Nothing happens until someone sells something. Attributed to Thomas Watson, Sr., founder of IBM
Everyone knows what sales is
Sales is what makes the cash register ring, although these days not everyone may know what a cash register is. Sales is revenue, the top line, ka-ching, money in the door, the act of buying, the transfer of money in exchange for a good or a service. The aim of a profit-driven business is to bring in sales that exceed the cost of fulfillment and delivery. As we saw, Profit is what is left over after you subtract Costs from Sales.
Defining marketing is a little trickier, and even at Fortune 100 companies, the role of marketing isn’t always clear. Often sales takes the lead, and marketing plays a supporting or subordinate role. That is partly because sales is very easy to measure: either you have orders and cash coming in the door or you don’t. But according to Peter Drucker, the father of modern management, marketing drives sales. He wrote the following a long time ago:
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
A contemporary of Drucker’s, marketing Professor Phil Kotler, said that the aim of marketing is to make selling unnecessary. Marketing encompasses an entire array of activities that are designed to makes sales easier. Promotion, publicity, advertising, pricing, positioning, branding, messaging, communications, and distribution are only a few aspects of marketing. One issue is that measuring the effect of such initiatives on sales is difficult at best for many companies, especially brick and mortar enterprises. Marketing initiatives are designed to work together, and sometimes you can’t tell whether it was pricing, advertising, or store shelf position that caused customers to buy. John Wanamaker, owner of the first department store in Philadelphia, is famous for saying, “half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Online, it is easier to measure the effect of the elements of your “marketing mix,” as testing is much more precise. You can run A/B split tests where half of your visitors see one offer and the other half sees another. If one pulls better than the other, then you will see if you can improve the higher performer and discard the lower performer. The line between Sales and Marketing has become increasingly unclear, partly because of the Internet. If you can buy from a company’s website, is it due to Sales or Marketing or both? The answer may be academic, but there is no doubt that you need to focus on bringing in the money if you are to succeed in business.
Money brings with it a whole host of issues. Some of us are not well-prepared to receive money. Some of us are brought up with the idea that having money is bad or evil or that anyone who has a lot of money is dishonest. Such thinking can be a major obstacle on the way to success. Each of us needs to be sure that we are ready, able, and willing to accept money and success.
Pricing is another issue when it comes to money. I know many entrepreneurs who are afraid to raise their prices out of fear that their customers will go somewhere else. Or they themselves wouldn’t pay premium prices, so they don’t think others will either. We can’t go deeply into pricing here, but price and value have a lot to do with each other. Figure out how to add more value to your offerings, and you can raise your prices. You can also include guarantees and other methods of reducing buyer resistance and perceived risk.