Return on investment in marketing is overrated.
What am I, some kind of heretic? Shouldn't everything a business spends money on have an ROI to determine if it is money and time well spent?
I think expecting every aspect of business to be measurable, especially marketing, can lead to adversity to risk. All too often, clients will say to me that they tried different marketing tactics and didn't have one direct client come out of the various initiatives they tried.
Granted, no one wants to spend money on something and not know whether they will get something of value, but some people take it to an extreme or have unrealistic expectations. The key is to understand what you are doing and why you are doing it and to have realistic expectations. Here are some classic examples of unrealistic expectations in various aspects of your business.
- Advertising: The reason you advertise is because you have something special to sell and are offering your product or service at a fair or competitive price. You pick a particular vehicle for advertising because of the demographics of its readers. If your product or service doesn't sell, it has very little to do with the publication you're advertising in and more to do with the perceived value of the product or service -- the look of the ad and the information it contains.
- Marketing services: Every company needs marketing. If you don't raise your visibility, you won't be able to sell your product or service. Marketing is all about demonstrating why your product or service is different, through unique benefits or cost. It's about creating a message that is memorable. Marketing can enhance your chances of selling your product or service, but there are no guarantees. If you are expecting marketing alone to get clients to open their wallets, you don't understand marketing.
- Organization memberships: One of the first things to get the ax on a budget is organizational memberships. I started and ran a large trade association, and I have been involved in many organizations. The reason you join an organization is to meet people who can help drive new business.There are no guarantees. If you want to measure the effectiveness of joining an organization, put together a spreadsheet and list the people you meet at each meeting. Include a column for each time you followed up with the various people and the results of the meetings, such as "requested a second meeting," "requested a draft proposal" or "made a referral to another prospect." I can assure you that if you don't join organizations and attend meetings, your chances to obtain new clients will be greatly reduced.
- Writing a column: I have been writing columns for print and online publications for 20 years. In all of those years, I have only had a handful of prospect leads, and none converted to sales. Have I wasted my time writing columns?Definitely not! My columns allow me to meet people I normally wouldn't meet through interviews and interaction at conferences. Writing a column enhances my chances of being requested to speak at business functions, which increases my chances of meeting a client or a referral source.
- Speaking: I speak 12 to 20 times per year at functions for trade associations, chambers of commerce, Rotary Clubs and business networking groups. I speak and teach at universities. Some years, I have gotten a few new clients, and other years, I have gotten none. Should I have stopped speaking after a year in which I got no new clients?My philosophy is that you never know whom you are going to meet when you speak. I once had a man come up to me after speaking to his Rotary Club. He said he thought I would be interested in meeting his son. My initial thought was that he wanted me to help his son find a job, but I was wrong. His son was head of the energy practice for an international consulting firm, and the father thought he would be a good contact for one of my energy clients.
- Public relations: It doesn't matter what you pay for public relations; if your client doesn't have a good story to tell, no legitimate news organization is going to write about him or her. PR people don't control the media in this country and therefore can't force anyone to report on their client. If you hire PR people, your only expectation should be that they can enhance your chances of gaining visibility because they can develop an interesting angle and have good media connections.
- Sponsorship: A client of mine sponsored a round-table discussion of how companies could improve their competitive positions. After the discussion, he told me it was a waste of time because he didn't get to promote his business and didn't get one lead. I asked him how he could draw such a conclusion so quickly. For months, he harangued me about what a waste of money the event turned out to be. He was adamant about not sponsoring another event. My client created a spreadsheet showing what his time, my time and a couple of his people's time cost and the return on that time. Ironically, six months later, the biggest client he had landed in three years came from a referral from one of the participants. The eventual return on his investment was more than a thousand percent.
Stop thinking in terms of ROI and focus instead on EC: enhancing chances.
My biggest concern for myself and my clients is whether we're doing enough to increase our chances of getting new business.
Developing criteria for EC is a good and prudent thing to do. Here are my criteria:
- Go after the right audience: Is the publication or organization targeting your desired demographic?
- Increased visibility: Is what I am doing or whom I am employing increasing my visibility so I can attract more clients?
- Cost-effectiveness: Is what I am doing cost-effective relative to other methods of marketing? If you are a grocery store or a restaurant, running an advertisement in a newspaper is easily the most cost-effective way of building image and attracting customers, because everyone is a potential customer.
The only bad use of your time is sitting around and doing nothing. Take chances, spend money, and make something happen. Don't wait for opportunity to come to you -- reach out and grab it!
Kramer is the author of five business books on topics related to venture capital, management and consulting. He is a faculty member at the Wharton School of Business at the University of Pennsylvania and the veteran of over 20 startups and four turnarounds.