New, amateur and small business entrepreneurs sometimes have a warped perception of what “marketing” truly is. In their eyes, it’s an expenditure–an exchange where you spend money in return for some fleeting value. They may see this expenditure in varying degrees of necessity, from being a “necessary” expense (like rent or a utility bill) to being a superficial one.
In their defense, marketing is too multifaceted and too customizable to be reduced to any one set of approaches, and there truly are applications in which your marketing budget will be counted as an expenditure. However, there are a greater number of applications wherein your budget is more of an investment, which carries more inherent value and a bigger overall return.
What’s the difference, and how can you learn to see marketing this way? I’ll show you.
The Principle of ROI
The guiding principle in defining your marketing strategies will be your return on investment, or ROI, which is appropriately named considering the subject of this article. ROI represents the quantitative benefits (usually calculated as revenue) you receive above and beyond those needed to cover your original payment. For example, if you pay $1,000 a month for marketing services and you earn $1,500 in new revenue from those services, your ROI is $500.
In an expense transaction, you’ll have a fixed return; you may pay $100 for a display ad for a month and receive $150 in revenue from it. But in an investment transaction, after you pay for the service, you’ll continue to reap the rewards, just as a stock investment may continue paying dividends long after you’ve purchased it. Only some marketing strategies offer this potential, and I’ll cover them in the next section.
Permanent Assets and Compounding Returns
Some marketing strategies can be called investments because they’re all about creating fixed, permanent (or semi-permanent) assets for your brand that continue to provide value long after their original point of creation. My main examples here are content marketing and SEO; whenever you publish an article on an offsite source, that article will likely remain there indefinitely. The link you build will continue to pass authority and send referral traffic your way, and you may re-syndicate the article at a future date to generate attention to it. Compare this to a paid advertising opportunity (more on this in the next section), which will stop returning value the moment you stop paying for it.
Permanent assets also give you campaign the potential power of compounding returns. Think of it this way; every piece you create adds some measure of constant value for your business. If we try to think of this numerically, if an article passes a value of “1,” your first article will cost 1 and your total return will be 1. Your second article will cost 1 and your total return will be 2. Your 50th article will cost 1 and your total return will be 50. These numbers are horribly inaccurate, as articles do return less over time and SEO is a complicated network of different strategies. However, they illustrate the core principle here; the more you invest, the more you stand to earn.
The other side of the equation is expense-based marketing strategies. These generally include things like paid advertising, where a fixed amount of money gets you a fixed amount of visibility or space. For example, Facebook will maintain your ads in circulation for as long as you keep paying them–usually on a per-click basis–but when the money runs out, that ad disappears, along with any potential for future value. You aren’t building anything permanent here, nor can you reap any compounding returns.
Choose the Right Strategies
Though I’ve illustrated the “investment” style marketing strategies as carrying a higher overall long-term return, that doesn’t mean that “expense” style marketing strategies are worthless. Instead of choosing between the two in any strict sense, your goal should be to find a balance, and invest in the strategies you feel will be better for your unique situation. For example, if you’re just starting out and you need a bit of extra momentum, the fast return of a PPC campaign could be well worth the money as a short-term measure for success, especially if you’re already investing in something like a content marketing strategy for the long term.
In that scenario, you can consider yourself planting a tomato garden, but buying tomatoes from the store as a short-term measure to cook your dinner. One is a temporary exchange for a fleeting product, while the other will offer you compounding returns on some future date. You may need one, the other, or both to truly succeed.
Once you learn to see marketing strategies as investments, rather than just expenses, you can start planning your budgets better and start optimizing your strategies for the best possible return. Though the best possible return isn’t always the one with the greatest long-term financial value (as short-term benefits have their own advantages), understanding the differences will help you plan better for what your business truly needs.