The Science of Marketing

Marketing is a science

In this report, I am going to discuss the differences between marketing, sales and advertising. Then I am going to show you how marketing in my opinion is more of a science than an art. Everything in marketing can be measured, quantified, tested and subsequently improved. No different to designing and conducting any scientific experiment.

We will take a hypothetical company, and I will use some numbers to show you, how if you take a scientific approach to your marketing, you can have a profound impact on the business.

The difference between marketing, sales and advertising

Most people are unable to understand the difference between marketing, sales and advertising. They think that they are all one of the same thing.

Let’s quickly draw the differences. Marketing in my opinion is the process of bringing value to the marketplace. The market could be an individual, or a group of people. If you are in business the market is your customers, if you are looking for a job, the market is your new boss. If you are looking for a relationship, it is the person that you are looking to develop a relationship with.

People only buy products, services, ideas, because it is of value to them. This is what I call perceived value, and what I talk extensively about this in my book. My whole book, Marketing is King!, is about one thing, and that is how to bring perceived value to the market in different life situations. This is what makes marketing broad and multi-dimensional.

If you bring others the value that they want, desire, or the perceived value that they feel is important, you will not have a problem getting what you want.

Marketing is always about others, how to improve other people’s lives by bringing them the value that they want in the form of your product, service or idea, which is no more than the solution to their problem.

If you do you marketing correctly in the business world people will buy your product, or in a relationship, want to develop a relationship with you. Or offer you a job if it is a professional situation.

Business, marketing is the process of creating perceived value for your customers, and a sale is the result. As part of creating perceived value, you need to advertise your product, service or idea, to let people know that you exist. Advertising is a part of the value creation process.

In summary, marketing is the process of creating value; advertising is a part of marketing and sales is the result. If you do your marketing correctly and are able to create value in the eyes of others for your offering, you will have no problem selling it.

The problem with marketing today

The problem with marketing today is that most people think that marketing is sales, and the only way to sell is to advertise. The major problem with this approach is that if you advertise things that you may think are great and others do not see value, you are wasting your money.

Marketing is about bringing people the value that they perceive to be important. If you bring them this value, you will have no problem selling your product, service or idea.

You need to take your shift and emphasis from what you think, to what others are likely to think of you. Most people fall into the “intrinsic trap,” they know that their product, service or idea is really good, it has intrinsic value. But people don’t buy intrinsic value, they buy perceived value, value that they perceive to be important.

Most business owners have been trained to think that marketing is sales, no sales is the result of doing your marketing correctly, marketing is about

1. Finding out up front, what is important to your customer, what result are they looking for, when they buy your product service or idea. Let’s say you sell Heating Systems. People are not buying heating systems, they are buying the result that that heating system will deliver to them. People always buy the product of the product.

2. Once you know with laser sharp accuracy, what it is your customers want, value and desire, then you can develop a promotional or advertising campaign to meet this need.

The result of this advertising campaign will be the sale. Your advertising is then not just letting people know that you exist, but what problem you can solve for them. The goal of advertising is simply to sell your product, service or idea, not to simply let people know that you exist.

Don’t fall into the trap

Today, most business think that marketing is a unnecessary evil. Why? Because they are unable to quantify any of the results of their marketing efforts. They are unable to trace their marketing spend to any tangible sales. All they know is that if they did not advertise, no one would know that they existed, and as such they would not have any customers. So more out of fear than anything else, they will open up their wallets to advertisers.

But I know several companies that have built $100mn organizations without any formal advertising. Because the best form of advertisings is always word of mouth.

Marketing is not something that you do out of fear, it is something that you do to make money. Leave the fear business to people that sell insurance. Very shortly you will see the impact of treating your marketing like a science.

As I point out in my special report, unless you can trace the sales back to your marketing efforts, simply don’t do.

Just because someone comes up and offers you advertising space at a discount, does not mean that you should take it. It may solve their problem, but does it get you sales? You need to think rationally and not emotionally when it comes to marketing.

You have been programmed to think, and believe that marketing dollars cannot be traced, measured or tracked. This is simply not true. Every dollar that you spend on your marketing should , be held accountable, and it can, as you will see shortly.

Don’t ever, allow anyone to take a dime from you in the future, without them telling you what potential sales this will bring in for you in the future.

