Economic Musings VII: Marketing doesn’t advertise itself
Have you ever wondered if marketing and advertising are the same, if not, what’s the difference and which is the more important of the two? And why should you care?
The most successful economic model is without doubt the market economy. It is the consequence of the wealth effects of the division of labour. Without the productivity gains through the division of labour everyone would produce for himself and not be induced to barter or exchange goods or services. Equally, no money would be needed and would not exist. Keeping part of one’s wealth in the idle form of money only makes sense if the capital lying idle in the form of money is more than justified in the gains it enables us to reap through participating in an economy distributing the fruits of the division of labour via an exchange mechanism that resorts to a common denominator in the form of money as a means to exchange or transfer these perceived values.
However, the most effective realisation of the division of labour relies on the best dissemination or availability of information about available skills, goods, services, land etc. While money flows in roughly the opposite direction of the goods and services exchanged, information about prices and the properties and availability of goods and services flows back and forth all the time. The research and communication of such information may, when instigated or caused by the agents who try to buy and sell, in the broadest sense be called “marketing“. In order to best market their wares (goods or services) market participants rely on advertising.
Advertising, like any other human activity, implies cost, either directly or in opportunities foregone, had one instead chosen another activity. Would, for example, a factory use all its sales representatives more “productively” by sending them to the shop floor, they’d no doubt produce more at exactly the same or even less cost (e.g. no hotel bookings and mileage) but they would sell less (or even nothing at all). There has to be some equilibrium.
But when and what do you advertise? Is marketing not by and large the same as advertising?
This is where things begin to get interesting.
All advertising is marketing, but not all marketing is advertising.
Maybe even only a tiny fraction of marketing is advertising, actually. When teaching the difference rather than referring to hundreds of pages in learned books, just consider this example: if e.g. the tobacco industry deliberately decided only to sell to adults, then that is part of their marketing strategy no doubt. But is it advertising? Rather the opposite – it is the absence of advertising (to under-agers)!
So advertising is (only) one of the many tools of marketing while marketing is, amongst other things, the deliberate decision if, where, when and how to advertise.
But marketing is still much more and this is often forgotten. Marketing in a market economy is all-pervasive. The engineer when doing his or her first design studies – what does he/she do it for? To arrive at a later stage at a … marketable product. So marketing starts before even the sheet of paper gets fastened to the drawing board! Or if it doesn’t, then that drawing board may soon be up for a closing sale.
So, for better or worse, each of us has to do his or her marketing, whether to get a scholarship, a loan, a job, or to sell cars or candy bars. To achieve advertising that will “sell”, you need to know your market first, only to then find the right advertising approach. Preaching to the converted is a waste just as much as proselytising in languages the target audience does not understand or at a moment when it is not convenient for them to listen as many know who have received door-to-door preachers or done the preaching themselves.
This goes for the largest corporations, for babies crying for milk as well as for NGOs which demonstrate the use of condoms in an African village by pulling them over a twig as a demonstration, only at a later visit to find many newborn babies and lots of twigs with condoms planted reverently before each hut (a true story).
And, yes there are excesses in marketing or advertising and by trying to clamour ever the louder and more “effectively” and with ever bigger budgets advertisers may get on our nerves and become a nuisance and be it only for lack of taste. But such inefficient advertising plants the seeds of is own doom eventually.
And much marketing may be misguided and not all advertising may be spent wisely like in the case of the Canadian newspaper that decided to write to all its subscribers it had lost in the past years to entice them to re-subscribe (that was in the late 1960s) only to get a letter from an exasperated customer “ok ok, I’ll subscribe – but you needn’t send me ten thousand letters” – the computer programmer had slightly goofed and all letters went to one and the same address.
Many misconceptions about marketing or advertising abound. One phrase CrisisMaven coined therefore is this:
“If advertising worked the way its target audience believes it works it wouldn’t work.”
This is why many people who start their own little business fail dismally if they take advertising into their own hands – they often copy uncritically what they believe advertising or marketing to be. Were it that easy no campaign would ever fail (nor would it probably even be necessary).
The economics of marketing and advertising
Like anything else in a market economy, advertising anything whose marginal gain is negative will eventually be given up like the production of goods that don’t sell above cost. So to the extent advertisers may err (like manufacturers who choose a less efficient method of manufacture) we become inundated with inefficient advertising that we perceive as a nuisance. Only, advertising almost always is a planned intrusion of privacy while an unsold product does not haunt us (as consumers) in our sleep. That contributes to the bad reputation marketing and advertising often have.
Companies (should) economise just as much on their advertising as on anything else.
“Advertising is the Art of getting a Unique Selling Proposition into the Heads of the most People at the Lowest Possible Cost” (REEVES, Rosser: „Reality in Advertising“, Alfred A. Knopf, New York, 18th ed. 1992, p. 121)
Many an adage is parroted about advertising, like
This is often taken to mean advertising (or marketing for that matter) was less a science than an art, and a clumsy one at that. But the above quote contains more than meets the eye: if, for example, you’re a mail order company and try to sell to your as yet unknown potential customers, what do you do? If you didn’t already know better, you’d send out 100% letters to 100% households to be sure to reach anyone who might be interested in buying your stuff. As a rule only 2 to 4% of these potential customers will turn into actual customers. So are 96% of this mailing wasted? Not at all – in order to pinpoint these 4% you first had the whole 100% to be aware of your products so that you could convince 4% to buy. Once you got the patronage of such a customer who came at the expense of 25 to 50 times the postage for a normal letter you should do everything to keep that customer and this is where even today many companies fail dismally although any enchanted customer might popularise your wares without further cost if satisfied.
Often (if not always) faulty marketing (research) lies at the root of misguided advertising:
“The legendary ad man Rosser Reeves once put it this way. He laid two identical coins on a table and said his job was to make his customers buy his coin.” (Build your business with results, not excuses)
So marketing and its consequential advertising are inseparable from a market economy, kill the one and you kill the other. Try to put up with it or live in centrally planned slavery seems to be the choice. China and other planned economies often arrived at their impressive growth figures by using production, not sales, as the measure of their economic “success”. We have yet to figure out how that’s going to end.
If you don’t want to read more than what’s absolutely necessary to grasp the essence of advertising, read Rosser Reeves’ book, it’s an eye-opener and, in closing, ponder about the still daily repeated deadliest sin ever in advertising:
“… big mistakes can be made if you try to judge an advertising campaign, always, by sales.” (REEVES, ibid., p 4).
(Statistics and indicators etc. in our References section!)