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Is marketing an expense or an investment? The truth revealed (and how it will change your behavior)

Is marketing an expense or an investment?

This is a question as old as advertising itself, and the long held wisdom from corporate board rooms to sole-proprietorships is that it is indeed just an expense. Historically the problem with marketing has been that it’s been nearly impossible to tell what’s working and what’s not. To quote John Wanamaker, a 19th century American businessman, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” So true, right?

Only here the 21st century, marketing is changing. With advanced tools like Google Analytics or direct-response tracking for analyzing your direct mail marketing performance we have a stronger grasp than ever on exactly what your marketing will do for you. These are tools that would have been unimaginable, pure science fiction to Mr. Wanamaker, so is it maybe time to revise our age-old wisdom along with the times?

Well, which one is it?

To return to the original question, let’s consider the difference between an expense and an investment. An expense is a one-time cost that you pay because you have to. It’s buying more supplies, paying a ticket, or purchasing fuel. Once it’s purchased, it’s gone, and there’s no way to know if it somehow led to a sale. An investment on the other hand, is defined by Investopedia as:

“an asset or item that is purchased with the hope that it will generate income or appreciate in the future”

Let’s put this in marketing perspective. You wouldn’t buy flyers or door-hangars with the expectation that they’d never land you a new sale, would you? No, you buy them rightfully expecting a return that’s greater than you paid to get them. And with the ability to track which flyers or door-hangar campaigns led to which sales, and to A/B test and improve them over time, suddenly you have some data that makes your marketing very predictable. And once you can reliably calculate your return, we are most definitely talking about investing.

So if marketing is investing, that makes you a marketing investor. And knowing that, how will you behave differently?

Here are our 4 time-tested principles of investing that you can apply to your 21st century marketing:

1.) Have a marketing plan

.Just like flossing, everyone says they do it but nobody ever does. Plans are important because they protect us from short-sighted emotional decisions. Even if “going with your gut” seems to work in the short run, research shows that it fails in the long run when it comes to investing. You wouldn’t throw darts to pick the stocks in your 401k, would you? Then let’s take some of the same rigor with your marketing dollars.

They best way to begin is to define a repeatable strategy. You want to avoid “random acts of marketing” where you chaotically throw money at campaigns when it’s convenient but ignore the topic altogether when it’s not. If you haven’t set up a marketing funnel, this will help you keep things organized and show you which campaigns to run to whom and when.

2.) Diversify your marketing investments.

The core of modern portfolio theory is diversification, or not having all of your eggs in one basket. Some investments are inherently more risky than others, and in marketing, there are so many factors that go into the success of a campaign that you’ll want to diversify and run many different ones to cover all your bases.

If you have a billboard campaign that’s proven extremely successful and drives most of your marketing revenue, what happens if a tree falls on it? Or if other billboards go up? Or if you depend on Google advertising and they change their algorithm, how will you adapt? Cover yourself and offset those star performer campaigns with other types so that if one were to stop working, your marketing table would still have three legs to stand on.

Rule of thumb: Always have campaigns running in at least 3 of these 8 categories:

4.) Invest in businesses, not their products.

That is to say, when buying stocks, look at the business running things and not the hot commodity that they’re selling. All too often a promising idea is destroyed by a poorly run business and they’ll take your hard-earned money down the drain with them. In marketing, this means choosing your marketing vendors carefully.

When you spend money or “invest” in a marketing strategy like email, advertising, direct mail, or SEO, peer behind the curtain and evaluate the company that you’ll be spending money with. Make sure that they have happy customers and have been in business for a while to ensure that they will actually be able to execute your requests and turn your investment into a marketing profit.

5.) Invest in marketing for the long term.

When asked how long he typically likes to hold his stocks, Warren Buffet’s response is “forever.” Once he commits to buying something, it’s in his portfolio for good and he’ll keep re-investing.

In marketing, the same is true: when you find strategies or channels that work for your business, double down. If you try some personalized email or postcard campaigns that bring in a glut of new customers, don’t celebrate! You’re not done yet. You have to keep up your marketing investments for the long term or you’ll fall into what’s known as the feast-and-famine cycle. This is when your marketing works so well that you get busy and stop marketing, and then before you know it, there are no new customers and you’re back to square one.

Well we just killed two birds with one stone, didn’t we? An investing lesson bundled as a marketing lesson, aimed at helping you cope in a world where marketing is an investment. With all of the data available to you today, it’s no longer sufficient to sit back and lament your marketing expenses. You have the tools to control them and turn them into highly profitable investments!

So pick up the phone and give us a call today at 877-222-6010 to add a postcard marketing campaign to you diversified portfolio of marketing investments.

And if you’re feeling like what you could really use is some stock tips from your wealth manager, *ahem*, marketing consultant, contact us at Opportunity Knocks Marketing to ensure your business’ complete financial health.