The whole basis of me writing this report is to show you that marketing is a science, everything in marketing can be measured, monitored and quantified, just like a scientific experiment.

As a trained scientist, I am going to show you how to treat the marketing discipline as a science, and when you do, you will be amazed at the results.

I am a “ results based marketer.” Please also read my special report number 28, where I explain in great detail my mindset and philosophy with respect to this.

In this report, I show you how marketing is an investment spend. You always should be able to quantify your marketing spend, and determine how much it makes you.

Any one that tells me that they cannot afford to spend any money on marketing, is really saying that they cannot afford to spend money on ineffective marketing, which is something that I totally agree with.

Marketing is simply the next level of investment for any business. It was just like when you started a business, you made an investment. In the same way, marketing is about investing to get customers!

As a business owner, you have been poorly programmed to think of marketing is selling, and the only form of selling is advertising. But there are many other ways to get your message to customers, via referral systems, joint ventures with people in complimentary businesses, webnars, seminars, etc.

Conventional print advertising as I explained in my special report number 28 is the hardest, most expensive and usually most inefficient way to get your message to potential customers.

As I have shown you, marketing is not sales. Sales is the result of you doing your marketing correctly. Also marketing is not advertising, advertising is merely a component of sales.

Now you understand the relationship between marketing, sales and advertising. And you understand that it is not an unnecessary evil, it is actually your opportunity to make money. It is an investment spend. Let’s talk more about how the investment spend works, by simply looking at it as a science.

The Scientific Math of Marketing

To determine if something is a good investment spend, you need to do some math. So now, we are going to take a simple company, and do some math to show you how marketing is an investment spend.

Case Study: Typical Company XYZ Vital Statistics
Sales: $1.25mn
Customers 250
Average Size of transaction 5,000
Capacity Utilization 75%
Attrition / Lost customers 10%
Inactive customers 50
Hot leads 50
Re-purchase time frame 6 months

1. Lost opportunity

In the above case, the company is running at 75% capacity. This means that it is loosing 35% of its revenue, Or $350,000 per year. This is the opportunity cost of not taking advantage of the full capacity available in the organization.

Most business owners seldom ask the question, how much money am I loosing by not running my operation at full capacity? They simply accept the whatever they can get.

If you are a hotel, restaurant, airline, etc. The amount of time that your hotel (Occupancy), restaurant (number of tables) Airline ( Number of seats ) are empty is really how much money you are loosing.

This is your market opportunity. This as I have shown can very easily be quantified. And this what you can take advantage of through effective marketing.

2. Advertising

All advertising dollars can and should be quantified and linked backed to sales. If your company is not generating any sales from its advertising, simply stop it. Don’t live in fear that if you stop , people will not turn up. You are fooling yourself.

If you don’t believe me, offer people $1 to respond to you if they read your ad. You will be very surprised at the result. Also try stop running your ads for a while and see what happens to your sales.

There are literally thousand of forms of advertising. I am not saying that advertising does not work. It does, but you need the right one. The one that is suitable for your product, and target audience. E.g. I would not recommend advertising high tech optical software on T.V.

The challenge is that no one knows which form of advertising will work for you. And there are really thousands of forms of advertising. You need to “ home in on the right one.” This means one that that can generate you the highest return on your investment.

You may currently use T.V. if you are a home improvement company, but you need to also try direct mail, letters and post cards to people that are likely to re- model their house. You can buy or quite easily rent this list of these people.

Then you need to measure and quantify the impact / return of both. The magic word in science and in marketing is called TESTING. You are testing to see where you can get the maximum return for your investment. The quickest way to make money in business is by doing effective advertising. Advertising that actually sells products for you, vs just makes you feel good, or gets people interested.

Having said this, most business owners will simply accept any form of advertising, that comes their way, because it is either available, or someone offered them a special deal. As you can see, if you are to get the most / maximum out of your marketing dollars, you need to test different mediums, then amplify the one that works.

The worst mistake that you can make in marketing is to assume that the medium or promotional vehicle is working.

Marketing is all about testing, no different to a scientific experiment. Having said this, no business that I have ever met tests anything. They quite happily give their money to an advertising agent, and assume it will generate sales.

You can and absolutely must test everything. If you don’t, you will never know which promotional vehicle is giving you the “maximum bang for your buck.”

Marketing in the business world is very simple, it is about getting the right message to the right person, via the right messenger.

