Does Spending More On Marketing Equal More Success ?


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This was a question that was raised at a recent meeting. It provoked a surprising amount of discussion as on the face of it, the answer should be yes. However and not surprisingly life is a bit more complicated than that.

There is no doubt that many surveys show that an increase in marketing spend leads to an increase in growth. However there seems to be only a limited correlation. Take this statistic for example; if we compare at High Growth companies (defined as growing at 20%+pa for 2 years or more) with average growth companies we get a radically different picture. The figures collated from a recent survey on High Growth firms by Hinge Marketing are that on average a typical business, that is one that grows at less than 20% per annum, spends about 5.1% of its turnover on marketing. At the top end of average firms marketing spend can be as much as 12% of sales. The average of the high growth firms surveyed showed their average spend was 4.9% of sales. Slightly lower than the average for the typical business! A bit of a surprise given that they are growing up to 5 times faster than the top spenders of the typical firms and spending much less on marketing.

That leads to the obvious question. Why? In short its to do with how High Growth businesses address their market. For one thing they are much more focused on meeting clients needs. For another they have a much clearer understanding of who they were selling to and what their needs are. Basically these high growth firms have recognised more than the average business, that their clients and prospects are selfish and concentrated on answering two questions:

What problem do I solve for my customer?Why should my customers buy from me rather than my competitors?

These High Growth businesses seemed to have recognised two things. Firstly that customers are selfish and are really only interested on what suppliers can do to help them overcome their own problems. Secondly High Growth businesses have spent a considerable amount of time and effort answering the question why me?

This really sets them apart. In a recent workshop I asked the 20 or so participants to answer the question “why should my customers buy from me rather than my competitors?” and without exception they all struggled. So actually admitted they couldn’t answer it at all.

This was further demonstrated when the same survey rate the elevator pitch. They asked each CEO to give us their brief elevator pitch. They then rated their response on a 5-point scale based on three criteria:

1) Clarity of the firm’s capabilities and purpose
2) Clarity of the target market
3) Articulation of the firm’s competitive advantage

High Growth businesses scored an average of 72.7%
Average growth businesses scored an average of 45.2%

What this signifies is that successful sales and marketing has more to do with the clarity and uniqueness of your proposition than the size of your wallet.

To get a full copy of the report from Hinge Marketing go here

Republished with author's permission from original post.

Laurence Ainsworth
Laurence Ainsworth founded Exigent Consulting in 2002 and since then has performed a number of successful turnaround more recently he has worked with businesses to utilise Social Marketing to drive sales performance, customer loyalty and brand recognition. He is skilled at working with, and getting the most from, owner managers.


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