Overcoming the pitfalls of diminishing marginal utility in marketing

Overcoming the pitfalls of diminishing marginal utility in marketing

The marketing and sales efforts of companies such as Zara, Red Bull and Airbnb prove that companies can receive optimum incremental benefits of revenue for every incremental marketing rupee investment. In other words, they can achieve both objectives of scale and efficiency. Here’s how you can do it too

Vedanarayanan Vedantham

Today, growth, scale and customer acquisition are the buzzwords in India’s consumer Internet industry. Companies in different phases of the growth lifecycle, depending on the industry, business model and strength of the product, reach an inflection point when they no longer receive the optimum incremental benefits of revenue for every incremental marketing rupee investment. This results in the classic conundrum, which comes up in every organization; beyond this point of inflection, should the focus continue to be on scale and growth, or making sure that customer acquisition is at a price point, which is affordable to the business? Efficiency vs. scale? Does it have to be a line in the sand or can both of these objectives be achieved?

Most companies choose scale over efficiency in today’s venture capital fuelled ultra-high growth capitalist regime. Efficiency is not very glamorous. Scale is. However, there are companies, which achieve both these objectives. Here are examples of three brands, which have cracked this puzzle.


At Zara, the storefront serves as their best branding vehicle since they are typically located right next to all other popular, high end fashion outlets, with the Zara products being priced lower but having great fashion quotient and value. In other words, they piggyback on the advertising efforts of their competitors and their consequent footfalls.


Zara: The Spanish multi-national fashion giant rakes in an annual revenue of US $10 billion and is one of the most profitable companies in their space. But, unlike its competitors, it does little to no traditional dollar in dollar out advertising in glossy fashion magazine covers, which involve skinny models or expensive digital marketing.

Firstly, the storefront serves as their best branding vehicle since they are typically located right next to all other popular, high end fashion outlets, with the Zara products being priced lower but having great fashion quotient and value. In other words, they piggyback on the advertising efforts of their competitors and their consequent footfalls.

Secondly, the inherent strength of their products results in great word of mouth referrals with their customers, thus converting them into not just brand ambassadors but evangelists. This gives them great social traction and positive word of mouth carries a lot more credibility in the eyes of other prospects as opposed to a message being communicated by a brand ambassador.

In addition to great product selection and breadth of choices, Zara ensures that the average available shelf life for any product is reduced. This forces the shoppers to buy the product right then or lose it, since the product would go off the shelf the following month.

Red Bull: Red Bull’s reliance from a marketing and brand perspective is on event sponsorships, associations and creating great dare devil, viral content which is either crowd sourced or performed by one of their brand ambassadors.  This allows a lot of earned media to be created for Red Bull since their content collaterals typically have great social share ability index.

While Red Bull does perform advertising in mass media to a certain extent, it is used purely as a force amplification to a lot of their primary efforts listed above.

Airbnb: Airbnb’s under the radar integration with Craigslist during their initial days was a great example of growth hacking, which allowed them to get the initial spurt of growth in North America.

Once the initial base was established, Airbnb focused on getting seller adoption in the rest of the countries through referrals and partnerships. This in turn drove enough buyers once it was clear that a large selection of properties were available at great prices. The price arbitrage was immense; properties were available even at high end locations such as Times Square Manhattan at prices which were 90 per cent cheaper than the lowest priced hotel in the vicinity.

And, buyers were reined and retained by creating two types of great content; pertaining to the city as a whole (travel guides, tips and more) and information specific to the property in question, including photos, descriptions and user reviews. Additionally, prospective buyers also had the option to directly chat with the homeowner before making a decision, thus bringing complete transparency to the whole process.

Like in the Red Bull example, for Airbnb, traditional advertising for driving demand was used as a force amplification pillar to the efforts listed above.

What does this say? 

Such proven examples share interesting ideas on creating viral, engaging content with high social shareabilty index (while being relevant to the key brand value propositions).

These indicate that the marketing focus was not just on getting enough demand, but also on creating a viable ecosystem for the demand to come in through a variety of different means; partnerships, location of store, driving seller adoption, growth hacking and more.


Vedanarayanan Vedantham is the head of marketing at Stayzilla, the online portal for booking and reservation of hotels in India.