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Marketing 360® Blog

Marketing is an Investment, Not an Expense

Post By Scott Yoder | Paid Search

There is no ROI without the I.

If you call Marketing 360® to get a demo of our marketing software, there is a question that’s on your mind.  If you’re like 90% of people we talk to, you’ll ask it early in the conversation.

How much does this marketing stuff cost?

This is a natural question to ask, but it’s also misguided.

Imagine standing at the foot of a mountain with a long trail ahead.  Far above is your goal – the summit.

Either you have the time, supplies, and energy to get to the summit or you don’t.

It’s an all day hike.  You can’t say Well, I only have two hours and one Snickers bar.  Is there some way I can get there with just that?

Either you have what’s needed to achieve your goals or you don’t.  It’s not a cost you can haggle.

 

It’s All About the Return

The misguided notion of the marketing as a cost has to do with the difference between an expense and an investment.

Marketing is not an expense.

If you’re a contractor, a new truck is an expense.  It’s a physical item that provides value for your business.  But the value of the truck itself depreciates over time.  If you sell it in a few years, you’ll get less than what you paid for it.

Marketing, on the other hand, is an investment.  The entire idea of putting money into marketing is to profit from the initial outlay.

Without a plan on how to get a return, there is no point to marketing.  You’re not just buying tools.  You’re investing in a strategy with the implicit goal of getting more back than you put in.

In other words, cost is largely irrelevant in marketing.  If you give me $1 and I give you $2 in return, you’ll give me every dollar you can.

 

How Much Do I Invest?

Knowing how much to invest is the real question.  Most business marketing must overcome a barrier to entry.  You have to invest a certain amount in order to reach your audience, keep pace with your competition, and establish your brand.

When you speak with one of our marketing consultants, we’ll research your market to estimate what barriers you face.  Our goal is to estimate an investment amount that gives you a realistic chance for positive returns.

This number is almost always personalized for your business.  It’s directly related to who your target audience is and who you are competing against.

For example, pay-per-click advertising is an auction system.  Your investment is determined by what other businesses are bidding to be on page one.

If you’re a wedding photographer in Manhattan NYC, you’ll have to invest more to be on page one than if you were in Manhattan Kansas.  If you want to reach all five boroughs in NYC, you’ll have to invest more.

Over time, the needed investment can fluctuate.  The competition might bid up.  Or with high quality scores, your investment might go down.

One thing is certain.  If you don’t invest enough to stay on page one regularly, you’ll have no chance at hitting your revenue goals.

To recap, consider these things when planning your marketing investment:

  1. What’s required to compete in the current market.
  2. The size of your target audience, both with respect to the number of people and the geographic area you plan to target.
  3. The number of marketing channels you need to be in to reach your audience.  More channels require more resources.
  4. How much work you need to outsource vs what you can do internally (for what you do yourself, don’t forget to consider your time investment).
  5. What basic tools, such as email marketing software and CRM tools, you need to manage your marketing.
  6. How much time it will take to create awareness, penetrate your market, and reach critical mass so you start to get a return on your investment.  This can vary a lot depending on the market you’re in.

 

Avoiding Costly Mistakes

When you think of marketing as some type of fixed cost, a tide of mistakes begin.

The first – and most serious – is that you won’t recognize and target your barriers to entry.  If you fall short here, you give yourself no chance at getting ROI.  Everything you do invest is likely to become a sunk cost.

The reality is that if you’re not able to invest in marketing to the point of critical mass (meaning your investment to revenue ratio is self-sustaining), you’re better off investing nothing at all.

Second, when you look at marketing as a cost, you instinctually start price shopping.  Instead of looking the best options to generate a return, you start looking for the cheapest service.

Unfortunately, many SMBs looking for cheap marketing find it.  And they get exactly what they paid for.

There are still a lot of sketchy digital “marketing” businesses out there that don’t have the tools or skill sets needed to get you to critical mass using multi-channel marketing.  Your attempt to save money results in you losing what you do invest.

Third, the cost mindset lacks flexibility.  You need to be agile in digital marketing, responding to changes in the marketplace, trends, and technology.  Your investment will change over time.  Sometimes improvements in performance or dialing in your tactics can save you money.  Other times you need to expand on efforts to remain competitive.  It’s a fallacy to think your marketing will have a set, consistent cost.

Last, businesses who start their marketing with the cost mindset usually have a poor sense of the time frames needed to be successful.  Instead of building their investment when they are about to overcome barriers to entry, they panic and pull out.

One of the most unfortunate things to see is a business whose investment is getting ready to payoff, only to see them pull out early because they think it’s costing too much.

Return on investment from marketing is your revenue.  It’s your wealth.

Start by understanding what you need to invest to get the return, or don’t invest at all.

In the end, looking at marketing as a cost will cost you.