Why a Marketing Investment Is Not Just An Expense
It’s easy for both new and seasoned business owners to look at outgoing costs as simple expenses…this especially rings true when it comes to marketing. In terms of the amount of money being spent, business owners can develop a warped sense of what marketing really is.
Sure – it’s an expenditure. You are spending money, but these funds are being expensed toward achieve a specific result, as opposed to overhead costs like rent or utility bills, which are essential to proper functioning of the company.
It’s true that marketing is multifaceted and that it can and cannot be reduced to a simple formula where cost directly translates into profit across the board. There are multiple different approaches and applications and some of them will directly qualify as expenses. However, unlike most other areas of your business, marketing has the most potential to offer more inherent value and a bigger overall return – which makes it a true investment in your business.
So what is the difference between treating marketing as an investment rather than an expense? Let’s take a deeper look.
When defining your marketing strategies, the guiding principle should always be your return on investment, or ROI. No marketing strategy can function effectively unless it is based on ROI. It represents the quantitative benefits (usually this boils down to revenue) that you receive above and beyond what is needed to recoup the original payment. For example, if you spend $3,000 on a marketing campaign and earn $4,500 in revenue from those ads, your ROI is $1,500.
When it comes to expenses, you will have a fixed return. For example, you might pay $1000 for a magazine ad and receive $2500 in revenue from it – a solid return. But in an investment transaction, once you pay for the service you will continue to see returns on it over time. This boils down to creating an asset that continues to provide value, such as an article that can be re-purposed into a series, an info-graphic or a listicle. Other examples include video, TV advertisements and other creatives that can be used over a long period in order to continue to produce results and drive revenue.
If you are interested in learning more about how marketing investments can benefit your business, we can help you create a strategy that works for you. Feel free to contact us or call us directly at 1-866-477-4420.
Temporary marketing expenses include things like paid advertising, in which you pay a fixed amount of money in order to get a certain amount of visibility. For example, Facebook will keep your ads in circulation on a subscription basis – as long as you are paying, your ads will be seen.
When you stop putting money into the strategy, the ad will disappear – and so will any potential revenue. This can be a good way to generate short-term income but you aren’t building permanent revenue or compounding returns.
The bottom line is that investment style marketing strategies DO carry a higher overall long-term value – but that doesn’t mean that you shouldn’t continue to explore a variety of marketing tactics, including those that would qualify as expenses. The way to get the best return on your marketing efforts is to cast a wide net – and use data and analytics to fine-tune your efforts. There’s no point in choosing between quick returns and long-term ROI. It’s more important to customize your efforts for each unique situation.
If you’re a startup and you need to get word out about your company, PPC campaigns and print ads can be a great way to do so. Combining this with a content marketing strategy that will benefit you over time will prove to be an even more effective way of producing the highest ROI.
Looking at marketing strategies as investments instead of just writing them off as expenses can help you start planning better budgets and optimizing your strategies in order to deliver the best returns.
Understanding how investments vs expenses work in marketing is a great foundation for helping you map out the best possible marketing strategy for your business.