Friday, March 18, 2011

Glossary of Fundamental Marketing Terms

I'm always surprised when I talk to clients how many business owners don't know some of the fundamentals of sales and marketing.

Here is a quick list of sales and marketing terminology and basic premises. If you're a business owner or entrepreneur you probably know most of them, but they are also fundamental that issues are one new item, it'll be worth your time.

The List -- The List is a throwback term to the days when direct mail marketing was a cornerstone. Every good direct mail company had lists. These lists were highly prioritized. Companies purchased general mailing lists, but also accept customer lists and "hot lists" that contained names of frequent repeat customers. Today, the mailing lists are less important because more people are using e-mail. It's still a good idea to keep a hot list for direct-mail purposes, but for e-mail the list is simply an opt-in list of e-mail subscribers. It doesn't cost any more to send e-mail to dead addresses than live ones, so you're less concerned about percentages and more concerned about quantity.

List building -- This is going to be complicated. It's the process of building your list! Okay, it's not complicated but it is immensely important. Direct mail and e-mail lists degrade over time. Additionally, your listing goes stale once your customers have purchased a number of products. You want to constantly be adding people to your lists. Make sure you have a distinct process for list building, and you'll want to track the costs associated with building.

Direct sales, or Outside Sales -- Direct selling is when you're meeting someone person to person. Even with Internet businesses, many of them rely on a direct sales strategy. Direct selling has two methods. One method is used by insurance companies, real estate, party-based MLM and others where you're selling direct to consumer. It also can be used in business-to-business selling if you're dealing with a business group that's geography-based rather than niche-based. Key account selling is the other method, and our next glossary term.

Key Account Sales -- This is a method of direct selling for business-to-business that's highly targeted. Each salesperson has a list of key accounts they service. The goal with this type of selling is large dollar value sales, or ongoing repeat customer sales. Manufacturers' key accounts would be distributors or retailers. Raw material key accounts would be manufacturers. Other examples would be pharmaceutical sales, consulting firms, IT companies and office suppliers. Key account sales can be Outside or Inside Sales.

Inside Sales -- Similar to direct selling, but the primary techniques are telephone and e-mail rather than traveling by car or airplane. Inside sales is actually growing considerably because more and more companies are relying on web-based technologies to hold meetings. Many web-based companies have solid inside sales forces as well. Dell Computer would be a good example of a company that uses its website and inside sales staff to sell to the consumers. Other companies such as CDW have sales people who manage corporate accounts. Inside sales has three primary methods; outgoing sales or telemarketing, incoming sales such as customer service reps for utilities or online retail, and key account which is a blend of the two but more targeted.

Telemarketing -- Everyone knows the definition of telemarketing, it's the people you cuss out when they call you at dinnertime. With do-not-call lists, direct to consumer telemarketing has declined, however telemarketing is still a solid strategy for business-to-business marketing. The key is having an organized campaign. Create prospect lists, then funnel them through the sales process.

The Funnel -- The Funnel is the process of narrowing prospects, down to hot prospects, down to customers, and down to repeat customers. The process is critical. The concept of the funnel is to have a clearly defined process with measurable results. How many prospects or leads to you have to drop in your final to yield X number of new customers? How can you refine the process to improve those ratios?

ROI -- Return on Investment (ROI) is the expected number of sales you get for each dollar that you spend marketing. When companies want to increase sales, they use this number to determine how much additional money to spend marketing. Then, after a marketing campaign, they gauge its effectiveness based on the adjusted ROI number. Effectively tracking ROI can be complex, however inevitably it separates the rapid growth companies from the rest. Rapid growth companies are able to grow because they are investing huge quantities of money marketing based on predictable results.

Call to Action -- Every sales pitch requires a call to action, whether it's an eBay auction, or a multimillion dollar presentation. Every marketing technique for campaign needs to have a very specific action they want the audience to take. Sometimes it's "buy now" but other times it could be "subscribe to our newsletter" or "sign-up for a free trial". When tracking you want to clearly define each marketing campaigns call, then base ROI numbers on the number who answer the call.

PPC -- Pay-per-Click is a type of online advertising where you pay the publisher based on the number of clicks you get to your website. AdWords and Facebook both utilize this type of advertising.

PPI or PPM -- Pay-per-Impression marketing is where you pay each time your ad is shown, regardless of whether the customer clicks your ad. (PPM stands for Pay-per-Mil, or 1000 impressions.) This is most often used with banner advertising.

CPC or CPM -- These two terms are Cost-per-Click or Cost-per-Mil. This is a rate the advertiser charges. So PPC is the method, while CPC is the expense associated with the method.

Pay per Lead -- A more advanced pay-per-click style of marketing is where the potential customer visits your website from an advertiser's website and take some action, such as filling out a form or signing up for a newsletter.

Affiliate Sales -- Affiliate sales is wary publisher or list owner promotes your website or product without cost, however they earn a commission or the finder fee for each sale.

Spam -- Everyone thinks they know what spam is, but it's a term that is often misused. Some people call any form of advertising spam. In fact, the term refers to unsolicited advertisement. The term spam only applies to e-mail. Whether you want to see advertisements or not, visiting a website and seeing ads isn't spam. Some message boards, such as the community boards on craigslist, do not tolerate promotional messages. Frequently these are incorrectly referred to as spam.

CAN-Spam Act -- This is a California law that has become the accepted practice for e-mail promotion. Residents of California were happy with the federal law passed, so they passed a stricter code. The basics of the law requires that you have consent, implicit or explicit, before e-mailing someone with a promotion. The law also requires that the individual be able to opt out a future mailings. Finally, the law requires that each promotional e-mail include the physical address of the company during the promotion. This is a very general overview. If you plan to do e-mail marketing you will need to know more about this law. There have been few prosecutions so far, but the penalties are extreme.

I hope this gives you a little more information.

Please add additional marketing related words in the comments section below, as I know this is far from a comprehensive list.

Photo courtesy of Elektra Grey Photography
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