WeWork failed IPO: Perception x Reality (or Hype vs Getting your Act Together)

WeWork has a very clear business model: It signs up big proprieties for long term, lower prices leases and then slice them up, re-rent them on short term and much higher prices. 

Similarly to Starbucks, Uber, Amazon, or Facebook, WeWork “blitzscaled” the market to create dominance and it is everywhere. It is cool amongst digital nerds, hipsters, millennials, genXers, entrepreneurs and even Wall Street bankers. Throw in some nice amenities, a contemporary relax-pro vibe and good networking opportunities and that rent is clearly justified, right? Even if they lose $219,000 every hour, it sounds like a smart real estate business, it makes sense to me…

That’s what WeWork’s $47 Billion IPO valuation counted on…until reality sunk in and the market could see only a $10-15B value. Still big but not close to matching the hype and buzz around it. This week the IPO was called off.

Besides the economics and governance issues behind this decision, what I find fascinating is how we, Humans, still struggle to play this perception vs reality game.

We make a lot of decisions based on what we “think” we know, not what we actually “know”, and I truly believe it is important as a marketer to drive positive perception, generating momentum, engagement, curiosity, interest and word of mouth. However, I see a lot of businesses trully believing that driving perception is a strategy and that it is more important than reality, that the coolness factor is eternal and they can ride that wave without really paying attention to their core product.

I learned that customers are not dumb. They find out whether you’re full of it or the real deal so in my mind the job of a good marketer is identifying what are the product/service truths that can be used as foundation for a positive perception, and then let the market forces take over, generating the hype we can back up.

Unless it is your business model (like some restaurants and fashion companies), hype based marketing can be a good tactic, but it is not a long term strategy…fruit-infused water is cool, but ItDoesn’tWork…

~ by gustavodemello on October 4, 2019.

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