Marketing: An Investment Or A Cost?

‘We don’t do any marketing, all our business comes from word of mouth,’ says the business owner as he leans on the counter waiting for the phone to ring.

‘Anyway I could never afford to pay for it; we are on a really tight budget’.

Sound familiar? What I often feel like saying to the business owner when we have this conversation (which is often) is ‘well if the word of mouth business is so good then why have you got no money?’ But I am sometimes too polite for my own good. This article will answer the question, is marketing an expense or investment?

Most people are in business because they want to make a profit. So why the stigma when it comes to actively looking for new business?  Often the business owner in this scenario has seen no growth in the business in the last 5 years, and isn’t likely to in the next 5. Yet when I ask if they want to grow they usually say ‘yes of course, if you’re not growing, you’re going backwards’.

Marketing is an investment

To me this is a classic mistake made by small and medium sized business owners, which is to see marketing as a cost, not an investment. There is a difference. A cost is dead money. Marketing is an investment. Put simply, if you spend £10,000 on marketing and it directly leads to extra sales of £50,000 and profit of £25,000; it has made you £15,000, and simply cannot be described as a cost. It has made you money, contributed to paying wages, bills and created cash for further investment.

What often happens is that the business owner takes a back seat and simply waits for something to happen.  Invariably they spent a lot of time worrying about how quiet business is, phone a mate in the trade and then between them blame the world economy, government policy or Chinese labour costs (or whatever other negative stories are in the news headlines that week). 

Grow your business

But if you seriously want to do more business, it is there. Just reach out and grab it. A bit of activity goes a long way.I have been learning guitar for a few years, and I found my teacher by typing in ‘guitar teacher Worcester’ into Google. Luckily for him he is an ex-website developer and had created himself a decent site. I gave him a call because his site ranked on the first page, and I was given a sense of confidence from reading it. When I spoke to him he seemed a decent chap, so 4 years later at £25 per hour once a week, let’s say 40 lessons a year , I have spent £4,000 with him.

 And I’m just one client – imagine if he could get another 5, 10, or 20! 20 extra people spending £1,000 per year would get him an extra £20k a year.

Yet if I suggested to most of his competitors that they should invest a few thousand pounds in a professional website or some search engine marketing, the first thing they would ask is ‘how much will it cost’. They will see it as a cost, and either do nothing or look to minimise the cost by getting it done ‘on the cheap’ and, as with anything, cut corners.

The thing is, I now have a guitar teacher and If someone asks me for a recommendation (and they have), guess who I am going to refer them to? Not the guy who is now really relying on the word of mouth business, but the proactive guy who has built a relationship with me by investing in effective marketing. So his return on investment has now increased from just the direct return from me. Now he is benefiting from referrals that he wouldn’t otherwise have had. This gives him the opportunity to take on a staff member, open a studio, and grow his business. Doesn't this help to answer the question, is marketing an expense or investment? We think it does!

WE practice what we preach

This is an example on a small scale, but the same applies for bigger business. At JDR we have been able to finance a move to bigger premises, more staff, more professional operating systems - in short, we have grown, because we have invested in many different forms of marketing.

So we practice what we preach - and even if it’s a small investment at first doing something is better than doing nothing, so if your business is relying on just one or two marketing channels then I urge you to speak to one of our team and find out what your options are.

Find out how we can help

We love helping small and medium sized business owners achieve growth, and like nothing more than hearing of our client’s success stories. To find out how we can help, please contact us, and we can explain if marketing is an expense or an investment.