BCSG, LLC

If you ask your accountant, they will tell you that marketing is an expense. Most businesses think of marketing as an expense because they keep writing checks for their marketing, but don’t see anything coming back in return.

The true business owner or entrepreneur knows that marketing is not an expense, it is an investment. For it to be an investment, every marketing dollar that goes out needs to account for more money coming into the business.

So why is this true for some businesses and not for others? Here are 10 tips of how to change your marketing mindset from that of an expense to that of an investment. By following these basic steps you will change the way you think about marketing forever.

1. Spend more time producing income instead of reducing costs. Many businesses spend their time trying to reduce costs just to make ends meet. This is an important aspect of business that can not be ignored. However, if you cut your costs to the bare minimum to keep your business running you can probably only add 10-20% to your bottom line, but if you focus on increasing income your impact to your bottom line is almost unlimited.

2. Put 50% of your time, effort and investment into distributing and more importantly the other 50% into sales and marketing. Most businesses spend about 90% of their time on getting their product or service to market to serve their customers. This leaves only 10% of their time to focus on sales and marketing. This happens because they are working in their comfort zone, this is what they are good at and what they know. To increase the revenue in any business, you need to focus 50% of your time on distributing and 50% of your time on sales and marketing.

3. Marketing is an investment when you measure and test your results. When asked, business owners don’t know where their leads are coming from and they usually say, “Yes, we ask every customer where you heard about us”. I then respond by saying, “That’s great, can I see the results?” They then inform me that the information is not written down or tracked electronically. It is impossible to accurately measure this information. To get a clear picture of what media, headline, and offer is working you must not only ask, “How did you find out about us?”, You must also record the results.

4. Acquiring customers is an investment so set your marketing budget by your acquisition costs. When you begin to understand that marketing is all about “acquiring customers” you begin to change the way you look at your advertising and marketing. If you understand the acquisition cost of a customer, then you can begin to create a marketing budget and acquire as many customers as you want. The concept is simple, you spend $1000 on advertising, and you get 50 phone calls, then you are paying $20 per lead. Now if you close 20% or 1 out of 5 of those leads, you’re paying $100 (5x$20) per sale. Now, if your product sells for $200, you have just made $1000 (50 calls x 20% closing x $200 minus $1000 advertising). The only thing left to determine is, am I making more per customer than the acquisition cost? This is referred to as your conversion rate. Also consider increasing your average purchase price.

5. Never focus on chasing market share, but on the pocket share instead. In the business world, if you are a small or medium size business and you are focused on just market share you are in effect just chasing your tail. When you are chasing market share, it is based on the assumption that you are buying a product or service and then turning around and selling them to your customers. However, if your mindset is now on acquiring customers you are now focused on how much, how many, and for how long can you sell to each customer. We are moving from being product focused to being customer focused. The key here is customer loyalty. Always remember, it is more profitable to sell to existing customers then to market to new ones. What other product or service can you offer that compliments your current sales efforts.

6. Establish the long term view of the value of your customers and their lifetime value. As mentioned above it is more profitable to sell to existing customers than to market to new ones. How much will your average customer spend over their lifetime? By establishing a long term view of a value of your customer, you can begin to appreciate the importance and impact of good customer service and how costly poor customer service can be to your business.

7. Always aim to reduce your acquisition cost and raise your customer’s lifetime value. If we go back to our example above, our acquisition cost was $100. Now, if our product sold for $100 instead of $200, we would only be breaking even. The success of this campaign would have to be based on the long term value of the customer. If our average customer will purchase from us on average 2x per month, we would now be making $200 per month from this client. Our goal now is to continually measure and test to decrease our acquisition cost by either getting our campaign to generate more leads or by increasing our conversion rate of lead to sale. Secondly, we need to implement strategies to get our customer to purchase from us more often and to shorten the time between each purchase.

8. We are in the Profit Business. You must determine the correct selling price for your product and service. If not, you will sell yourself into bankruptcy. Also, stop all advertising that is not working. Focus on reducing the acquisition costs of the advertising that is working.

9. Measure and Test everything. This is a simple but most overlooked strategy in business. Simply put, if you can not measure it you can not improve it.

10. Marketing is Math! By utilizing the simple formulas we discussed above you will take the guess work out of your marketing and turn it from an expense into an investment.