Spend Money on Marketing

By Alek Marfisi

To preface this entire discussion, let’s absorb the following logical facts:

  • Spending money on marketing increases sales.
  • (The inverse) Not spending money on marketing results in fewer sales than if a business was to spend money on marketing.

Here at the Field Center, we are in the business of reviewing business plans, and business is booming.  One may ask “What qualifies a generalist to comment on a niche business?”  Well, the truth is that there are commonalities amongst all businesses that, on the whole, determine whether a business will be successful or not.  The number one issue that I see with businesses (I would say, somewhere between 8 or 9 times out of 10) is a lack of marketing due diligence and insufficient funds allocated to marketing strategies.

A classic example:

A person is looking to start a restaurant.  They will build out a 60 seat facility and are looking to bring in nearly $1 million in revenue the first year.  A review of their financial statements shows a healthy $1 million in sales revenue…scroll down the same page to their operating expenses and they indicate a monthly expenditure of $500 on marketing.  A glance at their business plan reveals that the business will focus on social media as a marketing resource and look to build the conversation through “Likes” on their page and spend minimal funds on paid marketing.

The concept that paid marketing is a thing of the past is an illusion.  To clarify, building a conversation on a social network is a way of engaging the audience that you already have; it should not be used as a sole mean of building a bigger audience.  Conceptualize a sphere of influence around your business (see below):

What you are paying for when you buy advertising space is the opportunity to interface with your target customers that are outside your direct sphere of influence, and this exposure is invaluable.  For most businesses, the vast majority of your target customers are in this latter group; and your business will never reach its full potential if it does not interface with them.

A better way to put together marketing estimates:

The best way to put together your sales projections should be one in which they are directly based upon your marketing expenses.  What’s the relationship between these two?

  • Total Client Volume = Marketing Budget / Estimate of impressions garnered through all marketing channels.
  • Total Sales = Total Client Volume X Average Price
All in all, take another look at your marketing strategy and ask yourself “Can I justify my sales with this strategy?”

 

Alek Marfisi
MBA Candidate
Field Fellow/Baruch SBDC

 

 

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