How important is marketing in generating premium value?

Marketing - cropped

Jim Horsley, Chief Executive of CHA PR, shares his insight.

If you’re looking for sustained growth and premium value when you sell, how much should you spend on marketing? As importantly, where do you get the best return both in terms of the content you produce and the channels you use to engage with the audiences you want to reach?

The accepted wisdom is that you need a marketing budget of 5% of your total revenue just to maintain your current position. To grow or gain greater market share the rule of thumb is that you need to at least double that investment. Equiteq’s own best practice advice is that 10% of revenue should be spent on generating business through marketing and sales.

We undertook a survey of senior marketeers in management and business consulting firms* in the UK to identify not only what is their level of spend on marketing but what type of spend made the biggest contribution to the business.

Not surprising, perhaps, 70% of respondents spend between 1 to 5%; the consultancy sector has rarely had an ambitious approach to marketing. Another 15% are in the 6 to10% investment category. However, only 2% spend more than 20%. More than a third say that spend will increase over the next 12 months.

So what kind of return do those firms get on their investment? 30% say they get a £10 return for every £1 spent; 14% say the return is £5 for every £1 spent and 17% say the return is £4 for every £1 spent.

Based on those figures, there’s a strong argument that any increase in marketing is likely to pay dividends. Most companies want marketing to generate better quality and more leads and measure its success on the number of leads, the sales revenue generated as well as the quantity of sales. Brand building is not high on their agenda.

It is perhaps this focus on marketing purely as a lead generation tool that makes many firms reluctant to increase their marketing spend. The benefits of building the brand are not as easily measured and often don’t deliver the short term impact that sales leads can create.

However, without a strong brand, companies often find it difficult to sustain growth in revenue and profitability long-term and to generate premium value when the business is sold.

As you might expect, thought leadership and other content production is very or extremely important in our respondent’s marketing activities. It is case studies that generate the highest number of leads as well as the best quality. Blogs and web articles come second in the highest number of leads and third in the best quality. What’s less effective on both counts are videos, survey results, infographics and best practice guides.

In terms of marketing channels, the top three generators of the highest number of leads are events, websites and telemarketing. In terms of quality of leads, the winner by quite a distance is events, followed by cold calling and websites. PR, e-newsletters and social media are low scorers on both counts.

From a brand awareness viewpoint, the quality of websites, one-off emails and webcasts and webinars are seen as the biggest contributor to the brand. PR and social media score more highly in this category than in their contribution to lead generation.

It’s not always an easy choice to make to invest more heavily in marketing (as opposed to bringing on board new consultants or more sales resource). However, the survey clearly shows that many business consultancies do get a high return on marketing. Such investment long-term can impact revenue growth and the value of the business and the brand when you come to sell.

*100 structured quantitative telephone interviews were conducted amongst senior marketeers in management and business consultancies in September, 2014. The research was undertaken by Illuma Research.

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