Is marketing a cost or an investment?

Is marketing a cost or an investment?

We think it should be an investment!

 A cost is simply an expenditure of money, time and resource, whereas an investment is an expenditure with a return-on-investment over the long run.

Which definition corresponds better to the way your company sees marketing?

For many sales-orientated businesses, marketing is still seen as a cost – a necessity to tick the box. But by labeling marketing as a cost, a company is insinuating that it will get little from its marketing efforts over the long run. So, what’s the point in that?

We argue that marketing should not be seen as a cost, but as an investment. An investment to ensure future profit and growth. Not convinced?

Marketing ensures future sales

Gone are the days of separating sales and marketing. In the ‘Age of the Customer’ where customers have all the power, the sales process is not so simple. The customer’s buying journey is no longer a linear path, from awareness to closing the sale.

Instead, research has proven that a typical B2B customer encounters at least 6 touch-points before turning into a lead. It is therefore down to marketing and sales to work together to gather the customer insight and ensure that those 6 touch-points really do count.

Customers don’t want to be contacted directly, even B2B buyers want to do their research before purchasing goods and services. As a result, sales are no longer about reaching out to customers, but about receiving warm leads and providing them with an excellent customer experience.

It is down to marketing to work out where and how to engage these leads in the first place.

Marketing to keep current customers happy

Growth is not just about gaining new clients, but also about growing your current client base.

According to Reichheld (2001), the creator of the NPS, increasing customer retention rates by 5% increases profits by 25% to 95%. Loyal clients also become your best advocates and recommend your services.

It is down to marketing to improve customer loyalty by keeping current customers engaged through, for example, marketing activities such as events, promotional items and regular emailers. Marketers are also responsible for collecting ongoing customer feedback, to ensure the company is constantly adapting to changing its customer demands. Like so, it can keep customers happy in the long run too.

Marketing helps adapt to change

Marketing is a company’s eyes and ears. A good marketing team will regularly collect customer insights and track any market changes. Noticing trends and changes early can help a company be proactive, and react to changing market demands. This is especially important in today’s ever-changing economic climate.

It’s one thing understanding marketing’s potential, it’s another taking action. But first things first, companies must remove the cost associated to marketing, the marketing budget, and instead focus on the ROI it could bring.

Marketing permits a higher selling price

When looking at how much to charge clients, a company looks at perceived value of their service or product to the customer and price-elasticity.

Marketing not only helps acquire leads; it also helps build brand awareness. Great brand awareness builds up brand equity, which in turns improves the perceived value of a service or product.

If customers have a positive opinion of your brand, they will give it more credibility and therefore will be more likely to pay higher prices for it.

Bottom up budgeting vs. top down budgeting

Setting a marketing budget prior to setting objectives is counter-intuitive. How can marketers successfully achieve ambitious marketing targets with restricted resources?

A more logical approach would be to set the marketing objectives first, then build a strategy to reach those objectives and finally allocate a budget to support the strategy.

For example, if to grow by 15% you need to acquire at least 100 new clients over the next year, how can you reach these clients? What marketing material do you need? This all needs to be thought about before setting a price tag on marketing.

This way, marketing will be more conscientious about their marketing spend, and at last it will be much easier to measure ROI and understand the financial benefits of marketing.