Marketing = Message x Messenger

The message is your value proposition, or the reason that someone would want to buy from you. The messenger is the medium or your promotional vehicle. If people are not buying your product, service or idea, it is only because of one or two reasons

1. Either the message is not effective, or compelling
2. The messenger is not delivering the message

To maximize your marketing efforts, you need to maximize both the message and messenger. And this comes through testing. Only if you are sales are going through the roof, do you know if you have found the right miix.

The mix is the secret to marketing, being able to find out, what the right message is, and how best to deliver this based on the thousands of promotional vehicles available.

To say that advertising is an unnecessary evil is not correct. This means that you are doing the wrong form of advertising. It means that you are not quantifying or measuring your marketing effectiveness.

It means that you cannot trace back your marketing to sales dollars. It means that the only people making money from your marketing are the people that you are paying to do it for you.

The right form of advertising can generate you a lot of money, and it should! One company, Posatcard Mania, send out 72,000 cards per week. They have both the right message and the right vehicle. ( Messenger )

They are simply a print shop. But they spend $22,000 per week on sending out postcards to prospective customers. The results, close to $10mn in sales. Maybe $1mn per year on marketing to generate $10mn in sales. This is what you call a good investment!

They are one of the fastest growing companies in the U.S.A!

If you say that your marketing is not working, it simply means that you have not found the right mix of message and messenger.

All you need to do is to test different alternatives, to find out what works best for your situation.

There is a direct correlation between marketing and sales. It is linear. The amount of sales is in direct proportion to your marketing. The more value that you show others, the more they will buy.

One of the first things that I do as a results based marketing consultant is “marketing asset allocation.” I look at all the different forms of advertising that people are using, then quantify the results from each. Then simply invest more in the ones that are generating sales, and eliminate the ones that are not.

This way, you insure that you are maximizing your marketing dollars.

3. Formalized Referral Systems

Most companies usually get referrals, based on the quality of work that they have done. But nearly all of them make the same mistake as with advertising. They assume that people will give them referrals, like they assume that whatever form of advertising they choose will work and bring in the sales. When again. Their marketing can be quantified, measured and results predicted in advance.

In the case of referrals, you need to be proactive and set up formal systems that allow you to manage the referrals process in a systematic and logical manner.

Let me show you the math of a formal vs informal referral systems

Informal Referral System

Most companies that don’t have a formal referral system, referrals usually average under 10%. Assuming that all the referred customers became paying customers, the Math would be as follows:

Current customers x Referral Ratio x Conversion Ratio x Avg Size of Transaction

250 x 10% x 100% x $5,000 = $125,000

This sounds very respectable. But let’s now compare this to when we implement a formal referral system

Formal Referral System

Let say now that we proactively call all our existing customers, we get them to refer us to at least three prospective customers. We call all these people and are able to convert 100% of these to paying customers. What is the impact of this?

Current customers x Referral Ratio x Conversion Ratio x Avg Size of Transaction

250 x 300% x 100% x $5,000 = $3.75mn

Investment? Maybe a few hundred dollars for phone calls. Now you can see the impact of systematizing, formalizing and designing your marketing correctly, like a scientist would!

Is it worth the time and money to put in formal referral program vs ad-hoc, probability based ones? It’s a no brainer! It’s one of the best marketing investments that you can make. Word of mouth is always the best form of advertising.

4. Formal sales training

It is a fact that formal sales training can increase your sales effectiveness. Doug Hall in his book Meaningful Marketing, he shows us that a 1% increase in your sales effectiveness, will increase your sales volume by 6.5%.

Again, we have facts to decide, if this is a good marketing investment. Once you master simple sales techniques you will be amazed of what happens to your sales revenue.

Some basic sales techniques are

Always show people what you can do for them. Don’t just tell them what you can do.

Follow through on every action, mailing, call, meeting etc

Know the 5P’s of marketing

Prior
Preparation
Prevents
Poor
Performance

You must prepare before you meet or call anyone.
Know that selling is no more than helping. Helping others solve their problems.
Know that people don’t buy products. They buy the results that these products deliver.
Know that sales is a process not an event

Once you are trained in sales, your conversion ratio’s will shoot through the roof.

Conversion of suspects to prospects
Prospects to customers
Customers to referrals
Referrals to more customers
The ability to cross sell
The ability to up-sell
The ability to get customers to buy more frequently.

