Acquisition Cost – The total cost to a business of acquiring a new customer. This may include marketing and advertising expenditure, discounts, special incentives and the costs incurred by salespeople visiting the customer. The customer acquisition cost is calculated by dividing Total Acquisition Costs by Total New Customers over a set time frame. ‘Acquisition cost’ may also refer to the cost of an asset after adjusting for discounts and other incidental costs.
Benchmark – A benchmark is a reference point against which things may be assessed or compared. In the business environment, ‘benchmarking’ typically refers to the process of realistically comparing products, processes and other performance parameters to best practice elsewhere. This may be a comparison with a specific competitor, the entire industry, or broad-based global best practice covering a wide range of sectors. The aim is to learn from others and compete more effectively by introducing better products and processes. The term ‘benchmarking’ is also used in other sectors, among them computing and quantity surveying.
Branding – The marketing practice of creating an image(logo), perception and public persona around a product, service or organisation, with the aim of giving it a competitive advantage in the eyes of its target audience. A name, logo, payoff line, symbol and advertising are all part of branding. However, true branding goes deeper than that and is considered by marketing experts to be the ‘promise’ that the branded item makes to its customer. Successful brands like Coca-Cola or Apple can take decades to build.
Brand Equity – The premium on value that a product, service or organisation derives as a result of having a positive brand image in the eyes of its target audience. Having strong brand equity frequently means a higher price can be charged for a product/service, or that the organisation will be preferred by customers, even if it is essentially similar to its competitors. The 2011 Brand Z Most Valuable Global Brands study found Apple to be the world’s top brand, with an estimated value of US$153-billion.
Brand Recognition – The extent to which a target audience is able to readily recognise a particular brand by its ethos and attributes. This may be through simple cues such as a symbol, slogan, jingle or spokesperson. Or it could be through a set of widely-recognised brand values, which many marketers argue is the most desirable brand recognition of all. For example, “innovative technology that looks good” could easily be associated with Apple, or “maverick company that looks after the consumer” are attributes commonly attributed to Virgin.
Business Mission – Also known as a ‘mission statement’, it is a written declaration of an organisation’s core function, intent, ethos and business direction. It may vary in length from one short sentence to several lengthy paragraphs, but should be as simple and concise as possible in order to be clearly understood by all employees, customers and members of the public. For example, the international chemical giant, Dow, has the following simple mission statement: ‘To constantly improve what is essential to human progress by mastering science and technology’.
Business Networking – A type of social network which exists purely to create business-related interactions and opportunities within the group. These can be formal, such as regular ‘drinks’ gatherings for members of the local Chamber of Commerce, or as informal as business owners located in the same street gathering for snacks at the corner pub. While these may be face-to-face interactions, the rise of social media has meant that many such business networks now exist purely in cyberspace. Linked-In is an example of this
Business Plan – A formalised way of stating a set of business goals. It should indicate the strategic direction of the organisation and its long-term goals, while also charting in broad terms how these will be achieved and the approximate timeframes. It should include a sober and level-headed analysis of the likely success of the business and may include a SWOT analysis of Strengths, Weaknesses, Opportunities and Threats. A business plan is important when seeking a bank loan or access to government funding programmes.
Click-Through Rate (‘CTR’) – it is a marketing term for measuring the success of an online advertising campaign. It is defined as the number of times an ad is clicked on, divided by the number of times the ad is shown to online users (impressions), expressed as a percentage. For example, if an ad delivers 100 impressions and is clicked on once, then the CTR is 1%. The relevance of CTR has fallen in recent times, with marketers now more interested in ‘conversion rates’.
Co-Branding (Brand Partnership) – is when two or more organisations agree to work together to create marketing or brand synergy from which all parties benefit. The benefit to the companies involved is typically better credibility, greater brand strength, and access to new customers or markets. Examples in South Africa include Standard Bank and British Airways teaming up to offer a credit card or the partnership between Wimpy quick-service restaurants and Engen service stations.
Collateral – Assets pledged by a borrower in order to secure a loan or credit, and which may be seized in the event of non-payment. For entrepreneurs, Collateral could include premises, equipment, vehicles, policies, or even the applicant’s home. In marketing terms, Collateral refers to materials which help to promote the business and may include brochures, flyers, newsletters, fact sheets, press kits, etc.
