Future Marketing Economics

Had a great conversation the other week about the growth fixation of business.

The idea is that with most businesses we focus on growth all the time – however we can get to it.  As mentioned previously growing business with existing customers seems an obvious but overlooked area for most.

The follow-on idea was just imagine you can’t get the obvious growth angles like customer numbers and revenue – what would you focus on?

My guess is quality improvements for existing customers would have to be at the top of the list.

And it is getting to be much cheaper to go to market with some of the systems and processes on offer.

David Cowan has written again about the reducing cost of those systems…

My Internet Law
The time and money required to produce (design, develop, secure, test, launch, scale) a typical data-oriented form application on the web drops in half every 2 years.
This seems to have held true since the public emergence of the web in 1994. Do you agree? I don’t have much hard data, but McCain proposes new internet laws with far less.
For example, I recall the large systems integration firms charging as much as $20 mlllion to completely outsource development of a web application. (I forget the name but I recall a DFJ-backed pay-me-to-advertise-to-me startup that spent as much in 1996 with someone like Perot Systems and the app still never worked.)

Is there any doubt that most apps today can be launched with as much scalability for $300,000? The implied factor of improved efficiency is 0.5 to the sixth power over a 12 year period.

Cheaper hardware (Moore’s Law) accounts for only a small fraction of this effect. The real gains seem to come from decoupling and automating specific steps of the process. Major disruptions that come to mind: Microsoft FrontPage, SSL, Exodus hosting, Apache, Java, ActiveX, Javascript, Shockwave, Flash, load balancers, PHP,  XML, Ruby on Rails, web service APIs, AJAX, Amazon S3, DIY communities (Ning).”

We could quibble about the significance of some of his picks but it does make sense.

Not sure you can extract a reliable formula for this but the point that development costs are roaring lower makes huge sense. I have based a business on open source.

It is the only way to compete in the longer term I believe.

Guy Kawasaki has blogged often about this idea. Marketing and sales are still going to be much larger. The analogy might be production costs for a movie going much lower but marketing costs increasing at the extreme as competition for mind-share escalates.

In the future more businesses can be competitive but will need to do much more to get noticed and win business.

There is a still a certain level of novelty around online networking now / the equivalent of “free ink” is available but it won’t last. More of us will be in the advertising and communications sector for more of the time.

The idea of a Moores laws echo is a good one for gaining attention but the math doesn’t really hold up and for the reasons I’ve mentioned the game is being played elsewhere.

So production cost are lower – marketing costs are rising.