July 31, 2018 - Episode 5

What is Marketing and Why Does it Matter to a Small Business?

Running a small business is hard enough. To make matters even more difficult, thinking about marketing often feels overwhelming and expensive. It often leads to frustration and an assumption that it is a waste of time. The truth is marketing is inherent to every business regardless of its size. It is just a matter of if you are letting your marketing run on autopilot, or if you are really ensuring your marketing efforts align with your business goals. We discuss what marketing is and why it’s especially important for small businesses.

Episode Transcript

Jake Braun:
Hello, everyone. Welcome to Kickin' It With Kapok, a podcast about business owners' marketing struggles and solutions and other business-related topics. This is episode five, "What is Marketing and Why Does it Matter to a Small Business?" Today, Mirela and I will take a step back and try and dissect what exactly marketing is in business and why it matters. Mirela and I both have a bachelor's degree in business and over a decade of real-world experience in marketing, but I guess you have me beat since you have an MBA with a concentration in marketing, Mirela. So I'll let you start us off. How exactly would you define marketing?
Mirela Setkic:
Well before I tell you guys what marketing means to me or how I interpret the whole idea of marketing, I would like to give you the definition as published by the American Marketing Association, or AMA. And according to them, "marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value to customers, clients, partners, and society at large." And then Google also tells us that marketing is "the action or business of promoting and selling products or services, including market research and advertising."
And to me, marketing boils down to, I'm an organization, I have a product or a service and marketing is pretty much all of the steps that I need to take to communicate to my target audience or my target market what my product is, what makes it unique, how much it costs, where they can find it, things like that. All of those things are marketing. I guess, well that kind of takes me to the next step which is talking about the foundation of marketing and the different components, the Ps of marketing. And there are four, I guess, main and most important components of marketing, which are Product, Price, Place, and Promotion. And then there are three more, and these are kind of disputed. Some experts agree that these are part of marketing. Some say that the four that I just mentioned are really the core and the four Ps. But the additional three Ps are People, Process and Physical Environment.
And just to talk a little bit about the four main Ps of marketing, Product is pretty much what is your product or service and what makes it unique? So an organization needs to answer those two questions. And then the Price is what is your price strategy? Do want to charge a premium price? Do you want to be somewhere in the middle or do you want to charge the lowest price possible so you can just gain market share and break into the industry. And then the Place is pretty much your distribution channel. How will you get your product or service from your organization into the hands of your customers. And then Promotion, and this is the one I think that's mostly associated with marketing, I think a lot of people think that marketing is just the promotion component, which entails just the various ways that organizations use to disseminate information about their products, like TV ads, online ads, coupons and things like that.
Jake Braun:
All right. Well that sounds like a pretty good introductory definition of marketing. I think maybe we should now take a moment to look at a little bit of the history of marketing and see if maybe that explains how we've gotten to what people consider marketing today. And one of the more popular explanations or periodizations of marketing is that by Robert Keith, it's pretty popular in academic textbooks, and it's based on his experience at Pillsbury and he says that modern marketing is basically the culmination of three definitive periods: a Production Era, a Sales Era, and a Marketing Era.
And Keith posits that the Production Era started around the time of the Industrial Revolution and he claims that advances from the Industrial Revolution had made otherwise scarce goods very available, larger quantities. And in addition, people's incomes were rising. People had more money. So businesses only really had to worry about how can they produce more goods. The customers would just buy them. Whatever goods they produce, customers would buy them.
And then comes along a Sales Era and this arises in the wake of the Great Depression, according to Keith. Poor economic conditions and other environmental factors force businesses into more aggressively selling their products. So they basically just need to hard sell their customers on the products and force them to buy them.
And the finally a Marketing Era occurs. And in this era businesses finally need to start thinking about what products would their customers actually want and engage in market research and then design, develop and sell those products that customers actually want versus just what they could produce, which is what they were doing previously. And while this an extremely popular explanation of marketing history in some textbooks, Keith's theory was written in the 1960s and is really based on anecdotal evidence from him working at Pillsbury and it doesn't really align or necessarily extrapolate to many other buinesses that have existed since the Industrial Revolution.
So then in 1988 comes along Ronald Fullerton. And he was a professor at Southeastern Massachusetts University and he posited an alternative periodization. He disagreed with Keith that modern marketing popped into existence around 1950. And Fullerton tried to more accurately match the reality of marketing's origins and evolution based on actual historical research and facts. And I believe he cites over 100 references in his paper that he writes about this topic. And Fullerton argues what he calls a "complex flux model," which is actually rather simple and historically accurate premise. He says the groundwork for modern marketing basically arose at the same time as mercantilism which would eventually evolve into capitalism. And he goes into more detail, but the gist of his writing is that marketing evolution is a long and complex process that developed over time but is basically just small, constant iteration on previous marketing ideas that's gone on for at least 500 years.
