Just like other functions in a business (like sales, production, or finance) are the backbone of a company. Similarly, Marketing is also like a lifeline of a business. The discussion of whether to consider marketing expenses like any other expense has been in the discussion halls time after time. The correlation between marketers and CEOs in this domain has mostly been low.
The question is, can the right marketing strategy lifts stock price? We will see that in detail in this post.
Why Marketing?
Before starting our discussion, let’s understand the concept of marketing and why it is necessary. Marketing is an activity that helps to promote the products/ services of your business to increase revenue and, ultimately, profits.
Most of the time, it is considered a normal business expense; however, few marketing costs cannot be justified due to their nature but they have a massive impact on the business’s growth.
However, in a declining time period, it is crucial to make a smart strategy to keep marketing alive for the sake of business. Companies with the right digital marketing strategy during the pandemic were able to generate 200% gains. Some of those companies have resorted to the services of online brokers to cover the cost of their marketing strategy. In particular, the AdmiralMarkets has proven itself well as a reliable broker, the services of which can be found on the website https://brokerschart.fr/courtier-en-ligne/admiral-markets.
Keeping that in mind, marketing is necessary to promote the business, which will increase the customer base and, ultimately, will improve the shareholders’ value.
Relationship of Marketing and Share price
So far, we understand that marketing is directly related to the rise and fall of a business. We have used fall narration here because the wrong marketing strategy will bring doom to the business.
That being said, at present, deploying an efficient smart marketing strategy is mandatory to create value for the company, ultimately increasing the value of a share. With technological progress and the era of social media, traditional marketing practices are fading into the background, and digital strategies are gaining more and more popularity. A nice illustration of these words will be the fact that according to the research made by Bitpanda, email marketing has generated a 175% return per $1 investment. You can read more about this Austrian company on the webpage https://brokerschart.fr/courtier-en-ligne/bitpanda.
Apart from a marketing strategy, the quality of goods and services is also important. Today’s market operates in a way that satisfied customers create value creation for the share price. Further, with the prevailing social media marketing era, one good or bad word of mouth can make or break a product in a matter of hours. And the most dangerous thing is it has long-term impacts.
So, at present, one cannot ignore the power of a good marketing strategy and its impact on the shareholders’ value and the share price.
As experts of a well-known online broker Libertex https://brokerschart.fr/courtier-en-ligne/libertex say, 24% of the people who had used the right marketing strategy were able to earn significant investment gains and used it as a key diversification strategy in times of crisis.
Is marketing investment or a liability?
For this discussion, we are keeping aside the literal meanings in accounting language. The focus of any marketing campaign is to get new customers and retain them on a long-term basis. Their association with that particular product or service will not only create satisfaction for them but also improve the value of a company.
It is obvious that more customers mean more revenue and profitability, and in the end, business success and promotion. A good marketing strategy will catch that success and try to capture more market share. The benefit of this exercise is directly linked to the improvement in shareholder value and better stock price. We will name this section as a marketing investment.
On the other hand, there are some situations where extensive marketing campaigns become a liability for the company. In that case, post-campaign inefficient operations and lack of quality maintenance will increase the production cost, which will directly affect the bottom-line profitability figures. In this scenario, although the revenues are increasing, poor profitability reduces the share price. The inefficiency in operations will become apparent in the final product, and the customers will start to lose interest. This is what marketing as a liability means.
Testing your marketing strategy
The litmus test for checking the relationship between your marketing strategy and the share price of your company is straightforward. It all depends on the customer retention percentage of your business. In simple words, better marketing of your business means customer retention that leads to an increase in revenue and profitability, this will generate cash flows, and ultimately the shareholders’ return will increase, and so will the price of the stock.
On the other side of the coin, bad marketing of your business will cost you customers and, resultantly will reduce cash flows. In that case, lower shareholders’ return and cheap share price.
Final words
By wrapping up this post, we have seen that a smart and accurate marketing strategy is directly linked with the better performance of the stock price of a company. Further, we noticed that a good marketing strategy is an ongoing process because it retains and generates customers. An upward-trending customer base will improve cash flow positions resulting in sustained share price.
On the other side of the pole, inverse results happen due to bad marketing strategy.