[derefr]

> It's also not what capex means.

Per-unit-amortized CapEx costs, sorry. (Typo.) Think: labor acquisition costs when you're providing a high-touch service. You can only hire so fast. Or acquisition/expansion costs for facilities and capital equipment (factory mechanization), in the case of the small bakery. You can only make so many cakes per hour, by hand, in a room of a given size.

And it's 100% true. Look at any consultant. Look at any maker of artisanal goods. If you have "inelastic supply", then there is a certain amount of demand that is saturating, at which point you don't need any more demand — you only need better demand. Every customer you acquire from that point on replaces a lower-value customer on your fixed timetable. Untargeted outreach (advertising) does nothing to make that happen. You need targeted outreach (sales) at that point. Or just some very aggressive lead-qualification of your organic inbound traffic.

[grantsch]

I see what you're saying but the analogy isn't very good

The reason a local bake shop doesn't do superbowl spots is because they're wasting their spend on millions of people who their offer is irrelevant to. I don't think it's because they can't scale up to fulfill

there could be local bakeshops that advertise on local tv or a billboard for example. But bakeshops don't usually make enough profit to justify these efforts

to further emphasize this point - there's no rule a company has to fulfill an order on their own. if you can't figure out how to fulfill - many companies will sub that work out/outsource it. the highest touch services - think biglaw partners - those type businesses don't really scale and are more jobs than actual businesses

[derefr]

My hypothetical was that the bakeshop was given an opportunity to run a superbowl ad that it didn't have to pay for. There's still no point in running the ad (vs. paying to run an ad on local TV), because, despite theoretically being able to eventually scale up to becoming a global cake-factory megacorp (think https://en.wikipedia.org/wiki/Continental_Baking_Company), there are discontinuous CapEx costs in the way of doing that scaling; and nobody's going to trust this tiny bake-shop enough to loan them the money necessary to do that scaling-up, in advance of fulfilling orders, in order to build up to meet said demand; when they haven't even proven that they know how to scale.

> if you can't figure out how to fulfill - many companies will sub that work out/outsource it

Yeah, but if they're coming to you, specifically, it's probably not just because you've ran a superbowl ad, but also because you're offering something nobody else does offer, or is set up to offer, or even knows how to offer.

If you ran a superbowl ad for your little sandwich shop, that wouldn't make a million people interested in flying out to you to get sandwiches; your sandwiches are probably good, but so are many people's — there's no USP to what you're doing. Sandwiches are fungible-enough that the ad will just make people want a sandwich from their own local place.

But, well — you know the "pink sauce" lady? She's got a USP. You can't get pink sauce anywhere but her (for now.) And she's certainly trying to outsource her production to a big condiment corp, due to the massive accidental viral demand she's triggered for her product; but there wasn't anyone already set up to make pink sauce, so she couldn't actually just turn around and immediately buy it on the market, or subcontract its production (AFAIK there's no "condiments mixed to order" job-shop factory; only "we put your label on our pre-made condiments" factories.) Right now, she's just trying to meet millions of orders from all over the US, from her kitchen, and everything's going to hell as a result.