Does marketing increase revenue? Or is it a cost center?
A recent study from ITC and Velocify says it definitely works.
The two companies surveyed more than 1,000 insurance agencies. It found that
- agencies spending less than 5% of revenue on marketing are more than three times as likely to have flat revenue.
- agencies spending over 15% of revenue on marketing are more likely to grow by 20% year over year, regardless of agency type or size.
It matters what you spend the money on, too. Agencies using marketing automation and sales automation technology, for example, had very strong ROIs. Agencies with more leads tended to use marketing automation and, on average. they sold more policies per producer and per household.
The additional money wasn’t all spent on digital channels, however. While low-spending agencies got most of their leads from free referrals, higher spending agencies got significant number of leads from such paid sources as lead providers, traditional/offline advertising, and direct mail.
However, apparently the higher spending agencies focused too much on acquiring new clients, rather than retaining existing ones, because they had the lowest client retention rates. I’m not entirely surprised as I’ve seen many companies more focused on closing new accounts than growing existing ones. That’s a significant missed opportunity since it’s estimated to be 5X more expensive to get a new customer than to grow an existing one. That revenue growth is especially impressive considering that loss of clients.
This confirms what I found in my own study of the use of marketing technology in 351 companies across many industries. I studied how many of 9 leading digital marketing programs they are using; I think of it as a kind of marketing maturity analysis. Software companies were far more likely to be using marketing technology than companies in all other fields combined; the median was that they were using 7 of the 9 programs (whereas in the other companies the median was that they were using only 2 of 9). Using revenue data from the public companies I saw that the more martech programs they used, the faster they grew.