Marketing is an Investment not a Cost

Marketing is an Investment not a Cost

​In many organisations the spend on marketing activities is perceived as a cost.

Different departments, board directors and even marketers themselves invariably consider marketing spend as a budget. By definition a budget is an amount of money dedicated for spending on items and activity. And therefore it follows that such spend is a cost and the word cost has negative connotations.

Most businesses, and especially those who don’t have effective marketing planning processes, allocate a set amount of budget to marketing with the vague notion that it will be spent on some kind of activity that will assist business growth. Such activity tends to be sporadic, unplanned, disjointed and sometimes chaotic. It’s understandable though. By giving someone, even a seasoned marketing professional, a pot of money and asking them to spend it, can cloud judgment and put the individual under undue pressure to spend even if there is actual need to spend. The larger the organisation and the more widely spread the budget across various business units and countries and the pressures and chaos increase.

So here’s a thought. Forget marketing budget as a cost and think of marketing activities as an investment. Rather then simply allocating a random amount (how often do you hear words like, “you had that amount of budget last year and this year you are fortunate because we are going to increase it by 10%” or “this year we will be cutting your budget by 10%, but we want you to do more this year”.) and then looking for ways to spend it, how about starting with a marketing budget of zero.

Yes I said it. You have a marketing budget of zero.

Now the fun begins because you have to work out ways of creating marketing activities that will add real value to your business. Please read that again… REAL VALUE TO YOUR BUSINESS.

As we have seen, marketing budget is a cost because it is a sum of money that the business would actually rather take as a dividend payment or reinvest back into the business. So your task if you accept zero marketing budget is to propose strategic and tactical activities that each will deliver a return to the business.

You begin of course with all the favourite marketing planning exercises and out of that will come a wish list of activities that will create and sustain excellent value for the customer at the same time as delivering business development, sales opportunities and customer service support. There will be new product development opportunities and often the chance to enter a new market or diversify. Whatever the outputs of your planning each and every proposed activity must be shown to deliver a tangible value back to the business. I emphasise a TANGIBLE value.

The value may be in increased revenue, additional sales volumes, strategic partnerships or simply more effective ways of working leading to efficiency savings.

If you place a value against every activity and of course a way of measuring and reporting that value then the allocation of spend (I am not using the word budget here) against that activity can be shown to deliver an incremental gain. Spend a dollar and return five dollars. Invest a pound in an activity and return ten pounds in value to the business.

Whatever the outcome for each element of spend you undertake, the importance is that you will have turned around the way the business views marketing. Perform your marketing role in this way and you will be seen as adding strategic and short term value rather than simply being ‘that person who spends money, and we aren’t sure quite what they do’.