Peter Drucker, one of the fathers of Business Consulting, is quoted as saying:
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
Thus, Mr Drucker is saying that marketing, rather than being a cost, should be seen as a core tool for building a business. As such it should be considered an investment.
So why in so many businesses is it simply seen as a cost of sales?
The answer lies, I believe, in recognising that marketing covers a spectrum of business communication at one end of which lies sales promotion – yet it is sales promotion where many SMEs focus!
At its heart, marketing is about adding value to a business. OK, this value is normally demonstrated through profitable sales. However, generating short-term sales should not be the sole focus of marketing. Rather the focus should be creating an environment that makes those sales easier to secure (and more profitable!).
So, if we accept that marketing is an investment and that it should be measured as such, taking a long-term view, we have an issue: the way SME businesses are encouraged to measure marketing.
Search Marketing -The Issue Exemplified
If you ask any SME business owner what his/her marketing strategy is, invariably ‘search marketing’ will be in the mix. Usually as a combination of SEO and paid advertising analysed and measured using Google Analytics or similar.
Analytics encourages Goal Setting, measurements of conversion rates against these goals and the analysis of the “conversion funnel”. Whilst this process is a vital part of the picture, these are all measurements of sales promotion activity, not marketing,
You spend £100 in a month on Google advertising, or on technical SEO activities. This delivers 10 orders worth a total of £700. That £100 is simply a cost of sales. Stop spending the £100 and the orders will dry up.
So where does marketing come iN?
Marketing is a set of long-term activities. Over time these make people more likely to search for your brand rather than a generic product, or to spend more on your product rather than looking first and foremost at the price in comparison to the competition. Its success is measured via the long-term trends – order values, conversion rates, repeat order rates all going up, customer acquisition costs coming down. In other words, marketing is the activity that creates a favourable environment for your sales promotion activities. Increasing their effectiveness, reducing their cost, and extending their longevity. In reality, to be successful, a business needs both the full spectrum from sales promotion to Brand Marketing. Focusing on only sales promotion misses some major long-term opportunities.