Entrepreneur:

Marketing & Selling

Entrepreneurs' Primer on Marketing, Advertising, and Selling

How To Survive and Win in the Era of Over-Communication and Killer Competition

By: Terry Collison, Blue Rock Capital

 

 

Marketing isn't advertising Selling isn't the same as marketing.  And advertising isn't selling.  But no matter what your company does, it needs them all at least in one form or another.  Based on observing and working with lots of companies, this is easier said than done.

Most companies and, indeed, most entrepreneurs readily recognize that effective marketing, advertising, and selling are critical to the success of a venture.  Yet once this importance is acknowledged, there appears to be little parallelism in the way these three critical functions are actually implemented.  In fact, there appears to be great divergence in the way these three critical functions are even defined.  The differences are not explained simply by different companies (with different objectives) coming up with appropriately different strategies.

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In many instances, young companies seem confused or just plain inaccurate (this means "wrong") in the way they understand these three critical functions.  This mini-paper is intended to provide a few quick insights about the linkages between marketing, advertising, and selling.

Advertising ABCs

"Our company would really love to do more advertising but we don't have any money."  Too many companies say this because they allow themselves to get into the situation where it is the truth.  To put it in perspective, imagine an advanced technology company saying "We'd really love to offer products for sale but we don't have any money."  The company would simply not be viewed as credible.  No matter how small or how new, companies that are worthy of commercial success in the marketplace are expected to have some level of advertising built into their normal operating framework.  Here are the three most basic realities of advertising:

1  Each industry and product group has evolved a well established ratio between annual advertising expenditures and targeted annual sales.  If a company wishes to sell $1 million of product next year, then, to be at parity with competitors in its own product class and market, the company must have an advertising budget that is equal to some knowable percentage of its annual sales target.  The ratios for a wide variety of product classes are reported annually by Schonfeld & Associates and are published in Advertising Age (go to the commercial or business section of a library or contact a savvy ad agency); 

2   When a new product is being introduced into a given market, it is normal for a company to spend more than the ratio that is typical in that product class (i.e., instead of an advertising budget that is equal to X% of targeted sales revenue, the product introduction may require a launch budget of 1.2 x X%); 

3   If a company is not already an established player in a given market (i.e., if it has no "brand equity"), it is often necessary to spend a multiple on top of the special product introduction ratio in order to gain visibility and market credibility (i.e., instead of spending 1.2 x X% of targeted first-year sales revenue on advertising, a new company with a new product may have to allocate an amount equal to 1.5 x X% of its targeted first-year sales).  This is a specific instance in which advertising is marketing

To make matters somewhat more problematical for young companies, the money that must be allocated to advertising must all be spent "up front," i.e., prior  to the realization of sales.  (Hey, I didn't invent these tough realities; I just promised to report them to you.)  The concept of "promotional cash flow" is shown here.

Advertising is the process of communicating information to your targeted customers.  The content of what is communicated unique selling proposition (USP), product features, benefits, value statements, reasons to buy, who's behind this wonderful company, your 800 number, pricing, competitive comparisons, your pretty logo, your distinguished customer list are all variables that can be used and combined in various ways depending on your program and overall differentiation strategy.  What is essential is that each company communicate to appropriate potential customers.  Everything else  about  the  advertising  function  is details.   The  need for the advertising  function is absolute.   Advertising cannot be ignored (or deferred until cash flow magically picks up because the company sees the virtues of its product as "virtually self evident").

Want some other ideas about advertising?  >>>