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Sometimes Marketing's a Waste of Money

Not every business needs a marketing plan.

A couple of years ago, I had a large regional accounting firm as a client. The firm focused on small- to medium-size businesses and had a very healthy practice. They engaged me to conduct a client audit and develop a marketing plan.

The client audit yielded good information about the strengths and weaknesses of the firm. Suggestions about how the firm should market itself were substantive. The partners were pleased with the audit and the plan that I developed.

Then the partners asked me when they should launch. I stunned them into silence when I told them marketing at this time would be a waste of their money. Can you imagine your marketing consultant telling you that he or she doesn't want you to spend money with them?

After the short silence, one of the partners asked me if I was joking. Didn't I stand to benefit by being engaged to launch and oversee the plan? Why didn't I want to do it?

The answer is illustrative of an important consideration for any small-business owner or entrepreneur: Not every business needs a marketing plan.

In the case of my client, marketing made little sense, since its volume of business grew heavy in a sea of new accounting rules and regulations. A few years ago, in the wake of corporate accounting scandals such as Enron and MCI Worldcom, shareholders, politicians and government officials called for stronger oversight and controls. The result was the Sarbanes-Oxley law, which required more accountability and paper work and was a boon for the large national accounting firms.

Unfortunately, the firms only had so much capacity to deal with the extra work, so they pushed various private companies out the door. The large regional firms took those clients and they pushed clients they didn't have time to handle to the smaller regional firms. My client couldn't handle the avalanche of new client opportunities. They were pruning their smallest clients and sending them to even smaller firms or one-person practices.

The purpose of marketing is to build or increase a company's visibility so potential clients either call and ask for the product or service the company offers, or know the company's name so when salespeople call on them, they are willing to have a conversation. Marketing's mission is to trigger a response.

Think about it. Personal injury lawyers run ads and commercials to trigger a call from someone who feels they have been wronged. A money management firm runs a simple commercial supporting National Public Radio so wealthy individuals who listen to the show will consider calling the firm or taking the call of one of the firm's representatives.

Dominos

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will mail out coupons to get people to buy its pizza. In each case, the businesses aren't so busy they turn away customers.

Look at the reverse. Did you ever notice the best restaurants don't advertise because they are usually booked months in advance? Plumbers and electricians in high-income areas never need to advertise because the occupants of the homes in those areas are always remodeling or building onto their homes and the owners aren't typically do-it-yourselfers.

There are some businesses where advertising makes no sense because the competition either doesn't exist or is extremely limited. Take, for example, health insurance. In many regions, you either choose Blue Cross/Blue Shield,

Aetna US Healthcare

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or

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. Do those firms need billboards or run ads at stadiums or radio commercials? No, because practically all of their business comes from insurance brokers, human resource consulting firms and chambers of commerce.

Funeral parlors don't need to advertise because there are usually only a few choices in any given region. Those parlors are usually approved by various churches, synagogues, mosques or temples.

When determining if you need to budget money for marketing, you need to ask yourself the following questions:

  • How does my target market make its decisions? Will marketing improve my chances of getting clients? If you are a doctor, you know that most people choose a physician through their health care network based on physical proximity. For beauty salons, it's based on reputation and referral.
  • Can you handle more business? When there is a seismic shift in your industry and new business is going to fall into the lap of those who can handle the extra volume -- such as in my example about the accounting industry -- then why waste the money?
  • Can I afford to market? Buying and giving away hats and T-shirts or putting out flyers may be so insufficient and inefficient that the dollars you invest won't yield any worthwhile results.

I leave you with one last example. I had a client who sold a service to pharmaceutical companies. There were only two other competitors in the world, but for some reason both were buying ads in industry magazines and purchasing words on

Google

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.

When I interviewed my client's clients, they all told me they knew who offered the service. Because there was such a small number, each competitor was brought in to make their pitch. They weren't influenced at all by the ads and they didn't search Google.

Just because your friends or consultants are telling you that you need to spend money on marketing or your competition is spending money, doesn't mean you have to.

Marc Kramer, a serial entrepreneur, is the author of five books and is an instructor at the University of Pennsylvania's Wharton's Global Consulting Practicum, where he serves as Country Manager for Chile.