Today, I promise I’ll make something that is currently invisible to you, visible. It will be like throwing bright red paint on an invisible horse.
So, everyone knows that the best products make the most revenue, right?
Actually, no. That’s a myth. And I’ll prove it.
Being the best in your industry and the amount of revenue you generate are two unrelated factors.
If that sounds strange, I understand completely.
Society is constantly telling us we need to be the best.
We see inventors in movies who are forever making product tweaks before something clicks and they become successful. We hear stories about Thomas Edison testing a thousand different lightbulb designs before he found the best one.
The common belief is that you need to be the best in order to generate the most revenue.
In reality, your product only has to do what you promise.
Once it reaches that level, improving a product won’t overly grow revenue. Especially compared to how much time you spend on improving that product.
Consider the proverbial mousetrap.
Let’s say you have mice in your house. A basic mousetrap costs $10. It will get rid of mice for you.
Another mousetrap in the store, gets rid of mice but has pretty lights too. It costs $20.
With more features, the second mousetrap is a better product. But would you pay more for this better product, when all you want to do is rid your house of mice? Probably not.
It’s a basic example that compares two similar products equally. But it shows the principle quite clearly. A better mousetrap is not always a more desired mousetrap. More on this in a minute.
Here’s another example.
Some people are very enthusiastic about high-fidelity sound reproduction. They are known as audiophiles. They have forums, magazines, podcasts and dedicate their lives to authentic sound quality.
These people are used to testing sound equipment with scientific instruments. They can prove what the best sound players really are, under laboratory conditions, because they have a wider range of sound reproduction
What happens when you ask an audiophile “what is the best home sound system”?
You’ll probably be told of a device by a brand you’ve never heard of. You’ll notice that these brands are priced far lower than the big brands you see on billboards. They’re not priced higher like you’d expect.
Time and time again, you’ll see this pattern. The best products in class are often, not the famous ones that generate the most revenue.
An Important Distinction
Before you get the wrong idea, let me be very clear.
If you make the best product in a market, you still can make the most revenue too. I’m not saying that you can’t. It is possible to have both.
What I am saying is that being the best, and generating the most revenue are not related. You don’t have to be the best in order to make the most.
Having the absolute best product is definitely not essential in order to generate the most revenue and be the most successful company.
Everyone just believes that it is essential, but that belief is untrue.
So, don’t make the mistake of continually tinkering with a product to make it better if your outcome is really generating more revenue.
Why Are People So Mistaken About What Drives Revenue In A Business?
As mentioned earlier, let’s go back to mousetraps.
“Build a better mousetrap, and the world will beat a path to your door” we’re often told.
That is a false phrase.
I say false phrase, and not cliché.
Because clichés can be annoying but are often true. There really is no point in crying over spilt milk or anything else that has gone wrong. You’ll be better off spending your energy on fixing the wrongs.
However, false phrases like the ‘build a better mousetrap’ one are a complete lie. They are very dangerous. They create false beliefs that often cost people a lot of money, time and energy.
So why are false phrases so powerful?
False phrases are often true when they’re invented.
In the 1800’s, there was probably a total market size of three different mousetraps. So, if you built best mousetrap number four, word of mouth would make sure everyone in your small town heard about it. What would seem like ‘the world’ really would beat a path to your door.
However, that’s simply not true in today’s marketing blizzard.
Today we’re flooded with marketing noise and competing products. Most of them look the same. Sometimes we simply miss the actual best product because there are too many products for us to investigate and choose from.
We have so many choices and lessening time so we can’t learn of every available option any more.
So today, the ‘build a better mousetrap’ false phrase, is… false.
Another reason that false phrases are so powerful is that they fuel themselves.
False phrases keep being retold.
Do you know why? Because they make the person saying the phrase, look clever. And intelligence raises the status of a person – don’t we all want to look clever?
So, more people keep repeating the phrase in order to look clever. That means more people hear the phrase for the first time, who then go and repeat it to their friends…and on and on.
The false phrase also seems logical. You have to really see for yourself and do a real time, in-depth analysis for yourself to learn the truth. Most people don’t question what they hear, and don’t have the time to look into the truth. So they reason that the false phrase seems logical, and therefore it must be true.