Competitive Advantage – The advantage that a business has over its competitive rivals. These can include a groundbreaking product, better location (closer to main markets, rail or road hubs), higher-quality personnel, a lower cost base, ability to provide greater product benefits, better after-sales service, greater brand recognition, unique brand or product image, etc. A competitive advantage should be relevant, unique and sustainable.
Competitive Intelligence – Gathering, analysing and acting upon information which has been gleaned about business competitors via legitimate means. The aim is to gain a Competitive Advantage or to prevent competitors from gaining an advantage. Methods of gaining Competitive Intelligence include monitoring competing product launches and product updates, scrutinising media reports, studying the opposition’s brochures and annual reports, monitoring stock exchange data relating to opponents, etc.
Conversion Rate – A marketing measurement of the percentage of a target audience who can be persuaded to take a desired action. It is determined by calculating the total recipients of the marketing activity (for example, recipients of a special offer) versus the number who take the desired action (for example, buy the product, sign up for membership or agree to a free trial).
Core Competency – A specific factor or set of factors that a business sees as being central to the way it operates and the products and services it delivers. Ideally, a Core Competency should be difficult for competitors to replicate and should have the ability to be leveraged across many products or markets. In simple terms, it is “what the business does best”. As an example, the Core Competency of the SuperSport TV channels is to provide high quality live and packaged sports coverage
Core Marketing Strategy – Is the central and key focus for an organisation’s marketing strategy. For example, Coca-Cola’s core strategy may be advertising, because this is the main way in which it maintains its brand image and enhances general awareness. However, its secondary strategies could include sports sponsorship, participating in grass roots community events, doing point-of-sale marketing activities, etc. By contrast, the Core Marketing Strategy of budget airline Mango may be to promote low cost fares via all available marketing channels.
Customer Relationship Management (CRM) – it is a strategy or collection of strategies to establish, maintain and improve relationships with the customers of a business. Usually this will involve computerised information systems which can record, store and analyse all client interactions, ranging from enquiries and purchases through to personal preferences, family information, complaints and product returns. The aim is to use all of this data to create an ongoing and personalised relationship with the client.
Customer Serviced – Similar to Customer Relationship Management, but usually a less formal and less technology-driven approach to servicing customers before, during and after purchase. The Customer Service strategy may include such basics as greeting a client within two minutes of them entering the store, smiling, staff identifying themselves by name, etc.
Direct Mail Marketing – The strategy of targeting an audience by using direct mail campaigns sent via the Post Office or delivered direct to mailboxes by other means. Frequently known as ‘junkmail’ it has lost impact in recent years due to negativity from consumers, the high cost of printed materials, slow delivery times and unreliable delivery.
Direct Marketing – The strategy of delivering promotional messages to a target audience on an individual and direct basis, rather than using mass market communication channels such as television, radio and print media. A feature of Direct Marketing is that it frequently encourages immediate response and a one-on-one relationship between marketer and client. Typical Direct Marketing channels include: email; text messaging, direct mail, telemarketing and social media.
Diversification – A strategy which reduces or spreads business risk by adding different product and services to a company’s portfolio. This is particularly important when new and formidable competitors enter a company’s traditional market, or economic downturns hit a particular industry sector hard. Many long-established businesses also find they need to diversify as a result of changes in society and customer taste. An example is Coca-Cola which, despite being the industry leader in the cola market, has diversified into drinks like Fanta, Sprite and even bottled water.
Email Marketing – A form of Direct Marketing which uses electronic mail as the communication channel. It can include newsletters, coupons, invitations to purchase goods, or promotional literature in electronic format. For marketers, it has the benefit of being cheaper than traditional Direct Mail Marketing and it is easier to track and to measure return on investment. However, Email Marketing has become so prevalent that it is increasingly being regarded as another for of junk mail and is subject to regulation via privacy laws such as the Consumer Protection Act.
Focus Group – A market research activity in which a group of people representative of the target audience are asked for information, attitudes and opinions on a topic of interest to the research organisation and its client. Traditionally, a Focus Group comprises five to 12 people who are engaged in a discussion by a professional moderator. More recently, online market research has enabled Focus Groups to be enlarged and engaged in real-time using online communication techniques.
