Do You Treat Marketing as an Expense or an Investment?

The answer to this question is revealed in the kind of marketing you are doing. 

Most business owners do what I call “shoot in the dark” marketing. They create an ad or a postcard, and throw it “out there.”  Where this “out there” is…well, they can’t really give you a good idea.

It could be a list they purchased based on geographic area (zip code). It could be an ad in the local paper. It could be a flyer they leave in piles in “busy” places.

It never occurs to them to mail to their own list, which is one of the biggest mistakes I talk about in my Top Ten Mistakes book

What is wrong with this strategy? (And I’m using the term strategy here very loosely.)

For one, you do not have a good idea WHO  is getting your ad, and whether they are your ideal customer or not.

Furthermore, the ad has no tracking mechanism. It has no offer, no call to act now. In other words, you have no idea if people are responding to your ad unless you ask each and every new customer.

When marketing is done like this, then yes, it is merely an expense. You have no way to measure the return on the money you spent (your ROI—return on investment). Because of this, the business owner wants to make sure they spend the least amount of money.

Does that sound like an effective marketing strategy to you? Why, then, would a smart, rational, numbers-oriented business person do this?

Well, there are a couple of reasons. Sometimes, a business owner reasons that he wants to get his name out there, “be known”, build his brand. I get that. But, why not do that AND get boost sales?

In other words, building your brand is a bonus; getting an increase in sales is the primary objective. Make a spectacular offer that will have people running to you.

This is called direct response advertising…making an offer that demands a response or an action.

By using direct response advertising, I’ll betcha they’ll remember your brand much better than if you just sent them a glossy postcard telling them “Hi, this is me, call me if you need me.” Yawn…

Another reason is…and you can guess this…laziness.

Some business owners just don’t want to put the effort into crafting an effective, targeted, trackable, direct response ad. Too much work.

But, they want to make themselves feel better by doing something. They mistake activity for achievement and figure doing something is better than nothing.

But when they get no responses, and sales slump, they blame the economy and complain that marketing doesn’t work.

Let’s talk about the right reason for doing marketing—to get a measurable response.

Say for example, you have a product or service that sells for $20 per unit. You mail 5000 postcards to a list that you’ve carefully screened to include people who would have a moderate to high interest in your product. The total expense, including postage comes to $1200.

How much would you need to break even? You would need to sell 60 units ($60×20=$1200).

What if you sold nothing? They you would be out $1200 and realize your ad, your list, or both sucked and go back to the drawing board. An expensive lesson, but a good lesson nonetheless. Zero is a result. Successful people learn from results, whether or not the results are in their favor.

What if you sold 30 units? You made $600. That marketing effort cost you $600.

What if you sold 300 units? That means you netted $4800—a 400% return on your investment.

If you sold 300 units, would you run this campaign again? You betcha.

Would you run it if it cost you $1800? Yep. What about $2400? Yes, again. Because you’re still getting a nice return.

For my attorney friends, think in terms of getting ONE case. If this $1200 postcard mailing brought in a case that is worth $5000, $15,000, or $30,000, wouldn’t you be dancing in the streets over it?

It’s not about how much it costs, it’s about how much it will increase your sales. How much it will return money into your pocket.

But, you will never know unless your marketing is targeted, effective, and trackable.

This doesn’t mean you shouldn’t try to get the best deal or a reasonable price. Just keep in mind the best deal is not always the lowest price.

For your next marketing campaign, download this worksheet to help you figure out your ROI. And remember that you will never know what will work unless you try it.  

Category: Marketing