Modules for Investors
Understanding marketing and strategy
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What is marketing?
Welcome to this new module in Smart Money. Here, we’re going to be taking a trip into a side that is often unexplored in most stock market courses - marketing and strategy. While it’s often looked at as an unrelated area, particularly for traders and investors, understanding how companies market their product, services and their brand is important. You’ll see how it influences the company’s stock price, which, in turn, impacts your investments.
That gives you a brief introduction about what this module covers, and why. Now, let’s get down to understanding what marketing is all about. And to help you do that, let’s introduce you to two businessmen - Rajiv and Akshay. Both men are in the business of selling articles of clothing to the same target audience - millennial women. But the similarities end there. Rajiv’s and Akshay’s business have many differences.
- Rajiv has been in the business for 7 years now.
- He has a fluid customer base of about 300 people.
- Of these, only around 20 are regular/repeat customers. That is, around 6% of his customer base.
- Akshay is new to the field - his business is only a couple of years old.
- He has already succeeded in growing his customer base to around 1,500 people.
- Of those, at least 350 - that is, around 23% - are regular/repeat customers.
So, why is Akshay’s business doing better than Rajiv’s, despite being in the field for a much shorter period? Let’s see what the two businessmen did differently.
- Rajiv relied entirely on the word-of-mouth of his customers to spread the news about his business. And aside from telling a few of his friends and family about his venture, he made no attempts to get the word out.
- Akshay, on the other hand, dedicated 25% of his budget to putting the word about his clothing business out and about. He made use of print media like newspapers and local magazines, digital media and messaging apps like Instagram, WhatsApp and Facebook marketplace, and of course, also relied on good old work-of-mouth selling.
See the difference between these two? They chose to make their business known to potential customers in different ways. Rajiv barely did so, while Akshay went all out. This difference in their approach and the resulting business growth shows the true weight of the importance of marketing.
What is marketing?
Marketing is a collective term for the set of activities that a business organization undertakes in order to promote the buying and selling of its products and/or services. This set of actions increases the buzz around the company and its offerings, attracts more customers and makes them interested about the company’s products and services, and ultimately, aims to increase the sales. Marketing can be done for all kinds of businesses, such as sole proprietorships, partnership firms, private companies and public companies.
In fact, marketing is also important at an individual level. For example, say you are looking to switch jobs. If you’re meeting with a potential employer, how you sell yourself and your skills to them - that is marketing too. But if you think it sounds a great deal like advertising, we understand. Often, people assume marketing and advertising are the same thing. Well, not quite. Let’s see how the two differ from each other.
Marketing vs. advertising
Think of it like a pizza. Advertising is one slice. But marketing? That’s the whole pizza itself. Advertising is just one part of marketing. It is a commercial process that aims to increase awareness of a company’s product or service among its target audience. Marketing, on the other hand, is so much more. It includes advertising, along with other processes like research , product development, distribution and sales, PR, and of course, customer support.
Let’s take up an example of marketing to understand this better. A company wishes to launch a new beverage product in its core business area - food and beverages. Here’s what it does as a part of its marketing campaign.
- It chooses its own website, WhatsApp, Instagram and Google as the preferred channels to get word of the new beverage.
- The product development involves a great deal of market and consumer research.
- Following the development phase, the company undertakes a product testing phase.
- Having ensured that it checks all the boxes with regard to quality, the company rolls out free testing samples via its website, Instagram and WhatsApp.
- It also makes use of Google’s PPC (Pay Per Click) program to increase website traffic.
- Following the official product launch, the company strengthens its customer support system to ensure that interested and existing buyers have active channels they can use to get in touch.
Here, the advertising was limited to Instagram, WhatsApp and the Google PPC program. The marketing, however, was more complex and spanned the entire length of the process, from product concept to product launch.
The history of marketing
Marketing, as a practice, has been around for centuries. Historians have traced back the practice of marketing to the Middle Ages, when England and Europe had ‘market towns,’ where merchants sold their daily wares. It continued and expanded in the 17th and 18th century, when trade between different countries opened up new channels.
Advertising also has an interestingly deep history. When Johannes Gutenberg invented the printing press in the mid-1400s, it opened up the new possibility of marketing through print media. Mass printing became possible for the first time, and printed advertising began to appear. This practice further picked up pace in the 1700s and 1800s, with magazines and billboards becoming the choicest marketing channels. Later, the 1900s saw radio, TV and telephonic marketing channels take the front seat. Fast forwarding to the late 20th century and the 21st century, we saw the rise and the rule of digital marketing channels. And that’s where we stand today.
