When Does a Seemingly Great Marketing Investment Sink to a Disappointing Marketing Expense?
Updated: Apr 21, 2021
This text is from our consulting firm's latest 321 Biz Development podcast found on fifteen podcast platforms.
As a consulting firm, we have seen the following situation all too often:
what is proposed by the marketing company as a powerful marketing design to make phones ring off the hook and bring in more revenue turns into just another overpromised scheme...that is now an expense.
To be fair, the $10,000 paid to the marketing company was earned by honest efforts. Nothing was done illegal. The marketing company presented a statement of work to promote the small business and got the business owner's signature.
The business owner saw her ads on television, heard her company's name on the radio, and saw her posts on social media platforms. The business owner even received the marketing mailer at her address...and it look great...and it felt great getting the advertising piece in the mail just like the other 1,000 recipients.
This post and related podcast episode will look at how, why and when money spent to grow the business seen initially as an investment sours into a marketing expense.
The How, Why and When
In this explanation, I will represent money in $1 equivalents so this post and episode will not be seen sensationalized by using big numbers like $10,000 or $100,000. At the end, I will have use real dollars for real scenarios.
By definition, an investment is defined as money inserted into a vehicle that grows into more money. An example would be $1.00 invested delivers $1.20 at the end of the investment term. If the term was 30 days, then making $0.20 in profit in 30 days is a great investment. This is 20% investment gain! The annualized ROI is 877%. Meaning, if the 20% gain in 30 days would keep the pace over a 12-month period as it did the 30-day period, the gain would be an astronomical 877%!
If the measurement was over a 60-day term, the $1.00 to $1.20 investment would still have a physical 20% in profit, but the annualized ROI would drop to 192%. For a 6-month term, the profit is still 20%, but now the annualized ROI would drop to 44%.
It is important to note that the initial $1.00 investment might not bear fruit for another 180 days. A $1.00 investment on March 1, 2021 might return $3.00 in sales revenue by September 1, 2021, 180 days later. In this scenario, the $1.00 bringing in $3.00 is a 200% gain and an 800% annualized ROI.
Let's look at the same scenario as an expense.
The $1.00 money paid to a marketing company might deliver $0.20 in sales revenue in a 30-day period. This scenario would be a 80% loss and an 100% annualized ROI loss.
The $1.00 money paid to a marketing company might deliver $0.20 in sales revenue in 180-day period. This scenario would be a 80% loss and an 96% annualized ROI loss.
The sad news is that it does not take long for the business owner to realize if the marketing dollars spent will be a gain or a loss. Phones are not ringing, no new appointments, and revenues are not increasing.
It's rare that $1.00 spent on March 1 will deliver a gain 60 days, 120 days or 180 days after the money is spent...with one caveat or exception. The exception is when the business owner participates in the growth of the business.
The above, one caveat is the big difference between a marketing company and a consulting firm.
A consulting firm like 321 Biz Dev LLC works directly with the business owner during the revenue increase process. By definition, a consulting firm's solutions must work. "Must work" is defined two ways:
The business increases its number of new customers and revenue. And equally important,
The profit and the annualized ROI must be in positive terms.
321 Biz Dev works with business owners through its sales systems and podcast interview programs in several ways.
Sales systems are designated to support white-collar small business owners because their transaction prices or commissions earned start at $1,000 and could go as high as $50,000. So there is enough revenue potential to serve as a buffer to prevent white-collar small business owners from taking losses compared with consulting fees paid to 321 Biz Dev.
For example, using small dollar amounts again, when the white-collar small business owner earns $25 over a 60-day period and has paid $2 to 321 Biz Dev, the profit, just looking at revenue generated versus fees paid to 321 Biz Dev, is $23. Annualized ROI is 283,407,728%
The above example could be an event where 321 Biz Dev found a white-collar small business owner a client who purchased a product or service for $25,000 and over a 60-day period, 321 Biz Dev was paid $2,000. The huge 283,407,728% ROI means that if 321 Biz Dev continuously delivered a $23,000 profit over a 60-day period, all year, with multiple transactions, this white-collar small business owner would be very satisfied with 321 Biz Dev consulting services.
But, again, I reiterate, these results are not based exclusively on marketing, but from consulting services.
The consulting service may look like the following.
Maybe, 321 Biz Dev had to book three appointments before the white-collar small business closed the third one. Perhaps, the business owner caused the prospect not to move forward with the transaction. The business owner, possibly, did not follow the building rapport consulting training 321 Biz Dev provided.
During the second prospect appointment, the white-collar small business owner got closer to converting the prospect into a client, but was unsuccessful.
Now, after the white-collar small business owner has moved through a 60-day learning curve, the third appointment was successful and the business owner converted the prospect into a client and made $25,000.
I want to add that white-collar business owners pay 321 Biz Dev for three services:
Contacting and prospecting people mainly over the phone.
Sales system training which includes how to effectively manage appointments and convert prospects into clients.
Training white-collar small business owners how to find their own clients.
Podcast interviews and coaching sessions are structured to support small business owners such as restaurants, boutique shops, hair stylists, estheticians, tattoo artists, HVAC shops and plumbers. These small business owner prices are typically below $500 per transaction. Some HVAC and plumber transactions may be much higher than $500 or maybe reach the $10,000 range.
321 Biz Dev uses podcast interviews and coaching sessions to help these business owners better promote their products and services to the public in face-to-face settings.
Just as with white-collar small business owners, 321 Biz Dev fees are created to give great profit margins and above average annualized ROI.
For example, if a hair stylist pays $145 for a podcast interview and receives 60 minutes of coaching to find his or her next client, and the hair stylist generates a $300 sale in 30 days from a $145 investment, this sale results in a $155 profit and a 884,844% annualized ROI.
And, I'm just mentioning this for the first time. The information I just mentioned applies to white-collar small business owners too. The hair stylist may continue to generate more hair clients from the single $145 investment.
It's taken me a while to communicate 321 Biz Dev services in this manner. I have always wanted to, but now felt the time is right as small business owners are trying to get back on their feet after a not so kind 2020 year.
If this episode provoked some deep thought about improving your sales performance, please do not hesitate to contact me, Rick Nappier, at 726-999-0999. Or, if you are Spanish language business owner, please contact Yeilyn Rodriguez, VP, Business Development specialist at 786-697-3400. Ms. Rodriguez is fluent in both Spanish and English.
Interested parties can click here to visit our website. Then, click the Questionnaire tab to complete the 5-minute questionnaire so 321 Biz Dev can learn more about your current sales situation or learn about your current or past experiences with trying to improve sales performance. A 321 Biz Dev specialist will contact you within two business days to review your responses.
We hope your enjoyed today’s post and linked podcast episode.