Twice today, in two different places, I’ve come across the notion that “marketing is a cost center.”
I first encountered this belief in a recent report, published by The Economist and sponsored by Marketo, The Rise of the Marketer: Driving Engagement, Experience, and Revenue. The report features these two graphs illustrating the changing perception of the marketing function:
As you can see, the majority (68%) say that marketing is viewed as a cost center today and, unfortunately, that perception is only expected to change a little (3%) over the next 3-5 years.
In contradistinction to this view, a similar majority (69%) of marketers say that business owners treat marketing as a revenue driver. What’s more, they are very optimistic that this perception will change for the better (10%) in the foreseeable future.
The idea that “marketing is a cost center” was also repeated, albeit negatively, in a piece from NewsCred entitled, “How NewsCred Does Content Marketing.” There you can read, “Unlike common perceptions, we believe that marketing is a revenue driver, not a cost center.” [Emphasis in the original]
The post goes on to explain that, “Today, marketing drives 40% of NewsCred’s revenue on a first-touch basis, and influences 100% of deals. The best news? Content marketing is our most cost-efficient channel! For every $1 we put in, we get $14 out.”
Why am I Surprised?
Before going any further, I really need to make a confession: I’m not a business person by training. I have a PhD in German Studies and eventually wound up in marketing roles because I can write and talk good.
Thanks to my meandering career path, I never took a class on accounting or anything like it. For this reason, I never got the memo that, from an accounting standpoint, marketing is first (among equals?) as far as cost centers go. Naturally, one need look no further than Wikipedia to discover this:
To be honest (for once), if you had asked me to name cost centers in a company, I would have mentioned HR and finance and IT and, possibly, customer service, but I don’t believe I would have mentioned marketing. Why not?
One of These Things is Not Like the Other
I understand that is costs money to do marketing, just as it costs money to conduct business in general (unless you have figured out a way to procure and ship goods, or deliver a service, and charge money for it without incurring any cost at all, even the cost of invoicing). But the cost of doing marketing has always struck me as different from the cost of running AP/AR or your intranet.
For one thing, you might be able to run a company without doing any marketing (that is, with no website, no brochures, no advertising, no “brand,” etc.), but you would be hard-pressed to run a business without some way of billing and collecting money, paying employees (even if they are only contractors), incorporating or entering into contracts, etc.
That is, marketing is a deliberate, chosen cost. Not one that simply comes with the territory when you start a business.
Secondly, marketing can take an almost infinite number of forms. With your phone system, for example, you essentially have three options: rent or buy a phone system; make your employees use their own phones and pay them back (or don’t); or go without phones altogether.
With marketing, on the other hand, there is no particular marketing tactic that you need to employ. You can do direct mail, or not. You can do email, or not. You can focus on SEO, or not. You can have detailed price sheets, or you can let sellers determine pricing. You can have a logo, or not. You can have a website, or not. And so on.
In the end, and this brings me to my third point, marketing differs from all the other cost centers because it is intimately tied to what you do, what you sell, and, most importantly, who your customers are and how they buy. Marketing is and must be as strategic as everything else that you do when you “go to market.”
Thinking of marketing exclusively in terms of cost seems dangerously misguided.
Cost is the Mind-Killer
Cost is the mind-killer because it distorts our view of marketing.
When managing a cost center, your primary goal is controlling cost and, ideally, reducing it. This makes you look for ways of increasing efficiency in the cost center and always being on the look out for ways of driving cost to zero.
And, frankly, you can do this with marketing, as I’ve already mentioned. Indeed, I’ve been in organizations where marketing’s budget was cut to the point where it, for all intents and purposes, disappeared (yes, there were some folks left over to run the website, but they were essentially the marketing contingent of the IT department).
But is efficiency really the standard against which marketing should be judged? More importantly, should we be thinking of marketing as a cost center at all?
Is There a Third Way?
In the accounting world, according to my primitive understanding of it, things are either cost centers or profit centers. Cost centers generate no revenue. Profit centers, while they too have costs, generate revenue that offsets those costs and, to the extent the revenue exceeds the cost, produces a profit.
Marketing seems to fall somewhere in between these poles. Since it actually influences (and, in many cases, demonstrably drives) sales, it would seem like it’s more of a profit center than a cost center. On the other hand, particularly in sales-driven, B2B companies, that “influence” can be difficult to measure, and marketing can seem like it’s all “cost.”
Returning to The Economist study, it would seem that I’m not alone in believing that there should be a third way of thinking about marketing. After all, almost the same percentage of respondents said marketing was viewed as both a cost center and a revenue generator.
Can we square the circle? Can we think of marketing as neither purely cost center not purely profit center? After all, marketing is more than simply a cost of doing business, but less than an unambiguous revenue engine.
What do you think?