“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.”
— Charlie Munger
In this series, I’ll walk you through the latticework of marketing to help you make sense of the complicated marketing landscape. Subscribe to my newsletter to get notified for future posts.
You may have marketer friends, but depending on who you talk to, they may give you a different job description. After all, according to Hubspot, there are at least 41 types of marketing.
In this post, I’ll walk you through the fundamentals of marketing.
Business 101 - Basics
Yes, we will get to marketing 101. But because marketing is intertwined with business, we need to start with business basics.
For a business to grow, it needs to maximize its profits (revenue minus cost). To maximize profits, it’s essential to maximize revenue and minimize cost. For simplicity, let’s assume the cost is constant, in which case we have one job: maximizing revenue.
Revenue comes from paying customers. To maximize revenue, you need to increase the total number of paying customers and/or increase price per purchase, or both.
Total revenue = total number of customers (or sales) x total revenue per sale
Or both. 🥳 🎉
Given that the price is often static, we need to increase the number of paying customers to increase revenue. That’s where marketing comes in.
Purpose of marketing
Marketing at its core is activities that enable more customers to find your business and take revenue-generating actions. There are many strategies and tactics, but they all ladder up to the same goal.
Marketing funnel can be simplified into into Awareness -> Consideration -> Conversion. Before someone decides to pay for your product, they must know about it to consider it, and then take action. Since not everyone aware of your product would consider it, and not everyone who considers your product will buy it, the size of the pool decreases as you come closer to the purchasing action. This is referred to as drop-off.
Forget about the beautiful TV ads or creative messaging for a second. For a successful marketing effort (i.e., that drives the company’s bottom line), you need to ensure that there are as many people as possible on the highest funnel. Ensure that the drop-off at each funnel is minimized so that you can maximize the number of paying customers. In marketing jargon, this is about maximizing reach and conversion rate at each funnel.
In the subsequent posts, we will apply this framework to understand any marketing campaigns.
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