Marketing: Investment, Cost or Profit Center?

“The business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” – Peter Drucker

Should marketing be a profit center?

Consider this question carefully because I don’t mean should a company make a profit from the products or services it markets. It goes without saying. Of course, it should.

Instead, what I mean by this question is, in addition to the profit from products and services, should marketing also earn money by virtue of marketing?

Think: selling content, eBooks, sponsored content or banner ads on a corporate blog, or even tickets to an event.

There’s a handful of headlines emerging discussing plans to shake up marketing from an investment to drive profit, to the mechanism of profit:

“Mondelez will focus on forming media partnerships to acquire, develop and distribute content that will promote its so-called “power brands” like Oreo cookies and Trident gum. The idea is that becoming more of a publisher will open up new revenue streams.

Mondelez will invest in content properties and intellectual property that will enable it make money from selling distribution rights, advertising and brand integrations, said Laura Henderson, Mondelez’s global head of content and media monetization.”

Of the two paragraphs cited above, I’m a complete believer in the former and wary of the latter. More importantly, while I can understand the allure of this storyline for CMO it seems to me more akin to a “get-rich-quick-pink-slip-stock-pick-tip” for most organizations. There are always exceptions and it can work for a few rare examples — Marketing as a Bona Fide Profit Center — bur for most, it’s not just dangerous to marketing, it risks the model and focus of the business.

Virtual Profit by Virtue of Marketing

Some years ago a company I worked with planned to host a virtual conference. The conference would run just as you’d expect at a physical conference, except you’d login online. In short, it was a value-added twist on a webinar.

There would be a range of sessions or a specialty track to choose from. The conference speakers would be live and conduct Q&A after their presentations. There was even a virtual forum where attendees could enter to network with peers. It was very much like stepping into a virtual world.

As the PR director for the company, which developed and sold software, this conference sounded awesome. At that time, no one else was doing this sort of thing and we were doing everything right. The concept was new, we had long list of participating influencers, lots of content to work with a clear application for social media engagement.

This sounded like a fantastic marketing project until this little gem dropped: The tickets would go on sale. I don’t remember the price. Perhaps $100 or $150 per ticket for a five-hour virtual conference. The kicker? More than just covering the expense of the conference, marketing was seeking to profit from it.

What Exactly is the Business Model?

The problem I saw centered on the fact that we were a software company. We sold subscriptions to software as a service for profit. Trying to profit on content put us in an entirely different line of business.

Sure, we developed content and we wrote email marketing pitches and purchased ads. But these things were all intended to either drive awareness for the software we made – or product leads for the sales team to sell it.

Anyone that has attended a physical conference can appreciate the cost of overhead in a facility, food, staff, printing, and even entertainment. It’s quite natural to charge a ticket price to help defray the cost but not for profit.

Conferences produced by businesses are assets. These are investments in relationships, reputations, loyalty, brand cache and content.

To the best of my recollection, the results were less than stellar. Perhaps a few hundred attendees (MQLs), a couple of blog posts and some social media activity on Twitter.

By contrast, the next year the conference was free and the resulting impact far more significant: the free model netted thousands of attendees and dozens of earned media placements across news blogs and social media. That’s a good outcome for a company selling software.

Marketing is an investment over time with compounding returns.

Compound Returns of a Marketing Investment

The virtual conference, in this context, is part of marketing, and marketing is an investment. Maybe there are a few day traders that get rich with some lucky stock picks, but the vast majority of us don’t.

Instead, we put a little of our income aside and strive to make good decisions about how we save it. Over time, that investment grows through accumulation, appreciation and compounding returns.

Marketing, especially content marketing, works the same way. Marketing is an investment over time with compounding returns.

Marketing is not a cost center, and while it’s not profit center either, with consistent systems, repeatable process and bit of creativity, it certainly contributes to profits.

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Photo credit: Flickr, Chris Potter, Grow Your Money (CC BY 2.0)