Monday, November 16, 2009

Marketing Dollars and Sense: Spending effectively today to market for the future (Part 1)

In 2009 most companies scaled back on marketing expenses in an effort to control costs. For most companies the decision to cut marketing was a bang-for-the-buck decision, or more formally a return on investment (ROI) decision. When a company goes to cut costs, anything that doesn’t make dollars doesn’t make sense and for most companies without appropriate controls and measurements marketing is a hard, and often high, cost to justify. While cutting marketing expenses is certainly not a bad decision it should not be a permanent decision. Every company should spend some money on marketing, but the key is to find ways that help them spend effectively.

In the world of small businesses marketing as a practice usually falls into two categories: all or nothing. As we all have seen there are those small businesses out there that bombard the marketplace with marketing. These companies are run by owners who feel marketing is a salesman they don’t have to pay commission to. They send out fliers and e-mails and maybe do a radio or TV ad and they maybe buy a billboard or two or ten. This group typically is aiming for mass appeal and follows the adage that it takes 7 pieces of marketing before you can make a sale or generate business. I work for one of these companies. I do not insinuate that this is a bad strategy in any way. Our sales guys tell me all the time that this type of marketing is actually effective in our industry. The main reason is that there are so many competitors in our market that it is important to keep our name on top of the junk mail pile. Repetition leads to familiarity which leads to direct association which leads to picking up the phone and calling our company when their convection oven breaks. Without that constant stream of mail and e-mail and what have you our company name gets forgotten as easily as the name of your waitress at dinner (I mean really how many of us can honestly say you remember the waitresses name from the last time you ate out?) However as the VP of Finance for the company I am only concerned with ROI and when sales are off by… let’s just say they are off, it is hard for me to see how this strategy is truly effective for the long term survival of the company.

On the other side of the spectrum you can find the nothing group. These are the organizations run by owners who think marketing is a waste of money and who feel a stack of business cards and a good reputation in the industry is all you need to succeed in business. In this category marketing is no more likely to bring business into the office than would a casual conversation between a satisfied customer and a friend or colleague looking for the same service. This group typically is aiming to satisfy existing customers and create total loyalty. I also work for one of these companies. I definitely cannot insinuate that this is a bad strategy either. I know that for the particular nothing marketer I work for, marketing expense this year was a whopping $300 (primarily for business cards). In fact even if you add in the holiday gifts being sent to clients (which is but isn’t marketing), the total marketing costs for the year are less than $2500, or less than 0.5% of total costs. Yet despite sales revenues being only off slightly, the operations side of my job makes me wonder how long this strategy can be truly effective.

Seeing both sides of the spectrum leads me to ask the question: “How does an all marketer or a nothing marketer become more effective at managing its marketing habits?”

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