ROI: Advertising vs. Customer Service
Is the ROI of advertising higher than that of customer service? Does bigger advertising spend equate to higher sales?
Now is the time to shatter the myth that advertising delivers a higher return on investment (ROI) than customer service.
This is the time of year every department in every company is fighting for an increase in their budget. It involves determining what they are allowed to spend for the year. Most especially, the budgets of advertising versus customer service.
The only way to win the battle is to prove which budget will produce the company a better ROI.
Marketing Strategy Costs
In any kind of business, the marketing strategy is crucial and should have a return on investment. Ideally, this should always lead to an increase in sales.
This applies to all kinds of strategies, whether traditional or digital marketing. Each approach has its own metrics and marketing cost.
Traditional marketing covers advertisements on TV, billboards, radio, and other forms of print.
It is no doubt that TV is one of the great traditional ways of getting your product and service out. But, what does it cost? The average for TV advertising budget is $115,000 for 30 seconds of airtime.
In large markets, billboard costs can reach up to $14,000 on a monthly basis. That sums up to $168,000 for a term of one year. This will also depend on the billboard size, location, and foot traffic.
At this day and age where everyone has access to mobile phones, will the traditional approach still work? It may provide ROI from advertising, if you know your target audience extremely well. Otherwise, it will just turn out to be a very costly marketing spend.
A lot of companies, especially small businesses, make use of digital marketing to reach their target customers. One of the easiest ways to launch a marketing campaign is through social media. Other forms of digital marketing include search engine optimization, affiliate, email, content, and influencer.
Of course, each has its own cost. How much is spent on digital marketing? As an example, the budget range for a PR agency to handle a business social media page is $2,500 to $9,000 a month.
However, it is important to note that this digital approach is not a one size fits all. To have a successful online marketing campaign, a company should have thoroughly done its market research and identified its target customers.
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In a Social Times article titled Can Customer Service Deliver a Higher ROI than Marketing?, Tom Eggemeier, EVP Global Sales at Genesys, recently shared that global budget spends on marketing and advertising was $500 billion a year compared to $9 billion spent on customer service. Compare that to the % your company spends on marketing and advertising versus customer service.
Are you Penalizing Brand Loyalty?
Are you constantly offering incentives that are for “New Customers Only”? What about rewarding the customers that have been loyal to your business for years, that do business with you regularly, no questions asked, and refer others?
It is a fact that:
- Repeat customers spend more $$$ than new customers.
- Repeat customers give higher satisfaction scores.
- Repeat customers refer more than new customers.
- You need five new customers to produce as much as one repeat customer.
In Adobe’s report titled The ROI from Marketing to Existing Online Customers, it was reported:
- A 5% increase in customer satisfaction can increase a company’s profitability by 75%.
- 80% of your company’s future revenue will come from just 20% of your existing customer base.
Reversing the Spending on Advertising vs Customer Service
In 2016, the fact that this is even still a debate is a sign of old paradigm thinking by too many senior executives. The shortsighted obsession of constantly bringing new customers or traffic to your business is significantly more expensive than building an incredible customer experience.
Companies spend millions creating and advertising their brands, yet the customer’s experience is what drives customer perception. If you take really good care of your existing clients, they will generate more new customers than any kind of advertising campaign ever could.
Excellent Customer Service Improves ROI
Why is customer service worth making a top priority?
- It will allow your business to understand your customers better. This includes their needs and pain points.
- It is an effective way to get referrals. Satisfied customers will talk about their positive experience of your service.
- Excellent customer service will help you gain loyal customers.
- Providing world-class customer experience can give your business an edge over competitors.
- It strengthens your business reputation.
The ROI of advertising is not higher than that of customer service. The bigger ad spend does not guarantee more business. To keep looking for new customers is not the only way to grow your revenue.
The best opportunity is improving on what you already have. These are your existing customers and the customer service that you provide.
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*Related Article- Who is Losing Sleep at Night Over Your Customer?