The Creation & Extraction of Value

Apr 14, 2025

The discussion dives into the contrast between value creation and value extraction in marketing. It warns against the pitfalls of performance marketing that prioritizes quick profits over brand reputation. The host emphasizes the necessity of building a strong brand before attempting to extract its value. Sustainable marketing practices are highlighted as a superior alternative, advocating for the cultivation of relationships rather than exploiting existing ones. A memorable analogy from cinema rounds off the enlightening exploration.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

INSIGHT

Value Creation vs. Extraction

Performance marketing, or direct response advertising, excels at extracting value from established brands.
However, this approach is short-sighted, as value must be created before it can be extracted.

ANECDOTE

Milkshake Analogy

Roy H. Williams uses the milkshake scene from "There Will Be Blood" to illustrate performance marketing's exploitative nature.
It's about taking value without creating any.

ADVICE

Sales Activation

Instead of performance marketing, Roy H. Williams recommends sales activation within relational ad campaigns.
This approach, likened to shearing sheep's wool, allows for repeated value extraction without diminishing the brand.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

“If we train our children only to harvest, who will plant the seed?”

I wrote those words after contemplating the short-sightedness of so-called, “performance marketing,” on March 11, 2010.

“Performance marketing” is the new name for direct response advertising. It works best when it extracts the value from a well-known brand. Its objective is to bring in a lot of money quickly.

That is why business owners are attracted to it.

But here’s the caveat: value cannot be extracted from a brand unless it has first been created. You cannot squeeze a good reputation dry unless you first build a good reputation.

Do you see the problem? When you have finally squeezed the last ounce of value from a good reputation, you don’t have a good reputation anymore.

As I was contemplating that last line I just wrote, the words “extraction of value” popped into my mind. I typed those words into the Google search bar. The AI Overview that appeared at the top of the page whispered to me in a conspiratorial tone:

“‘The extraction of value’ refers to the process of capturing or appropriating value from other stakeholders, often through exploiting a monopoly or manipulating competitive market processes, rather than creating new value.” – WIKIPEDIA

The eight words that leaped out of the paragraph were, “exploiting… or manipulating… rather than creating new value.”

Do you remember that famous scene in the movie There Will Be Blood when Daniel says to Eli,

“If you have a milkshake, and I have a milkshake, and I have a straw… There it is. that’s the straw, you see? Watch it. Now my straw reaches acroooooooss the room and starts to drink your milkshake. I… drink… your… milkshake! I drink it up!”

That is the voice of performance marketing.

The healthy alternative to performance marketing is sales activation within a relational ad campaign.

Sales activation is like shearing the wool from a sheep. You can do it again and again and the creature is never diminished by it.

Performance marketing is like slaughtering that poor sheep, piece by piece. It is painful, and there is nothing left when you are done.

I apologize for putting that horrible image into your mind, but we are talking about your business.

I’m sorry if I stepped over the line.

Roy H. Williams

You will find 4 examples of what the wizard calls “sales activation within a relational ad campaign” on the first page of the rabbit hole. I can hear what you are thinking right now. And to that, I say, “You’re welcome.” – Indy Beagle

Roving reporter Rotbart will be away on a secret mission in Italy for the next two weeks. He didn’t tell us exactly what it was, but here are our top 3 guesses. One: He is studying the original manuscripts of Leonardo Da Vinci for a special series of investigative reports to be aired on PBS this autumn. Two: The roving reporter was invited to the Vatican to meet with the Pope. Three: There is no secret mission. He is just eating gelato at a seaside cafe with his lovely wife, Talya, while gazing at the beautiful Mediterranean Sea. We will update you next week when we know more. – Ian Rogers