Should you spend more on technology or marketing?

Here’s a tough question for many tech-savvy web developers: Should you spend more on marketing or technology?

Here’s a story for you: When I was growing up, my father spent time at the local YMCA working out with a shoe salesman. This guy always had new ideas for shoes, and my father and friends got a kick out of hearing his ideas. One day, he bought a small sneaker company called Reebok. The rest is history.

His name is Paul Fireman, and one thing people also said about him in his early days was this: If he had only $100 to spend, he would spend it on marketing. Maybe Reebok isn’t Nike, but Mr. Fireman managed to bring in $11 million per year for himself for a long, long time.

In web development, the question gets a bit more tricky. Here is my take on it:

You are either a technology play or a marketing play. But be careful. Many people who think they are a “technology play” really aren’t. Their technology is nothing new or different, and doesn’t change the world. Really they should be a marketing play.

A marketing play means that, with good marketing and by knowing your customers, you can create and provide unique products and services.

I’ve learned the hard way that a good venture that is a marketing play should spend on marketing vs. technology by about 5 to 1 or more.

This sounds obvious but isn’t. Too many people get enamored by technology. They end up creating huge technological bohemoths, and run out of money for marketing. Or they keep investing in technology that nobody really wants.

If in doubt, spend money on marketing. Then build your solution when you prove that people want it.

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  • http://www.solas.cc MCsolas

    I’ve learned the hard way that a good venture that is a marketing play should spend on marketing vs. technology by about 5 to 1 or more.

    Thats a pretty hap-hazard way of looking at things. Just flat out ‘spending money on marketting’ wont get you anywhere. Bring up reebok? Anyone remember Dan and Dave. Kind of fell apart when one of the doods didn’t qualify for the olympics, but they sure spent that cash. In the end, Reebok looked pretty stupid. That shut them up for nearly a year before they came back, Nike left reebok in the dust during the time period of their failed marketting attempt.

    I am entering a business in which we are trying to provide a level of IT service and payment intelligence in a manner that has never before been attempted. Our business relies heavily on technology, and certain things that I have developed that would be classified now as trade secrets. Technology can give you the upper hand, and that is exactly how I am going to market my new business. We are entering a very saturated market, with very poor consumer choice models. We offer the consumers the assistance in making said buying decisions.

    I am in a very unique situation, but I can tell you this.. we havent even started yet and the word of mouth is so strong, I doubt if I will even need to spend 1:1 on marketting to sustain rapid growth.

    With that said, I plan on spending more, only because my minor is in marketting , and they just elected me CEO, so I can make these decisions now.

    If in doubt, PLAN! Then spend your money wisely.

  • Eric G

    I see that Fireman has been paid almost $7M over the last FIVE years… http://www.forbes.com/finance/lists/12/1999/LIR.jhtml?passListId=12&passYear=1999&uniqueId=E552&passListType=Person&datatype=Person

    not $11M/year.

  • http://www.designity.nl peach

    sorry but what’s a YMCA? I know it’s a song but that doesn’t really fill the gap.

  • aneitlich

    YMCA is a non-profit health club, children and families group.

  • aneitlich

    MCsolas,

    Your points are all sound. Of course you have to spend any marketing dollars wisely, and hopefully everyone measures their dollars and the results they get (and starts with limited tests to minimize downside).

    At same time, it appears that you have a technology play, not a marketing play, so different rules may apply. Even still, it is early to be overconfident in word of mouth as a means to generate sales. I probably should have used “resources” instead of money to describe marketing budget, because time is also important. History is littered with examples of brilliant technologies that people rave about but no one buys. I spent a few months last year working with a public tech company that got rave reviews for its solution — including awards from major groups — and is still struggling to make a major sale. (On the other hand, who can forget hotmail, sold for $400 million or so with almost no revenues!).

    Please keep me posted!

    Eric G: I stopped tracking his income long ago. But back in the late 80′s and early 90′s, I remember my father talking about Fireman making $11 million, and regretting the day he didn’t invest on the ground floor! I imagine Mr. Fireman is not facing personal hardship as a result of his pay reduction!

  • pdxi

    In the end, Reebok looked pretty stupid. That shut them up for nearly a year before they came back, Nike left reebok in the dust during the time period of their failed marketting attempt.