The false phrase is also short, and therefore easy to remember.
The false phrase keeps being retold by more and more people. Many of them have no experience in business, so will never know if it’s actually true or not.
The constant repetition from different directions means that the message sticks in our minds, and becomes a belief.
That’s why people are so mistaken about what drives actual revenue in a business.
What Actually Drives Revenue In A Business?
Communication. Actually, a very specific form of communication.
In fact, Peter Drucker, the much respected business consultant, once revealed the profound secret:
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
There you have it.
Some say “Money makes the world go around”. Others claim the world goes around because of love. The real truth is that marketing makes the world go around.
Does Marketing Really Drive Business Success?
So many titans of business and industry have long sang the praises of marketing and selling. The scale travels from business greats like Peter Drucker to habitual overachievers like Arnold Schwarzenegger.
If someone achieves repeated success in any area of business, you can bet they have fantastic communication and marketing skills (even if they don’t know it).
The highest level of understanding is that every successful business is really a marketing business. This is the core piece that every company has in common.
The end product or service is simply the solution that you deliver. But the activity that drives revenue and business success is a high level understanding and practice of effective marketing. The higher the level of your understanding, the more revenue you will generate.
Why Is Marketing So Important?
Marketing brings people to your business. Without marketing, there is no business.
This is often ignored by many entrepreneurs at their peril. The fact is that sales are what keep your business alive.
Any other department in a company can afford to take a temporary break and the company can still move forward. However, if the sales department stops working then cash flow dries up. The entire company will grind to a halt.
The Highest Paid People In Every Company
Have you ever noticed who the highest paid people in any company are? They’re usually the people who work to:
- Bring in new customers.
- Increase the average spend of newly joining customers.
- Sell more individual products to existing customers.
- Make existing customers buy more often, over time.
What do you notice about the above four activities?
They are all marketing activities.
The reason is that the highest paid people are involved with marketing because solid marketing drives business revenue. That is what really results in business success.
Proof That Marketing Is The Most Important Activity In A Business
Let’s look at some real world examples. The following are all well known companies that you may never have thought of as marketing companies.
But they are.
Marketing is their biggest daily concern and their biggest revenue generator. They just happen to sell products too.
When was the last time you saw an advert talking about the exceptional quality of the Red Bull product?
Some may say it even has a weird taste.
But that doesn’t affect its sales. As further evidence, the company as we know it today was even started by a marketing guy.
In 1982, Dietrich Mateschitz was marketing toothpaste, when he came across an already existing Thai energy drink called Krating Daeng (‘red bull’ or ‘red gaur’, in English).
He formed a partnership with them, and positioned the drink as a premium energy drink for the western market (there was no energy drink market at this time).
Today Red Bull literally spends its time in marketing activities. That drives its revenue and success.
The same can be said for Coca Cola.
Mark Pendergrast, historian and author of “For God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company that Makes It” (Basic Books 2000), spoke about the Coca-Cola’s secret recipe.
He spoke specifically about the liquid in the can, and how the secret recipe is actually irrelevant.
“Even if you tried to make ‘The Real Thing’ now, it wouldn’t make any difference.” he said.
“The real secret of Coca-Cola isn’t a secret at all: It is its advertising, economies of scale, marketing and distribution. It’s a brand.”
It might be surprising to see Google on this list. However, no error has taken place.
Google may be a search engine, but it’s not a search company. It is actually an advertising company. Advertising is a marketing activity.
But Google’s product is a search engine, isn’t it? No. Let me ask, when did you last pay to search on Google?
Google’s search engine is not a product. It’s a service. Are you a Google customer when you perform a search? No. You haven’t paid for anything. You’re a user.
Google actually has a dual/multi sided market.
On one side, it has users who use their free search engine. On the other side of the market, it sells advertising to companies in return for currency.
Google’s product is advertising. This is their value bridge to companies who want to make more sales. These companies are the customers who generate Google’s revenue.
Google does not build free products like search, docs, analytics etc in order to be helpful. It’s actually building a data profile on you so it can sell your data profile to advertisers through its ad networks.
There’s nothing wrong with that.
I’m happy for access in return for my data [disclosure – my firm also advises clients on technical aspects of using Google’s Ad networks to advertise].