Goodwill – An accounting term for the intangible asset which accrues to a business or brand when it has a positive reputation and strong recognition within its target market. Other elements which can contribute to Goodwill include employee satisfaction and customer loyalty. The presence (or absence) of Goodwill becomes important when a business is valued or sold, and finding the correct ‘value’ in any given situation is a global problem. Marketers in the US are currently working with the accounting profession to set nationally-accepted valuation guidelines for this.
Green Marketing – Marketing products and services which are claimed to be safe for, or at least less harmful to, the environment and to society as a whole. More recently, this has extended to analysing the marketing practices themselves to ensure that they, too, are as environmentally-friendly as possible. This may involve analysing the ‘environmental footprint’ of the practices – for example, reducing the number of printed brochures, cutting down on travel by sales teams, etc. The growth of Green Marketing has also given rise to the practice of ‘green-washing’ – pretending a product or service is more friendly to the environment than it actually is.
Guerrilla Marketing – A marketing strategy, usually low cost, which uses unconventional methods to market a product or service. Whereas traditional marketing tactics use ‘conventional warfare’ involving large numbers of personnel with strong back-up and big budgets, Guerrilla Marketing is likened to ‘unconventional warfare’, with small bands of marketing ‘guerrillas’ making short, sharp strikes which have very high impact. Not to be confused with Ambush Marketing, which is when marketers ‘piggy-back’ on an event or activity sponsored by another company.
Impression – Also known as a ‘page impression’ or ‘page view’, it is a measurement used in search engine marketing to determine how many times a particular page is viewed by internet visitors. A high number of Impressions per visitor indicates they are viewing many pages and the site is therefore interesting or useful. Advertising is frequently bought on the basis of the number of impressions a website receives.
Internet Marketing – Also known as ‘e-marketing’ or ‘online marketing’, it encompasses all marketing activities which take place in an online environment. With the strong growth of the internet in recent years, this form of promotional activity has grown strongly and many predict that it will eventually become the dominant form of marketing worldwide. Specific activities include search engine optimisation, group buying sites like Groupon, online sales sites such as Kalahari.net, e-mail marketing, blogs as marketing tools, etc
Loyalty Programmes – A marketing strategy which encourages customer loyalty and repeat purchases of a product or regular usage of a service. Typically, customers will receive rewards like discounts, preferential deals, gifts or upgrades, depending on the number of points or credits that they accumulate. The company also benefits by being able to build a client database which includes profiles of their product preferences and buying habits.
Market Development Strategy – A structured plan to take existing products and services into new markets, or to expand demand within the existing client base. Strategies to achieve the former may include moving into a new geographic region or country, or marketing to a new demographic group within an existing region. Strategies to achieve the latter will include promoting innovative new uses for an existing product or service.
Market Cost Analysis – In an environment where costs are escalating dramatically, but marketers are unable to pass these on to cash-strapped customers, containing marketing and distribution expenditure has become a key management tool. A Marketing Cost Analysis is used to evaluate whether such costs within a business are being properly managed, and to determine how further efficiencies can be achieved. Components which may be analysed include: distribution costs; cost of holding stock; related staff costs; the cost of extending credit; promotional and advertising expenditure, etc.
Market Penetration Strategy – A company’s structured plan to increase its presence, or to dominate, in an existing market. Tactics to achieve this may include low pricing, discounts, product bundling, special offers, or increasing marketing and advertising expenditure. Similar to Market Development Strategy
Market Research – A systematic and objective marketing effort to gain knowledge about an organisation’s target audience and their likes, dislikes, opinions and attitudes. This may pertain to a particular product or service (planned or existing), or to broader issues around entire consumer sectors and society in general. In collecting and analysing this information, professional marketers may use Focus Groups, broad-based surveys, questionnaires, psychological investigations, online and offline observations, academic studies, etc.
Market Sales Potential – The maximum number of sales, or total share of a market, that a business can reasonably expect to capture under ideal conditions. Determining Market Sales Potential is an important part of a firm’s decision-making process when it comes to introducing new products or services, or entering new markets.
Market Segmentation – Dividing a target market into segments which have common requirements, attitudes, disposable income, or other uniting characteristics which allow them to be simultaneously targeted by a single product, service or marketing strategy. Segments can be based on a wide variety of variables, including geography, demographics, or psychographics.
