What Your Marketing Dollars Really Get You

In a ten minute stretch during last week’s Monday Night Football game, there were three  separate Mercedes-Benz commercials shown on consecutive TV breaks.  Pretty aggressive.  

So, the obvious question… how many new cars were purchased in direct response to all of that marketing?

I would be surprised if the answer is anything but zero.   And it would be zero even if they showed 10 commercials.

Mercedes doesn’t spend gobs of money on marketing expecting to sell new cars on the back of a couple of 30 second spots.   The reason that they spend gobs of money on marketing is to get people into the showroom.

It is a misnomer to think that marketing is designed to sell.  It’s not.  Marketing is designed to engage.  It’s designed to shape perception, create energy around a business and incite action.  And of course, even if you do that exceedingly well, you then still need to convince people that the actual product is worth purchasing.

That decision is obviously not based on just one factor.  Once a prospective customer is drawn into the showroom, auto dealers know that most still need to take a test drive, then discuss option packages…and then learn about financing.  And if any of those don’t meet their needs, it doesn’t matter what kind of tear-jerker commercial the company produces – no cars will get sold.

The entire experience is really not much different than making any other big ticket purchase decision.  Asset management included.  Just like a car buyer or a fundamental analyst picking a stock, hedge fund investors build a “mosaic” based on all sorts of considerations before making an allocation.   The product and diligence is different than an automobile – but the overall process is the same.  And part of the process is simply getting investors “into the showroom”.

We get a lot of questions on the ROI of marketing.  Specifically…”how much money will I raise if I make a video or hire a third party marketer or attend a conference?”  I know plenty of marketing people in the industry that have no issue drawing a direct correlation between marketing dollars and assets raised.

But that’s not exactly being intellectually honest.  It completely devalues the due diligence process.  No different than the inverse – a marketer promoting a fund with mediocre performance and suggesting that he would be more successful if only he had better numbers to work with.

The more relevant ROI considerations than conversion rate are - how your marketing helps fill your sales pipe.  How many new rooms you are you getting into and how efficiently you are getting from a first introduction to a decision.   You want to measure stuff - those can be easily measured.  But the intangibles - like enhanced name recognition and brand value, cannot.

Don’t agree?  Ask yourself - what is the ROI on hiring a CCO?  How about switching from a mid-tier prime broker to Goldman?  Or to Citco as an administrator?  You know all of those can help a firm’s business and are considerations for investors when raising capital.  But exactly by how much?

And just as an auto company needs to have great branding… and performance… and safety features… and comfort… and audio system… and the right color choices… You gotta’ have it all!

For salespeople, the best response to the question of whether marketing is worth the investment or not is always the same. “I have absolute proof that marketing works…

You called me.”

By JD David

MarketingJD David