Why cutting corners with your marketing isn’t profitable
“Why is it that the same people who are willing to spend upwards of $300 for a single pair of jeans are unwilling to invest in high quality marketing materials and services?”
This is a real question I get from my account managers from time to time. The conversation quickly veers into a dialog about the downfall of society and the demise of mankind itself. Well… not really, but it does bring up a great topic: the cost of being cheap with your branding.
Investment versus expense
Many business owners mistakenly list their marketing as an expense. I say mistakenly because their marketing budget is a pot of money that should be bringing more in return than is spent. It is extremely important to remember that your marketing budget is an investment like salaries, inventory, and machinery. While in the accounting world these are all classified as expenses, in my mind they are all investments with expectations of returns (ROI).
ROI reflects the profitability of an investment. In plain terms, it’s how much money you expect to make off a certain amount invested. Most entrepreneurs are excellent at calculating the ROI of a special piece of machinery or potential return on human capital, but don’t always fair as well with the value of their marketing. I see this most commonly with restaurateurs who will spend a million dollars on renovating a space for a new location, but leave nothing in the bank for marketing purposes.
As much as your employees are the face of your company, your marketing is the voice. CEO’s of young companies invest countless hours and dollars into their employees with training, cultivating culture, continuing education, providing health insurance, and so on. They’ll also invest in state of the art computers and equipment for higher productivity and efficiency. Then all too often, these same leaders will leave their marketing high and dry to fend for itself, neglected and underfunded. I ask these folks, “What good is a pretty face if it has no voice?”
Frugality does not equal profitability
Frugality seems to be a coveted trait of a successful entrepreneur. I know I was the poster child for what it meant to be frugal when I started my first business. I would take advantage of every opportunity to save any amount of money, even if it were a mere fifty cents on a couple of pens. Most of my frugalness, like many entrepreneurs, was based on necessity. But sometimes I found myself stepping over a dollar to save a nickel. Occasionally that dollar was a marketing dollar and the nickel was the only thing left after missing out on the other ninety-five cents I could have made if I had invested in my marketing properly.
While being frugal is a positive trait in a business owner, there is a time and place for prudence. It is crucial to identify when penny-pinching is less profitable. Marketing is one of those areas where being thrifty can cost you money. Here are a couple of examples:
The cheap logo is the most common.
You get a friend, family member, or even one of those discount crowd sourcing services to drum up a logo for you. They send you a file that you can paste onto the top of your letterhead and use with your desktop publisher to get some simple business cards designed and printed on perforated Avery cardstock. The image and print quality isn’t the best, but you tell yourself that you are a start-up and people will understand.
This is all fine and dandy until you want shirts made up and the silk screener charges you an extra $100 to prep your logo file for silk screening. Then you get charged another $150 when the embroidery shop needs to do the same for your jacket. Then the sign company spends another couple hundred of your dollars on prepping the logo for your building sign and car decals. At this point, your free logo has already cost you over $500 and you haven’t even opened your doors. Even worse, these kinds of costs continue for years until you have a professional create the kind of files these vendors need to do their jobs efficiently.
In the end, it is better to start your branding efforts by hiring a professional who gives you everything you will need to expand your brand after they are done. Working with a professional who understands branding gives you an opportunity to create an image that will stand the test of time and exemplify your company’s essence. On the technical side, this investment also pays for itself tenfold as the years pass and your marketing needs get more complex because the professional files your designer provides can be utilized by other vendors along the way with little affair. You can also go back to your designer for tweaks as needed with little cost years beyond the reach of your sister’s then ex-boyfriend.
The do it yourself website is second on the “frugality costs you money” list.
I see it time and time again with new clients coming to me either frustrated with a cut rate design firm or exhausted from trying to build a website on their own.
There is one major flaw with developing your own website — you’re most likely not a professional website developer. This leaves you at an enormous disadvantage because you don’t know what you don’t know. The seemingly endless ocean of DIY webpage development sites is very good at luring you away from the one commodity you can never replace — your time. And what is your time worth? What are the opportunity costs of you spending countless hours trying to customize the perfect template to work with your brand? Once you do get something you can live with, how much time will you have to keep it up to date, add the functionality you will inevitably need to serve your clients, or ward off hackers? The worst part is that once you do finally go to a professional, you will most likely need to start the development process all over. Do yourself a favor and start with a trusted professional. You will thank me later.
With that said, there are a few things to know about hiring a professional web developer. First, hiring a contractor who promises the world for a price too good to be true is never a good idea. Most times, these types are working off templates and rarely set your site up properly for future growth and technology. They can also be very slow in delivering and are rarely around to service your site after it launches. Of course, spending your money with a high-end agency doesn’t guarantee results either. Super fancy advertising agencies or hyper techy development companies are overkill for most small business owners unless your idea is e-commerce driven with highly technical customer experience elements. Their pitches are convincing, so make sure you completely understand what you are getting at launch and what the maintenance costs will be before signing. The trick is finding a reliable firm whose past work you like, with references you can talk to, and one that is reasonably priced for what you are looking to get developed.
Buying discount advertising help online, from a mailer, or an unsolicited telemarketer is not recommended.
I am constantly rescuing clients who have sunk a year or more of their time and thousands of dollars on some fly-by-night online vertical marketing company who hailed themselves experts in a specific industry. Particularly hit are medical professionals who are bombarded with national companies looking to throw another name on their overused templated system and recycled out of date content. The medical industry is not alone. There is a vertical marketer lurking in the shadows for almost every professional vertical known to man.
Another trap is trying to do it all yourself from beginning to end. One of my favorite books to refer people to is Michael Gerber’s E-Myth. In this book, Michael walks through the side of effects of working in your business rather than on your business. He describes the typical entrepreneur as someone who usually starts their business as a solopreneur wearing the hats of the CEO, COO, CFO, CMO, etc. all the way down to the janitor. Unfortunately, most business owners aren’t equipped or proficient at executing every aspect of a successful business. Instead of tackling everything all on your own, Mr. Gerber suggests that business owners surround themselves with experts in each area of their business. Sometimes that means hiring employees, but as one gets started with their business, enlisting the help of consultants and private contractors often proves more affordable.
The secret here is to recognize that people who specialize in a specific trade like accounting, law, or marketing bring extensive knowledge and experience with them. Most will work on an “as needed” basis, and there are professionals to meet most every business’s budget. In the long run, investing in these experts will set you up for early success, save you money, frustration and time spent trying to figure it out on your own, and thwart many opportunity costs along the way.
Looking good versus being profitable
Borrowing from the adage, “Dress for success” comes my own adage, “Market for success”. If you are willing to spend what it takes to look successful, why would you skimp on the marketing that will help you be successful? Remember, without a strong marketing voice your company has no one to talk to, and in return, no one buying your product or service. Understand that investing in your marketing is one of the most profitable financial outlays you can make in your business. It is also the first step in building a business that will afford you the luxury of buying those $300 designer jeans for every day of the week — or whatever luxury floats your boat.