Don’t sacrifice tomorrow for the needs of today

In a sad way, it’s funny that the marketing budget is typically the first expense a business cuts when it faces a financial hardship. It’s funny that a company would choose to cut the very vehicle it needs to solve its problem, and that is to reach and solicit business from its customers. I understand why a business would choose to cut marketing out from its expenses; it is an easy way to save a big chunk of money right away. But ultimately it’s a shortsighted maneuver that has much longer lasting repercussions.

Think about this: From 2000 to 2008, the population of Colorado increased 14.8% (2009, quickfacts.census.gov) which translates to roughly 79,680 new residents each year statewide. That figure just accounts for the overall growth, it does not count for the loss of residents who move to a different state or even a different community. If a company decides to stop advertising (just for one year) it not only loses out on reaching all those potential new clients, but it also loses all those existing customers who have moved elsewhere. Granted, this number reflects 79,680 across the state, so it’s not like any business instantly loses potential business with that many people. Overall, the amount of new arrivals will be far smaller and fluctuate based on the size of the community (urban area see a greater amount of new residents, rural areas fewer). But for any business, especially a small business, how many customers can it afford to lose and fail to replace and still remain viable? Not many.

Without a marketing effort in place to attract new customers to replace the ones who have left, a business will find an ever-increasing challenging in making up lost revenue and returning to a position of financial stability.

So the question is: “How to you trim the bottom line AND position yourself for growth?”

The answer is surprisingly simple and the first step is to evaluate where you spend your marketing dollars and what kind of Return on Investment (ROI) do you receive from each effort?

Far too often I’ve found that companies don’t have any real strategy for reaching customers. Worse yet, they tend to target the wrong customers or use the wrong advertising vehicle to spread their message. In many instances, it is very much a ‘throw it against the wall and see what sticks‘ approach. Businesses regularly allocate a certain amount of funds to marketing, but lack a detailed plan on how to utilize those resources.

Here is a list of 10 common questions to help get you market more effectively:

