What is Marketing Capital?

by Jason Ogden | Nov 12, 2019

Every day, I wake up ready to face one central challenge: How do small companies grow?  This question takes many forms and has issues big and small as the companies we serve can be very different.  Of course, when you think about growing your company, it always takes on an extra layer of consideration. It’s personal.  

One of the core conclusions I’ve made over the years after speaking with hundreds of small company owners and those charged with growing the companies is it matters how you think of marketing financially.  Is it an expense or is it an investment? If you think of marketing as an expense, you’re likely to:

  • Be focused on lowest possible cost
  • Think about it in terms of tactics and work produced
  • Evaluate marketing value based on total cost/deals won over a period of time (ROI)

Before I propose the benefits of marketing as capital thinking, I do want to acknowledge some truths about the “expense” approach.  It’s often necessary for early or very small companies. It’s common when companies begin marketing for the first time after referrals or when the sales-based approach has slowed down growth or plateaued the business.  

Marketing Capital

Ask yourself one question: Do I want marketing to generate returns for me?  If the answer is yes, you must eventually move past the “Expense Model” and into the “Capital Model.”  You’re trying to accomplish something that separates you in the market, not buying commodities like printer paper or pens.  This change in thinking ultimately becomes necessary if you’re going to continue to grow your small company. It varies by business, and the further you make it on the expense model, the more reluctant you tend to be to change.  Ultimately, continued growth requires that you change.  

Continued growth requires that you change.

The Marketing Capital Model is based on: 

Short Term Dollars. This what you might call campaign-based.  There is a very specific cost and time frame involved and you can measure ROI pretty accurately. 

Long-Term Dollars. These are investments that begin to short circuit the basic ROI calculation.  Things like CRM, automation tools, buyer persona and journey development, brand messaging, elevation of creative… the list goes on.  The point here is that none of these things drive short-term ROI on their own, but each one is critical in driving long-term marketing success.  

Manpower. This is simply the thought time and energy of your internal teams spent on anything related to growing your business. 

Opportunity cost. This one is the litmus test.  Once you understand the cost of an investment, you need to ask yourself two questions:

  • Is this a problem worth solving?  Does the investment likely generate returns or not?
  • What else could you do with the same investment, marketing or otherwise?

Clarity on your approach in light of these 2 models is meant to help you decide if your approach to marketing makes sense or not.  It matters where you are and where you’re trying to go. When you know that, the right model should be obvious.

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 by Jason Ogden

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