Marketing – Industry guru, Philip Kotler, defines it as: ‘The management process that identifies, anticipates and satisfies customer requirements profitably’, while the Chartered Institute of Marketing in the United Kingdom describes Marketing as ‘the right product, in the right place, at the right time’. Modern day marketing is frequently used as an all-encompassing term covering a variety of related disciplines such as market research, advertising, public relations, customer relationship marketing, etc.
Marketing Audit – A periodic and in-depth evaluation of an organisation’s marketing assets to determine whether they are being used effectively to achieve the designated objectives, and are in line with the overall marketing and business strategies. An audit will typically focus on three key areas: the external marketing environment; the internal marketing environment; and evaluation of the current marketing plan. Regular marketing audits are vital in a global social and business environment which is characterised by rapid and dramatic change.
Marketing Plan – A document which sets out an organisation’s strategies and tactics designed to achieve its marketing objectives in support of the overall Business Plan. Typically, it will cover a timeframe of one to five years and be a blueprint for the organisation’s interactions with, and understanding of, its target audiences. Among other things, the Marketing Plan may define the target audience, analyse competitors and their strategies, set out the organisation’s own communication activities, set pricing parameters, detail Loyalty Programmes and anticipate market change.
Mission Statement – A short statement which defines key elements such as an organisation’s reason for existing, its objectives, philosophy and the markets it intends to serve. It is typically a concise summary of the broader business strategy and serves as a compass for staff and management, as well as an important statement for customers, suppliers and the community at large.
Multi-level Marketing – A strategy used in the Direct Sales industry to encourage existing distributors to recruit new distributors. Should they do so, they receive a percentage of the new recruit’s sales as an incentive. Distributors are typically part-time, commission-only workers. Amway and Justine cosmetics are good examples of Multi-Level Marketing. Not to be confused with so-called Pyramid Schemes, which are outlawed in many countries.
Niche Marketing – The opposite of Mass Marketing, it is a small subset of a broader market that has very specific requirements in terms of what it requires and the price it is willing to pay for that product or service. Current changes in society’s expectations and needs in terms of individuality, indicate that once-size-fits-all strategies are giving way to products and services tailored to more individual (niche) needs.
Perceived Risk – The level of uncertainly experienced by consumers during the course of making the buying decision, particularly for big ticket items (like cars) or complex products (such as life insurance). Consumers will frequently attempt to reduce this uncertainty by doing their own extensive research, consulting experts, or seeking advice from their peers. For their part, companies will try to allay fears by, for example, providing comprehensive warranties, implementing PR campaigns, or obtaining approval/endorsement from trusted bodies (eg: SABS accreditation; winning industry awards, etc).
Penetration Pricing Strategy – A marketing strategy aimed at achieving a high volume of sales and strong market penetration in a short space of time, typically for a new product or service. The hope is that the business will thus quickly achieve economies of scale and block entry to market before competitors can effectively mobilise. Typical tactics of a Penetration Pricing Strategy include low pricing and very aggressive promotion.
Point-of-sale (POS) – it is a main computer linked by a network to a number of checkout terminals, usually in a retail environment. Using the information generated by the system, management can analyse shopping trends, identify peak and trough periods, track stock levels and generate new orders. The POS system can also typically be linked to credit card readers, receipt printers, cash tracking software and other electronic systems designed to track stock and cash flow. In marketing terms, point-of-sale refers to in-store promotional activities designed to target consumers at the point where they are making the buying decision. It often leads to impulse buying.
Premium – The amount at which a product or service is valued, over-and-above its intrinsic value. This will frequently be as a result of a premium brand image generated by marketing and pricing strategies. For example, a Gucci-branded handbag will sell at a premium price versus an identical handbag without the Gucci label. In investment terms, Premium refers to the amount at which a securities option is traded. In Insurance terms, a Premium is the amount paid monthly (or at another agreed interval) to ensure a policy remains active.
Product Life Cycle – The period of time over which a product or service is conceived, developed, brought to market, reaches maturity and is eventually discontinued or becomes obsolete. A Product Life Cycle can vary from a few weeks or months (such as World Cup souvenirs) through to centuries (such as Coca-Cola). The stage of the lifecycle that a particular product/service is in, may have an impact on the way the product is marketed and its pricing.
