In business, we often hear the term "cost-centre" associated with marketing. The prevailing idea has been that marketing is an avenue where money flows out without a guaranteed return. While marketing does 'create the opportunity for a sale,' there's a perception that unless it also 'closes the sale,' it is a drain on resources.
In difficult financial times or when there's a need to show cost reduction, marketing - both in terms of head-count and program budget - is often the first on the chopping block.
Yet, this viewpoint ignores the essential role of marketing in a go-to-market (GTM) business model—a framework that bridges the gap between product development and customer acquisition. Forward-thinking leaders understand this and consider marketing not just as a discretionary expense but as a strategic investment.
We all understand that businesses need to balance immediate revenue with sustainable growth, so why not approach marketing as an investment portfolio?
Just like how an investment portfolio is critical for financial growth, the marketing mix can be a diversified portfolio essential for business expansion.
Cutting Your Marketing Budget Could Be Hurting You
Before we explore the paradigm shift towards treating marketing as an investment portfolio, it's essential to discuss why cutting your marketing budget might not be a wise move. When times are tough, or when there's pressure to show immediate results, marketing takes the brunt of the blame. However, by reducing your marketing efforts, you're essentially tying one arm behind your back.
Marketing is not merely a tap you can turn off and on - it’s a long-term commitment. Pausing or reducing your marketing activities can severely impact your brand’s visibility, customer trust, and ultimately, revenue. It might solve a short-term cash-flow issue but at the expense of medium to long-term growth and market share. Think of it like pulling money out of an investment portfolio when the market is down - you might feel like you’re reducing losses, but you're also missing out on the eventual upswing.
Shifting the Perspective: Marketing as an Investment
While it's true that marketing paves the path to sales opportunities, boiling it down to just a cost fails to recognise its significant impact on a brand's trajectory. Forward-thinking business leaders understand this depth.
They realise that sustainable growth isn't just about immediate revenue. Instead, a dual strategy is imperative: catering to the present while also laying bricks for the future. And perhaps, this is where the analogy with an investment portfolio becomes apt.
What is an Investment Portfolio?
Before diving into the metaphor, let's clarify what an investment portfolio is.
Simply put, it's a collection of various types of investments, such as shares, bonds, and real estate, which are managed to achieve specific financial goals. The key features of an effective investment portfolio include diversification, risk management, and return on investment (ROI).
Diversification: Spreading your investments across different asset classes to reduce the impact of a poor-performing asset.
Risk Management: Evaluating the level of risk associated with each asset and balancing it against potential returns.
ROI: The ratio between net profit and the cost of investment, used to evaluate the effectiveness of an investment.
Marketing as Your Investment Portfolio
Much like a financial portfolio, a marketing portfolio is a mix of assets—here, marketing channels. From traditional / offline avenues like print media and billboards to modern platforms like social media, SEO, PPC, and email marketing, each has its unique risk and ROI profile.
Let's consider superannuation companies as an example. These companies take your money and invest it in a range of assets, from conservative to aggressive growth options, to ensure long-term financial security. Similarly, your marketing portfolio should be diversified to include both conservative channels, like SEO, which might have a longer-term ROI, and aggressive growth channels, like PPC campaigns, offering quicker but riskier returns.
Balancing Risk and Reward
It ultimately boils down to the level of risk you're comfortable taking for the reward you expect. Just as you wouldn't invest all your money in high-risk shares, you shouldn't invest all your marketing budget in a single, volatile channel. A diversified marketing strategy acts as a safety net, allowing your business to continue thriving even when one channel underperforms.
Choosing the Right Marketing Portfolio Mix
The key to a successful marketing portfolio is alignment with your business objectives. Are you aiming for short-term sales boosts, or are you building a long-lasting brand? Your goals will dictate the right mix of strategies and tactics. For instance, if immediate revenue is a priority, a larger investment in PPC and social media ads may be warranted. On the other hand, if you're focused on sustainable growth, your portfolio might lean more heavily on content marketing, SEO, and customer retention programs.
Risk Management in Marketing
In the world of investments, each asset comes with its risk profile. Similarly, each marketing channel has its own set of risks. While SEO may offer stable returns, algorithm changes can impact your rankings. PPC, although quick to set up, can be costly and less effective if not managed properly. To mitigate these risks, businesses must evaluate the potential pitfalls of each channel and adjust their strategy accordingly. Whether it's through A/B testing, customer feedback, or data analytics, businesses must continually refine their marketing portfolio.
The ROI Factor
Return on Investment is a crucial factor both in finance and marketing. Measuring and tracking ROI for different channels can provide valuable insights into their effectiveness and should be a core part of any marketing portfolio strategy. While some channels may offer immediate returns, others contribute to long-term growth and should not be hastily discarded if they don't show quick results.
The Future: Trends to Watch
As we move further into the digital age, emerging channels and tools promise exciting opportunities for marketing diversification. Innovations like Artificial Intelligence (AI) and machine learning offer unprecedented consumer insights, enabling more personalised marketing.
New social media platforms are consistently entering the market, each providing a unique avenue for brand interaction. These emerging channels could very well be the next "hot stocks", “blue-chip assets” in your marketing portfolio. By staying ahead of these trends, you position your portfolio for both immediate gains and long-term profitability.
Conclusion
Marketing is not merely a cost-centre - it's an investment in your business' future.
Viewing your marketing strategy as an investment portfolio can help align your tactics with business objectives, manage risks, and maximise ROI. As you would with your financial investments, diversify your marketing assets, continually assess the risks, and measure the returns. By doing so, you'll be more resilient in fluctuating markets and better positioned for sustainable growth.
Isn't it time you looked at your marketing strategy through the lens of an investment portfolio? Take stock of your current marketing mix and align it with your business objectives, risk appetite, and expected returns.
Need some help with your marketing portfolio?
Hire Peez & Co to develop your marketing strategy and budget allocation.