In his book, Average is Over, economist Tyler Cowen argues that marketing, not STEM fields is the most important skill set for the future.
“It might appear that a masseuse is not much affected by computers, at least provided you are skeptical about these robots that now offer massages. Nonetheless, masseuses increasingly market themselves on Google and the internet. These masseuses fit the basic model that favors people who can blend computer expertise with an understanding of how to communicate with other people.”
No matter what your skill set is, you have to be able to effectively market it. Though many people don’t realize it, getting a job is mostly a marketing problem – getting the right company to notice you and be willing to give you money in exchange for your services.
In an effort to improve my own marketing chops, I’ve read about 30 books on marketing.
One thing I learned is that there aren’t 30 books worth of things to say about marketing.
Most marketing books just remix existing ideas from earlier marketing books while adding some more relevant examples and tweaking the terms.
The benefit of being exposed to those ideas over and over from slightly different angles is that you can start to see the fundamentals. What are the core principles of marketing that everyone should know?
I believe Marketing 101 can be boiled down to three laws:
Law 1: The Law of Stardom
You must own your category. If you don’t, you must create a new category.
The prerequisite for any company to have successful marketing is that they must define and own a category.
When consumers buy, they go through a two-step decision process:
- They pick the category (e.g., SUV)
- They pick brands (e.g., Lexus, Honda, Mercedes)
By owning the category, you are able to short-circuit the buying process. They don’t think about comparing you against another company; they see you as the best option in your category.
As a result, you can lower your customer acquisition cost (CAC) by winning at Step 1 (category) rather than competing at Step 2 (brand). Competing with established brands in an established product category never works and will drive up your CAC to an unsustainable level.
The best way to own a category is to pick some segment or trend that is small and uncompetitive but growing quickly. You want it to be something with natural momentum where you can ride the tailwinds.
Perhaps the best example of this in modern marketing history was Salesforce.com. Salesforce developed a customer relationship management (CRM) software solution. However, Salesforce never marketed themselves as a “CRM software”; they marketed themselves as a software-as-a-service solution that used “The Cloud.” You know it worked because of how often you hear people talk about the cloud now.
Salesforce started in the early 2000s when cloud computing was just getting started. All of Salesforce’s marketing materials focused on the advantages of adopting the cloud and only briefly mentioned their software. The Salesforce logo is a picture of a cloud and their one-sentence summary on Wikipedia doesn’t even mention CRM but does mention that “Salesforce.com, Inc. is an American cloud-based software company.”
If Salesforce had marketed themselves as “CRM software,” you probably would never have heard of them because they wouldn’t have been able to compete. Often this new category takes multiple trends and compresses them into a single term which you can own.
Hubspot created and owned the term “inbound marketing,” which was really just a basket of other growing digital marketing trends like pay-per-click and search engine optimization.
When you own a category and that category is growing quickly, you have what Boston Consulting Group calls a “star business.”
A star business is the market leader in a fast growing market and should be doubled down on
A Cash Cow is the leading business in a slow growing market and should be milked for profits
A Question Mark is usually the 2nd or 3rd largest business in a fast-growing market and needs to either become the market leader or it will become a dog when the the market growth eventually slows.
A dog is not a market leading business in a slow-growing market and should be abandoned
Why is a star business so attractive?
It is the combined effect of market leadership and high market growth that makes a star venture so powerful. Leadership means that the company and its products are preferred by the market’s customers. Like Salesforce or Apple, the company’s products can usually command a price premium. But even if they don’t, the high volume should mean that the market leader is able to achieve lower costs than its rivals by negotiating with suppliers (Walmart is the canonical example here)
Because the leading firm can demand higher prices, and/or lower costs, they will generate higher profits and cash flow than a similar business that is a follower in the market.
Market growth compounds those profits and cash over time. As Albert Einstein (perhaps apocryphally) said, “the strongest force in the universe is compound interest.”
As a rule of thumb, the category you start with should always feel uncomfortably small. I love the idea of a “minimum viable audience” — what is the smallest possible group you could target? Until they love you, just focus on them.
There are two ways to narrow down your category. One is geography – you don’t have to be the best real estate agent in the world to be successful, just the best in your zip code.
