What is Marketing?

Robinhood Learn
Democratize finance for all. Our writers’ work has appeared in The Wall Street Journal, Forbes, the Chicago Tribune, Quartz, the San Francisco Chronicle, and more.
Definition:

Marketing is the process that companies go through to increase awareness about their products and services and convince consumers to buy them.

🤔 Understanding marketing

Marketing is one of the primary activities that companies take part in to increase sales in their business. Companies use marketing to educate consumers about their firms and increase name recognition. They also use marketing to set themselves apart from the competition. It’s how companies grab the attention of their target audience and show them why they should buy what they have to offer. Companies use several different types of marketing, including internet and print marketing. Many companies have internal marketing departments that are responsible for all of the marketing activities within the firm. There are four basic concepts that companies typically use in their marketing efforts: product, price, place, and promotion.

Example

Marketing is how companies capture the attention of their audience. Some marketing efforts are so successful that they capture the attention of just about everyone. One famous example of a successful marketing campaign was the California Milk Processor Board’s “Got Milk?” campaign. Milk consumption in California had gone down, and the board put out the ad to get people drinking milk again. Despite existing before the days of social media, the marketing campaign went viral. The campaign made its way into more than 70% of American households and increased milk sales nationwide.

Takeaway

Marketing is like going fishing…

When you go fishing, you use all different kinds of bait to get the fish to bite. You learn about what the various fish are attracted to, and when they’re most likely to be active. Marketing is similar in that it requires you to get to know your target audience. You figure out what they want, and then you use it to get them to bite (aka buy your product).

Ready to start investing?
Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

Tell me more…

What are the objectives of marketing?

For each marketing campaign, companies usually have a particular objective in mind. This objective is what they hope will be the result of the campaign.

The objective for a specific campaign might be broad, such as increasing brand awareness. They also may have a more specific goal, such as making sales on a particular product.

Let’s talk about some objectives that companies will often have for their marketing efforts.

Create demand

One of the objectives a company might have with their marketing efforts is to create demand for a product. When a company is coming onto the market with a brand new product, they have to educate consumers about the product and show them why they need it.

Consider the example of a company like Uber. Sure, taxi services already existed, and plenty of people used them. But Uber brought in a completely new business model. You may not have realized you wanted to be able to order transportation services from an app.

Before Uber could become successful, they had to convince people why they needed their product in lieu of a traditional taxi.

Increase brand awareness

Another marketing objective is to increase brand awareness. There are plenty of companies out there who produce a good or service that is already on the market elsewhere.

Their goal isn’t to educate consumers about the product itself, but to increase brand awareness, so that people buy the product from them instead of from someone else. They need to grow awareness about their company and help to share the public perception of their company.

One of the reasons that brand awareness campaigns are so critical is that companies want to make sure that the next time they come out with a new product, people are already paying attention. If people are already paying attention, they might have higher conversion rates (purchase rates) when the company runs a marketing campaign to promote that new product.

Decrease customer turnover

Another goal of marketing campaigns is to decrease customer turnover. Marketing experts agree that the cost to retain an existing customer is far cheaper than attracting new customers.

Getting existing customers to continue to spend money can have a significant impact on a company’s profit margins. The less they’re spending on each sale, the more of each purchase goes to the company as profit.

Grow revenue

Ultimately, companies need to be profitable. Whether they’re putting forth a marketing campaign to increase brand awareness or decrease customer turnover, the end goal is to make money.

Some marketing campaigns, like those meant to create demand or increase public awareness, are done in the hope that those consumers will eventually make a purchase.

Other marketing campaigns have a far sharper focus on sales. For example, suppose a store is having a massive Black Friday sale. They aren’t doing a marketing campaign in the hopes that those consumers will purchase someday. They’re doing the campaign in the hopes that those consumers will buy during the sale on Black Friday.

What are the different types of marketing?

There are many different types of marketing that companies might use. The kind of marketing a company chooses will depend largely on their marketing objectives and what they’re selling.

Here are some popular forms of marketing:

Paid advertising

Paid advertising represents what many of us perhaps think of when we hear the term marketing. Paid advertising includes the air time and print space that companies purchase for TV, radio, newspaper, and magazine ads. Today, companies use more modern marketing practices such as paid advertising on websites and social media to drive internet traffic to their product pages.

Influencer marketing

When companies engage in influencer marketing, they pay someone who has influence over the buying decisions of others to promote their product. Influencer marketing has become more popular with the rise of celebrities and content creators being active on social media platforms. Companies are banking on the fact that if you see your favorite celebrity promoting a particular product, you’ll want to give it a shot, too.

Relationship marketing

Relationship marketing is a strategy companies use to build a long-term relationship with their customers. This form of marketing places a premium on retaining customers rather than just bringing in new ones. Companies might use relationship marketing by having and advertising a rewards program.