Product Line – Also known as Product Range. It is related products and services offered by a single company to the marketplace. For example, auto maker Toyota offers smaller and bigger cars, bakkies, mini-buses, light commercial vehicles and 4x4s in order to cater for as wide a range of customers as possible. Extending the Product Line is usually a good way for an established company or brand to leverage its good standing with consumers and expand into other areas. For example, Tag Heuer offers not just watches, but other lifestyle accessories such as eyewear and mobile phones
Profit Margin – A measure of how much out of every rand that a company keeps in earnings. Usually expressed as a percentage, it is Net Profit (see listing under ‘N’) divided by Sales. A higher profit margin typically indicates that a business has good control over its costs, or that it has established itself as a Premium brand and can therefore increase its prices more than its competitors, while still offering a similar product.
Public Relations (PR) – The processes used to establish and promote a favourable relationship between an organisation and its target audiences. A common international definition used by Public Relations industry bodies is: ‘It is the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics’. Public Relations is often confused with Media Relations, which is only a part of the broader PR function.
Retailer – An individual or organisation selling goods to consumers, as opposed a wholesaler or a business-to-business supplier, which sells goods to other businesses – usually in bulk and sometimes at a discounted rate. The retailer will normally purchase from wholesalers, or direct from the manufacturer, and sell to consumers at a mark-up. The definition encompasses anything from a small neighbourhood ‘spaza’ shop to the likes of giant retailers like Checkers or Edgars.
Sales Break-Even (Break-Even Analysis) – It is a method of determining at what point a company’s financial situation is in equilibrium and it makes neither a profit nor a loss. In doing a Sales Break-Even analysis, management will typically calculate the volume of sales and/or income required to cover the costs associated with producing it. If sales/income is predicted to fall below this point, then the operation is deemed unviable or in need of further action, for example reducing the unit cost of producing the item.
Sales Forecast – A projection of likely sales revenue for a business, based on an analysis of market trends and broad economic trends, industry surveys, previous sales history, and input from the sales team and existing customers. It is a vital part of the management strategy of any business, as sales will normally be the main form of income and cash flow. Without an accurate Sales Forecast, a business cannot successful plan for the future or determine the stock and assets which it needs to have in place, as well the expenses which it may incur.
Sales on Credit (Credit Sales) – It is products and services sold on the understanding that payment will be made at a later, mutually agreeable, date. This may involve payment via a single lump sum – over 30 to 90 days, for example – or payment in instalments over a period which may last for several years. In the latter case, this will frequently involve an interest payment as well. The opposite of Cash Sales.
SMS Marketing – A form of Mobile Marketing which uses Short Message Service (SMS) text messaging on cellular phones to send promotional and advertising messages to consumers. The advantage for marketers is that it is cheap, can be highly targeted to a specific audience, and can be personalised to individual consumers. However, in South Africa, new consumer protection laws governing privacy and Direct Marketing make it increasingly difficult to use SMS Marketing effectively.
Social Media Marketing – The worldwide growth of Social Media, plus the fact that it is relatively inexpensive to use and can be highly targeted, has led marketers to develop marketing strategies aimed at leveraging social networks, online communities, forums, blogs etc as a means of reaching consumers and promoting the organisation’s message. One of the benefits, both for marketers and consumers, is that it allows for instantaneous interaction and feedback.
SWOT Analysis – A business tool, particularly common in strategic planning and marketing, which is used to assess Strengths, Weaknesses, Opportunities and Threats. It can be applied to the organisation as a whole, to specific products or services, or to competitor organisations and their products and services. A SWOT Analysis helps a business to be objective about its own strengths and shortcomings, as well as those of its competitors – and to plan accordingly.
Target Market – That segment of the overall market to which a business wants to sell its products or services. Very few products are so generic as to be suitable to everyone, everywhere. Therefore, companies will identify more specific targets which may be segmented by age, gender, lifestyle, income, ethnicity, cultural or religious beliefs, geographical location, etc. Target Market also applies in the business-to-business environment where, for example, a manufacturer of surgical equipment for operating theatres would target surgeons and hospitals as likely customers.
Target Marketing – Marketing strategies and tactics aimed at that those specific segments of the market which the business has decided to target.
Telemarketing – The tactic of marketing to existing clients and potential customers by telephoning them to promote a product or service. As with other forms of Direct Marketing in South Africa, the effectiveness of Telemarketing is under threat from new consumer protection laws governing privacy.