THE MISUNDERSTANDING OF MARKETING & THE TRUE COST!
Thanks for stopping by to read the 2nd Edition of my blog.
Marketing in my opinion is by far the most important function of all the business functions that make up a business endeavour, the success of a business truly hinges on marketing, and I’m writing this piece to explain why.
I didn’t truly understand and appreciate the concept of marketing until I was completing my marketing major at university. That was despite years of being involved in business marketing and sales, Now I truly understand the science and art of marketing. However, it’s obvious to me that only a small percentage of people truly understand it, those that do, have studied it deeply usually at an academic level.
In my opinion and experience the first misconception of marketing is people don’t understand that marketing tactics such as advertising, branding, sales, customer service/experience, procurement/delivery of products and services all fall under the umbrella of the 4 p’s & 7p’s marketing mix. People will typically view and use these marketing tactics in isolation, but they all form part of an overarching marketing strategy, call a strategic marketing plan.
In my opinion the second misconception of marketing is people view marketing as a cost not an investment. This is where people misunderstand marketing and its importance to the success and long-term sustainability of a business. Marketing is typically the first to be cut from budgeting if the expected results aren’t generated over the short run due to an emphasis on managing and protecting financial positions. People just need to take the time to understand what marketing is and how it works, it runs a lot deeper than creating a website, running a few google and social media ad’s and then giving up if immediate returns are realised.
I will give you a typical example as to why people think it’s a cost but in fact it’s an investment.
Let’s say a barber invests $500 in a meta-ad campaign because the barber needs more clients.
The ad campaign generated 8 clients paying $40 each for their first cut, totalling $320 in revenue. Initially it appears the barber has lost money, so the barber cuts off the ad, however, the barber did a great job cutting all 8 customers hair and they all come back the next month for a cut, that’s another $320, they come back again the following month that’s another $320, Get the picture ? let’s say all those customers come back each month for 12 months that totals $3,840 in revenue from the $500 investment. The cost to acquire each customer was $62.50 with each customers lifetime value (LTV) being $480 over 12 months generating $3,340 profit or 7.68 ROAS. Marketing is more than just running ads and converting the lead to a booking though, the barber needs to provide a great service which they did resulting in the barber retaining those customers and generating re-occurring revenue.
Barber example numbers.
| Ad Spend. | $500 |
| Customers. | 8 |
| Price of haircut. | $40 |
| Customer acquisition cost. | $62.50 |
| Total haircuts per customer. | 12 |
| 12-month customer LTV. | $480 |
| Total 12-month LTV revenue. | $3,840 |
| Total 12-month LTV Profit. | $3,340 |
| Return on ad spend (ROAS) | 7.68 |
| Return on investment. | 668% |
To understand marketing, you need to understand the definition of marketing.
Here is the American Marketing Association definition of marketing”.
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large”. American Marketing Association – Marketing Definition
Using that definition, marketing is essentially the whole value chain of the business that’s customer and revenue focused, if one section of the value chain is inefficient it can potentially affect the ability of the business to generate, sustain or grow revenue through the acquisition and retainment of customers due to the business inability to efficiently create, communicate, deliver and exchange offers of value for customers. If the barber didn’t deliver and exchange a good haircut and service, they would’ve lost money on the $500 ad spend, the barber example highlights that marketing is the whole process of initially creating an offer communicating the offer of value to a target market, delivering the service or product to a high standard in exchange for renumeration and repeat cliental.
Why Marketing Is an investment.
Investing in marketing is an investment in the business, its customers, and its revenue!
Marketing is managing every section of a business that effects the customer experience and revenue, marketing is customer focused and data driven. Its looking for and implementing improvements to generate and retain customers through improving the whole value chain and its capacity.
Why a Business Must Have a Strategic Marketing Plan.
A holistic well executed approach to marketing consistently implemented over the short medium and long run is truly where the business success lies and that’s where a strategic marketing plan is critical, it highlights areas of improvement, weakness, opportunities, and threats, it highlights where capital resource need to be deployed or redirected to drive the business forward to generate new and repeat customers delivering revenue and growth.
Marketing optimises the positioning of the business and maintains and improves the value chain in a cost-effective way to satisfy customers, also ensuring the business has the productivity capacity to acquire and retain customers, achieving this underpins revenue, business performance and drives profit. Without an efficient strategic marketing plan in place achieving capacity equilibrium becomes difficult and problematic leaving businesses inefficient and potential capital loss endeavours.
The Redundant View of Marketing.
The redundant view of marketing is it’s a cost not an investment, if marketing is a cost to a business, it’s been incorrectly implemented or not implemented at all, investing in marketing is investing in the future of the business through customer satisfaction. The true cost of a poorly planned and executed marketing strategy or not investing in marketing at all – Is the future sustainability of the business!
In summary, Marketing is by far the most important business function of all the business functions that make up a business endeavour, as it focuses on the customer and generates revenue for a business, marketing is misconceived, misunderstood and is only a cost if it’s not implemented correctly or not implemented at all!
Get your marketing right and your business will be right!
I hope this article has promoted you to think about your business and how you can improve it through consistent implementation of an effective strategic marketing plan.
I’ll leave you with these questions to think about –
- What areas of your marketing strategy and implementation needs improvement ?
- Do you need more customers ?
- Do you need to be more consistent with your marketing endeavours ?
- Do you have a capacity issue restricting you from providing an adequate level of service or taking on new customers ?
- Do you even have a marketing plan or you just don’t know where to start ?
If you want to discuss how to strengthen any of those areas or discuss increasing your revenue, profit and overall business performance, hit the link and book your free 30-minute strategy call today.
Cheers!
Stuart Paul Young.