I’m a huge fan of avoiding false economy. False economy is an apparent financial saving that actually results in larger expenditure in the long run. Any business owner or manager needs to be aware of it and should always take it into consideration when they’re weighing up their quotes and making business decisions.
In marketing, which is my area of expertise, there are some common areas where you can fall into false economy entrapment.
The False Economy of Websites
Websites are top of my list because they’re the most common way in which people try to save money, only to end up spending more in the long run. One of the key reasons for this, is that we don’t really know what we’re paying for. There are a lot of behind-the-scenes parts to a website that don’t receive enough attention. When they’re not taken care of, we’re often not aware of it until the website designer who built the website has long gone. Sometimes these underlying problems won’t rear their ugly head until you’re in a stage of growth. A lot of the time we’ll run into troubles when someone asks for a tweak to their fairly new website.
When a new website designer comes along and tells you that your website needs a full upgrade to save you money, it’s worth listening. However, many customers just can’t bring themselves to do that because the investment they already made on their website hasn’t been long enough for them consider reinvesting. For instance, they may have just outlaid $4,000 for their current website only a year ago. They thought this was going to last them some years, and now they’re learning that they have to reinvest the money again. It’s like buying a brand new house, only to learn that it has structural defects that you need to pay to fix. So they pay for the tweaks rather than the rebuild. Sure enough, weeks, months or a year later this same customer has their website hacked, broken in a wordpress upgrade or some other catastrophe that needs addressing immediately. Whenever you have to address a disaster, you don’t have time to shop around for price and you need to rush the job to get it done. Not only will you end up spending more money on the new website that you otherwise would have, but you have to rush the job and end up with a lesser result. Your website is one of, if not ‘the’ key marketing document for your business. It’s a false economy not to reinvest when it’s time to, even if that time comes sooner than you’d like to hear. Eat the ball of concrete and get it done right.
The False Economy of Branding
I have come across many businesses that double-up on their branding spend because they don’t take the time or advice to do it properly in the first place. Normally this is because businesses have a fear of spending any bulk upfront money on things that they think don’t lead directly to revenue, but it doesn’t have to be the case. There are many ways to approach branding on a budget and it doesn’t have to be doing it with bargain basement online fix-ups.
When you go out and get a logo designed by Fiverr or some other online cheapie you often don’t get a proper representation of your brand. These businesses/services don’t take the time to know your business and don’t take the time to consider all the ways in which you’ll need to use that logo…and this is just the logo I’m talking about. In fact, if you hire someone with a marketing expertise to help you in your branding, you’ll find these people (if they’re any good) know a lot of shortcuts to keep costs down AND get you a great result on your logo, visual styling and your branding messaging. Remember that you’re the one in charge and therefore you’re the one who sets the budget. You can still keep costs down by using an expert.
When you don’t get help straight up, you’ll resort to using online cheap cuts and you’ll get a sub-standard result that only needs replacing when you’ve realised the shortcomings. One of the reasons that people fall into this trap is due to a lack of education of branding and what it is, and the power it can bring to your business when done well. Many people think that branding is just about what a logo looks like and the definition of good lies in whether they like that logo or not. This is not really branding. Yes, you need to like and identify with your branding, but more importantly, it needs to be something that your target audience i.e. your future customers will respond to. Your branding needs to have a message that will drive sales. It’s a false economy to go too cheap in your branding set up.
The False Economy of Online Advertising
When you’re running online ads, the amount you spend isn’t finite in the same way a print ad is sold. There is no guarantee with an online ad that say $100 is equivalent to 1,000 people seeing the ad and 100 people clicking on your link and therefore 10 people purchasing from the ad. The results fluctuate depending on the effectiveness of the ad. What this means, is that $100 spent by someone who is experienced with online ads will go a lot further than $100 spent by someone who is inexperienced with online ads (unless they get lucky). You can spend the time doing courses and learning how to improve your effectiveness if you’re a beginner, however, you might be better off spending that time on other elements of your business, and letting an experienced marketer do the ads for you.
Again, it’s easy to look at the money you may spend on a consultant or employee and see straight through to the hourly rate. I hear people say, well $95 per hour is more than I make per hour or more than I’m willing to spend on a consultant, so it is too expensive to get this person to run the ads for me. This type of thinking is a false economy. This is not the best way to rate the success of your ad spend. You also need to consider the fact that the experienced advertiser will spend your money more wisely on your behalf and therefore your advertising dollar will go further.
Summary
Most of the time businesses treat marketing as a luxury spend rather than a necessary spend. It’s the first budget item to get the chop when times get tough and it’s something that inexperienced staff are willing to give a go without the formal training. Marketing is also the key way that businesses generate leads, that lead into sales, that lead into revenue. Thus, it’s usually an easy sell when you know what the true value of that marketing spend provides for you. More expensive does not always mean better, however, when you go cheap you’ll probably get what you pay for. My advice is not to rush into cost-cutting measures because you have a tight marketing budget. Look to the return on that investment and the value it will bring to your business.
