#021: Are Marketing and Advertising the Same Thing?

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Transcript

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Welcome to two a million and beyond. This is Matt Willis. Are marketing and advertising the same thing? If you've ever wondered whether there is a difference between marketing and advertising, you are not alone. Over 10,000 people asked Google this question last month alone. Let's start by dissecting what marketing is. Simply put, a market is a group of potential customers. Marketing, therefore conveys the act of approaching that group of potential customers. For example, if you do business at an open air market, your marketing includes things such as how your products are presented, how friendly you are, your reputation, how you present your. Your pricing, your guarantees, the quality of your products, the banner at your booth, et cetera. In other words, marketing encompasses any experience your potential customer has with your brand. But marketing isn't just what you say about yourself, it's also how your customer support team treats your clients. How organized your store or website is. And how happy your employees are. This is why David Packard of Hewlett Packard or HP famously said, marketing is too important to be left to the marketing department. Advertising defined. So how does this differ from advertising? Advertising is paying for access to someone else's audience. Let's go back to the open air market example. How do you get more people to come to your booth? You could pay the shopping center to put up signs for your booth. Pay to be featured in the market brochure. Pay a social media influencer to visit your booth and promote you, et cetera. Radio, tv, Google, Facebook, valpaks. Anytime you are paying for access to someone else's audience, you are advertising. Many business owners make the costly mistake of deciding where they will advertise, whose audience they will buy before they have a solid strategy to approach the market. This is like choosing your weapons for battle. Before you know the terrain, the weather, or anything about your enemy, it's effectively throwing hard earned money into the wind. To maximize your marketing budget. Start with creating your strategy for approaching the market. Then create messaging that aligns with your strategy, and then find the best place to advertise the nitty gritty. Okay, so with our open air market example, what about the fee for the booth itself? Does that count as advertising? Yes and no. Your accountant will likely consider the booth rental to be an operational expense because cost of occupancy is considered necessary for the business to operate, unlike advertising, which is voluntary. However, the three rules of real estate apply. Location, location, location. This applies to business as well. Sometimes the best advertising is paying a little more rent for a higher traffic location. For this reason, my partners and I factor the cost of occupancy into our calculations when we recommend an ad budget for you. In fact, our founding partner, Roy Williams, came up with a below equation. To help clients calculate their ad budgets, start with 12% of your total sales, multiply by your average markup percentage, and then deduct your cost of occupancy. For example, if your business does$10 million in total sales, 12% of that would be 1.2 million. If you have a 92% average markup. You multiply 1.2 million by 0.92 and get$1,104,000. You then deduct your cost of occupancy of$720,000 a year, and that leaves you with an annual advertising budget of$384,000 as you decide how to approach the market and where to allocate your advertising budget. Beware of leeches. Leches are old school marketing firms that charge you based on your budget and not on their progress in growing your business. The problem here is that the solution to a lack of success with their advertising is just increase your budget. My partners, and I believe this is immoral.