For example, Domino's allows customers to earn points for each pizza they buy. Once they’ve purchased a specific number of pizzas, they get their next pizza free. Domino’s is hoping that once you purchase from them, you’ll be one step closer to that free pizza and will continue to go there instead of to the competitor down the street.

Direct mail marketing

Direct mail marketing occurs when a company sends marketing material to your home through the mail. Companies might use this method as a way to target newly moved-in homeowners, in the hopes of getting them to shop at their local business instead of a competitor’s.

Viral marketing

Viral marketing is a technique that companies use to help their message go viral online (meaning consumers are organically sharing the message with their friends and family).

An example of viral marketing would be the ALS ice bucket challenge, which was a marketing effort on the part of the ALS Association to raise awareness and money. Millions of people participated in the challenge and shared it on social media, and the marketing campaign raised $115M in just eight weeks.

Green marketing

In the case of green marketing, companies are promoting products that are green (meaning they’re environmentally friendly). A company might promote the fact that they use environmentally friendly packaging.

For example, the food brand Alter Eco markets based on its packaging being recyclable and compostable. A brand might also use green marketing if the product they sell is environmentally friendly. For example, Rothy’s shoe company uses recycled plastic water bottles to produce its shoes, and it uses that information in its marketing efforts.

Keyword marketing

Keyword marketing is a strategy companies use to target consumers based on the keywords they search online. The goal of this strategy is to appear at the top of the search results in a search engine like Google. Companies might do this by organically optimizing their content to appear in the results for particular keywords, or they might pay for ads to appear at the top of those results.

Guerilla marketing

Guerilla marketing is when companies use surprising and unconventional strategies to get people’s attention. People pay attention to these marketing techniques because they are outside the norm.

What are the principles involved in marketing?

There are four basic principles that companies must have in place to create a successful marketing strategy. Those principles are the four Ps of marketing: product, price, place, and promotion.

Product

A company’s product is what it offers to potential customers. It can refer to a tangible product you’d buy in a store, but it can also refer to a service that the company provides.

For a company’s marketing to be successful, it has to understand exactly how its product benefits consumers, and how it is a better choice than whatever product their competitor is selling. Knowing the value of their product will be critical to putting together a marketing campaign.

Companies not only need to understand what their product is, but also who is consuming it. Doing market research to understand their target audience will be vital to promoting their product because it will help them to hone their promotional message.

After all, the way you would promote a pair of shoes to a teenage boy is not the same way you’d promote a pair of shoes to an older professional woman.

Price

The next component the company must consider is the price at which they’ll sell their product. There’s a lot a company has to take into account here. First, they want to ensure the price they’re selling the good at is one that consumers are willing to pay.

The demand has to be there at the price point they choose. They also have to consider what it costs them to develop their product and price their product high enough to see a good profit margin.

Depending on the company’s goals, the price of their product might be a part of their marketing message. For companies who want to differentiate themselves from competitors by having the lowest prices, including the price in their marketing makes sense.

On the other hand, a luxury clothing brand probably won’t include the price in their marketing efforts, because the people buying those products aren’t looking for the most affordable item on the market.

Place (aka distribution)

To sell a product, companies have to get it in front of consumers — They have to distribute it.

For many stores, this requires a physical storefront. Many companies also sell their goods through ecommerce. In this case, it’s not so much about getting the product on a shelf as it is about putting up a web page where people can find the product.

Knowing where to distribute a product requires a company to understand their target market and understand where they are likely to shop. This information can help to ensure they get their product in front of the people most likely to buy it.

Promotion

The final principle that goes into effective marketing is the actual promotion of the product. When promoting a product, companies will choose different types of marketing tactics.

For example, one company might decide to use influencer social media marketing, green marketing, and paid advertising to promote its new, environmentally friendly product.

Why is marketing important?

The “build it, and they will come” mentality isn’t one that works in most businesses. Instead, companies have to devote resources to increasing awareness and bringing attention to what they have to offer.

First of all, marketing helps to inform consumers that your product is available. They might have a need but don’t yet know that there’s a product to address that need. Effective marketing can educate them about that.

Marketing also helps companies to craft their own reputation. There are many companies that bring to mind certain thoughts or emotions based on what you’ve personally experienced or have heard second-hand about the company. Marketing allows companies to help influence the way consumers see them.

Marketing also allows firms to build and maintain relationships with their customers. Marketers want to get the attention of new consumers. But they also want to ensure that customers keep coming back again and again. Marketing can help to reach new and existing audiences.

Finally, marketing helps companies to increase sales and bring in revenue. The ultimate goal of marketing campaigns is to get customers to spend money — and to help to create profit for the company.

Ready to start investing?
Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

2164083

Related Articles

You May Also Like

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

1771482

© 2022 Robinhood. All rights reserved.
Follow us on

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

1771482

© 2022 Robinhood. All rights reserved.