The Difference between Marketing and the Marketing Department
Marketing and the Marketing Department are two different things. Marketing might best be defined as all organized efforts, activities and expenditures designed to, first, acquire a customer and, second, maintain a customer. (It should be added — at a profit.) The Marketing Department is a unit of organization, traditionally charged with carrying out specific tasks that are deemed to be “marketing” (such as advertising, market research).
This distinction is not merely semantic. As the definition would suggest, customer-acquisition and customer-maintenance efforts go beyond the organizational boundaries of the Marketing Department. When all departments know and understand their role and importance in the marketing process, the functions of marketing work better. The Marketing Department works better.
Usually, the role of marketing is viewed from the inside of an enterprise looking out to the marketplace. In many instances, the marketing function should provide the perspective of the marketplace looking in.
Critical marketing functions include:
1. Identifying the important constituencies within the marketplace. Yes, there are customers and prospects, but there are also groups that set rules and regulations, influence or recommend, establish barriers, service the product after the sale, review the product. All of these groups and more are constituencies that play a role in the successful marketing of a product or service.
2. Identifying and valuing specific target purchaser/user groups for the product. (Also known as target audiences or market segments.). Marketing should answer the questions focusing on who will be a likely prospect, who will be the best customer. Keep in mind that within the target audience there may be groups that will be readily obvious as “end users” but there may also be groups that specify, recommend, purchase, service, pay for; without a great stretch of the imagination, they may all be considered customers or prospects.
3. Communicating with the marketplace. This function may involve traditional communications disciplines (public relations, advertising, sales promotion, face to face selling) along side new disciplines (the Internet). Each target audience segment within the marketplace may play a different role in the success of marketing so different techniques or disciplines may be required to communicate effectively. Objectives need to be set for each discipline used and for each audience group or segment that is targeted.
4. Conducting transactions with the marketplace. Most people think of marketing activities as advertising or promotional events — very visible, very costly. But other interactions are part of the marketing process and should be viewed as such. (Here is where the outside-in perspective of marketing plays a vital role.) Order processing is not just an inventory transaction, but a marketing one as well — the timely delivery of a product in good condition goes a long way in helping establish a positive attitude about the company and provides another reason for the end-user to purchase again and to recommend the company and its products to others. Payment processing is not just a financial transaction; it is an important element in the marketing process — payment is what is given in exchange for the item that will satisfy a need (or an itch). Shipping the product is not just the act of putting something in a box and handing it over to UPS; it is a marketing transaction as well — satisfaction with the product or the company is never higher than when the box or envelop is just about to be opened.
5. Obtaining on-going feedback from the marketplace. An important function of marketing is to measure the performance of the enterprise in its efforts to acquire and maintain customers. What does it cost to acquire a customer? What does it cost to obtain the second order or purchase? Establishing performance metrics is often an afterthought in the planning process and, in many instances, superficial.
Market share is but one measure of marketing performance. Share of Customer is equally, if not, more important: if a customer purchases 100 units/year from enterprise ‘A’ but purchases 500 units /year in total, enterprise ‘A’ has a Share of Customer of 20%. How much effort should be expended to increase Share of Customer? Or, how much should be spent to maintain the customer at that level?
Obtaining feedback also means understanding the environmental conditions that the enterprise operates in, the product is marketed in. Spending on research is essential to direct the development of a product or service and the development of communications messages necessary to acquaint potential customers with the product or service, instill in them positive feelings about the product or service and motivate them to purchase.
Marketing Departments need to be open minded. Marketing Departments often fall into the trap of thinking they already know all the answers — and all of the questions. In fact, many Marketing Departments are just as isolated from the marketplace as the third-shift maintenance group. Constant dialogue with all of the component elements of the marketplace is one way to avoid missing opportunities or missing problems before disaster strikes.
The selling function is an important element of the overall marketing process. Many organizations establish a separate sales function, apart from other elements of the marketing process. This is often a sound business strategy but can lead to a chasm between Sales and the other marketing elements. Even when both are contained within a unified Marketing Department, separate sales and marketing groups often create the situation where they have competing views of the marketplace, competing objectives and competing priorities (e.g.,budget, prestige).
One area that often creates the opportunity for jurisdictional disputes and other serious problems is lead generation. In many instances, some component of the Marketing Department is responsible for developing leads and then turns them over to the Sales Department. “Discussions” over the timing and quality of leads are a top topic at almost all Sales-Marketing joint meetings.
Make sure that planning and execution of plans are always coordinated, and that all programs are integrated across both marketing and sales efforts.
Developing an Initial Marketing Plan
A marketing plan and a business plan are not the same thing. Marketing plans should cover all elements of the marketing process in great detail. Business plans should highlight the major marketing initiatives, their costs and potential.