The other is by interest or industry. PayPal started by focusing on eBay power sellers, which was only a few hundred people, making it comparatively easy for PayPal to own the market. If you are only going over a few hundred people, you can really cater to them, get on the phone with all of them and make them feel special. Once Paypal owned the eBay power seller market, then they only needed to hold on; the growth of people buying and selling over the internet was a huge wave that they were able to ride.
Law 2: Yoda’s Law (Yoda, You Must Be)
Once you have a new category, you have to take prospects through a hero’s journey.
The hero’s journey is a concept that Joseph Campbell, a professor of mythology, popularized. It was made famous by George Lucas’s Star Wars Trilogy. It’s a fundamental story structure which nearly all popular myths and stories share, from the Sumerian creation myth to popular films and TV shows.
It can be boiled down to three stages:
- Departure: the hero leaves the familiar world behind.
- Initiation: the hero learns to navigate the unfamiliar world of adventure.
- Return: the hero returns to the familiar world.
Part of the initiation phase is the mentor or helper who assists the hero. In Star Wars, this role is played by Obi-Wan Kenobi and then Yoda who help Luke learn to navigate the unfamiliar world of the “Force” in order to be able to defeat Darth Vader and bring balance to the Force (and complete the Return phase)
Your company is the mentor or helper (Obi-Wan Kenobi/Yoda), the prospect is the hero (Luke Skywalker), and your product facilitates transformation (Yoda’s training helps Luke defeat Vader to bring balance to the Force).
This works because the hero’s journey is a universal structure which humans can’t help but like. In fact, the best way to think of the hero’s journey may be as a virus — done well, it self-replicates in the mind of your target market, grafting itself onto primordial structures.
The hero’s journey is fractal (self-similar at different scales) within an organization. This means that the organization should have a grand 25-year vision, and then the vision should get more granular on a division and product-line basis. At the product level, it should be tightly coupled with an acute pain point like losing that last 10lbs or increasing your company’s profits.
Consider the payment processing company Stripe. What could be more boring than payment processing? Yet Stripe’s mission is to “increase the GDP of the internet,” which is grand and inspiring, akin to “bringing balance to the Force.” Stripe is Yoda, helping your company (Luke) on the grand quest to sell products or services and increase the GDP of the internet.
The problem with this grand vision is that it doesn’t relate to an acute pain point. No one wakes up in the morning and says “I want to increase the GDP of the internet.”
Stripe deals with this at the product level. Stripe’s Atlas product is “the best way to start an internet business” and the marketing focuses on an acute pain point — how much it sucks to fill out paperwork and navigate bureaucracy to get a new company set up. Lots of people wake up in the morning dreading having to spend all day filling out forms and trying to navigate a maze of bureaucrats.
This combination allows Stripe to speak to specific pain points that prospects are feeling right now (“paperwork sucks”) and connect it to something that gives them a sense of purpose and grand vision (“I am helping increase the GDP of the internet”).
Law 3: The Law of Marketing Stamina
Once you have brand positioning that resonates and establishes you as the leader in the category, what matters most is marketing stamina. If you have a winning marketing message and campaign, you don’t stop when you get bored of it, you stop when you can no longer profitably acquire a customer (this is usually way after you get bored of it).
De Beers came up with the slogan “A diamond is forever” in 1948 and they are still beating that drum because it is still working. The slogan works because it reduces the resale of diamonds, which constricts supply to newly mined diamonds, for which De Beers owns the supply chain and thus pricing power (they are the leader in the category!).
De Beers has a slot machine into which they can put $1 and take $2 out; they should never stop putting dollars into that slot machine because they “get bored.”
Salesforce has been talking about “the cloud” for two decades now and it’s still working. If ain’t broke, don’t fix it.
- You must own your category. If you don’t, you must create a new category. To come up with a category, ask “What is the minimum viable audience for my product or service that is growing at least 10% per year?”
- Your products and services constitute a hero’s journey — you are Obi-Wan, your prospect is Luke. To come up with your hero’s journey, consider the transformation you are taking your prospects through, what is their equivalent of “bringing balance to the Force”? Repeat this for each division or product in your company.
- You must have marketing stamina. Once you’ve done steps 1 and 2, don’t quit!
P.S. If you’re looking for book recommendations, check out my list of favorite marketing books.
Last Updated on August 3, 2020 by Taylor Pearson