Risk can be simply defined as the potential that an activity will lead to an undesirable outcome. Financial risk, put plainly, is the possibility that an investment’s return will be different than expected. The standard method of reducing financial risk is diversification. Mitigating marketing risks is no different; diversification through investment in integrated marketing tactics is crucial. Moreover, an integrated marketing campaign incorporating various tactics will reach a larger audience. Smart marketing is the new standard, and choosing an agency that reflects that will ensure the best return on your investment.
We’ve all heard the the phrase “don’t put all your eggs in one basket”. In terms of investing, putting all of your investment into one asset might increase return for that asset, but it considerably increases your risk of loss. In other words, your only returns will come from that basket, and if that basket breaks you’re out of luck. A portfolio of various investments, often called a market portfolio, will yield a diversified return. Let’s think about this in terms of marketing.
Fortunately, today we have the tools to predict the return on a marketing investment. We can forecast the success of marketing tactics, and measure the yields, therefore the risk of a particular marketing tactic investment is better controlled. In this case, diversification can be compared to integration. A variety of marketing tactics will contribute to a fully integrated marketing campaign. A strategic marketing plan that incorporates a heterogeneous approach through, for example, online marketing tools like search engine optimization, pay-per-click advertising and content strategy creates a greater reach and more conversion than implementing just one technique. After all, “risk” in this case is the possibility that marketing dollars do not produce a return on investment.
In the past, it was common for clients to blindly invest money into an advertising campaign, hoping that it works. Today, marketers use a wide variety of quantitative tools to measure the success of marketing tactics. For example, the success of a website can calculated in terms of traffic, page views, bounce rate etc., so the client can see exactly how their marketing dollars are being spent. As a result, the risk has been reduced significantly, since the outcome of every tactic can be quantified.
The adoption of metrics means marketers have to be smarter with their clients’ marketing dollars. The risk lies in working with a marketing firm that is not spending dollars wisely. The best marketing firms share several characteristics:
- Provide solutions backed by significant, and relevant market experience. Exposure to a variety of client circumstances means the firm has the capacity to work with many clients, on a large scale.
- Considerable depth and breadth of services. Media today is constantly changing, and an agency that can offer high quality, diverse services based on target market and geographic area is well-respected one. Creative capabilities and a high degree of flexibility is important.
- Good client/agency “fit”. Client/agency fit is perhaps the most important feature to look for in deciding on a marketing firm. A strong, customer-responsive team and an honest philosophy are a sign that they will spend your marketing dollars wisely.
Marketing risk, although more controlled than ever, is still widespread. Mitigate risk through integrated marketing, marketing metrics and smart marketing. Choose marketing firms carefully, and look for those that share the best characteristics.
Meghan Tooley is a blogger at Metric Marketing, an online marketing agency specializing in pay-per-click management services and other online marketing tactics.
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