Marketing Budget – Expense Or Investment?

May 28, 2010 by  Filed under: Marketing 

Usually most small and medium businesses, don’t really understand the real significance of marketing. In today’s stringent economic climate, companies are always looking at ways to cut costs in order to remain profitable. Marketing is usually outnumbered and the first to go.

Why do marketing anyways.

I mean a penny saved is a penny earned. Correct! But let me ask you this. What is the real value or object of marketing? Marketing is not just about advertising and spending your money mercilessly. Marketing should be viewed as a collection of activities with the primary goal to generate more business and revenue or simply attract more people to buy your product or service.

Most companies don’t spend enough on their marketing budgets, thinking that by not spending they save money. This is a misconception. I’m sure you must have heard this before “Spend Money to Make Money”. But the real deal is that you need to spend your money cleverly on a tailored marketing plan aimed at promoting your goals. Remember that your marketing efforts are directly proportional to your revenue.

So, do experts view marketing as an investment or expense?
Like it or not, when your marketing does not bring more business it is sadly an expense. And if you’re the head of marketing, you’re getting the blame anytime now.

Run the numbers will ya.

Numbers say it all, Say for instance you place an advertisement in the newspaper that costs you $900. Doing so attracts 50 clients to your business, of which let’s say only 10 use/buy your product or service, spending an average of $80 in purchases.
So if each service or product costs you $40, you make a gross total of ($80-$40) x 10 purchases = $400. Now is it me or is that a loss of $500. In this case, advertising is surely an expense! And maybe a marketing strategy gone wrong.

On the other hand, if the same $900 advertisement is made more effective. Perhaps by using the right words and targeting the right audience. Things can take a quick turn around. Assuming that the ad now attracts 200 people to your business, out of which 40 customers spend an average of $80. That makes a gross total of ($80-$40) x 40 purchases = $1600. A profit of $700. Keep at it and I’m sure you’ll be able to buy your dream ride real soon.

Bottom line when your company uses effective ads and measures its results, advertising becomes an INVESTMENT rather than an EXPENSE.

Article Source:

http://EzineArticles.com/?expert=Mayyada_Kamran_Ansari

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