1. How much money should a business allocate to marketing? The typical range varies depending upon who you talk to, but generally speaking 5-7% of total annual revenue seems to be what most experts recommend. So that means $5 to $7 of every $100 in earnings should be earmarked for next year’s marketing.
2. Are there any fool-proof marketing methods out there? The honest answer is no. Even the best researched, best intentioned marketing campaign is an educated guess. Focus groups, market research and expert experience can help narrow the margin for error and increase the odds of success, but it all comes down to how the audience reacts to your service/offerings.
3. Which is the best approach, branding or call-to-action advertising? It all comes down to what results you expect from your adverting. Branding advertising is designed to promote awareness – SuperBowl ads are typically branding ads and typically contain clever messaging or positioning statements. Branding ads are designed to keep your company in the public eye, but not designed to move specified amounts of product. Call-to-Action advertising advances a very specific action and benefit on the part of the client and is designed to get the cash register or phones ringing. A good call-to-action will do the following things 1) Sum up the value of the product with a tangible reader benefit; 2) Instruct the reader as to how to go about obtaining said product and 3) Instill a sense of urgency.
4. Which advertising vehicles work best? That wholly depends on the intent of the marketing, but each vehicle has strengths and weaknesses. What I have found is that businesses often get caught advertising because the got ‘a deal’ – a sales rep called them with a special rate on airtime, or print space. This is not a reliable approach to marketing, nor an effective use of limited marketing budgets. The goal is to pair the right message or product with the right medium. For example: Newspapers are really good a limited-time or price point offers (call-to-action). They are not good at delivering results on image or branding advertising as they don’t have a shelf-life long enough to garner repeat views; Magazines however are just the opposite. They excel at branding and are less effective with call-to-action (C2A) advertising because their shelf life is often far longer, and C2A ads tend to expire before the reader can act on the offer. The limited lifespan of newspapers works for C2A because they are most often read the same day as they’re received whereas magazines may sit around for weeks or months before they’re opened. Radio and television can be used relatively efficiently for both branding and call-to-action advertising, but production costs and achieving the frequency needed to reliably reach the masses can be very expensive. On average a person needs to see or hear a broadcast spot 7-10 times before they actually realize they’ve heard the commercial. Phone books, in my opinion are almost a total waste of advertising money. They sit up-opened for months on end (especially with the advent of the the Internet) and even when they are opened, in most instances, people are searching for a specific name (i.e. they already know what business they’re going to use) and will not be casually leafing through trying to make a buying choice based on a yellow pages ad. Websites are a good area to spend money in your advertising (your actual web site), but banner ads and pay-per-click advertising doesn’t yield a great ROI. Social media is growing and is a great tool for branding yourself as a subject matter expert, giving you and your company added weight in terms of reputation, but like pay-per-clicks and banner ads, don’t expect a significant ROI.
5. How much time is there to attract the attention of the customer? Not much. In print, you have maybe one-half of one second to attract a reader’s attention. With television and radio, you have maybe a second or two before they switch to a different channel or hit the mute button (or fast-forward their PVR). This isn’t to say that you can’t be successful in reaching the audience with these mediums, but you have to do it the right way.
6. What’s the right way? In my opinion, the best way is to be clever, be informative, but be brief. Get straight to the point and show that you value the time of the reader. This means you streamline your message to only the single most important communication point – don’t clutter up the message with a ton of irrelevant facts. In short, ditch the irrelevant … lose the picture of your kids and your dog (unless they’re the ones selling me a product, I don’t want to see them); cut out all the ego statements, the company history retrospective and ditch any photos which don’t directly support A) the product or B) serve as bait to attract attention; bullet-point your copy, if someone has to read through paragraphs and paragraphs of content, they’re not going to invest their time. Help them get in, get out and then on with their lives.
7. How much is too much to spend on any one project? That depends on your project and what kind of realistic ROI you expect. It’s not uncommon to see clients freak out over a production bill and get caught up on a single number. You don’t want to overspend on any project, but you also have to be realistic about what the results will be if you underspend. If you pay too much, you’ll never achieve a decent return. If you underspend, your effort will look cheap and that can have a significant and negative impact on your brand (public perception). It’s a balancing act and there will always be a certain level of give and take. But if you’re presented a bill for $1,000 for 500 sales brochures – but one single sale from that piece will not only cover, but exceed the total production amount – that’s a good return on your investment. If you spend $10,000 on a project and it would take hundreds or thousands of clients to cover the production costs, then it’s not a good ROI. Too often I’ve seen customers not proceed a project simply because of the initial cost, even though the realities of the ROI would indicate that only the smallest response rates (1%) would more than cover any of the production costs.
8. How much money will my marketing bring in? That’s entirely the wrong question to ask of your marketing investment. I get this question a lot from prospective clients. As I mentioned in #2, marketing is a best-guess endeavor so specific dollar amounts don’t necessarily have relevance. The numbers can be extrapolated based on expected response rates, but I wouldn’t go so far as to say that achieving those numbers is an exact science. No, the right question and ultimate purpose for marketing is to bring people in the door. I’m going to write it once more for clarity. THE PURPOSE OF MARKETING IS TO BRING PEOPLE IN THE DOOR. It is not to move product. That is your job as a sales person. The advertising helps promote awareness and spread your messages to the masses, but once they step foot through your door, call you on the phone or land on your web page, that’s your turf and the success or failure to sell, promote or enable action rests squarely on your shoulders. If your customer service or your inventory quality isn’t up to snuff, no amount of marketing can make up for a shoddy product.
9. Can’t I just use word-of-mouth advertising? Word-of-mouth advertising is a very powerful tool. There’s no question, but it can be used for both good and evil. You can network and glad-hand people until you’re blue in the face and that can help bring business to your doorstep. But how much time do you spend to win that business? Is the amount of time you spend soliciting business taking away from running your company or improving upon your product or service? What happens when the people you speak to find your service or product to be of inferior quality. Impress a client and they’ll tell three people. Wrong a client and they’ll tell ten. Yes, word-of-mouth can be a very powerful tool, I just wouldn’t trust it as the only tool in my arsenal.
10. An old adage in marketing is to focus on one medium and do it very well. Is that still true? Not in age of decreasing attention spans and multiple options (TV, Radio, Social Media, Video Games, Movies, Music, etc.) competing for our customer’s attention. The best approach is to have a strategic and multi-platform marketing plan in place. It doesn’t mean that you have to overspend or even increase your marketing budget (it may if your budget is unrealistically small), but it does mean that to reach the most qualified potential customers just at the moment they’re looking to act requires that you try and reach them in more than one area in their lives. They may hear your ad on radio, but it’s not until they see your ad in print or online do they realize that they’ve heard of you.

It is also very important to keep in mind that any advertising effort take time to gain traction; patience is very much a virtue. It takes time for repetition and awareness to fully seep in to the public consciousness. In my day I’ve seen far too many campaigns yanked after a week simply because the phones didn’t ring the very same day the marketing hit the street. If your marketing message is topical, if your distribution method is sound, if you are reaching the right customers, your marketing will be successful. It just takes time to get the word out. Marketing very much builds upon momentum and can grow stronger and stronger over time as long as your message is consistently reinforced.

Before you cut your marketing budget, take a long-term look at what’s really at stake. It’s not the short term success of your company, it’s the long-term ramifications that will really matter. The key to marketing effectively is to use your resources in the most optimal manner possible and to have realistic expectations as to the results. Examine what you’re currently doing and identify what is effective and what is not. If it isn’t working, trim it out of your budget. You can put that money to better use; either to help your bottom line, or to reinvest it into the marketing strategies that are generating results.

There’s a saying that moving to a new home is the best way to clean out the clutter in your life. If your bottom line isn’t what you want it to be, the answer isn’t to become homeless (i.e. eliminate marketing), it’s to streamline and cut out all the ineffective marketing and move to a new strategy that is more efficient and productive.

UPDATE – EXTRA READING:
An article from the Wall Street Journal discussing a similar topic.
A really great analysis by Gerard Tellis on the topic with data dating back to 1920 — good stuff.

Courtesy of:
Matt Schroeder at the Allegra Marketing Blog