<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=857064631080988&amp;ev=PageView&amp;noscript=1">

By
Bill Walls
Bill Walls on July 31, 2020

Is Marketing An Investment Or Expense?

Is Marketing An Investment Or Expense? Many companies view marketing as an expense, but those that view it as an investment are more successful over time..

Many companies view marketing as an expense...only to spend money on when it is absolutely necessary and they need more sales. As a result, they look to minimize this cost as much as possible.

Instead, business owners would rather spend their money on other things that are needed to run their business, whether it’s purchasing new equipment or hiring new employees.

With this mindset, it’s easy to miss the big picture...Without new customers and sales, you may not have a business.

Here’s what business guru Peter Drucker says:

“Because the purpose of business is to create a customer, the business enterprise has two - and only two - basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” 

Companies that view marketing as an investment understand that in order to grow their businesses, they must continually invest in creating new leads and new customers. 

 

Why Businesses Don’t Invest In Marketing

 

Businesses that choose not to invest in consistent marketing tend to have several traits in common. They are as follows:

Survive Mode Vs Thrive Mode

Marketing investment or costIf someone asked you if your business is in survival mode or thrive mode, what would you say?

Most business owners prefer to be in thrive mode, yet many of them make decisions based on survive mode … or fear of spending any money beyond everyday expenses in case they won’t survive. 

Survive mode is a constant struggle. Either your business is just getting by, or you have a fear that your business will be in a position of barely getting by. Your decisions reflect this and tend to produce more short-term results. You cut expenses you perceive to be unnecessary or extravagant, and your decisions tend to be more reactive than proactive. Businesses in this mode will often spend some money on marketing, get some sales and then stop marketing until they need more sales again. It is a start and stop mentality.

Thrive mode takes patience and persistence. Your decisions reflect both short-term and long-term thinking. Business owners who are in thrive mode budget for marketing their businesses and see this investment as the only way to meet long-term goals.

Perceived Value Vs Cost Of Marketing

Successful business owners know that the value of an effective marketing plan goes way beyond its cost. It helps your business grow and gets everyone on the same page working toward a common goal. And, often other areas of the business that need improvement are identified as sales increase. 

All of these benefits impact your bottom line now and in the future, making marketing a worthwhile investment. In fact, studies have shown that businesses that have developed a marketing plan grow 30% faster and that 71% of fast-growing companies have plans.

While some business owners may perceive the low cost of a marketing plan as its value, a customized plan that works toward fulfilling the goals of a company has a much higher value than its initial cost.

Unrealistic Expectations

Some business owners expect results now. It’s a normal human reaction to have, especially as your livelihood depends on the success of obtaining and retaining leads

However, getting immediate results can be challenging. Today, buyers have the tools needed to research and compare products and prices at their fingertips … and they don’t always buy out of the gate. 

While companies may feel like their marketing efforts should more closely resemble a sprint, the most effective content marketing plans are a marathon. The good news is...blending a high-quality content marketing strategy with other tools, such as social media, can create a powerful combination that has long-lasting impact.

Previously Failed Marketing Efforts

If a company has been burned in the past by marketing efforts that didn’t work, it might be difficult for that company to jump back in. 

It is not uncommon to find companies that were talked into spending money on marketing ideas that were never a right fit for their business. 

Or, sometimes businesses have dabbled in marketing programs run by small inexperienced marketing outfits, not to mention large marketing firms that lose them in the shuffle. 

Either way, if a business does not see positive results, it can be easy for an owner to declare, “I’m not doing that again!” 

The key is working with a marketing company that is as invested in your success as you are.

 

Impact Of Not Investing In Marketing

 

Marketing investment or expenseToday, companies can’t afford NOT to invest in marketing. If you want to grow, you need to have an effective marketing plan. After all, nobody is going to walk into your office and ask for whatever it is that you are selling unless they know who you are, what you do and have the confidence that you can deliver the goods.

Not investing in marketing often keeps your business where it is at now. In other words...stuck in a rut with no new prospects, a business model that no longer works and overhead expenses like rent, payroll and depreciating assets that aren’t going away.

The worst case scenario is that it can cause your business to go under. We have seen this all too often when businesses do not focus on marketing and sales.

 

Gaining A New Perspective

 

It is time to look at marketing from a new perspective. Here is a comparison between the survive and thrive modes of thinking:   

Survive Mode:

Company A has $60,000 cash to invest and decides to purchase a truck with that money.

Impact: 

  • The company now has a new commercial truck to improve delivery of its goods and services.
  • The company has a new asset valued at $60,000 minus depreciation. 
  • The company has ongoing maintenance costs.

Future value:                                                                                                                                                                                                     

  • The company has an asset, but the value of the truck depreciates over time. In fact, commercial vehicles often depreciate faster than a personal vehicle because a company vehicle is subject to more extensive wear and tear. (Most commercial trucks depreciate 20% per year over five years.)                                                                                                                                                                                                                                

Thrive Mode:

Company B $60,000 cash to invest and decides to invest in inbound marketing.

Impact:

  • Company receives $500,000 in additional revenue (results will vary depending on type of marketing and average order size)
  • The company receives $150,000 in additional profit (assuming a 30% profit margin).
  • Additional profit covers the $60,000 in marketing investment, provides the money to purchase the $60,000 new truck the next year and creates $30,000 in net profit.
  • New customers have been created for more future business (assuming a $20,000 average order amount, this number would be 25 new customers).

Future value:

  • Assuming the company is one that has recurring orders as part of its business model, the dollar amount that each of the new customers brings in over five years would be $100,000.
  • The total recurring value over five years for the 25 new customers would be $2.5 million ($20,000 per order per year x 5 years).

  Company A Company B
Investment Amount $60,000 $60,000
Investment Area Commercial Truck Inbound Marketing
Impact 

New Commercial Truck

New Asset Valued at $60,000 (Minus Depreciation)

Ongoing Maintenance Costs

$500,000 Additional Revenue

$150,000 Additional Profit (Covers Marketing Investment, Money to Buy Commercial Truck and $20,000 Profit)

25 New Customers

Future Value Asset That Depreciates 20% Per Year Over 5 Years $2.5 Million in Revenue Over 5 Years
     

 

 

In looking at this example, we see that it isn’t just about the $60,000 initially being spent. Instead, the more important point is HOW the $60,000 is spent. How it is spent impacts the future of that business not only over the next five years, but the next decade and beyond as well.

 

Never Stop Marketing

 

Successful companies never stop marketing. They look at marketing as an investment … not a line item expense that can be cut in order to reduce the budget. 

A marketing agency, particularly one focused on inbound marketing strategies, provides substantial value for your business. Benefits include:

  • Experience in executing inbound marketing plans
  • A marketing plan specific to your needs
  • Execution of your marketing plan immediately
  • No employees necessary to manage and handle marketing
  • No additional overhead from employee salaries and benefits
  • A 100% tax deductible expense (for accounting purposes)

Working with an inbound marketing agency also allows you to focus on running the operations of your business, not executing a marketing plan or managing staff. You can read more about this in our article, Why Should I Hire A Marketing Agency For My Small Business?

You may be asking yourself if you can afford an experienced marketing agency. But, the better question is...can you afford NOT to invest in marketing?

 

The Business Owner's Guide in Hiring an Inbound Agency

Bill Walls

Bill is the CEO and Founder of InTouch Marketing. Bill drives the vision and direction of InTouch except when England's playing in a soccer tournament, because everything stops!