We live in a world where most SME business owners and company accountants see marketing as an Overhead not as a Cost of Revenue.
This is an out-of-date assessment. Fundamentally, today profitable sales generation is the key to business success. This is an important thing for company accountants and business owners to understand.
Quite simply, before multichannel marketing and the explosion of digital, marketing and technology were generally seen as an overhead on management accounts Profit & Loss.
There is now a deep difference between the ‘old world’ of traditional advertising-based marketing and the ‘new world’ of multichannel campaigns. This has a major impact on how the management accounts Profit & Loss should be viewed and how investment into marketing should be considered.
Attract & Engage Director Richard Willis – who has over 20 years’ experience in media planning and buying for some of the world’s most influential B2C & B2B brands – shares insight into this shift.
“In traditional marketing, it was practically impossible to attribute a ‘brand’ advertisement to a specific customer purchase. We’d consider that the ad may have influenced the decision to buy, but would also have factored in other considerations such as the location of retail unit / facility or the helpfulness of the sales or customer service team.
Today’s multichannel and digital-first models are vastly different. It’s therefore crucial that management accounts Profit & Loss is re-evaluated to take into consideration the way that modern businesses generate leads, sales and growth.
In today’s digital-first marketing environment, the change is that new sales can easily and consistently be tracked to the marketing investment from which it originated, for example a Google or LinkedIn ad, an email newsletter, or a piece of organic social content.
We advocate for smart key marketing metrics linked to marketing qualified leads, sales generation and profitability to accurately inform decisions on new campaigns. This is the shift to a Cost of Revenue mindset VS an overhead.
From here, it’s easier to understand why we warn against the trap of ‘capped’ marketing investment. By setting a final figure you are unwilling to invest beyond, you are in effect reducing your ability to generate increasing more sales growth.
Look at marketing investment as a share of the gross margin generated – and if that percentage cost is payable from gross margin – you will have a profitable business that will continue to grow with each re-fuel of your marketing campaigns.”
How to Invest to Fuel Growth
Why do huge global brands spend £millions on their marketing EVERY year. Because they understand what works for them and (MORE IMPORTANTLY) what doesn’t. They are not thinking about marketing as an Overhead, they are tracking it as a Cost of Revenue.
When implemented correctly, marketing is 100% an investment in future growth & sales, but you must have the balance right between long term (brand), and short term (performance) investment.
Richard explains:
“Branding raises awareness of your offering, performance is call-to-action. Asking the prospect to do something there & then. Buy now, click here for 10% off, share this social post etc.” (see fig1)
“Investing in performance-based campaigns will drive short term sales, and you will see an attributable peak. “Great!! Marketing is working well. I spend £1 here and get £3 in sales, lets spend £10 and get £30 back”, but there is always a ceiling. You’re only ever going to appeal to someone who is in the market right now. What’s wrong with that?”
“Solid brand activity ensures that by the time a prospect is in the market for your product/service, they are more likely to buy from you because they are more familiar and will favour you over competitors. Sometimes, they connect with your business so much, they won’t even consider them.”
“This is the holy grail of marketing, prospects WANTING it because you connect with them. Offers & incentives largely become irrelevant. The relationship is authentic, and they will assume the role of an advocate to tell their networks. Win Win.”
“Whilst tempting because of their attributable ROI, too many short-term marketing metrics will damage the long-term profitability of a business.” (See fig2)
“It’s vital to have a balance of both for long term growth & success. The optimum split is 60:40 (B:P), but every business objective is different.”
Attract & Engage is led by a senior team, that together has over 40 years’ experience in marketing & communications campaign strategy and delivery for the world’s most influential B2C & B2B brands, including Boots, Mercedes, Red Bull, Hewlett Packard and Mitel networks.
Thanks to this pedigree, we’re perfectly placed to help clients weigh up the pros and cons of ALL online and offline marketing tactics. Designing comprehensive marketing strategies that have the right balance of brand awareness and performance investment, and building inbound sales funnels that deliver against clearly defined marketing objectives.
Talk to us if you would like to help with your marketing investment strategy.