What Constitutes Legitimate Marketing Expenses?
You have to invest money to make money, and many expenses fall under the legitimate category of “a cost of doing business.” But you shouldn’t pour money into a bottomless pit, either.
What criteria can you use to determine when to spend hard-earned and sometimes scarce cash on sales and marketing?
- Are you meeting with an economic buyer? I think nearly any travel is justified if you’re guaranteed uninterrupted time with an economic buyer. That means you have to absolutely test to ensure it is the buyer, and that you’ll have sufficient time together to begin a relationship and perhaps pursue conceptual agreement about a project. I think that 90 minutes is about right. I would travel across the country on my own dime to spend that time with that type of buyer from a major corporation.
- Is the business potential significant? Even driving down the road for an hour doesn’t make sense if the prospect needs only $200 of help or hasn’t any money or refuses to hire consultants under any circumstances. I’ve know consultants who intelligently invested a thousand dollars or more in customized marketing materials for a specific prospect, and I’ve know others who waste a few hundred dollars almost daily in responding to worthless leads.
- Is it timeless? Can you use what you’ve created continually, or does it have a very brief shelf life? A marketing piece based on John Paul Jones may be eternal, but one based on the last Superbowl may not be relevant three months later. How much use can you get from the investment?
- Are you reaching the correct audience. Many consultants pride themselves on expensive and impressive newsletter which are visually pleasing and highly informational. But they are not being read by potential buyers or recommenders. What assurance do you have that you’re reaching the intended targets?
- Are you paying for results (outputs) or tasks (inputs). Hiring a public relations or marketing firm is stereotypical. Most charge a monthly retainer whether they generate business, interviews, and leads or not. But some charge only based on an article being placed, qualified leads being received, or business being consummated. A PR firm which has no connection to your business activity level is like a nice buggy whip when you don’t own a horse.
- Is it a must, a want, or a nicety? You probably must have a professional web site, and you may want to be able to automatically update search engines periodically. But how important is that streaming video or complex opening screen which the designer felt was so important? It’s simply a design nicety, done for the sake of technology but not business. Apply that paradigm to all your marketing investments. Just because something is nice doesn’t mean you want it, much less require it.
- What is the effect on your good name? Brochures, collateral, stationery, attire, etc. create invaluable first impressions. You’re much better off with a very expensive pen and business card-which people are prone to see-than car or office desk-which no one is likely to see. Any marketing investment which enhances your image to buyers is usually worth it.
Never be penny-wise. This IS the marketing business we’re all in. You can no more refuse to invest in marketing than you can refuse to use a computer or telephone. But you probably don’t need a state-of-the-art supercomputer, or the most complex global phone. You need what is appropriate for you, and the same applies to your marketing investment.
People have asked me what percent of revenues to use for effective marketing, and I don’t know that answer. I do know that your marketing activities should increase every year, and that you should have more and more “avenues” to reach the market and create need. Just make sure there’s traffic on those avenues.