Category: marketing, sales, PR, advertising

Business terms

A couple weeks ago I sent my business partner in one of my projects a list of indirect competitors.  He, a television producer without a business background, replied that they are not competitors.  That made me realize that the many terms used in business are very confusing and their subtleties are unclear.  So I put together a little glossary of some terms that are often misused/mistaken.

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Direct competition vs. Indirect competition:  Direct competition is pretty clear but what about indirect competition?  For example Netflix’s direct competitor is Hulu.  They’re both streaming video platforms.  An indirect competitor can be the simple antenna TV or something that can be a technology that is still in R&D.  Over the air TV broadcast isn’t necessarily a streaming on-demand platform but it is a substitute video entertainment/content delivery system.  So a competitor can be something that is obvious or something that is not so conspicuous.

Industry vs. Market:  Industry is what your company is in.  It is your competitors, your supply chain, and related companies.  They are essentially the parties that sell to the market.  The market is your customers.  They are the buyers of your product or service.  When industry publications write “market size” they are talking about the amount of money that can be made from the customers.

Sector vs. Segment:  Sector is a subsection of an industry.  The “telecommunications industry” for example is made up of thousands of sectors; the router sector, the ground wire/cable sector, the GPS tech sector, etc.  Industry term is only as broad as the scale of your analysis.  If you are analyzing just the GPS sector, then you can say “GPS industry” and then breakdown the relevant sectors within that industry.  Segment is a subsection of a market.  A segment of the “millennial market” is tween girls, etc. (when a segment is referencing a group of people, then it can also be called demographic).  A segment of the “restaurant market” is Mediterranean restaurants.

Revenue vs. Profit (income):  Revenue is the money that is coming in before costs, expenses, taxes, depreciation, etc. are taken out.  Once those pesky things are taken out you have profit.  There is gross profit which is revenue – expenses, and and net profit which is revenue – expenses – taxes.  Then there is retained earnings, which is another step!

There are many many more (branding, PR, etc.) so if you are unsure, please feel free to ask!

When is everyone having your product a bad thing?

When you are a luxury brand.

The next thing people might be wondering is, “aren’t luxury product expensive?  how is everyone buying them?”

To answer this, we have to take a step back and look at marketing.  Lots of people think marketing is just advertising.  Advertising is one part of marketing.  Abstractly, marketing is everything that goes into getting the product/service into the customer’s hands.  When you push the art of marketing further you get to branding (i.e. brand image).  Branding can be described as the “persona” of the product/service the company wants to portray.  Why will some people pay $5 more for a plain white t-shirt with a swoosh or an alligator on it than one without the logo?  The t-shirts are likely to have been made in similar factories, made from the same materials, and have similar levels of workmanship.  Branding!

Branding goes beyond saying a product is “good” or has “quality” and that the company “cares about its customers” etc.  Branding pushes marketing to a level that makes the product/service alive.  Excellent branding is one of several reasons Apple now has a market capitalization of $700 billion.  How does a company make a product “alive”?  This is a very complex answer but in short, having a consistent image that is portrayed through the unison of the product/service itself, advertising, sales price, customer service, and distribution channels.  Alexander Chernev’s Strategic Marketing Management goes into excellent depth on the various components of branding.

Michael Kors in Fresno, CA.
Image from http://fresnobeehive.com/archives/29400

So going back to the original question “when is everyone having a product a bad thing?” is what luxury handbag maker Michael Kors is facing now.  When everyone has your purse, then the exclusive element of its luxury image is weakened.  How is everyone getting your purses?  Through your distribution channel.  Michael Kors used to just sell their goods in their 231 stores.  However, after their 2011 IPO, they tripled their store count to 703 in 2014.  Although Michael Kors is enjoying high profits now, if it continues to sell in every market, it may fall into the same category as Liz Claiborne.

Wowza!

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That’s more than most small businesses make a year.  Nonetheless, go big or go home right?  Targeted advertising is most effective and efficient but if your target is the general US population, then few places match the Super Bowl for exposure.  This is why you won’t see wealthy but relatively niche players such as hedge funds advertise while companies like Anheuser-Busch InBev, Pepsi and Chrysler spend a lot of money.

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Whasssap!!!

Budweiser is not a great beer and Bud Light Lime is a terrible Frankenstein experiment gone wrong of a concoction.  However, one thing that Anheuser Busch more than makes up for its lack of delicious libations is its creative marketing and branding.  What is branding?  See my article on the Redbull Flugtag.

In its 150 year history it faced Prohibition, economic Depression and Recessions, and acquisition.  Nonetheless, it is still going strong despite of new ownership.  There’s a great 2 minute video summarizing Budweiser’s interesting history.

Branding

Would you buy tea from Nike?  Or shoes by McDonald’s?

Sure one might think Nike doesn’t have the facilities, operational know-how, etc. to make tea.  With the vast majority of its manufacturing overseas, Nike is more of a design and marketing firm than a shoe manufacturer, according to a Harvard Business Review article. 

Getting back on point, Nike can’t sell tea because of branding.

What is branding?

Branding is the personality of the company.  This “personality” helps determine what the company sells (it can be more than one or even a few things), where it sells them, how much they charge, how their ads look, etc.  In a previous post, I mentioned how Redbull had an event called the Flugtag and that it’d be difficult for Lipton to hold a similar event.  This is because an event where people dress up and launch a home-made contraption off of a pier does not fit Lipton’s brand image.

One brand that has crossed more product categories and demographics more than any other is Hello Kitty.  Beyond clothes and accessories, there are Hello Kitty branded motor scooters, toasters, airlines, and adult novelty toys (although this might not be an official Sanrio licensed product).  Yet another addition to the roster is Hello Kitty Beer.  Is there nothing this kitty can’t brand?!

RedBull Flugtag, marketing, and branding

Your Startup Guru case study - Redbull Flugtag

The RedBull Flugtag is an entertaining spectacle and a genius public relations event all designed with its branding in mind.

Last weekend I attended the RedBull Flugtag in Long Beach.  It was an entertaining spectacle with lots of energy and a massive audience.  The highlight of the event?  To watch little more than shoddily made objects fall into the harbor.

Would such an audience turnout for out for an event held by, say Lipton Tea?  Imagine the Lipton Flugtag.  Do you think hundreds of people would sign up to spend many hours to build something that will last for seconds in front of tens of thousands of people?  If Lipton sponsored such an event, do you think tens of thousands of people will even show up?

This is because the event (or more accurately) public relations event, is dependent on the brand image of the brand (i.e. RedBull) is maintaining (or pursuing if the brand is trying to reposition itself).  People associate RedBull with action, irreverence, fun.  Lipton?  Not quite as much.  However, Lipton has market awareness strengths they can flex that RedBull is ill-fitted for.

How you advertise, where you advertise, the contents of your advertisement is highly contingent on your brand image.

Pop quiz:  What is the difference between marketing and public relations?

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