The Cost of Marketing

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Financing Marketing

By ACS Bookshop UK on September 19, 2018 in Business | comments

When we consider marketing, we often look at the advert, the mail out, the email out, but do we consider the financial implications of a marketing project? This is the Return On Investment (ROI), i.e. a measure of the financial return or profit compared to the outlay in generating that profit.

Finance is an important part of marketing, as there has to be justification in making expenditure, or repeated expenditure. There is little point in eroding profits of the business to fund a marketing project if there is no appreciable gain to the business. However, it is not always just about finance, it can also be about presence.

For example, say you get a 10% increase in sales of your existing product range. Is this because of your marketing?

With a marketing audit, you also have to look at what works and what doesn't. For example, say you spend money advertising that you sell a new range of soft drinks. You spend $100 and only actually sell $150 of the drinks in a year. This is not going to be good marketing. BUT it looks as though you have made a profit. You've have made $50, but was that worthwhile?

Say you spend 5 hours a week doing free marketing on social media advertising the soft drink and find it doesn't work at all – you could then consider why didn't it work, what could you do better? Or it might be that it increased sales massively; you could then look at this more, e.g. you posted a free special offer such as "Buy 5 cans and get one free" and that day, you get a 100% increase in sales. Or every time you post, that day, you get 10% more customers etc., but that wears off after time, so you have to find a new  way to attract customers.

Do you see what I mean? Marketing can be very expensive and time consuming, so it is not just about the financial increase but  also what works effectively.

IF you do your own marketing and you have your own business, you may feel you are not having to pay for that time, but actually you are. If you spend 5 hours doing something and it doesn't work, you are losing 5 hours which could be applied more productively elsewhere. So it is good to keep a track of how you market, what works and what doesn't to ensure it is good in terms of your time and also your money.

It also needs to be appreciated that marketing activity may not always generate an immediate improvement in levels of business. Marketing activity can be embarked upon for short term gain, i.e. price or product promotions, but it can also be used to create a presence in the market place. 

Reviewing of your marketing activity and the ROI should also be an ongoing and flexible process. Say you do a leaflet drop and find an increase in customers the first time, while the second time there is less of an increase , and the third time, no change in customers, you might want to leave this for a few months or year before taking this approach again. Using channels such as social media may be useful in raising the profile of your business with certain groups, as may targeting advertising in publications or on websites and so on.

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