Four States Small Business Blog

Why the Highest Performing Companies Treat Marketing as an Investment and Not an Expense

Posted by Mark Zimmer on February 7, 2017 at 8:30 AM
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iStock-494940062 (1).jpgThis may be the point in the year when you and your marketing team are taking a look back at the marketing efforts of 2016 and evaluating what exactly it cost your company. Or, if you’re a new business owner, you may be determining what kind of expenditure you’ll need to make to start advertising. Either way, there’s something important you need to remember to do: view marketing as an investment. Quite simply, marketing isn’t something that’s merely nice to have or a good idea that you can get to later, and the costs associated should never be considered without the ultimate impact it has on your bottom line.

How Marketing Is an Investment

With so many expenses to juggle, it can be easy to lose sight of what it is marketing does for your company. When you have a limited budget, especially if you need to trim your business down to something more lean, you may be wondering, why is marketing an investment? This calls back to the basics: an investment is defined as spending money and/or capital to generate profitable gains, whereas an expense is something that requires you to spend money, as with bills. Paying the rent for your office or brick-and-mortar location is an expense.

However, you invest money into marketing to create leads, spur sales, generate revenue, and, ultimately, grow your company. By categorizing marketing as an expense, you blind yourself to the benefits and returns that marketing provides.

ROI is Why You Invest

Typically, good investments result in gains. For marketing, the results you’re looking for are returns-on-investment (ROI). It’s defined as a performance metric used to evaluate the efficiency and efficacy of invested money, which is expressed as a percentage that’s determined by the following algorithm: Net Gain / Cost of Investment.

What makes marketing so difficult to understand as an investment is that not everything it achieves is tangible. The impacts it has don’t necessarily immediately and obviously tie into the budget you’ve given it. It’s easy to mostly understand the usefulness of a marketing campaign that offers coupons good for a specific period; you merely need to count the redeemed coupons and look at the revenue that came in from the appropriate sales. However, consumer awareness about your brand as well as brand perception is extremely important to your ability to maintain current customers, find new customers, and move your product or services. Awareness and perception are nebulous, with no dollar sign attached. You’ll need to sit down and do the math to determine the cost for acquiring customers, for maintaining customers, and sales outcomes. You’ll have to identify important metrics for your company that help measure behaviors related to intangible goals.

Areas to Invest in Marketing

There are some key goals that the highest performing companies achieve through marketing, including:

  • Awareness — This is, perhaps, the most obvious reason to invest in marketing. Customers can’t use your business if they don’t know you exist, and they can’t know that you’re running a promotion if they never hear about it. Marketing is what gets your company and what you have to offer in front of the customer.
  • Reach — Coupled with awareness, reach is important because it involves how many customers are made aware of your business offerings. For instance, anyone that walks by your brick-and-mortar location will be aware of it on some level. But what about the customers who might be interested that never walk by? Invest in marketing to reach and convert the potential customers that are otherwise never going to know about you.
  • Frequency — A critical component to the decision-making process, frequency is understood as the number of times a customer has to be exposed to an idea or call-to-action before they’ll make up their mind. This is why it’s important to invest in marketing consistently: only hearing about your business or a new product once won’t achieve very much.
  • Staying Top-of-Mind — Investing in successful awareness goes far beyond just knowing that your company exists. With the right marketing, customers will remember and consider your brand first when a new need or desire arises. Without it, customers may consider the competition first and make the purchase decision before your business is even an option.
  • Branding — A confluence of all the areas we’ve just mentioned, branding is who your company is in the mind of the customer. This is what differentiates you from the competition and makes your business immediately recognizable. It encapsulates all the ways your customer perceives your brand and how happy they are with it.
  • Influence — Ultimately, strong marketing and compelling branding should result in your business gaining the sort of prestige that gives you power in the mind of the customer as well as in the market. It can influence the relationship you have with partner companies, like vendors, as well as other contractors.

Tips from Big Brands that Work Without Big Budgets

Fill one cup at a time.
Do your best to own one platform, medium, station, or daypart at a time. Omnichannel marketing is necessary for longevity, but that doesn’t mean you need to try and achieve that immediately. Instead, build one success on another. GoPro, for example, conquered the video medium; that’s not just in terms of their product either. The product is powerful, and they leverage that into their marketing.

Conquer consistency.
Consistency is the key to unlocking the full potential of the frequency we mentioned above. By creating a consistent brand image through your logo, colors, visuals, and message, you increase how memorable your brand is for customers. Just consider McDonald’s: The double arches are recognizable worldwide.

Lock onto targeting.
Segmentation and targeting are key to a powerful marketing tool, namely personalization. Investing the time and money into understanding your customer means you can save time and money while developing the messaging and platforms to reach them. Dollar Shave Club, for example, understood that Millennial males didn’t like the current razor market. This was the basis for the model and message, which promises high quality for low prices.

Maintain authenticity and transparency.
Modern consumers demand authenticity, which is why they don’t just want to be sold to. Transparency is part of how your company maintains that authenticity and allows you to leverage it into something powerfully influential. Johnson & Johnson, for example, became a year-round champion for community improvement at home and abroad with a focus on health as well as the little comforts.

Clearly, your company needs to view marketing as an investment and not merely an expense that can or should be cut the moment it seems to be an inconvenience. The best performing brands are leveraging marketing to generate positive ROI, expedite growth, and solidify their place in the market. Be sure you’re following their example.

Building a small business annual marketing plan

Topics: Marketing Strategy, Marketing ROI