I want to discuss an important business concept with you that is often misunderstood: Marketing. This idea is fundamental in business and you really need to get a handle on it if you want your venture to be successful.
Evidence of marketing has been around for what seems like forever. Anyone involved in commerce had to figure out a way to present their goods to others in an attractive way that resulted in sales. The advent of the written word was the first huge revolution in being able to communicate ideas and track the movement of goods in business. However, it wasn’t until a man named Johannes Gutenberg came along and invented the printing press in the mid 15th century that we really started to get marketing as we know it today. With the introduction of a moveable type printing press, businesses could mass produce advertisements and leaflets to distribute and attract customers.
For another couple of centuries, this is, largely, how marketing continued. There were basic advertisements posted and vendors hawked their wares in local markets. The problem with this method of marketing is that there is a heavy reliance on people coming in the relative vicinity of the business in order to draw them in. This period, during the Renaissance, was a huge cultural revolution and paved the way for many advances in art, politics, commerce, and science. However, as far as marketing goes, that revolution didn’t come until a little later.
The mid 1700s and into the 1800s was the first time that the power of marketing was fully realized and nothing is more apparent and familiar to us as the billboard. Originally used for successful advertising of circuses, the first recorded billboard as we know it came in 1835 and this was really the first time you could hit a broad audience from a distance and draw their business toward you. This was a much more efficient way of reaching an audience and really revolutionized business until even more powerful media came along.
In the 20th century we start to see a lot of the marketing techniques we recognize today. The mass adoption of radio, telephone, and eventually television took marketing to an entirely new level. Businesses were really able to adopt marketing as a comprehensive plan and vision to draw customers in. Marketing firms become huge and are now immortalized thanks to shows like AMC’s Mad Men. Big money was invested into marketing strategies and advertising and technology made it much easier to reach a ludicrous volume of potential customers efficiently.
Nowadays, we have everything from radio, print, television, phone, and internet at our fingertips and reaching customers has never been easier. However, because their is so much “noise” out there, you need to really be deliberate in how you plan on reaching your potential market. Carefully planning and targeting your marketing can be the difference between seeing a huge return on your investment and a massive waste of money.
Knowing the roots of marketing can help you get an idea of the different methods that have been used and help you recognize how and why trends have shifted over the years. Knowing what works and doesn’t work ahead of time can save you a lot of money and capital down the road. It’s also helpful to know what marketing trends are, and have been, your industry because that can give you an idea of the most effective ways to reach your target customers, or ways to reach them that differentiates you from the competition. Entrepreneur.com has an excellent infographic on the history of marketing and I encourage you to look at it.
What Marketing Means
So now that we have an idea of where marketing comes from, let’s delve a little deeper into the definition of marketing. According to the American Marketing Association, the official definition of 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.” So what exactly does this mean?
Marketing is not simply the advertisements that we as consumers see. Many people have this misconception because it’s all we’re really familiar with. The ads during the Super Bowl are one of the major draws to the event; to some, it’s a bigger draw than the game itself. We only really see the end result of a long planning process and when we see a puppy being saved from a wolf by Clydesdales, there is an emotional response that is then linked to a brand and Anheuser-Busch has successfully drawn us in. A successful marketing plan should be elaborate on the back end, but the consumer should only see what you want them to see.
So let’s break down the definition of marketing:
What are the “activities, set of institutions, and processes” that the definition alludes to?
These terms refer to anything and everyone that has a stake in, or affects communication with your target consumers. Last week’s post on the Importance of Relationships plays a key role in this idea. You need to think about who is going to be involved and building good relations with them. These include vendors, manufacturers, employees, printing companies, shipping companies, suppliers of raw goods, competitors, and the target market. This is by no means an all encompassing list, but gives you an idea of how many individuals and other institutions should be involved in your marketing plan.
Say your business is going to revolutionize the sock industry with a new sock design with a material that was just recently discovered at MIT. You’re going to need to think about and define an efficient production process and a way to create textiles. The specific steps involved in this phase alone involve a lot of people. You need to get licensing rights from the inventor of the new material which involves the legal system. There are considerations of who is going to actually manufacture the textile which involves research into different global textile companies and working closely with them. Then you need to translate that textile into a finished product which could include yet another manufacturer if you don’t make them in house. That’s a lot of people and institutions, and I didn’t even cover all of them.
When you move on in the process there are even more people and businesses that you’ll have to work with and each one needs to be recognized from the outset, so that there is less likelihood that you’ll be surprised in the middle of everything. Having a good idea of the stakeholders can be the difference in the most efficient process and a huge waste of capital.
