taking it to a larger market. With the inexpensive targeting and feedback mechanisms of the internet, start-ups within new and existing businesses are increasingly taking this route.
You don’t own your message
The internet is an interconnected network. This is a truism, but many companies have not internalized it. They sit at one end of marketing channels, seeing themselves as beacons of clarity, sending one-way communications to an attentive and passive audience. If they zoomed out for a wider view, they would see themselves as merely one tiny node on a vast network of organizations and individuals, with incessant chatter moving in every direction.
With the benefit of humility borne from perspective, they may realize that the days of controlled messaging to their customers and prospects are over. Brand and product perceptions today are shaped through multitudes of conversations, fighting with each other to rise above the noise.
With detailed information, analysis and sharing at, quite literally, their fingertips, today’s consumers are influenced far more by community than company messages. In this new state of cacophony, companies are better off persuading others to spread a less controlled, yet potentially more viral and impactful message.
For a new business, whether a start-up or within a larger organization, begin with those customers and partners who are most likely to talk passionately about your product or service—your early adopters. They will overlook flaws, engage with the product actively and, if it solves a key problem for them, share their enthusiasm with others. Their feedback allows you to improve the product to the point where it is ready for a larger, less forgiving customer base.
Uber successfully executed this approach in its early days by giving out free rides at the SXSW conference in Austin, Texas (as described in Growth Hacker Marketing by Ryan Holiday). Its early adopter audience, of young, tech-savvy, smartphone addicts, was there in droves with a clear need: finding a scarce ride to and from a crowded conference. Their excitement about this novel use of smartphone technology, and a sense that they were onto a cool new secret that they must share, far outweighed early kinks in the service, and helped spread the word about Uber to a larger customer base.
Your product is the key line item in your marketing plan
When file storage and sharing service Dropbox was still a young company, it faced a marketing dilemma. After an initial burst of success with early adopters, it needed a new engine of growth. Dropbox tried paid advertising, but the cost to acquire each new user was well in excess of $200. After months of struggle, the team solved the problem by building marketing into the product.
Dropbox added a “Get free space” button on their product, giving users 500MB of free storage for every friend they convinced to sign up to Dropbox. As a result, growth shot up dramatically at low cost, and in the process, the service became more useful for its users. Not only did this magic button open the door to more storage for the referrer, it also welcomed friends and colleagues—the referrer’s most likely collaborators in file sharing—onto the service, further reinforcing the value of Dropbox.
Some will argue this is product development, not marketing. In reality, this type of customer insight based product evolution is exactly in the purview of strategic marketing. But leaving nomenclature aside, if as a marketer, you rein in spending while acquiring new customers, and retain a higher proportion of existing users, you would have done more than just your job. You would be a hero, who wouldn’t need the vanity of a large marketing budget to justify your existence.
What a strange world we live in… said Alice to the Queen of Hearts
As with any human activity, the conventions of business too have rested on available technologies. Barter was the means of exchanging value, until currencies were invented. Readers did not have much of a voice in newspapers, because the technology of print does not allow it. And products were conceived and built independent of how they were marketed and sold, until the internet permitted a different approach.
This new, multi-nodal world is more free-flowing and less controllable. But it offers the opportunity for greater return on your efforts, at a lower cost and reduced risk, should you be clever about harnessing it.
This is not just about thinking differently, as the answers don’t generally come from cocooned contemplation, but about experimenting differently, as feedback can be obtained in real-time, and multiple experiments can be run concurrently.
Think of the internet as your giant laboratory—to hypothesize, validate, change direction and generate revenue while you build and evolve your product. Think of it as a giant game of Chinese whispers, where your message travels farther and with greater influence, if you build marketing into your product, and are clever about recruiting and motivating your early adopters.
Nish Bhutani runs an education and consulting company specializing in digital strategies and transformation.
His fortnightly column in the Mint on Sunday, Digit Spinner, addresses the digital capabilities of consumer businesses. Read previous columns here.
Nish publishes on his blog, and can be reached at email@example.com for feedback on this column.