Author: Viraj Chhajed
Written on: 26th August 2021
Most people think that ads or marketing, in general, is a waste of money. People say:
- Tesla spends $0 on marketing! So, spend your time making a good product it will sell automatically!
- The amount of money that should be going into product development is being wasted on marketing
- The final consumer is then bearing the cost of advertising
Economies of scale
But, in most cases, this is not so true! Marketing promotes your product and leads to greater demand and a boost in sales.
Now there is an interesting concept called "economies of scale" Which in general states that:
Higher the production quantity, lower the per-unit production cost. To put it simply, imagine buying something in wholesale vs in retail. Naturally, the more the demand, the cheaper something becomes
So, due to marketing enabled "economies of scale" people are actually paying less!
Now, this isn't just applicable to hardware products. take a look at AWS pricing options for example ( on which most SaaS are dependent)
And greater demand brings in more capital, which in turn can be deployed to make a better product and R&D.
So, even though on the surface level it looks like marketing isn't beneficial to the consumer. It sometimes can be!