If You Build It, They Won’t Come.
This has happened to me a number of times. Maybe it’s happened to you, too.
You stumble across a hole-in-the-wall restaurant you never even noticed before. The food is absolutely fantastic. The employees treat you like family. And the prices make it possible to take the whole crew out for dinner without breaking the bank.
Then one day you show up hungry as can be, only to find locked doors and a “closed” sign. What went wrong?
Most likely, the owners suffered from what I call “Field of Dreams” syndrome. They thought that if they created a great restaurant, people would magically appear at their door. In other words, they thought they didn’t need and/or couldn’t afford marketing. Truth be told – and as time proved – they couldn’t afford to not market.
Of course, “Field of Dreams” syndrome isn’t limited to just the food-service industry. In fact, I see quite a bit of it in the financial technology space. Companies large and small view marketing as somewhat of an extravagant expense – a nice-to-have rather than a must-have. The real fallacy here is looking at marketing as an expense at all.
If you had purchased 1,000 shares of Apple stock in 2003, it would have cost you about $14,000. That’s not chump change. However, if you had held it until now, it would be worth around $1.4M. Please, please tell me if you think there’s a single person on this entire planet who would moan and groan about the expense of having to shell out $14,000 for Apple stock, given this scenario. Clearly any sane person would view this as an investment, not an expense. And they’d be damned happy about it.
With that thought in mind, it blows me away that companies grumble at the thought of putting money into marketing – an endeavor that’s proven to help grow companies and contribute to the bottom line. Marketing is an investment and – executed properly – it carries a measurable and favorable ROI. If your marketing isn’t making you money, you’re doing it wrong. There’s no other way to say it.
The big question is: How much should you really be spending on marketing? Google around and you’ll find varying opinions, but they all seem to fall within the range of 5-10 percent of total revenue. And in fact, that appears to be what B2B companies are actually spending. A survey conducted by CMOsurvey.org based on 2013 data showed that in the B2B sector, both product and service companies spent about eight percent of total revenue on marketing. That’s across all revenue sizes.
Interestingly, it was the smallest companies – those with less than $25M in revenue – that spent the most on marketing as a percentage of revenue. These companies spent over 11 percent of revenue on marketing. Incidentally, the lowest spending revenue range was $500M-$1B, at only 3.5 percent.
Is your marketing investment at least somewhere in the general ballpark of the numbers I shared above? If not, do you think it’s because you know something everybody else doesn’t, or because everybody else knows something you don’t? I hate to break it to you (okay, honestly I don’t), but if you’re under-investing in marketing, you’re really doing your company a disservice.
You know the old saying. You have to spend money to make money. That’s not exactly true. You have to invest money to make money. And when you invest wisely in marketing, you can make more money than you ever thought possible.
That is all.