Seeing Marketing as Long-Term Investment

When top line revenue declines (like during a recession), spending cuts often look like a great option for lifting your bottom line. You know what I’m talking about—layoffs and budget reductions.
While I think it’s financially wise to look at how we spend each of our business dollars, and while I concede that some budgets can afford to be trimmed (e.g. travel), one area I wouldn’t touch is marketing. In fact, I might expand it.
Sure, marketing is an easy target for cuts because its expense is not directly tied to the production of whatever it is you make, but it’s critical for two reasons:
Marketing’s not all about right now. In a recent post on Huffington, Jenny Darroch, Marketing strategy expert at the Drucker School of Management at Claremont Graduate University, reported:
“I found that firms that spent more on marketing than their peers during the recession [in the 1980s] enjoyed a higher market value five years after the recession ended. To me, this result provides clear evidence of the long-term effects of marketing expenditure.”
How you spend your marketing dollars today will influence how you’re doing five years from now. It’s easy to track the results of a discount or coupon (immediate response stuff), so we’re tempted to think of marketing an operation to immediately pull sales through. However, like PR, our marketing strategies help to build up a brand perception and presence that has lasting significance.
Marketing investment goes farther in recession. If you look around and everyone else is cutting their marketing budgets but your keep yours the same, you’ve got a distinct advantage—you’re outspending your competitors. This means that you can start to gain market share for far less money than it would cost you when everyone else had more aggressive budgets.
Both of these reasons suggest that instead of seeing marketing as a short-term quid pro quo, it’s important to view it as a long-term investment. Sure, marketing investment, like every other investment, carries risk. But there are very seldom great rewards without some risk. In order to mitigate that risk, I’d suggest the following:
Make sure your marketing people know what they’re doing.
The easiest way to get great returns on Wall Street is to hire a great broker. The same is true of your marketing efforts: the key to results is knowing how and were to invest.
If you have the suspicion that your marketing people are lagging behind, it may be a good idea to help them with some extra targeted training. If you don’t have a marketing department, it might be worth while to hire a consultant or coach to help you get on track.
Determine how you’re going to measure short-term and long-term ROMI (return on marketing investment).
It’s important to view what your marketing efforts are going to do in the short term (pulling sales through), and what they’re going to do in the long term (build brand presence, awareness, and customer relationships).
For example, when I was working in New York, I helped develop a marketing campaign for a ski resort to entice first-time skiers to return to the mountain for another visit. All first-timers were given a coupon with a serious discount to distribute to their friends. We determined short-term ROMI by the revenue generated from new customers (i.e. the friends), and we determined long-term ROMI by the number new customers gained, the number of return visits, and the value over time of those visits.
Whatever you do, measurement is necessary so you can learn, analyze, respond, and refine. You wouldn’t let your broker get away with saying, “eh, I think you made a reasonable return, but I’m not sure.”
Work hard to discern what’s worth sticking out and what you need to ditch right away.
No matter how talented your broker or your marketing staff, there will always be investments that don’t return very well.
It’s tempting to cut the losses of every campaign that doesn’t work out immediately. But be aware that it is possible to give up too early (e.g. the sell off right before the rebound). For example, I have a colleague who works at a company that stopped a personal selling initiative after three months because it wasn’t generating enough sales. The tragedy is that sales cycles in personal selling relationships can often take longer than three months. Make sure that you seek out a root cause for something that’s not working before you decide to abruptly end it.
The list of issues to think through as you process marketing as a long-term investment is far longer than what I have room for here, but if you have questions or comments, please feel free to drop me a line @wordpost or at [email protected]

When top line revenue declines (like during a recession), spending cuts often look like a great option for lifting your bottom line. You know what I’m talking about—layoffs and budget reductions.

While I think it’s financially wise to look at how we spend each of our business dollars, and while I concede that some budgets can afford to be trimmed (e.g. travel), one area I wouldn’t touch is marketing. In fact, I might expand it.

Sure, marketing is an easy target for cuts because its expense is not directly tied to the production of whatever it is you make, but it’s critical for two reasons:

1. Marketing’s not all about right now. In a recent post on Huffington, Jenny Darroch, Marketing strategy expert at the Drucker School of Management at Claremont Graduate University, reported:

“I found that firms that spent more on marketing than their peers during the recession [in the 1980s] enjoyed a higher market value five years after the recession ended. To me, this result provides clear evidence of the long-term effects of marketing expenditure.”

How you spend your marketing dollars today will influence how you’re doing five years from now. It’s easy to track the results of a discount or coupon (immediate response stuff), so we’re tempted to think of marketing an operation to immediately pull sales through. However, like PR, our marketing strategies help to build up a brand perception and presence that has lasting significance.

2. Marketing investment goes farther in recession. If you look around and everyone else is cutting their marketing budgets but your keep yours the same, you’ve got a distinct advantage—you’re outspending your competitors. This means that you can start to gain market share for far less money than it would cost you when everyone else had more aggressive budgets.

Both of these reasons suggest that instead of seeing marketing as a short-term quid pro quo, it’s important to view it as a long-term investment. Sure, marketing investment, like every other investment, carries risk. But there are very seldom great rewards without some risk. In order to mitigate that risk, I’d suggest the following:

Make sure your marketing people know what they’re doing.

The easiest way to get great returns on Wall Street is to hire a great broker. The same is true of your marketing efforts: the key to results is knowing how and were to invest.

If you have the suspicion that your marketing people are lagging behind, it may be a good idea to help them with some extra targeted training. If you don’t have a marketing department, it might be worth while to hire a consultant or coach to help you get on track.

Determine how you’re going to measure short-term and long-term ROMI (return on marketing investment).

It’s important to view what your marketing efforts are going to do in the short term (pulling sales through), and what they’re going to do in the long term (build brand presence, awareness, and customer relationships).

For example, when I was working in New York, I helped develop a marketing campaign for a ski resort to entice first-time skiers to return to the mountain for another visit. All first-timers were given a coupon with a serious discount to distribute to their friends. We determined short-term ROMI by the revenue generated from new customers (i.e. the friends), and we determined long-term ROMI by the number new customers gained, the number of return visits, and the value over time of those visits.

Whatever you do, measurement is necessary so you can learn, analyze, respond, and refine. You wouldn’t let your broker get away with saying, “eh, I think you made a reasonable return, but I’m not sure.”

Work hard to discern what’s worth sticking out and what you need to ditch right away.

No matter how talented your broker or your marketing staff, there will always be investments that don’t return very well.

It’s tempting to cut the losses of every campaign that doesn’t work out immediately. But be aware that it is possible to give up too early (e.g. the sell off right before the rebound). For example, I have a colleague who works at a company that stopped a personal selling initiative after three months because it wasn’t generating enough sales. The tragedy is that sales cycles in personal selling relationships can often take longer than three months. Make sure that you seek out a root cause for something that’s not working before you decide to abruptly end it.

The list of issues to think through as you process marketing as a long-term investment is far longer than what I have room for here, but if you have questions or comments, please feel free to drop me a line @wordpost or at [email protected].

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