The ROI of Marketing: Numbers to Grow By

Generally when we are helping a company transition from one level of operations to a higher level, we find that the client is usually enamored with the idea of making major investments in marketing and sales.  The primary reason for this is that they spur business development and provide the most tried and true method to obtain new revenue.  

Depending on the business, there are many times when major investments in marketing are not only permissible but necessary to facilitate the growth necessary to justify larger investments in the company.  However we generally find that many clients are not well versed in how diverse a marketing portfolio should be.  Similar to stock or bonds the diversity of your marketing profile is vital to assuring that your marketing profile produces a significant ROI. 

As an executive or business owner; it must be understood that MARKETING IS AN INVESTMENT; and like all investments the evaluation of marketing is based on the Return On Investment (ROI).  Your ability to generate a return through increased sales is the primary reason why marketing programs are implemented so every evaluation of marketing should center on this measurement. 

Your marketing portfolio should include several different methods of marketing which should be based on your existing experience in the market, and your plans for growth during this new stage of development.  The problem with the development of these portfolios is that many customers think that those marketing programs that are the most expensive yield the best results, and while sometimes this is true, many times it is not. 

It is important to realize what your customers’ value in marketing and then develop your plans based off of that.  For instance, if your primary demand driver is that your products are low-priced, then your marketing should highlight that, if your primary demand driver is that your products are energy efficient then that is what should be highlighted.  For many companies deliberate viral marketing is the most cost-efficient marketing program that can be used to acquire customers.  In addition to this it is something that most companies with positive economies of scale depend on as the anchor of their marketing portfolio.  If you can develop a marketing program that requires you to only plant the seeds inside of one level of customers and then without further input watch those seeds grow then this should be at the forefront of your marketing plan.  For those unfamiliar with the basic premise of viral marketing, it is the time honored fashion of directly marketing to 10 people, having those 10 people tell 10 people, having those people tell 10 people, and so on.  The problem with implementing this program into your marketing portfolio is that it must be planned out very carefully and management must ensure that it dictates the information that goes out through the marketing chain.  This is highly important because, while the primary benefit of viral marketing is that it can lead to an explosion of market notoriety, the company must take care that the notoriety the company is obtaining is positive and not negative. 

With the continued progressions of the Internet as the basis of many marketing plans, viral marketing is becoming much more prevalent, but it is also becoming much more difficult to plan because so many companies are attempting to use it. 

In addition to viral marketing there are numerous other methods of cost efficient market development that may or may not be industry-based.  The point is that it is necessary to place effort into understanding where and why your customers come to you, and then exploit that in your marketing plan. 

In addition to planned marketing initiatives; most companies really have to depend on some form of organic growth to increase their sales output.  The fact is that as a company grows the marketing expense per customer attracted should continue to decline; if it doesn’t it means the company is forced to actively pursue each customer.  While this may be ok for companies that have an inherently small or insulated client base (i.e. a company that works with communications companies or government contractors), it is not sufficient for companies that market to the masses.  Utilizing organic growth to fuel your marketing plan is one of the most cost efficient ways to improve your marketing ROI, so (to a point) management should focus on locating ways to grow organically whether it be through positive PR or branding or product/service exposure. 

It is very important to realize that most marketing initiatives are considered “soft” investments in that if they don’t work you can’t recoup your investment, thereby it is important to understand what works and what doesn’t; otherwise you could see your company flame out because of poor marketing investments.  This is the primary justification for having individuals who are savvy in the fields of sales and marketing within your marketing department; because their talent should be in identifying the best ways to engage the targeted market which provides a much larger opportunity for success. 

While the glamour of mass-media marketing is quite intriguing to have as a portion of your portfolio it is also important to understand that these same results can be obtained from other marketing methods.  Instead of Banner Ads maybe you need to build a direct response advertising campaign, instead of television or radio, maybe you should focus on “plant marketing” campaigns through social networks or industry trade forums. 

After you have selected which marketing programs you will include in your portfolio then you should immediately project the course for each program (how long will they take to begin working) and stick to that.  If you project three months, then you should review in three months, if one month then review after a month.  If they don’t work then review them for internal errors and make the necessary changes, if they don’t work at that point determine whether or not they should be scrapped.  REMEMBER THE BEST WAY TO MAKE A SMALL FORTUNE IS TO INVEST A BIG FORTUNE INTO SOMETHING THAT DOESN’T WORK.  

EVERY quarter you should review your financials and determine how sales are being affected by your marketing programs, then you should review each program and ascertain the financial results acquired from your efforts.  Like any other investment, knee-jerk reactions can be detrimental to your success.  This is why you should have a working knowledge of each marketing program that you are using so that you understand what the requirements are for these programs from a time and investment standpoint.  If you need help to develop your marketing plan then seek it from any number of marketing firms geared to help in these areas. 

At the end of the day, like any other investment, your return on marketing investments should be within a range that is considered positive for your company.  Because marketing investments are such a large part of the overall financial portfolio of a company the ROI for your marketing portfolio should be consistently one of the most important factors that you use to gauge performance.  If certain programs are yielding better-than-expected results then find out why and determine whether further investments will generate even better results, also concentrate on the “Grass Roots” or viral tactics that can yield positive results with modest investments.  If you do this you will be able to control the performance of your marketing and from there you would have implemented an efficiency module that could become the litmus test for the overall long-term viability of your business.

 

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