Marketing From First Principles: 5 Fundamentals To Any Marketing Strategy

January 12, 2022

Kobe Bryant used very simple drills during his training, he was focusing on the basics. Once asked, why is he working on the basics, he’s the best player in the world. His response was that he is the best player in the world because he never bores of the basics.

Basics are simple, but not easy. Just look at FC Barcelona’s golden age.

In science, we refer to basics as first principles, the fundamentals that everything else is built upon. Elon Musk famously talks about how he uses first principles in his thinking. So does Naval Ravikant and many others.

Marketing, too, can be distilled to fundamentals and first principles that you can use to build or improve any marketing strategy, regardless of channel or medium that you use.

Fundamental 1: What Is The Goal of Marketing?

We need to understand why we are marketing in the first place. Is it to win a game? Impress someone? Get a blue badge on instagram?

What is our goal?

Let's define what the goal of marketing is.

Marketing is not about buzz, traffic or retweets. These are vanity metrics.

Marketing is a mechanism of transforming inputs into (more) outputs. It's an investment.

Your outputs are either customers or revenue. Customers, normally, result in more revenue.

What are the inputs that we need for growth? Inputs are limited resources that we consume in the process: time, money, attention, skills.

The goal of marketing is to transform available inputs into maximum outputs.

This loop needs to be a net positive (outputs > inputs), otherwise, it's a decline, not growth.

Thus, the goal of digital marketing is to grow revenue.

Fundamental 2: Revenue = Quantity x Price

We grow our revenue by either: selling more (quantity) or selling for more (price). Marketing primarily focuses on selling more (quantity).

We can achieve this by selling to more new customers or selling more to existing customers.

To sell to more new customers, we need to acquire them (hence acquisition teams, acquisition marketing). To do that we need to show value to a large enough relevant audience in places they congregate.

To sell more to our existing customers we need to introduce them to more offers of value during their lifetime with our company, hence the lifecycle marketing.

Principle 1: Vanity < Volume < Value

To acquire new customers, you need to show your offering in front of a relevant audience.

A relevant audience is an audience that can become your customers.

Offering free hamburgers on a street to lure people inside a Mercedes store will not work. You will have a million visitors and generate 0 sales. Traffic (or footfall in this case) is a vanity metric.

Serving a million non-buyers is expensive and distracting. That's why traffic should not be the focus of marketing, ever.

Coming back to our Mercedes shop, you can bring in 10,000 people into the store who have no intention to buy using your free hamburger campaign but that 1 relevant customer who was going to come and buy a car will choose to go elsewhere because you are too busy to service them.

This is extremely important if you're working in an organisation that has both sales and marketing. Lead quality is more important than lead volume.

In another example, you can have 1 visitor and generate 1 sale. This is a great scenario not only because we generated a sale, but we also did it very efficiently (conversion rate 100%).

The number of sales (volume) should not be our goal either. We can make 1,000 sales but if they all were for air fresheners and not cars, our revenue will be very low.

We need to focus our marketing on the value it creates. In other words, how many dollars did we generate?

Principle: we need to reach an audience that generates the most value, not volume or other vanity metrics like traffic for our business.

Principle 2: Marketing Needs Scale

Both sales and marketing are 'sales'.

Marketing is a one-to-many sales approach, while sales is a one-to-one approach.

They go hand in hand in the right organisation. Marketing generates leads with a one-to-many approach (inbound lead generation). Sales representative closes the deal in a one-to-one format.

Marketing can work on its own as well, where you generate and close the sale in a one-to-many approach, like e-commerce or self-service SaaS.

For marketing to work effectively, we need to have a large enough audience to move the needle.

If your total addressable market is 1,000 people (like high-end B2B), you should not use a one-to-many approach. It is not effective. Sales will always outperform marketing in a one-to-few approach because it can be extremely custom.

That individual/custom approach, however, doesn't scale easily and that's why marketing is more effective with large audiences.

What is a large enough audience? If you can list all your potential customers in a spreadsheet, go straight to sales. Otherwise, you need marketing.

Principle: marketing is the most effective method to sell to a large audience but won't work with a small audience.

Principle 3: Marketing Needs To Be Personalised

Marketing will only work if you reach the right person at the right time. This means you need to define who the right person is and understand their willingness to buy.

You can't tailor marketing to every individual person but you can do it for groups of people who share similar characteristics. You do this by limiting your reach to people who fit your predefined criteria resulting in a personalised approach.

If you advertise only to Mercedes owners, you can personalise your ads to speak to the specific problems Mercedes owners are facing.

Usually, you build buyer persona(s) for each product you offer. A buyer persona for an entry-level Mercedes, or SaaS plan, is different from a luxury-level car, or enterprise plan.

For example, Sarah is 50 years old, lives in New Jersey and works for Goldman Sachs. She appreciates quality, heritage, prestige and has a conservative approach to new technology (Tesla doesn't appeal to her). She also likes Cartier, Chanel, Loro Piana and Bloomberg.

Sarah is a person who we will speak to in our ads, our content and our landing pages. Our marketing will revolve around her. Our product will be there to add value to her.

You build a buyer persona for each product you offer. A buyer persona for an entry-level Mercedes, or SaaS plan, is different from a luxury-level car, or enterprise plan.

You may have more than one buyer persona per product, that's fine. But you will need to build dedicated marketing campaigns for each one of them.

Principle: marketing will only work if we personalise our content to the specific buyer needs of that audience.

Marketing in a Tweet

Marketing is a scalable one-to-many way to sell. Our goal is to generate revenue either by acquiring more customers or selling more to our existing ones.

To effectively executive marketing we need to identify the right audience and personalise our marketing to them.

To manage the performance of our marketing we need to monitor the value it creates and not other vanity metrics, otherwise, it’s a hobby.

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