In fact, Facebook does the same. It offers a free product so they can generate revenue by selling companies advertising space on that free product.
But the facts are when you look deeper, every successful company that is generating a lot of revenue is in the marketing business (whether it’s obvious or not).
Marketing Is So Important That You Will Be Forced To Focus On It
I will put myself on the line right now. Marketing is so important for revenue generation, that I predict as time goes on, businesses will be forced to focus on it.
How can I be so sure? Because it’s already happening.
It’s fair to say that most business innovation takes place in Silicon Valley, right? Well the dirty secret is that you usually only hear about the major winners.
Just like anywhere else, most companies started in the Valley fail. However, in the area where there is the most intense business competition in the world, marketing is becoming a new focus. And it’s creating winners.
Silicon Valley refer to it as the ‘Lean Movement’. However, these are simply direct marketing methods that have been re-purposed. For example, marketers have been ‘dry testing’ ads since the 1930’s. Silicon Valley calls it Customer Development etc.
They have actually just adopted techniques that direct marketers have been using for almost eighty years.
Plot Twist: The Final Nail In The Coffin (Undeniable Proof)
Earlier on, I introduced false phrases. In our case, the false phrase was ‘Build a better mousetrap, and the world will beat a path to your door’.
Do you remember what made false phrases so powerful?
False phrases are powerful because:
- They work when even when they’re not true (they work regardless of the actual content they carry).
- They self perpetuate, and fuel themselves (people feel rewarded, smarter and get a raise in status by passing the phrase on to their friends).
- The phrase makes sense and sounds logical.
- The phrase is short and easy to remember.
- The constant repetition from lots of different directions means that the phrase sticks in our minds, and slowly becomes a belief.
Now, let’s look over that list.
Does anything stand out? What do those points remind you of, as a collection?
Have a look again…
The things that make a false phrase so powerful are the exact same things that make a powerful marketing message work!
The reason that people don’t understand why marketing is so important is because the ‘Build a better mousetrap’ false phrase is such a powerful piece of marketing.
The false phrase is actually the perfect example of how important great marketing is.
A powerful marketing message is so powerful that you don’t even know it is marketing. It covers its own footprints.
It actually diminishes its own self importance. That is the power in marketing.
Great marketing can even make you believe that marketing is not important (when it fact, it’s more important than anything else as far as revenue generation is concerned).
I hope you can see that now.
It works like special effects in a movie. If they’re done well they’re actually invisible. That’s because you don’t realize that they’re special effects, because they seem so natural.
Great marketing works in the exact same way and there is nothing more important in business.
If Marketing Is So Important Why Is It Often Ignored?
Firstly, marketing is different in many people’s minds.
What most people call marketing is actually ‘Humpty Dumpty’ marketing. That goes like ‘here’s our company name, here’s our product, here’s our price, buy buy buy!!!’.
In today’s crowded market filled with more options than we can even consider, that doesn’t work.
Everyone is offering the same service. Then they’re sitting in a circle and looking at each other, copying each other’s marketing too.
There is zero differentiation, and they fail to generate a solid revenue stream.
So most people have a go at ‘Humpty Dumpty’ marketing, and walk away thinking ‘marketing’ doesn’t work.
What they don’t realise is that marketing is like a plane. It will take you where you need to go if you know how to use it.
‘Humpty Dumpty’ marketing is completely different from high level marketing that actually generates trackable revenue. Most people don’t even know high level marketing exists because there is not much awareness around it.
Those who understand high level marketing can create solid revenue streams. It’s the core component of a successful business.
The other reason why marketing is often ignored is that it’s also much more fun as a passionate, hands on founder, to be locked away, tinkering with your product and making it better.
This way you feel like you’re doing work and getting something done. There is far more freedom in manual work with your hands, and building something tangible that you can see.
It’s also far easier to do something you’re already familiar with then tangle with a potential new dark art, like high level marketing.
For many people, that would mean mastering a new area of expertise. They don’t have the energy, mental focus or the passion to learn something new like marketing either.
The false phrase around ‘build a better product’ perpetuates this idea too.
But now you know that is just another clever marketing idea, hopefully you’ve seen the proof of just how powerful a great marketing campaign can be.