And I agree with Fullerton's periodization and I would actually go one step further and cite the story Umbricius Scaurus. He was a legendary manufacturer in the first century AD in the ancient Roman city of Pompeii. And he produced a variety of fish sauce known as liquamen or garum at the time. And he was very successful at selling his fish sauce. He's actually estimated to have controlled over 30% of the market. He lived in a lavish house. And part of his success stems from the fact that his containers of liquamen would be branded with things such as, "The Best Liquamen" and "Product of Scaurus." And his brand and product were known to be very high quality throughout the Mediterranean. It was understood that these labels meant you were getting a high-quality fish sauce. And one scholar has even described him as "The Ketchup King of Campania," which was the region that he was in. And not the tomato-based ketchup that exists today, but the original ketchup which was really also based in fish sauce, but I think that's enough about sauces.
The labels that he had might not be as elaborate as the branding that we think of now for modern day brands like Nike or Disney or Apple. Even if it's not that sort of branding, it is an early form of marketing. The labels communicated with the customer, so it's marketing. And whether you want to classify it as branding or advertising or some other precursor form of marketing communication, it's marketing. And I think the takeaway from this story is that marketing is inherent to any business, and really commerce more broadly. If you are buying or selling goods or services, you're engaged in or engaged with marketing and that's really true regardless of if you're a first century fish sauce producer or a boutique on Central Avenue in St Pete.
So with that being said, what do you think are some of the activities that businesses are engaged in that they might not even realize are actually marketing, Mirela?
Mirela Setkic:
So many thing, I mean, it can be something as simple as deciding how much you are going to charge for your handmade sweater or for a bar of soap that you just created, or even a taco that you are going to be offering for lunch. That is in one of the Ps of marketing, which is price. Also, packaging. When someone comes into your store and goes to your online store and they purchase something and when it comes time to prepare that product to be delivered to that person maybe you want to present it in beautiful packaging that includes some type of branding so that customer can have some type of a reminder and receive some type of a branding message when he or she receives that package from you.
Also the types of customer relationships that you build and you want to have that's the people aspect of marketing. And also that goes even further into considering the people within your organization, what message you want them to communicate to your customers and also the people who are outside of your organization who are your customers, how do you want to communicate with them? Do you want to be a fun organization? Do you want to be a super serious organization? And all of those things are components of your marketing strategy and one of the things you want to do is define your brand voice and your message.
And I think, at the end of the day, most organizations end up doing all of those things, they just don't realize that they're doing them, because they're really non-negotiables for being in business.
Jake Braun:
Yeah. I think a lot of buinesses might not even realize that they're engaged in marketing purely by virtue of running a business.
Mirela Setkic:
That's very true. And I think that's why it's so important to think about the seven Ps and break marketing down into those seven categories and identify them and then just take care of each one of those for your business one by one. So you have a clear understanding in terms of what message you want to communicate and how you want to do it. And then at the end of the day, when you clearly define all seven of those Ps for your organization you will realize that you essentially have a full marketing plan.
Jake Braun:
Yeah I think the question you really have to decide is are you going to have your business running on some sort of marketing autopilot or are you actually going to think about what your business goals are and how your marketing can help you with your goals. And if you don't have a goal you can start with the idea that you probably want to remain in business and to remain in business you need to be profitable, or profitable in the near future, and then go from there and think about establishing a more elaborate goal. And then, make sure that your marketing efforts are really aligned with that and helping you achieve your goals, because you don't want to just be in the autopilot mode where you're relying on luck and happenstance or just pure chance to succeed as a business.
And I think people might not realize how many businesses fail. According to the US Department of Labor, I looked up something that they published, and one out of five businesses will fail within a year, half of businesses will fail within five years, and four-fifths of businesses will fail within 10 years. But it doesn't mean that you can't have a successful business. It just means that you really need to think about your marketing efforts and everything about your business if you hope to be the one-in-five business that makes it 10 years.
Mirela Setkic:
And that's very true and two things are certain when you're a business. One is that time is going to continue to pass and things are going to continue to happen to you and your business. So do you want to be in a position where you feel more aware of what's going on and you have a clear vision? Or do you just want to be just waiting for things to happen and not have a lot of certainty?