Simply doubling the time in front of your customers will most probably double your sales!

If you read the chapter on sales in my book, or you took a course on sales. I guarantee your sales effectiveness would increase by at least 1%. What does that mean in dollars for this company? That is another $81,250 to the top line! Just with an investment of maybe a few hundred dollars investment.

5. Work your database

Most companies have no idea of the power and impact of working your database. A database is your second most prized asset any company has after its employees.

Large corporations simply do not use their database, small companies just do not have one. The closest thing that they have to a database is their accounting system.

The most important thing to know about databases is that they contain three types of customers

Present Past Potential

Each calls for a different strategy.

Present: Get referrals from
Past: Reactivate
Potential: Convert to customer

Plus all the marketing activities can be quantified. I already showed you the math of getting referrals from all your present customers. Now let me show you the math of reactivating past or inactive customers.

In this example, we have 50 past or inactive customers. It is a well known fact that by simply calling all past or inactive customers 25% will come back, that is about thirteen.

Or in dollar Value 13 x 5,000 = $65,000 in this case. The investment again maybe a few hundred dollars.

Again, marketing can be quantified and the results predicted in advance, like any scientific experiment.

Now let’s turn to our prospects, or people that have shown some interest in buying. Simply by sending these people a direct mailing, reminding them what a good value your product, service or offering is, you will get at least 20% to buy. Since they are already well qualified.

The math would be as follows: 50 x 20% x $5,000 = $50,000

Again, with a simple investment of a few phone calls, and letters. You don’t need to run any huge ads.

6. Get your customers to buy more frequently

If the above example, the re-purchase time-frame is 6 months. A simple reminder, or maybe making a deal in advance that would lock in your customer to only buy from you, would give you a 100% increase in sales.

Again the effort and the result can be quantified.

7. Stop attrition

Attrition is loss of customers. Most business owners have no idea of how much business they are loosing due to attrition. Simply stopping the bleeding will put these sales to the top line. This is done through putting in place customer service programs.

Summary

Marketing in my opinion is more of a science than an art. It is about testing, not assuming. What gets measured only gets better! Everything in marketing contrary to believe can be tested and measured and subsequently improved. I have shown you numerous examples here.

Don’t let anyone tell you that you need to continue to run ads, if you ads are not making you money, stop them. Because if you listen to them, you are simply making them rich.

Simple calculations and logic can make a huge difference in marketing, like they can in any scientific experiment. But you need to plan, think, prepare and be willing to test.

You need to run the numbers, like you do when preparing a financial statement or projection. Marketing is no different. Determine how much you are going to spend, determine the result, compare it to other marketing alternatives, and then determine if it is a good investment.

Marketing only has one goal and that is to get you more customers and generate sales. It is the revenue generator.

You need to continue to test, until you find the absolute optimal thing, that works best for your business. Most people who are inexperienced in marketing will usually get “burnt,” because they try one form of promotion and it did not work.

Most business owners say that they have tried different marketing approaches, but it was a waste of time, they got no sales. But, when I then ask them, did they change the message, did they change the messenger, and if so, how many times? There response is usually that they did not.

Again, the secret to marketing is getting the right mix. The right message, to the right person, using the right vehicle.

This takes time and patience and of course a lot of testing. This is what makes marketing a science.

You need to change test the headline of your ad, which us marketing people call the ad of the ad. You need to test the body copy. Or the main information.

You need to test the call to action. Etc.

Then you try different messengers, T.V., Radio, Print, Trade Shows etc, until you find out which works for you.

The magic word in marketing is called TESTING.

Test until you get it right, don’t assume. Keep testing, not once, but until you know what works. Then amplify like crazy. This will make you very successful. Believe me it is worth the effort.

As I close, I can only remind you of one thing. Most companies unknowingly are limiting the amount of business that their customers can do with them. They

Limit the amount of customers they can attract, by not having formal referral systems. In our example here. I showed you how we could easily have doubled the sales of XYZ Inc, if we implemented a formal referral system.

Limit the amount people can buy. This is by not having people professionally trained in sales. This way, they are not really selling a total solution, but components thereof.

Limit the amount of times that people can buy from them, by not controlling the frequency of times that people can do business with them.

Loose business due to attrition, because they never capture customer feedback. Attrition is like bleeding, you don’t know how bad it is, until it hurts.