Should You Be Spending Money On Marketing Now?
By Jayme Broudy, Contractor's Business School
Dear Jayme: I’m spending a fair amount of money on marketing. I’m thinking about cutting it down to conserve cash since things are tight. Good idea or no? Thanks. - Frank
Dear Frank: It’s a common misconception that marketing is an expense. It’s not. It’s an investment. An expense is something like paper clips. An investment, on the other hand, pays you back a premium, like a CD or an income property.
But if you don’t do your homework, an investment can look just like an expense, meaning money out the window with nothing to show for it.
So, have you done your homework? Do you know your customer, what they want, how to reach them, what makes them buy? Not just a guess, but really know? Do you have good data to see that when you do marketing campaign “A” at cost “X” it produces result “B” with ROI of “Y”?
If this all sounds complicated to you, it’s okay. You’re not alone. But the process isn’t really all that tough if you know the steps (see below).
Your marketing engine has to be efficient. That means for every dollar invested, you get back a predictable amount of business. Here’s the BIG thing to know:
• When the economy is decent, good marketing processes will sustain or bring in more and more income. They’re a necessary investment.
• In bad economies, good marketing prevents you from losing income. They’re still a necessary investment.
I know it sounds uncomfortable but think of it this way:
Suppose you know (because you do your homework and track the data) that $1,000 in marketing historically increases revenue by $200 each month. Invest $1,000, get back $1,200. No brainer.
On the other hand, if your revenues are declining due to the economy, the market’s tougher. You may only be able to get $1,100 back for each $1,000 you invest. Not as good, but still 10% a month.
So what happens if you slash marketing investment to “save” money? You’re taking $1,000 money out of an investment that’s paying you 10% a month (or 1200%) a year, and sticking it in a 2% CD. Smart?
Finally, let’s suppose you stop marketing and your competitors don’t. Then what? Who’ll get a share of the smaller market and survive?
“But” you say “my marketing has never done much for me anyway. Cutting it out will just save money.”
If that’s the case, you’re right, and it means that you don’t have a legitimate marketing process in the first place. You can probably stop spending and not see a loss.
It’s hard to maintain marketing investments when the market is down and money is tight, but that’s exactly when you need it most. Even if it doesn’t increase your revenue, it will help maintain revenue at a time when every income dollar counts.
(Note: Beware of marketing companies who make big promises and want money up front. Ask them to back up their promises with guaranteed results and see how fast they disappear.)
Now, if you’re against the wall and it’s either make payroll or run ads, you do what you must to make ends meet. But if there’s cash coming in, marketing is an investment worth keeping.
My best to you,
Jayme
Contractor’s Business School® is a coaching, training and consulting firm specializing in helping contractors produce more profit in less time. Calling on experience dating back to 1993, the company has worked with hundreds of contractors in many specialty areas to build successful stand-alone businesses. Visit www.contractorsbusinessschool.com, or call (800) 527-7545 to get the FREE CD "10 Key Strategies to Build a Business that Works."
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