And when you have some type of a plan or an idea or you know where you're going, it's easier to get there, and it feels a lot less stressful for you and everyone else in your organization. And you also appear more put together and organized and you have a cohesive message that's put out into the universe and consumed by your target market or your customer base.
And the other thing is that whatever you're doing right now, it's going to stop working one day. So maybe you started a business and right off the bat things were great and you feel like, "Welp, I don't need to do anything. I should just ride this wave and keep collecting the cheese and just everything's going to be really, really great." But one day you're going to come in and things are not going to be as good. And if you don't have a plan and you haven't really thought about this stuff, you're going to be really caught off guard and you might be really ill prepared and that's not a good situation to be in.
Jake Braun:
Do you think that there's anything else that small business owners can do to make sure that they improve on their marketing or are there any misconceptions that might be out there?
Mirela Setkic:
Yes, there are a lot of misconceptions. There are a lot of things that organizations and small buinesses can do. And I think that that's one of the challenges, is just the sheer number of things that are out there and that people can do and there are marketing organizations who are calling buinesses and offering all these things and everyone is a Google partner and super good at what they do, all you have to do is give them $5000 and they're going to make all your dreams come true. But it doesn't really have to be that overwhelming.
Step one is to develop a sense of curiosity and develop a sense of wanting to learn what else you could be doing to make your current situation better. Even if you're doing great, you could still be doing better. And sometimes hiring someone that is outside of your organization who has experience and more expertise who can be there to hold your hand and guide you is a great idea. And sometimes you go all in, and you're like, "You know, I'm just ready to change my current situation and I just want to do everything differently." And that's okay.
Some organizations want to do things piecemeal and pick different aspects ... Pick different goals and say, "Okay, well this month I'm going to focus on figuring out the lifetime value of my customer so I know how much I should be paying to acquire new customers." And or sometimes you just want to do several different things. Whatever your cup of tea is, doing something is way better than doing nothing.
Jake Braun:
I think that all makes a lot of sense. I think one thing just to be cautious about is, there is an opportunity cost of moving too slowly as well. I think it was in episode two we talked about strategy and strategic risk and how that's kind of also inherent to business much in the same way that marketing is. So there is, like I said, an opportunity cost to moving too slowly. So you should do what works best for you, but moving slowly isn't necessarily the most strategic or even cautious thing to do. Sometimes moving slowly is the most dangerous thing to do.
Mirela Setkic:
That is true. And sometimes it feels like it's safe, or the safest option, but it's a false or fake safe and it just tricks you into a vicious cycle of procrastination or, "Well, I'm not ready. All the stars haven't aligned. I just need to do this one more thing." And next thing you know it's November and you have pretty much spent 11 months of the year just trying to find a perfect time to get started. And at the end of the day, there is no perfect time.
Jake Braun:
Yeah I think people can get lulled into a false sense of security too. But one thing that's certain is that things are gonna change. And one thing I forgot to mention about those stats from the US Department of Labor is that that data is actually from 1994 to 2015 and so it includes things like the dot-com bubble and the 2008 financial crisis. And those failure rates are relatively uniform across that entire period of time. I mean there's small changes and certainly more buinesses did fail in those time periods, but it's like one, two, three, maybe five percent difference. It's not like failure rates doubled or anything like that. Businesses are failing all the time. And succeeding all of the time. But you have to realize that change is occurring all the time.
Mirela Setkic:
Yes. You cannot stop time. You cannot stop just regular changes in the environment, in your industry, in people's taste, and things like that. So you really have to keep your finger on the pulse and make sure that you understand what's going on, or you have to work with someone who is going to do that for you. And I think, Jake, you mentioned misconceptions about marketing, and one of the misconceptions is that sales is the same thing as marketing.
So, I'm a small business in St Pete and I mostly do B2B, or business-to-business, and I have a really good salesperson and he or she goes out knocks on doors and sells my product and has been doing a good job and that's all I need. I don't need to spend any more money on marketing or any other marketing efforts, I'm just going to rely on professional selling. That's actually a big mistake and a misconception. Marketing is not sales. Sales is a component of marketing and it falls under the promotion component of marketing.
I guess you can think of marketing as the foundation for or I guess when you're painting your house and before you put on the final coat of paint you have to prime the wall and you have to prepare it for the paint. That's what marketing is for sales. You have to make sure that you are communicating with the consumer, or your target market about the products and services that your salesperson will be going out to sell. So you're laying the groundwork so it's easier for the salesperson to go out and sell.