Parallel to the growth and evolution of marketing as a practice, the world also saw the rise of marketing as a thought. The study of marketing emerged in the early years of the 20th century. Today, we know that marketing as an academic field is a big deal of its own. And over the years, marketing practice and marketing thought have both evolved to intersect without losing their own individual significance.
The different types of marketing
From our brief discussion in the previous segment, of how marketing as a practice has evolved, it is clear that there are different types or channels for marketing. Marketing campaigns are created by using a mix of these tools. Here’s an overview of the most popular types of marketing.
1. Print marketing
Print marketing, as we’ve seen, has been around for centuries. Newspapers, magazines, and even brochures and pamphlets all contribute to this type of marketing. The great thing about print media marketing is that it supports both text and images. Despite the evolution of non-print channels, print marketing continues to be relevant even today.
2. Video marketing
A bit outside the purview of print marketing, but a niche of its own, video marketing involves using commercials and short videos on TV and other channels that support video content. Video marketing’s major upside is that when done right, it can hold consumers’ attention for longer periods, making it highly likely to turn a lead into a sale.
3. Internet marketing
The era of the internet has no doubt revolutionized nearly every aspect of life. And marketing is no different. Internet marketing is now a major force by itself, and it has opened up multiple smaller subsets in marketing. The greatest advantage that internet marketing gives businesses is that it enables customer access anywhere, at any time.
4. Blog marketing
Blog marketing evolved as a result of internet marketing. Almost like the online version of print marketing, blogs were the first channels that businesses relied on to elevate the popularity of their products and services. Even today, when we have branched out into other internet-driven channels, blogs continue to be relevant for businesses.
5. Search engine marketing
Search engines like Google are the holy grail of marketing in the digital age. The concept driving this type of marketing is Pay Per Click (PPC). It essentially means that companies can pay search engines to prioritize links to their website, thereby increasing the chances of the website driving traffic up.
6. Social media marketing
Social media marketing is yet another kind of marketing that has evolved as a result of internet marketing. Social media platforms like Facebook, Twitter, LinkedIn, Instagram and more present diverse opportunities for businesses to reach out to more of their target audience. And social media marketing involves taking advantage of these opportunities.
SEO, or Search Engine Optimization, is different from search engine marketing. SEO involves optimizing the content on the company’s website, so it organically features higher on search engines. This is different from the PPC approach that search engine marketing involves. SEO is an ongoing and consistent effort that can pay off in the long run.
What is the purpose of marketing?
You may have now understood the what of marketing. But what about the why? Why is marketing necessary, and what purposes does it fulfill? Here’s a preview of the importance of marketing for businesses.
- It helps companies and businesses define and manage their brand.
- Marketing improves the awareness of a product or service among the business’s target audience.
- It serves to create and maintain the image of a company in the media.
- Marketing, when done right, can increase the revenue and profitability of a business.
Does marketing impact a company’s stock price?
Why all this talk of marketing in a course that’s about stock marketing investing, though? If you’re wondering about this, let’s explain. You see, investors are a sensitive bunch. Even the slightest change in any aspect of a company could unexpectedly drive their sentiment either way. And marketing is a huge driver behind how a business is perceived by the public. One marketing fail, and the stock price could come plummeting down. And one good marketing move could improve the company’s stock performance.
The link between marketing and a company’s stock price may be complex, but it certainly exists.
Here’s one of the many routes connecting these two points.
- A strong marketing campaign could increase the customer base of a company.
- This would directly result in increased sales.
- And that translates to increased revenue.
- Investors generally perceive a surge in the revenue of a company as a positive development.
- And if investors like a company, the demand for its stock rises, leading to a rise in the price of the stock.
- That, of course, will impact you if you are keen on investing in the stock market.
See how it’s a long, but certainly a clear way from marketing to stock price changes?
This is why in this module, we’re going to be looking at the marketing side of a company’s operations. What goes on behind the scenes, what are the famous theories and practices that companies use as a part of their own analysis, and how can you benefit from knowing these details? These are some of the key areas we’ll touch upon in the coming chapters. Keep reading and keep learning.
A quick recap
- Marketing is a collective term for the set of activities that a business organization undertakes in order to promote the buying and selling of its products and/or services.
- Advertising is just one part of marketing. It is a commercial process that aims to increase awareness of a company’s product or service among its target audience.
- Marketing, on the other hand, includes advertising, along with other processes like research , product development, distribution and sales, PR, and of course, customer support.
- There are different types of marketing, like print, video, internet, blog, SEO and more.
- Marketing can indirectly impact how a company’s stock performs.