Discover more from Learning by Proxy with Vivek Srinivasan
Marketing Vs. Sales
In the digital world that we live in, it is easy for startups to confuse sales and marketing especially in a new paradigm. Are Google Ads - Sales or Marketing?
Marketing is a long term investment. You determine the way you want people to perceive you, craft communications to that effect and find the best way to reach the customers. You try to ensure that people can understand your philosophy and gravitate towards you. Marketing creates long term value for the company and if done right creates re-collection. It is about making an emotional connect that can last over a long period.
By comparison, Sales is a short term activity. Sales is about here and now. It is about bringing in the revenue. You seek out the customers, create a lead pool, introduce the product or service to them and then sell to them. Sales is very transactional and each subsequent purchase requires direct engagement with the customer to drive purchase.
When was the last time you saw an Amul ad? Or for that matter Parachute Coconut Oil? I am sure many of us who are a product of the last century would even remember the jingle that Maggi used.
The brand-building that was undertaken by these companies over the years continues to serve them in terms of bringing them business. The marketing was powerful and has been delivering revenue to these companies. This is not meant to discount the distribution and many other functions that need to have performed remarkably well to deliver the results.
Marketing is powerful. And can deliver long-lasting value to a business if it is done right and makes the right connect with the customer. Typically, marketing is undertaken by B2C companies and Sales is the tool for B2B companies.
Exporting this analogy to the digital world
Booking.com became a reservation juggernaut by riding the Google advertising engine. They make sure that they pop up at the top of the page which in turn drives purchases and the growth of the business. Have you ever heard anyone suggest Booking.com as the site to visit for a booking requirement? I have not.
By comparison, Airbnb has driven its growth on the back of the focus on SEO and at the same time, they also invested heavily on branding and marketing. The PR and the buzz around the brand have been huge.
Fast forward 10 years and one of the biggest problems that Booking.com is faced with, is not COVID, it is what they call ‘Google Tax’. The company continue to be dependent on each lead that is driven by Google to them. This translates into a certain amount of money being paid to Google for each booking. While that figure does not hurt for a small company, it is very painful for an organisation at scale.
Airbnb was wildly unprofitable for a long time but as they reach profitability, every new customer that comes to the company is not as expensive as the early customers of the company. Their brand drives people to them instead of specific sales activity.
More to the point, paying Google or Facebook is akin to sales activity. Startups should start focusing on certain marketing and brand-building as well. Far too many startups are dependent on running these ads to drive sales of their products and services and over time it becomes difficult to wean off them. It becomes easier to lean more and more on these two companies to drive more customers, who will drive revenue; rather than taking the effort to communicate with the customer.
In the very early days, revenue is important and by extension, sales is a critical activity (even for B2C). But at the same time thinking actively about Marketing and establishing a position is important for the long term health of the company.