    You talk a lot of trash, but when’s the last time that you started a multi-million dollar shoe company? ;)

  • http://www.solas.cc MCsolas

    You talk a lot of trash, but when’s the last time that you started a multi-million dollar shoe company? ;)

    I am 1 1/2 years invested into a project that might go worldwide – eta early jan 06. I have confidence (its also my responsibility) for meeting this deadline. Its this commitment to the project that earned me the title of ceo. If this works, I might know a thing or two about starting multi-billion dollar companies.

  • http://diarist.com marcel

    YMCA = Young Men’s Christian Association

  • Aristotle

    “In the end, Reebok looked pretty stupid. That shut them up for nearly a year before they came back, Nike left Reebok in the dust during the time period of their failed marketing attempt.”

    Fairly circular logic – doesn’t show how investing more in technology would have yielded a different result for Reebok.

    Quite obviously if your business is IT you will be investing more in technology than in marketing – Comparing your strategy to Rebooks’ is completely tangential (you are not a marketing play). And comparing Reebok to Nike (who left Reebok in the dust because of better marketing) does not exactly strengthen your point as Nike can attribute nearly all of its success to marketing and branding.

    However, you do make one crucial point – PLAN first, SPEND second!

    I think Andrew has made an excellent point here – only the ratio of marketing:tech really depends on the business. Which is very apparent with our potential multi-billionaire colleague here (good luck with that! and if you need any help….)

  • http://www.solas.cc MCsolas

    Im just wary of pure marketting plays, as he describes as a slight shift in the marketplace might leave you marketting product(s) where there is little or no demand. No ratio of spending can overcome this barrier, or its quite similar to how a product reacts in the last period of the product life cycle. The market becomes saturated, comparable products enter the marketplace, the amount spent per customer goes up, margins down.. profit becomes trickier.

    re: my plans — dont worry I was going to post a nice thank you on sitepoint becuase I have gotten so much help in the forums. What I am doing has the potential to enrich a lot of lives, in a real tangible way. For now, just another broke guy, with a lot riding on a great idea.

  • Anonymous

    How do you feel about RSS Marketing? I think it is more for retailers…offering coupons and such.

  • smeagain

    However, you do make one crucial point—PLAN first, SPEND second!

    Well said. I have been involved with several startup IT solutions all of which where fantastic IT products that made the competition look like slugs drowning in a dish of old beer.

    The reality is if you build it… the customers will not necessarily come. While there obversely needs to be a balance between Technology and Marketing your number 1 priority is to work out how you are going to sell the thing.

    You don’t want to be guessing about marketing and sales, seriously… you need to know marketing and how to sell or the only thing you will be cashing in is food stamps.

    The cost of learning can be expensive. If you don’t know marketing find someone who does.

  • Austin

    What Is Marketing?
    Marketing is a process of planning and carrying out the pricing, promotion, an distribution of products, ideas or services. (Wikipedia, 2005).

    Ill say this, marketing can be played two ways, one you can push your products or two you can find out what consumers really will buy, not necessarily what they want, but what they will buy. Then you give that to them.

    The shoe company Reebok fulfilled its purpose. It generated revenue for a sustained period of time. Now on the flip side they could have sustained longer if it were not for the failures they encountered in marketing.

    But as far as technology vs. marketing. I agree that they are equally responsible to the success of any company depending on what your company is selling. If your company is IT based, and then your focus is going to be on services and technology for example IBM, they offer support and services and rarely need to launch a full out marketing campaign to gain customers. Now on the other hand, American express, one of IBM’s clientele, launches a massive marketing campaign ever three month or better. Because what does Amex do? They simply sell you accommodations for travel. They need to get your attention. IBM could care less about marketing as they don’t really sell a variety of products to the pubic; all of their products are geared for corporate use. But Amex is geared too individuals.

    Am I making any sense?

    –Austin D Carey.

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  • Leo

    If you consider the movie industry, they generally spend equal amounts in production and advertising for a movie. Thus, if a movie cost $50 million to produce, they would invest another $50 million to advertise and bring in an audience.

    This blog poses the question, which came first, the chicken of the egg? If you build a GREAT website with no visitors, you lose. If you bring tons of visitors with a piece-meal Web site, you may do more harm than good (low conversion ratio, damaged reputation etc…).

    Here is another story… a local wedding gown store that was known for selling high-end wedding gowns and bridesmaid dresses advertised in the Yellow Pages. They recevied about 10 calls per day as a result of their Yellow Page advertising, most people would visit the store. However, they threw up a crappy Website and added their Web address in the Yellow Page ad. Instead of calling, most people went to their crappy Website and based on the site’s rediculous design and navigation, decided they were not worth visiting.

    OUCH!