Obviously, all plans should contain objectives, strategies and tactics, budgets and timetables, but the real first order of any marketing plan is to describe the product or service being offered for sale. Not by its chemical or physical properties but how the end user will be encouraged to see, feel and react. The product or service has to appear to be different (and better) than other similar products. (This is called “positioning” and there is a great book all marketers should be familiar with: Positioning: The Battle for Your Mind by Al Ries and Jack Trout.)
Another primary task of the marketing plan is to define the target audience for the product or service. Many, if not most, marketers define their target audiences in demographic terms — males, 18-34 years of age, high school graduates, or CFOs and CIO, purchasers versus end users. There are other ways of defining — or segmenting — the target audience. Life style or psychographics are often mentioned in the next breathe after demographics. But, there are still other ways to segment the target audience and, perhaps the most important of all, “reasons for needing or wanting” the product. This last one is not as easy to uncover as the others, but well worth the effort: selling messages based on the motivations underlying purchase will always be more successful than messages based on less “intimate” factors.
What is a customer worth? How many sales dollars will each customer generate — initially, over a two or three year period, over a lifetime. How much profit will each customer generate?
Customer analyses appearing in trade or general purpose publications often cite “the average customer”. First, there is no such thing as an average customer. Second, if there were average customers, satisfying them would be the quickest road to ruin. All customers are not equal. The 80-20 rule or some variant is alive and well in most, if not all, marketplaces.
Life-time value is a concept that is widely written about. If we examine the purchases of a customer over the life of his or her relationship with a marketer we can determine a historical value. Past behavior, however, cannot be assumed to continue well into the future: consumers change their behavior with a high degree of regularity in some product categories; they change their minds, attitudes and feelings about a particular product; their needs change so they change their purchase behavior; the marketplace offers new, better or different products to satisfy their needs.
Recognize that customers move through various stages in their relationship with a particular company or product. Stages are not tied to any particular calendar or precise chronology, but rather a customer-internalized set of logical and emotional reasons. Attempt to identify those stages and then set realistic estimates for behavior for those stages. While harder to do then trend-lining the past, valuing customers in this fashion allows a better match between marketing expenditures and sales.
Finding the Right Customers
A common mistake many start-ups make is that they overestimate the size of their target market. While millions of individuals or businesses may have a theoretical need for your product or service, very few will ever purchase. There is such a thing as the “wrong” customer and while it is very difficult to differentiate in advance a wrong or right customer, the importance of proactively managing the customer relationship is critical to long term success.
Examples of potentially wrong customers: customers who respond only to promotions (buy “on deal”), customers who are only 50-60% loyal, customers who purchase only once.
Some consumers (businessmen and housewives alike) are known as “early adaptors”. These individuals are the first in their boardroom or on their block to purchase your product. They are critical for success, but they probably won’t be your best, long-term customers.
Over 100 years ago, John Wanamaker, a Philadelphia merchant, observed that 50% of his advertising dollars were wasted, but he didn’t know which 50%. Recent examples of marketing burn rates and subsequent business model failures would suggest that Wanamaker’s 50% has crept up to about 80-90%.
Ad agencies primarily concentrate on the communications aspects of marketing: creating messages aimed at your primary target audiences to motivate them to behave the way you would like them to behave — i.e., purchase for the first time, purchase over long periods of time, be brand loyal, upgrade every year, etc.
Always keep in mind that ad agencies make money by spending yours.
In the agency selection process, guard against your emotions taking over (don’t fall in love with the agency’s work done for other clients) and clouding your judgment. Remember that you are committing dollars to a third party to invest as they see fit.
Some thoughts on selecting the right agency:
1. Do your homework, be prepared to work hard. Be very specific and sure of what your communications needs are. Interview as many agencies as your time will allow. Ask them questions that get them out of their canned presentations as quickly as possible.
2. Don’t rely on reputation alone. Don’t rely on the recommendations of CEOs and board members. Talk to people who deal with the agency everyday, who work with them, are frustrated by them, are pleased by them.
3. Demand that the team that will work day to day on your business be the ones that pitch your business. After you sign the contract, you may never see the chief creative officer or strategy guru again. Remember, most day to day functions between you and your agency are carried out by junior staffers. Find out if they can think independently, stand up for their beliefs, LISTEN, react quickly. See if they quickly pick up on your business and not try to shoehorn your business into how they work for their other clients.
4. If you don’t like the people, don’t hire the agency — no matter the reputation or what they promise they will do for you.
5. Don’t get enamored with the creative the agency shows as examples of their work. The “creative product” is the result of a process, a process of conceptualizing, clear thinking, understanding, interpretation and, then, communicating.
6. When you visit an agency for the first time and see a wall full of awards for creative excellence, do a quick about face and head for the elevators. There are a lot of examples of award-winning ads and commercials that did absolutely nothing for the client’s sales and profits. Attention on winning awards produces work that is often at odds with the marketing and communications needs of the advertiser.
7. Be wary of claims of “we can do it all for you.” Agencies often make the claim that are fully integrated, that is, they are excellent at advertising, one-to-one marketing, database development, public relations. Be skeptical. In many instances, sister divisions within agencies are distant strangers and have poor working relationships — they often compete with one another.
