How much should I spend on marketing?

It sounds like a simple question. All you have to do (that’s always a warning phrase) is calculate your Marketing Return on Investment (MROI) or expected MROI. Which is to say, it’s as simple or as complex as you choose to make it. The Harvard Business Review offers this formula:

Marketing Return on Investment MROI formula blue

Your MROI will depend on what expenditures you include in the Marketing Investment (really an expense), and what you count as Increased Value to that single investment, and where you begin the process. If you lean too far, it could become a veritable fool’s errand, depending on the factors included.

The Mysterious and Malleable Sales Baseline

What would our sales and profits have been if we didn’t have a marketing program? That’s not an easy question. It’s a dynamic environment which makes it very difficult to determine where to start. Even companies that go to market without marketing incur related opportunity cost somewhere, whether it’s time from sales or word of mouth from the founder.

And now, marketing is owning more areas; customer service, digital, video, sales enablement. There’s social. There are touchpoints everywhere—and they all impact the audience, the brand, and its value. As a Harvard Business Review article states: “The key is to remember that while marketing expenditures hit the P&L immediately, every dollar you spend today is building your brand as an asset for the future. So, ideally, your marketing program is not only affecting sales and profits this year but also strengthening your brand equity and customer relationships over time.”

No Barriers, No Funnel

Because there are so many entry points to a brand, the idea of a customer funnel is coming to an end or certainly shrinking. There are too many choices and no way to force a customer through a path predetermined by marketing. Instead, it’s more like stepping stones, or a pick your own path adventure, where the customer chooses how they get from one side to the other. Or just hang out at a stopping point of their choosing. You don’t have to be a customer of a brand to be an advocate or to participate in the branding experience. For example, Tesla’s Facebook has thousands of fans that don’t own Tesla cars. That adds value to the brand, and while it appears on the balance sheet, it doesn’t appear on the income statement. The more established automaker, Ferrari, takes in nearly 20% of its revenue from things that aren’t cars or parts, using the value of its brand to sell merchandise and sponsorships.

So, back to what marketers should do—build their brand value through position, offer, audience, message, and delivery. Make every touchpoint and experience reflective of that brand. Monitor the audience to recognize their behavior that ultimately leads to a favorable action for the brand. Recognize the digital body language of their different audiences. Look at how they can identify and connect with underserved areas that can add to the business, accelerate sales, build goodwill after the sale, and on and on. Tech will play a role everywhere, no doubt. But tech is just a tool that enables marketers to better achieve their ultimate goal of building a market. It won’t create the relationship that customers want and brands ultimately need.

You can see and hear more of our take on the subject of Marketing ROI in this edition of Wilson Bridge.

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