Why does marketing cost so much?

Hey there I’m John Doherty and I’m the founder and CEO of Credo where we help great companies get introduced fast to the best pre-vetted digital marketing firms. And if you find this content helpful, I’d love for you to subscribe to this channel so that you’re notified about weekly videos moving forward.

Be sure to stay to the end where I’ll tell you where you can go to download our free guide to hiring a digital marketing firm

Today we’re going to talk about a question we get a lot which is why marketing costs so much. 

At Credo of course, we hear this in the context of why it is so expensive to hire an agency or a consultant to help with your marketing. After all, how can the average US-based agency charge $140/hr (which is what our latest pricing data shows) when a $45,000 per year full time hire works out to just $25 an hour at 1,800 hours a year worked?

That’s what we’re going to discuss today.

If you’re watching this video, you probably have the following challenges:

  1. You’re having discussions with agencies and struggling to justify the spend they’re asking for
  2. You’re trying to decide if you should hire an agency or a full time marketer, and trying to justify the price difference.
  3. You’re unsure about what you’ll get for your marketing spend and thus unsure about committing to any level of spend for any certain amount of time.

The opportunity ahead of you after watching this video is big. You’ll learn three things.

  1. First, you’ll learn why agencies price themselves the way they do and why you need to look beyond the cost and start looking at return.
  2. Why the dichotomy between agency or full time marketer is a false one, and how to better think about it.
  3. How to set goals for your marketing and how to track your metrics over time so you know what budget is necessary to hit your goals.

I’m a professional digital marketer by trade, and when I was consulting I worked with a lot of companies to help them increase their traffic from search engines so they could continue to grow their business. 

I also worked in house for two years and managed a marketing budget (in retrospect, badly, but I did it) so I understand the challenges around knowing if you’re getting a return.

And as an entrepreneur, I recently experienced an instance where we spent $12,000 on ads but only made $3,000 in return. While this was painful, we also learned quickly and were able to stop the bleeding before it became catastrophic to the business.

Before we get into the main points, I want to dispel a quick myth. That myth is that you can easily find top shelf talent for bargain basement prices. I’m a bourbon drinker, with my favorite drink being a rye Old Fashioned. I can get a bottle of one of my favorite ryes for about $40, but there are also rare bottles available for multiple thousands of dollars. Now, should I expect to get one of those bottles for the same price as a bottle of Pinhook? By no means. The same holds true for digital marketing. There are real costs and real value involved, and your challenge is to find the ones who can do what you need for the budget that you have. I can look all day for a rare bottle of whiskey for Pinhook prices, but I’m not going to find it. It’s the same with digital marketing.

So today let’s talk about three reasons why digital marketing is “so expensive”.

  1. First, let’s talk quickly about what you’re paying for. Marketing, just like anything else in business, takes time and effort from skilled people. The first cost in marketing is people, as they are needed to run campaigns. No technology or platform can operate without a person or people who know what they are doing to get the most out of that platform and its insights. Second is the actual budget required outside of your team, such as for ads or for a writer to create content for your site to attract your target audience. This is where marketing differs from something like web development, as there are costs outside of just people and their time and expertise associated with marketing. This is where marketing becomes complicated, as you have to account for not only ad or other channel budget but also for people to know if your marketing is or could be profitable.
  2. Second, when thinking through the full time vs agency you need to consider what you’re getting. Realistically you can hire a FT in-house marketer for the same amount as you’d pay an agency for a year. But the difference is that for that spend you’re getting just one person versus a team able to execute. Realistically we most often see companies have  full time marketing director who also works with various agencies. This is called the hub and spoke model, and is a very common way that companies scale their marketing team. 
  3. Third, before you invest in marketing or say marketing is too expensive you need to set growth goals based off your historical data. If you don’t have historical data, then goals you set will at best be a guess and you should be prepared to adjust them over time. If you’re unable to acquire customers at the cost you need, the problem isn’t that marketing is “too expensive”. It’s just that specific channels might not work for your business to acquire customers profitably through that channel. Either use a different channel or channels, or see if you can raise your prices to make that channel profitable.  

I’m a marketer. Marketing can be expensive. But at the end of the day, instead of looking at marketing as a cost center or expense you should look at it as an investment. When investing in the stock market, you’re not expecting 15x returns in a year. You’re investing knowing that what you invest will likely grow, based on past years, 6-8%. With marketing the goal is to grow a bit faster than that, often 2-4x your marketing budget in a year, but expecting greater than that is often unreasonable.

Budget and project your growth accordingly. 


To review:

  • Today we talked about why agencies price themselves the way they do and why you need to look beyond the cost and start looking at return.
  • Why the dichotomy between agency or full time marketer is a false one, and how to think about it better.
  • How to project growth off historical metrics, what happens if you don’t have those, and why marketing may seem too expensive for you.

If this was helpful to you, search “busy executive’s guide to hiring a digital agency” in Google and download the ebook you find there on our site. Or, find the link below in the description.

I’m John Doherty, founder and CEO of Credo, and I’ll see you next time.

Mentioned resource: https://getcredo.com/guide/busy-executives-guide-hiring-digital-agency/