Lee Rust, Owner, Florida Corporate Finance
This month, let's talk about marketing. The words "Sales and Marketing" are often used as a single phrase without any idea that the two activities are quite different. But they are.
Sales is the presentation of a product or service to a potential buyer and then asking for and getting the order. I might add that getting paid for the order is also a sales function, a part of that effort which is frequently neglected by the members of the sales team.
Marketing, however, is making some potential buyer aware of your product or service, creating demand, and then enticing them to buy.
If the first purpose of marketing is to make a potential customer aware of your product or service, you must understand who those potential customers are and develop cost effective methods of reaching them. Start by defining your customer or customers, write a short description of each customer type and a typical profile for each, and then list all the ways you might introduce your products or services to those audiences. Also list the factors that contribute to a buying decision by each type of customer, rank those, and make sure that your marketing addresses the most important of the factors on that list.
Among the choices for marketing, there are thousands of different media that can be used. The most prevalent in the print media category are trade and consumer magazines, newspapers, your own company's product or service brochures, and, of course, the Yellow Pages, both book form and now on the Internet. In the broadcast media segment, TV and radio are the giants, but those are divided into hundreds of channels, time slots, and audience targets. Today, broadcast media also includes the Internet from banner ads on Yahoo to your own company's web site. Other types of marketing media include a wide scope of presentation venues from trade shows, a particularly effective marketing tool for many products and services, down to the silly idea of hiring a small truck with changing advertising messages on its sides to drive around town as a movable billboard.
Marketing or advertising venues are also becoming ever more fragmented. Broadcast media now includes messages delivered to cell phones. Product placement marketing includes Pepsi cans appearing in kid's video games. And premium "giveaways" now include small computer flash drives with a company's name and logo on the side.
Among this confusing plethora of marketing choices, the problem is determining which might be the most cost effective for your product or service. Much of that determination can be based on simple logic. During the dot-com frenzy of the late '90's, spending several million dollars to present a thirty second Super Bowl ad for a new, and until then unknown, industrial Internet portal with no revenues was just ridiculous. I've read many business plans, particularly for start-up operations, that forecast enormous expenditures for marketing with no indication as to why or how those expenses would result in an increase in product or service awareness or demand.
On the other hand, if you sell an industrial product whose performance or functions are high on the list of factors that control a buying decision, presenting that product and explaining those functions in trade magazines can be particularly effective. In an earlier newsletter, Number 4, I discussed the importance of a company web site in today's Internet connected world. Such a web site is not only an effective method of presenting information on your company and its products and services, it should also be at the top of your list of marketing expenditures.
Although it is particularly difficult to measure the effect of various marketing methods and expenses, there are simple tools that can be helpful. For trade show attendance, keep a record of the number of sales leads generated at the show, the number of orders that resulted from those leads, and the show cost per order. For any product or service, all potential customers contacting your company for the first time should be asked, "Where did you hear about us?" Then keep a record of the responses.
Marketing expenses can be particularly wasteful or unusually effective. I've often wondered if it was cost effective to put a company name and logo on ball point pins given to various people in contact with a company. I think not. On the other hand, Zep Manufacturing became a leader in the highly competitive markets for industrial sanitation and cleaning chemicals using premium giveaways as a principal marketing tool. For years, Zep filled its salespeople cars with literally hundreds of cheap Zep premiums from a set of steak knives in March to Halloween candy in October, all with the Zep logo prominently displayed. The Zep salespeople were always welcome by the members of the maintenance department, and they picked up an order with virtually every visit. It was also relatively easy for Zep to measure the cost benefit ratio for those premiums.
In addition to product or service presentation, effective marketing should also create demand for those products or services. Go back to your list of factors that control a buying decision for your product or service. Then for each marketing expense incurred by your company, ask yourself how each one addresses one or more of those factors. If a marketing expense doesn't create demand, it's probably a waste. Does the logo on a ball point pen influence a buying decision? A list of product uses and competitive advantages in a company brochure or appropriate print media certainly does.
Every company should have a marketing budget. How that budget is spent will be one element in determining how successful the company will be. For that reason, the application of each marketing dollar should be a carefully considered, results should be continually measured, and funds should be allocated to the most effective marketing media for the specific product or service.
I read an article some years ago that said, "Marketing is only sales with a college education." That college education, however, results from the experience associated with developing a cost-effective marketing campaign. Any such campaign should contribute directly to product or service awareness. That awareness should, in turn, include the factors that control a customer's buying decision. Controlling those buying decisions will then create demand and lead to higher sales, the original purpose of the marketing expenditures. As with virtually all elements of running a company, effective marketing requires only careful consideration, measuring results, and then making appropriate adjustments.
Lee Rust, owner of Florida Corporate Finance, specializes in Mergers & Acquisitions, Corporate Sales, Strategic Planning, Financing and Operations Audits. He can be reached by phone at 407-841-5676 or by email at hleerust@att.net.
Next Article