The way you answer this question, “Is Marketing an Expense or Investment?”, is important, especially if you’re a business owner. For a lot of people, anytime they spend money, they feel it’s an expense. Most of the time, this is true. But not always. In order to answer this question, we should start with definitions. After we clarify what we’re talking about, we’ll look at some examples. By the time you finish reading this short article, your perspective on marketing, and what it is, may change in a way that will transform the success of your business. Ready? Here we go.
What is an Investment?
If we want to know whether marketing should be considered an expense or investment, we need to first understand what defines expense and investment. The word “expense” is broad, and the first definition in Merriam-Webster defines it as “financial burden or outlay: Cost.” In this context, I think that definition is appropriate.
An Investment is defined as spending money or capital to gain a profitable return. When you invest, you expect the returns to outweigh your initial cost, and by a good amount. You’ll often see the term ROI (return on investment). ROI tries to directly measure the amount of return on your investment, relative to the cost. It lets you know if you made a wise decision or not.
What is the ROI in Digital Marketing?
Let’s say you’ve decided to frame spending money on digital marketing as an investment and not an expense. You’ll naturally want to know if your investment is working. Unless you’re strictly an E-Commerce website, the calculation of your ROI in digital marketing can be challenging at first to understand. However, there are specific metrics you can measure that will tell you if your investment is paying off.
- Unique Monthly Visitors – How many new people are coming to your site each month.
- Cost Per Lead (CPL) – This is calculated directly in PPC platforms like Google Ads for you.
- Cost Per Acquisition (CPA or CAC) – Tells you what you are paying to acquire an actual customer.
- Return on Ad Spend (ROAS) – Tells you the revenue earned for your ad spend.
- Customer Lifetime Value (LTV) – This tells you what you can afford to pay in ad spend to acquire each customer profitably.
- Lead-to-Close Ratio (LTCR) – This tells you if you’re getting high-quality leads and whether your sales are efficient.
- Average Position – This tells you which ranking you receive by search engines for keywords.
- Non-Brand CTR – This metric tells you how well your SEO campaign is performing.
Ready to Start Investing in Digital Marketing?
If you always think of marketing as an expense, you’re leaving a lot of opportunity on the table. Today we’re living in the digital age. Your customers expect to not only find you online but find you on their mobile devices online. If you’re not showing up through search or Ads, chances are they’ll never be your customer.
When they do find you, they have expectations. They expect a mobile-friendly website that is user friendly with a professional design. All the better if your website offers valuable information that helps them solve or understand their problem better. For potential customers, your website is the online version of your physical store. If they think you haven’t put the effort into keeping it nice and friendly, they’ll move on.
If you’re ready to clean house or start from scratch with your digital marketing efforts, contact Doohickey today!