Zero to One_ Notes on Startups, or How to Build the Future ( PDFDrive )

mass appeal but lack any method of viral distribution. Procter & Gamble can’t
afford to pay salespeople to go door-to-door selling laundry detergent. (P&G
does employ salespeople to talk to grocery chains and large retail outlets, since
one detergent sale made to these buyers might mean 100,000 one-gallon bottles.)
To reach its end user, a packaged goods company has to produce television
commercials, print coupons in newspapers, and design its product boxes to
attract attention.
Advertising can work for startups, too, but only when your customer
acquisition costs and customer lifetime value make every other distribution
channel uneconomical. Consider e-commerce startup Warby Parker, which
designs and sells fashionable prescription eyeglasses online instead of
contracting sales out to retail eyewear distributors. Each pair starts at around
$100, so assuming the average customer buys a few pairs in her lifetime, the
company’s CLV is a few hundred dollars. That’s too little to justify personal
attention on every transaction, but at the other extreme, hundred-dollar physical
products don’t exactly go viral. By running advertisements and creating quirky
TV commercials, Warby is able to get its better, less expensive offerings in front
of millions of eyeglass-wearing customers. The company states plainly on its
website that “TV is a great big megaphone,” and when you can only afford to
spend dozens of dollars acquiring a new customer, you need the biggest
megaphone you can find.
Every entrepreneur envies a recognizable ad campaign, but startups should
resist the temptation to compete with bigger companies in the endless contest to
put on the most memorable TV spots or the most elaborate PR stunts. I know
this from experience. At PayPal we hired James Doohan, who played Scotty on
Star Trek, to be our official spokesman. When we released our first software for
the PalmPilot, we invited journalists to an event where they could hear James
recite this immortal line: “I’ve been beaming people up my whole career, but this
is the first time I’ve ever been able to beam money!” It flopped—the few who
actually came to cover the event weren’t impressed. We were all nerds, so we
had thought Scotty the Chief Engineer could speak with more authority than,
say, Captain Kirk. (Just like a salesman, Kirk was always showboating out in
some exotic locale and leaving it up to the engineers to bail him out of his own
mistakes.) We were wrong: when Priceline.com cast William Shatner (the actor
who played Kirk) in a famous series of TV spots, it worked for them. But by
then Priceline was a major player. No early-stage startup can match big
companies’ advertising budgets. Captain Kirk truly is in a league of his own.