Eli5 How does a huge sum of a company’s money used for marketing really help in the long run?
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There’s a lot of difference in nuance depending on the nature of the company, the product, the industry, and the kind of marketing, but the general gist is: you bank on the idea that you’ll eventually make more money in sales than you spent on advertising.
If your company is growing, or branching out, then the marketing is usually meant to attract new customers (or alert existing customers to new products). If a company already dominates a marketplace with no more room left for growth, then marketing is more like an operating cost (like rent or electricity or stationary) that you have to pay to maintain market share and prevent other companies from eating away at it.
So, for one small example, the company I work for sells a narrow range of super complicated machines to a very niche industry. The industry is quite small, staff move around within it a lot, and facilities tend to have very byzantine procedures for approving purchases of capital equipment. So when a buyer needs to buy a new machine, we know the first thing they’ll do is call someone they’ve worked with before, and failing that, they’ll check who made the machines they have now and call that company first. If we can be either one of those, we have an in. If we’re both, then it’s basically a guaranteed sale.
So we spend enormous amounts of time, energy (and money) to break into discrete units of the industry (facilities, companies, buying groups, outsourced service groups, etc) because we know that every single sale winds up being an advertisement for further sales for years and years.
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