Are Marketing and Advertising the Same Thing?
It’s Not a Dumb Question…
If you’ve ever wondered whether there is a difference between marketing and advertising, you are not alone. Over 10,000 people asked Google this question last month alone.
And the answer is?
Not quite.
Marketing Defined
Let’s start by dissecting what marketing is. Simply put, a “market” is a group of potential customers. Market - ing, therefore, conveys the act of approaching that group of potential customers.
For example, if you do business at an open-air market, your marketing includes things such as:
How your products are presented
How friendly you are
Your reputation
How you present yourself
Your pricing
Your guarantees
The quality of your products
The banner at your booth
Etc.
In other words, marketing encompasses any experience your potential customer has with your brand.
But marketing isn’t just what you say about yourself - its also how your customer support team treats your clients, how organized your store/website is, and how happy your employees are.
This is why David Packard (of Hewlett Packard, HP) famously said, “Marketing is too important to be left to the marketing department.”
Advertising Defined
So how does this differ from advertising?
Advertising is paying for access to someone else’s audience.
Let’s go back to the open-air market example… how do you get more people to come to your booth?
You could:
Pay the shopping center to put up signs for your booth
Pay to be featured in the market brochure
Pay a social media influencer to visit your booth and promote you
Etc.
Radio, TV, Google, Facebook, Valpaks - anytime you are paying for access to someone else’s audience you are advertising.
Many business owners make the costly mistake of deciding where they will advertise (whose audience they will buy) before they have a solid strategy to “approach the market”. This is like choosing your weapons for battle before you know the terrain, the weather, or anything about your enemy. It’s effectively throwing hard-earned money into the wind.
To maximize your marketing budget, start with creating your strategy for approaching the market, then create messaging that aligns with your strategy, and THEN find the best place to advertise.
The Nitty Gritty
Okay, so with our open-air market example, what about the fee for the booth itself - does that count as advertising?
Yes and no.
Your accountant will likely consider the booth rental to be an operational expense because “cost of occupancy” is considered necessary for the business to operate (unlike advertising which is voluntary).
However, the three rules of real estate (location, location, location) also apply to most businesses. Sometimes the best advertising is paying a little more rent for a higher traffic location.
For this reason, my partners and I factor cost of occupancy into our calculations when we recommend an ad budget for you. In fact, our founding partner, Roy Williams, came up with the below equation to help clients calculate their ad budgets:
Start with 12% of your total sales, multiply by your average markup percentage, then deduct your cost of occupancy.
Here is an example:
If your business does $10,000,000 in total sales, 12% of that is $1,200,000. If you have a 92% average markup, you multiply $1,200,000 by 0.92 and get $1,104,000. You then deduct your cost of occupancy of $720,000/year and that leaves you with an annual advertising budget of $384,000.
As you decide how to approach the market and where to allocate your advertising budget, beware of leeches. Leeches are old-school marketing firms who charge you based on your budget and not on their progress growing your business. The problem here is, their solution to a lack of success with their advertising is “just increase your budget”.
My partners and I believe this is immoral.
If you agree and want a true partner in growing your business, we’re happy to connect with you.
You can send me your questions or connect with me further at MattWillis@WizardOfAds.com
