07 Sep Why You Should See Marketing as an Investment, not an Expense
How marketing, when seen properly, is a money making machine
How much does it cost? That’s what many attorneys focus on when evaluating their marketing options. While cost is definitely an important criteria in determining any marketing strategy, a more effective criteria is whether or not the marketing initiative is cost-effective.
Taken one step further, the ultimate criteria that determines the success and viability of any marketing effort is how solid the return on investment (ROI) is. In other words, how much profits does your “investment” in marketing bring you? As attorneys shift their marketing focus from cost to ROI, they will choose the right types of marketing strategies, diversify marketing initiatives, be more aggressive in their marketing, and will reap profits that they wouldn’t have otherwise achieved.
Why we tend to see marketing (and most business expenditures) as costs
It is easy to see most business “expenses” as just that, expenses, when in reality most expenses are really investments. “Payroll expense” is really just investing in the productivity and results that your employees produce. “Office expense” is simply an investment in a place that allows you to work and make money. “Travel expense” is an investment in the profits reaped from the meeting that will occur there. If expenses were really expenses, no one would pay for them. They would be reduced to 0. Marketing is often bundled into the category of expenses and seen as something that should be reduced.
While this makes sense with the “expense” mentality, with a new paradigm of the “investment” mentality, marketing takes on a whole new meaning.
How to shift to an ROI perspective – The money machine analogy
If there was a vending machine that, upon inserting a dollar, returned $2 to you, how many dollars would you put into that machine? You would put as many dollars as you had on your person. You would then put the dollars the machine gave you and put them back in again, doubling your reward. You would continue the cycle until that machine was dried up and had no more dollars of inventory left to spit out.
What if there were many vending machines, each giving a different return on your dollar? What if one gave you $1.02 in return? What if one gave you $0.85 in return? What if one gave you $10 in return? What if one gave you inconsistent values back ($4 one time, $.25 the next time, $.75 the next time, etc) To complicate things, what if you didn’t know what your return would be until you actually put in a dollar?
Would you not put money in any machines, for fear that you would lose it? Would you only try a few machines? What would you do?
In this situation, you would likely put a few dollars in each machine to determine:
- What the return on your dollar would be in each machine
- How consistently the machine produced the same return
- How many dollars the machine had in inventory to give out
After learning about each machine, eventually you would stop using the machines with inconsistent returns or with low returns and focus on the machines that gave you high returns and more consistent, predictable returns. You would use these machines over and over until they ran out of money to give you. And you would eventually be a very, very rich person.
The marketing money machine
Each marketing medium, whether it be a radio commercial, billboard, online ad, or direct mail piece, is in a sense, a marketing vending machine. When you invest your time and money in them, they will return money. Some will reap impressive returns, while some may actually lose money. Some may produce consistent results, while others may not.
With the mentality that you are investing in your marketing, follow these 10 steps to increase your ROI of your marketing.
- List all of your marketing “investment” opportunities
- Choose which marketing mediums to pursue for an experiment
- Set a sufficient test budget to get enough data on your experiment
- Run marketing campaign tests in each chosen medium for a sufficient amount of time
- Pause the marketing campaigns after enough time has passed
- Analyze your costs, revenues, and profits that came from each campaign
- Determine which campaigns flopped and which were successes
- Discontinue marketing initiatives with negative, low or inconsistent ROI
- Increase your budget and spending on positive ROI initiatives until you reach the point where that initiative begins to produce marginal returns on your investment.
- Diversify your marketing investments to protect yourself against fluctuations in marketing results from individual mediums.
In conclusion, you shouldn’t care as much about whether you are spending $5 or $5,000, as much as you should care about what the fruits of your marketing investments are producing. As you focus on ROI, and not total cost, you will experiment with new marketing initiatives, analyze their cost-effectiveness, focus on the marketing strategies that yield the most profitability, and increase your law firm’s profitability over time.