If I am Sally the salesperson and my company doesn't really advertise in my territory where I'm selling, when I go to knock on doors no one is going to know who I am or who my company is. But if my company or my employer spends some money to tell that region that this is who we are, this is what we sell, when I go to knock on people's doors some of them will recognize my company and it will be easier for me to actually go in and make a sale.
Jake Braun:
So what would you say to a small business owner who says, "My salesman or saleswoman or even customer support personnel is already selling a lot of my products, I'm already profitable, why should I engage in other marketing efforts?"
Mirela Setkic:
Because you could be selling more. You're probably not selling at the maximum level that you could be selling.
Jake Braun:
Yeah, I think one of the things you said is that the salespeople could be selling faster and people need to realize if they're selling faster that means that they're potentially selling more and it's easier to sell if people have already heard about you through other marketing efforts.
Mirela Setkic:
Yes. And maybe if you start promoting your product or your service and you realize that there is way more demand than you thought. Or maybe you are creating that, or eliciting that demand. Maybe you need two salespeople instead of one. So maybe now you're selling twice as much. So you don't really know if you are just always staying at status quo.
Jake Braun:
I think one other thing that might be a misconception is that marketing is all creative too. That you don't really know if you are getting thing out of what you're doing. You can't measure the results. But I think especially in recent years there's a lot more science to it, it's not just creative. It certainly is creative, but there's also data and analytics and science behind it, especially in digital marketing.
Mirela Setkic:
That's very true. I think I always, or I try to tell customers and clients that making money is not pretty. I mean, we do produce pretty stuff, and we can and we should. But, at the end of the day, it's a formula. It's defining your sales funnel and mapping out what all of the steps are between point A, B, C, D and so on and so on. So there's definitely a formula and each step can be tracked and should be tracked. And like you said, in 2018 marketing or advertising is a lot more sophisticated and trackable.
Jake Braun:
Yeah, and we'll probably do a separate episode on digital marketing.
Mirela Setkic:
Yes.
Jake Braun:
But for now, I think we've gotten a pretty good explanation out there about what marketing is and misconceptions. Are there any resources that you would recommend to a small business owner to learn more about marketing? Obviously, besides this podcast and the Kapok Marketing website and social media.
Mirela Setkic:
Well. Yes, a couple of things. We have a really sweet blog. And it's on our website. Well I guess you mentioned our website, but we try to really write and post useful and relevant blog content on our blog. So there's always a lot of very useful and free information on there. Also, we like to read. And everyone should be reading. And I know that reading actual physical books is not everyone's cup of tea. Some people like e-readers like Kindle or maybe even audiobooks. Whatever your version of the book is, you definitely should read books.
Jake Braun:
Or watch videos.
Mirela Setkic:
Or watch videos. YouTube, whatever the case is. And there is a library. Our office happens to be right across the street from the library. So they have a lot of books that you can get for free, obviously. And one of the books that we are reading right now is called, They Ask, You Answer. And it's a revolutionary approach to inbound sales, content marketing, and today's digital consumer.
The other thing is that any books that we read and that we share on our ... That we I guess talk about on our social media, more specifically Instagram and Facebook, all of those books are available for our clients or the audience to actually contact us and loan them from us and read them. If we finish the book we would rather give it to someone else than have it sit around our office and collect dust.
And also if you go to our blog and you see an interesting topic and you want to learn more about it, let us know and we will point you in the right direction where you can get more information. Maybe it's something we can help you here in-house.
Jake Braun:
That all sounds great. And speaking of things that we're willing to do for our listeners, if our listeners are enjoying the podcast, we would really appreciate it if they would subscribe and rate or review us wherever you listen to your podcasts. We really would appreciate it. It helps us find new listeners, or new listeners find us rather. And it really keeps the podcast going.
Mirela Setkic:
I agree. And also if you can just tell your friend to tell a friend to tell their friend to listen to us. And also send us feedback. The good, the bad, the ugly, and we want to know how we're doing. If you have any suggestions for us. If you have any constructive criticism. I mean we could always be doing things better. So anything you think of, send it our way.
Jake Braun:
Yep. We definitely can handle the criticism. Well I think it's been a great fifth episode. Feel free to reach out to us if you have any questions or comments about anything we talked about today, or marketing in general. You can visit us on our website, KickinItWithKapok.com, or on social media. We're on Facebook, Instagram and Twitter as Kapok Marketing.
This has been Kickin' It With Kapok brought to you by Kapok Marketing. Thanks for listening. We'll have something just as great for you next time.