The basic marketing definitions you need to know when starting a company
Regardless of what kind of company you’re trying to build, you’re going to hit a stage where you want to start marketing to a broader audience. This is important when trying to discover new customers that sit inside a large, amorphous blob of people — but you can’t find them unless you start sifting through that blob.
There are a ton of buzzwords that you’ll hear the second you start walking into the realm of advertising and marketing. A lot of these can be confusing and have very loaded meanings, but when you’re just getting started, you really just need a more surface-level understanding: where to point your advertising dollars.
With that in mind, we put together a very early crash course in advertising concepts for your startup to help you get started.
What on earth is the marketing funnel?
When we talk about the funnel in marketing, it is basically referring to the process of narrowing down a universe of people your brand encounters to the set of people who are your actual customers. It’s not exactly a black hole, but if you wanted to envision it in a very basic semi-3D version, it might look a little something like this:
You can get much, much more specific when it comes to the stages of the funnel (and there are more), but from a very broad perspective these are a few key stages that tie very closely to advertising products and what it is you’re trying to sell. From a very broad perspective, you do want to hoover up as many eyeballs as you can and see which ones start sifting down toward the bottom of the funnel.
There are many different ways you can pay for advertisements. When you’re buying ads on an ad platform, you’re fighting other advertisers for placement in front of an audience. This is called the bidding process, where you are deciding how much you’ll pay to get in front of someone instead of a competing brand.
You’re trying to get people to understand what you are and what you do. You encounter a lot of this without really realizing it. You might drive by a billboard with a brand name or see something as you’re flipping through your Instagram feed.
Platforms: Facebook, Instagram, out-of-home, Pinterest, Snap, YouTube
You have found someone that wants to buy something, but they’re still deciding which brand or specific product to buy. They’re in a kind of search-and-destroy mode for an answer to their needs at that given time. This ties very closely with search-related activities across any number of platforms.
Platforms: App Store search, Google search, Amazon search, review and affiliate sites (i.e. Yelp, Credit Karma, Gartner)
Their credit card is out and ready to go, and this is your last shot to grab their attention. They’ve already narrowed their purchase selection down to a handful of (or even one) products and you are trying to get them to pull the trigger.
Platforms: Buy/Download buttons (Pinterest, Instagram), online checkouts or carts, related products (Amazon, Google), contract reviews (for B2B)
All of this is important for calculating your customer acquisition cost (or CAC). When you are calculating the health of your business (or how much more time you have to burn cash), you want to compare your CAC to the lifetime value of a customer (or LTV). Hopefully the second one is bigger than the first, or it will be eventually as you scale. These definitions will be very different depending on your product — especially if you’re an ecommerce business or startup.
How am I paying for all these ad products?
Platforms have made it very easy to start buying advertisements when you’re ready to try to increase your total audience. But once you decide to start, they’re going to throw a lot of options at you. Here are some of the main ones that you’ll run into, and roughly what they mean.
Cost per action (CPA): Some platforms have some associated “actions” for each advertisement. Depending on what you’re trying to advertise, you might want to optimize those actions. For example, you might be in a position where you want people to save your products to a Pinterest board or share them on LinkedIn.
Cost per click (CPC): This refers to how much you have to pay a platform for someone who clicks on your ad and goes to wherever you are sending them. If you’re selling an actual product, you’re trying to get them to buy a product from your website.
Cost per install (CPI): This one’s generally reserved for app install ads, which you’ll find in some platforms.
Cost per impression (CPM): This is how much you’ll pay to get it in front of a set number of people, where the format will vary from platform to platform. (The “M” in CPM is sort of an artifact from when it used to refer to “Cost per mille,” or 1,000 page views.)
Keep in mind that these are the absolute basics
As you continue to grow, you’ll begin to understand your customers a lot better. By then, you’ll want to start looking at more specific advertising products as you get a better handle on how to acquire customers. Facebook and Google still remain dominant when it comes to advertising because of their effectiveness. But you might drill down into more specific kinds of audiences or skip some platforms altogether. Your marketing needs will change over time — and there is a much bigger dictionary that we’ll start diving into soon.