When it comes to evaluating your business financials, your expenditures are typically sorted into spending and investing. After all, cash flow statements have separate sections for operating and investing activities and how much cash was used in them. But while fixed assets like buildings, vehicles, and equipment are considered major capital investments, all marketing and advertising expenditures simply get classified as another operating expense often designated for the chopping block to boost those key ratios.
Even though all of your marketing-related expenses may be considered one in the same on financial statements, how do you make the distinction from marketing spend versus marketing investments?
Investing: Branding and Marketing Materials with a Longer Life
Generally, you’re making an investment in your marketing if the project, campaign, or initiative is intended to have a perpetual or incredibly long life.
This would entail the creation of branding art, slogans, and consulting with marketing experts to put your company on the right path to differentiating itself in the marketplace. Rebranding efforts would also fall into this category, as it’s common for companies to make changes to their logo and overall look and feel with time. Nevertheless, formulating cohesive branding is a major investment in your business as potential clients and customers will remember eye-catching logos and color schemes. Think of how large multinational corporations have highly-recognizable fonts and icons that people can easily reference: that’s a hallmark of investing rather than spending.
This results in trademarking and filing for copyrights for brand names, images, and other intellectual property which results in an intangible asset that has had much invested in it as far as time and money go. Any additional proprietary processes and tools created for digital marketing purposes would also count as an investment rather than marketing spend.
Types of marketing that are meant to have a long life or even exist in perpetuity would also be considered an investment. Content marketing is one of the most prevalent examples of this because a company can have a blog post that’s at least four years old but is still drawing traffic to a website. HubSpot found that 14.6% of leads obtained through content marketing were likely to convert compared to just 1.7% of other outbound marketing methods. Regardless of how effective a method is though, what differentiates content from other types of marketing is that it’s more of an investment than just more figures to toss under “marketing spend”.
Spending: Advertising Bursts and Other Short-Term Marketing Expenses
One of the chief reasons why marketing is considering spending rather than investing for financial accounting purposes is because there are many short-lived elements to it.
Advertising is generally considered spending rather than investing because unlike consistent branding efforts and long-lived content, advertising campaigns are only valid for the time that the marketing manager pays for them to run. Since advertising frequently needs to be changed to adapt to markets and platforms, it definitely doesn’t have the same shelf life as content.
Printed materials also fall into this category since business cards, promotional postcards, brochures, and other marketing materials often have a time-sensitive element like special events or promotion periods. Employees can change job titles, contact information, or leave the company altogether and no longer need their cards. Having to get these materials replenished because they were distributed also indicates that this item is spending rather than investing. Promotional items that are meant to be given away can also fall into this category.
Even though an advertising campaign can wind up being memorable to the viewers who stumble upon it, campaigns would still be considered spending rather than investing since they’re only designed to run for a specific time frame.
Marketing is an integral part of growing your business and getting recognized as a key player in your chosen field. In differentiating marketing investments from marketing spend, it can help you make more sound decisions when it comes to both marketing budgets and assessing which spending areas should be cut if margins are looking less than desirable.