I have a soft-spot for Box. I think Aaron Levie and his team are building a really interesting and valuable business. One with a simple proposition that is succeeding against multiple 800lb gorillas in an increasingly competitive cloud storage and sharing environment. Impressive stuff.
One of the major reasons they’re succeeding is that they’re really smart marketers.
Now, I know this statement is going to be about as popular as passing gas in an elevator for some people, but please bear with me for a second.
Lets start by heading back around 50 years to quote the late, great, Peter Drucker:
“The aim of marketing is to make selling superfluous. [It] … is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”
The final sentence here is key. What Box have been so good at is creating customers who are ready to buy.
They do this by getting individuals to sign up for a free Box account, thereby familiarizing themselves with a product type they’d never considered they needed before. Once there is a large enough set of individuals from any one organization using (and demanding) the product, the Box sell to the enterprise buyer for that organization becomes as easy as saying “why not buy a license so that you control the use of the product your people are already using anyway? Secure and managed for you, no change in behavior for them.”
While the Box product is great, the above approach has nothing to do with product and everything to do with marketing. In Drucker’s words, they’re creating a customer who is ready to buy. And if you consider how conservative enterprise IT buyers have traditionally been, this approach is pure genious. In fact, in hindsight, it may have been the only way for them to succeed in the enterprise space.
Of course, I recently saw an article with the following headline: “How Box built a multi-million dollar business without spending a dime on marketing”.
The truth is that of course Box spent money on marketing. What they didn’t spend money on is advertising. Instead of going out there and spending on media placement, they gave the product away for free. Giving the product away for free is in fact a marketing cost. The revenue you forgo up by giving the product away for free is a pure cost of customer acquisition.
The difference, and why this really matters for startups, is that money foregone is very different from money spent. If you have $10m to spend building a product (and a business) you’d obviuously be foolish to spend that $10m on advertising. You probably can, however, afford to give away $10m worth of free product (particularly since the marginal cost per unit in the digital environment is generally very low). In effect doubling the available budget for your business. $10m on the product, $10m on customer acquisition. Navigating this course is exactly what Box have done so well.
Looking forwards, we can look again at Drucker to find another nugget of marketing wisdom:
“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
This quote is again important when we look at the direction Box are innovating in. A recent article stated that they are working with their clients to create cross-platform solutions. The unmet need is simple. The modern day enterprise environment is multi-platform (particularly when we take mobile into account). However, the major cloud competitors all have their own platforms they want you to use exclusively, meaning little or no interest in building cross-platform solutions. (As cross-platform solutions mean lost revenue for them)
By working with their clients to innovate cross-platform, marketing is in fact driving product innovation for Box. Not marketing as advertising. But marketing as value creation. Marketing designed to create a customer by creating a product that will, in effect, sell itself.
Unfortunately, a fundamental misunderstanding of what marketing is has become pervasive today, particularly in this startup space. Instead of value creation (creating a customer) many people see marketing as a pure cost (selling me crap products I don’t want). And while this may be true for some, particularly some of the biggest advertisers, the advantages of marketing as value creation are so strong that we should be careful not to fall into this mental trap.
My advice for anyone who wants to replicate some of the success of Box is simple. Get past the idea that marketing is your enemy. Instead focus on how you will create a customer, how deeply you can understand this customer and how you can create a product that meets their needs so well that it makes selling unnecessary.
Get this right and you too will be a great marketer.
Oh, and everyone should try to read Peter Drucker if they can. He said it better than I ever could a very long time ago.