The answer to this question all depends on who you ask. The caricature of an austere accountant will have you believe it is all cost; while the flamboyant marketer parody will defend the value of the brand to a dramatic end.
Let’s compare costs and investments:
A cost is an outflow of money, time, or resources. An investment is an expenditure that has a strong possibility of a return. What tips the scales from pure cost to investment is the yield – which can only accurately be judged when it is measured. Yet unlike tangible assets on a balance sheet, the value of a brand is a lot more difficult to assess financially.
Best practices
To accurately evaluate the relationship between marketing spend and brand value, you need to commit to measuring the impact of marketing on your business results.While a simple ROI is easy to do, it requires a big assumption. The assumption being that the total month-on-month sales growth is directly attributable to the marketing campaign. For the marketing ROI to have value, it is necessary to have contrasts. Monthly comparisons, principally the sales from the business line in the months before launching a campaign, can reveal the results more clearly.
Using a 12-month campaign lead up, you can compute the present sales trend. For example, if your sales experience organic growth of 8% per month on average over the last 12-month period, then your ROI calculation for the marketing campaign should exclude that 8% from the sales growth.
(Sales Growth - Marketing Cost) / Marketing Cost - Average Organic Sales Growth = ROI
When you combine the financial science of measurement and process management to the art of marketing, you can more precisely measure, forecast, and improve the success of your marketing efforts. This essential move will drive steady growth and narrow the gap between marketing efforts and financial outcomes.
If you need real-world advice when allocating marketing resources and determining marketing’s contribution to return on investment and the bottom line, contact SSConsult for a free initial session.
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