Consider marketing activities as an investment or as a cost?
When dealing with "web analytics", people often ask how to convince a client of the particular value of a web strategy or tactic. The strategies and tactics that people place value on are things like a new website redesign, content marketing, social media marketing, SEO, etc. Trying to convince a financially minded client of the value of these can be a frustrating experience. Questions can arise like, how am I going to make money on what you're charging me? What is the ROI? How long will it take to be profitable? What is my return? Clients often see these strategies as just a cost and if they don't see an immediate relationship to an outcome, then the project is a no go. If the client simply sees the project as an expense, they are not considering key factors.
Here's the deal: finance people, "business people", etc. look at expenses in two different ways.
The two different expenses are:
CapEx vs OpEx
CapEx (capital expenditure), or an investment, is an expense that creates a future benefit. CapEx usually includes items such as the purchase of buildings or equipment. These also have a useful life outside of the tax year. CapEx is evaluated by the financial professional through tools such as NPV or IRR, which allow you to evaluate the return on a project over time. The financial professional fully expects that in the beginning the investment may be a loss-making venture and no money can be made on it for quite a while, but you still expect a big profit (return) in the future!
OpEx (operational expense), on the other hand, is an operating expense. These are items that you spend that usually have no long-term value value. These include things like paper clips, cost of goods sold, etc. While some of these items might make money, they have no future value and cannot be resold. Projects are typically valued based on immediate return on investment or as a necessary cost of doing business.
When looking at the difference between CapEx and OpEx, it's important to remember that you can't resell OpEx expenses, or have you ever thought of reselling your newspaper ads?
What are you actually selling/buying?
The big question is: when you sell internet marketing services or acquire them as a client, what are you selling or acquiring? Are you selling an asset (CapEx) or an expense (OpEx)? Different marketing strategies form the opposite side of this question. A new website is a profit, while a PPC campaign is an expense. Both will hopefully make money, but as soon as you stop the PPC campaign, you stop making money from it and you can't sell your PPC campaigns either. The website on the other hand will continue to make you money for years to come.
Which expenses are CapEx and which are OpEx?
Investments
Website: A website has huge value in today's world. Your website is the equivalent of buying a building in the information age. If you have a good domain and website, it can only increase in value. If you market it, the value grows even more as rankings etc. increase.
Tinkering with your website can be the foundation of your business for years to come. In this day and age, if a company treats a website as a cost, they are mistaken. Most businesses are slowly starting to understand the value of their website, but many still treat it as just another media buy.
Blogging: A good blog with SEO-optimized copy on your website helps build links to your website and builds a community over time. Gaining rankings and links is like building more roads to your business and we all know that the prices of real estate with the best locations and access are higher than those in the dumps, so you have to take advantage of that. The best part of blogging is the reputation you create. Blogging will generate an incredible amount of traffic for years to come. Blogging is therefore a real investment. It doesn't pay off in the beginning, but over time it will increase the value of your real estate, i.e. your website.
Email marketing: People have been paying for customer lists for decades. Everyone wants information about other people's customers and the bigger and better the list, the more profit you make. In the beginning, email addresses may not be very lucrative, but if you do it skillfully, every email can become a goldmine.
Video marketing: Similar to blogging, this builds content, generates links, shows up in search engines, builds a reputation and has long-term benefits. A partner of mine published a video for a client back in the day that was very successful at first. But, the full value of that video wasn't really realized for a few years as it kept coming up in searches. Many return to the video to buy the product.
Mobile apps: Mobile apps are just like your website, they provide value in the long run. This is again an area where business is starting to realize the long-term potential. Hardly anyone looks at their app as something they are "burning". You're building it for long-term customer loyalty or long-term revenue potential.
SEO: Last but not least, SEO. How many times have you told your clients not to expect overnight results? Even if you make your client pay a monthly fee for your services that looks like an expense, investments in the physical world have monthly mortgages. You and your client or business know that if you get in now and spend time getting a top ranking on Google, the value of the website will grow immensely in the future!
Spend
PPC, Banner & Facebook Display Ads: I have summarized these 3 forms of spend to keep it short: All paid ads are and will remain an expense. That doesn't mean it's bad for your business, but it's just not an investment. "But what about brand value?", this is partly true, but mainly has more to do with creating content than buying the ad.
Social media marketing: This key point overlaps. If you're not creating new content that can be shared on social media, it's an expense, because if you're not giving content to your users, you're just using social media as a customer service and PR channel. While these efforts can build the brand, they are more closely related to the cost of doing business.
Turning visitors into customers
So how do you take the understanding of CapEx-based marketing strategies and use it to persuade your client or boss? I'm only going to focus on the CapEx elements, but you can show and prove it to others using numbers. Work hard to use the tools at your disposal to present an IRR (Internal Rate of Return) to your client. When you show traffic, conversions and margins, you can build a long-term model. You can show finance-oriented clients and bosses that this strategy offers a return on investment that they would not otherwise achieve.