Are you underestimating your marketing costs?

Setting a marketing budget and estimating costs is always challenging.Hand filling jar with coins.

Often when we think of the word ‘cost’ we think in terms of money – dollars and cents.

In terms of marketing, we may think of cost as the fee to book the newspaper ad or the cost to have a display at a health fair.  But let’s take a moment and think about some other types of costs.

Indirect costs, the cost of your time and opportunity costs are less obvious but still important to consider.  These are the ones that often get missed, and leave us underestimating marketing costs.

Direct vs Indirect

Think of direct costs as those expenses you are completely aware of.  They are obvious.  You took time to consider them.

Indirect costs are often those where you go….”oh yeah… I hadn’t thought of that!”  These are the costs that are a little less obvious and may appear out of nowhere.

Example 1 – A Conference Booth

For example, you decide to have a display at a regional Mom’s conference.  You are a nutritionist who specializes in allergies in young children and it seems like a great fit.  You sign the agreement, and send the booth fee of $250.

A couple of weeks later you start planning what your booth will look like.  You decide to create a banner.  There is a great tablecloth at the home décor store that will complement your look exactly.  How will people remember you – maybe a postcard?  Don’t forget the money spent on lunch, parking and transportation costs.

The banner, tablecloth, signage, pens, postcards and other items are what I would consider indirect costs.

Example 2 – Social Media

For the second example, let’s think about your social media profiles.  You are a busy organic farmer – you rarely have time to stop and sit down in front of your computer.  Without your mobile phone, you would be hard pressed to take photos then find the time to download them and post them.

The cost of your phone, and the resulting monthly fees are now an indirect marketing cost.  Perhaps you use your phone for other business purposes as well, but consider at least some of those mobile phone costs as related to marketing.

Tips…

Think through each step of how a promotion will be completed.  Try to predict as many costs as possible. 

Budget for unexpected costs. 

Keep records of all costs even the unexpected ones.

Recognize that as you become better at recognizing costs, you’ll likely consider more of the ‘indirect’ costs as direct costs.

Time Cost

One of the things about marketing these days is that there is a wealth of low to no cost ways to market your business.  Social media is again a great example.  For no cost you can have a Facebook or Twitter account and reach hundreds to thousands of potential customers.

However, it will take time (lots) to have a successful social media presence.  It will take time to

  • decide what you want to focus on
  • get the necessary photos
  • write and edit what you will say
  • respond to comments
  • analyze results

There is a time cost to any marketing initiative – including events, publicity, e-newsletters and blogging.

Tips…

Track the time you spend on marketing. 

Watch for ways to be more effective with your marketing time.  For example, practice re-using your content.  Once you have written a blog post – pull Tweets and Facebook posts from it.

Opportunity Cost

This is the cost of not doing something.  If you decide to not attend the Mom’s conference or not have a Facebook profile, how many leads or sales will you miss out on?

This is a very subjective cost and hard to define.   Experience from similar promotions in the past can help you predict.

Tip…

Recognize that businesses market for a reason – to grow their sales.  Although it is important to choose efforts carefully, if you don’t do any marketing or your marketing efforts get sidelined there is an opportunity cost.

The main lesson… being aware of ALL of your costs helps you make better, more informed decisions!

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