What are you “creating, communicating, delivering, and exchanging?”
Some of this was covered in the previous section, but it’s worth mentioning this part separately. All of the people and institutions involved in the process are necessary to get a wealth of ideas in how to design, and get the revolutionary socks to the customer. You’ll have your product designer, which may be yourself or partner, the input from the manufacturer on how to carry out that design in practice, getting feedback on prototypes from customers and tweaking the product to make it perfect, and figuring out the most attractive packaging to draw the customer in.
We have our socks and they’re going to be made from a material that, no matter the conditions, will create the perfect foot temperature to ensure the maximum, most perfect comfort to ever be put into a sock. How do you design it so that it conveys that sense of the best designed sock ever made? It has to have a certain je ne sais quoi that causes the customer to say, “That is the coolest sock I’ve ever seen!” Including all of the previously mentioned individuals and institutions will allow you to finally come up with the best design possible for your revolutionary product.
You’ve come up with the best possible design, and it has tested well with focus groups and you’ve refined everything, but none of that matters if you can’t effectively deliver that product to the target market. These are the people that you want to focus your marketing plan on. For these socks you may want to target active individuals that need foot temperature control in some extreme conditions. Well where are they going to access this product?
You need to get into the mind of an outdoor enthusiast. Where do they shop? A good place to try and get the product would be stores like REI or Sports Authority. You could even try to get into some smaller retailers and e-tailers because these places can often provide unique customer access that you wouldn’t get from the big box stores. For example, in a small town like Joseph, there are no big name stores, but there is an incredibly vibrant outdoor community. Being able to get into smaller markets can provide an opportunity to reach new people. This is an especially good tactic for a small start up like we’re trying to simulate. It’s easier to meet demand in a smaller market and work your way up to big contracts and will save you cash capital as you build your business.
What value are you providing and what is the ultimate benefit to consumers?
One thing you need to make a distinction about is price versus value. The price of something is correlated to the value of it, but value is much more important when it comes to the target market. You’re not just selling customers a product, you’re selling them a part of you. You’re selling them the idea that what you’ve created will make their lives better.
Guy Kawasaki is a modern day Peter Drucker when it comes to entrepreneurial thought and he has a book titled The Art of the Start. One of the central themes in the book is to create meaning. Whether you’re starting a new company, rolling out a new division, or creating a new product line, there has to be meaning to the consumer. What they get from you is not just a pair of socks, but a new way to experience the world around them. They can push the limits of what they previously knew because they have a product that allows them to be out longer and under harsher conditions.
Entrepreneur.com has an article that discusses how the number one thing to keep a start up going is to continue to create value for the customer. They need to receive more benefit than simply covering their feet; they can do that with any old pair of Hanes. The article discusses the idea of a “Value Cycle.” In it, there are three steps: 1) Create Value, 2) Capture Value, and 3) Renew Value.
Creating value is everything we’ve discussed to this point. Coming up with a product or service that people find beneficial. They see the product offering of these new socks and think, “Wow, that will really help me on my week long camping trip.” There is something they see in the product that makes them want to buy them in the first place.
This step is really what makes you money. You need to figure out how valuable those socks are to people and be able to determine a price that the target customer is willing to pay and it needs to be high enough that it covers the costs of business. Let’s assume that this revolutionary material is also incredibly cost effective and they only cost you $2 a pair to produce. If the customer sees the value of these socks as worth $10 a pair, you’ve created a massive profit for yourself and will likely get rich quick.
So this product takes off and people love it, but after a bit of time customers find themselves wishing they could get more out of this material. The socks are great, but there are a lot more parts of the body than just your feet. You are missing out on a huge value potential and can capture more value by listening to what customers want. This is called Market Driven demand. When you first introduced these amazing new socks you were a Market Driver because you introduced and changed the way people think about socks. However, when customers give you feedback and want more out of this material, your response is being driven by what consumers want. This is important because even if you introduce something revolutionary, you still have to respond to what the market is asking for in order to thrive. Here is a good article on the difference between Market Driving and Market Driven. If you can anticipate what consumers may want in the future it will be much easier to plan for at the very beginning of your marketing plan.
This should be a good introduction to the ideas of marketing. This is nowhere near all of it and next week I’m going to continue to discuss this complicated topic and why it’s important for you to understand. Take this week to digest the initial information presented and next week I’m going to delve a little deeper into marketing and how, if used efficiently, start ups can break through the noise of markets and get their products and services noticed.