8. Set up a multistage or multi-step process. First, you want to see how they work. Second, you want to see how they think. Third, you want to see the results of steps one and two.
9. Never abdicate your marketing responsibilities to the agency. Agencies are quick to talk about partnership but they seldom share to the same degree in the risks of a wrong decision.
Help your agency perform at the highest level. Transmit to the agency what you know about the product, the marketplace, the selling process. Share your objectives and your expectations. Give them clear assignments and tell them how they will be judged. Then let the agency do what it does best — develop communications. Don’t write copy. Don’t second guess. Judge the agency’s output on whether or not it satisfies the communications objectives and follows the communications strategies.
Keys to the Marketing Budgets
Ask yourself two questions. How much must I spend to acquire a customer? How much is available to me to spend to acquire a customer? There used to be a rule of thumb in the mail order business that might help with these questions: one-third of the selling price covers the cost of the product, one-third covers overhead and profits, and the remaining third is for acquiring the customer. While not precise, it certainly frames the issue.
When launching a new product (or a new company) keep in mind that you get only one chance to get it right. You need spend enough to position the product or brand in the minds and hearts of the target audience and then motivate a sufficient number of them to purchase.
Research is an invaluable tool for successful marketing. Research provides direction and guidance, but not necessarily concrete answers to specific questions. Unfortunately, a lot of research investment dollars are wasted — either the information obtained is misleading or just plain wrong.
What should you research? Research can help you understand your target audience’s reaction to your product or service. It can help you decide whether your concept is viable and can provide a gross indicator of sales potential. It can help with the final design of the product or service — the features. Research can help with how you communicate the benefits of the product or service to your target audience, and finds ways to differentiate it from others already on the market.
Write yourself a Learning Plan? The plan should represent an on-going commitment to finding out what information you need to drive your business forward, to help you make better decisions, to effectively spend your limited resources, to constantly improve your product or service. The Plan should embrace the idea of an on-going process, and not a one-shot, annual effort or a series of one-shot projects when the need arises. Get in the habit of entering into a dialogue with all major constituencies in your marketplace, including the competition, in order to spot opportunities and to learn what your customers really want and need.
A word or two about Focused Group Interviews: they are an overworked form of research. They are relatively cheap, easy and quick to execute and, therefore, are used to answer a wide range of questions. When entertaining the idea of using Focused Groups keep in mind one thing: do you really want to bet your company or your future on ten, twenty or thirty people that you know very little about, have met for only one hour, and have very little idea if they really represent your best customer target audience, or even know what they are talking about?
One of the most rewarding research efforts you can mount in the early stages of product or service development is to uncover the motivations underlying your target audience behavior: why people will buy your product. Called “Right Brain” research, the techniques attempt to identify the emotional reasons for behavior — the facilitators as well as the barriers.
Research is essential. Plan wisely.
Customer Relationship Management
Customer Relationship Management (CRM), also known as One-to-One Marketing, Relationship Marketing, Database Marketing, has become an industry unto itself and is made more complicated than it really needs to be. Successful marketers practice good customer relations as a matter of course without giving it a special name. Purchasing CRM software without a commitment to the primacy of customers (their importance, value) is a waste of money.
CRM is about using information from your existing customer base to 1) sell more to your best customers, and 2) to find new customers with the same qualities as your best existing customers. It should be obvious that it costs more to generate the first purchase from a new customer than it does to generate the second purchase from an existing customer.
To manage customer relationships you need a marketing database.
A marketing database is, first, a repository of bits of information arising out of your relationship with your customers. It is made of many table of similar data (purchase history, demographics, lifestyle, service history, etc.) stored in such a way as to make analysis quick and easy.
Database software can run on almost every computing platform. Database functionality can range from simple record keeping up to decision making ala expert systems. Need determines functionality determines the cost of a marketing database; databases can cost from a few thousand dollars to several million.
Plan your database so that it can evolve or grow as its required functionality is identified. Start with only the functionality you need but plan on “upgrading” on a regular basis.
The most common function of a database is that of providing a list of who to contact — a mailing list (e-mail or snail-mail).
The next use of the database is segmenting the total base into relevant groupings of like customers (heavy, medium and light users; corporate versus individual customers; families with and without children; first-time buyers versus repeat customers, CEOs of companies with more than $10 million in annual sales and those with less than $10 million, etc.) Segmentation is the key to understanding your customers because you can alter how you view them, how you think of them. And, segmentation facilitates more effective communications by tailoring the message to the unique audience.
The keystones of knowing your customers so that you can maintain and grow a mutually profitable, long-term relationship rests on two key pieces of information: what they buy and why they buy it. Most databases address the first and ignore the latter.
Populating the database with information from customers should be governed in part by a Learning Plan (what information must I have to drive the business forward, to make better decisions).
Strict measures of database performance must be planed from the outset.
Architect @ earthlink.net