I'll try not to start this article off with a rant, but it will be hard. Anyway, once I'm over this part I can ensure you this is followed with some solid, practical and rational discussion.
Anyway, from where I'm sitting there seems to be two types of business owners, each with their own predominant mind set – both staring down the same barrel of an economy under stress. On the one hand you have those who are sucked into every depressing news article the media publishes. This they absorb and take to heart and by doing so allow it to remove any enthusiasm they have left. These people see all this 'economy' stuff as being 'done' to them and so, once it all stops, all will be back to normal. That is as long as they can survive along the way. So for them, all they can do is sit back and hope they can ride out the storm of an economy in turmoil. Based on the theme of the two recent articles Paul Holmes has written for the weekend papers I would put him in squarely within this category.
In one he cited the increased difficulty in selling his premium olive oil at the Auckland Food Show when compared with the same experience a year prior. For him, this issue supported the commonly understood but rarely discussed fact that the economy was going down the toilet. I have heard of the Big Mac index being a predictor of purchasing power parity between alternative currencies but now we have the sales (or limited ones in this case) of olive oil being correlated to dire economic issues.
The week after his first article, the NZ Herald did a follow-up note, including some of the letters that were sent in by readers. As usual, there were a bundle that supported the view that all is bad and we need to hide in a hovel until it all goes away. However, within this mire was one from the show's organizers stating that he was sorry Mr. Holmes had not achieved the same success that other exhibitors had this year. In fact, other premium suppliers of olive oil had actually sold out their product during the same days he was struggling to shift a drop. Just brilliant – it brought a chuckle across the table that Sunday afternoon.
Now, don't get me wrong – I am not one to gloat at anyone's misfortune – and I readily admit that when it comes to consumer spending, if the For Lease signs along Auckland's Newmarket are anything to go by, then things are tight.
Nevertheless, my view is that when things start getting tough it is very easy – and is almost a natural reaction – to focus attention on what we see as causing the problem (usually it's some nebulous thing like the 'economy') and blame it for ALL of our problems, when there could be a dollop of our own making in what we are experiencing.
But this counter view just gets lost in the barrage of media sound and print – as it continues its obsession with espousing the view that we are helpless and just mere pawns in the process. I suppose you sell more papers and grab more TV viewers when you convince people that this is all 'beyond their control'. And what's more, with it changing daily if not weekly, it is our personal responsibility to keep updated on all the latest ills that are heading our way.
So with all this brainwashing, when the economic changes push buying decisions out a bit further, and more prospect convincing is required, few make the connection to what this means for their online marketing. And, for example, if you rock up to a food show expecting to present your wares in exactly the same way you did last year then things may be a struggle. The market has changed and, therefore, your marketing needs to.
Some have wised up to this fact. And, just like there was an olive oil business a few stands down from Mr. Holmes that was doing a roaring trade, we have seen stories of business success from those who have tweaked their marketing to best suit the current economic state.
Now, there's a multitude of different forms this act of tweaking can take, but here are three 'category wide tweaks' that could be applied to nearly all business types and produce some positive change.
Tweak #1: Fix all Leaky Buckets
Here you're looking for improved efficiencies in your current marketing and promotional activities. It applies to both your customer and prospect marketing. First, here's an easy one – a customer 'win back' campaign. This is for all those customers who used to buy from you but, for a whole wealth of reasons, don't now.
They have already had the initial marketing expense invested in them to get them to that first sale – now all you need to do is convince them to come back and purchase again, and again. Just like a regular customer newsletter, every business should have in its regular promotional arsenal a quarterly customer 'win back' campaign that rolls out during the year to entice those who have bought to buy again. The offer could be a 'value add' or a product/service discount – whatever it takes – and you will need to test which works best and to what degree. All this could be delivered by good old trusty direct mail or email. Whatever form this takes, this campaign could be honed into something that brings people back spending at a very efficient cost per sale.
Fixing prospect 'leaks' was the subject of this month's customer conference call. The fancy title I used here was 'Lead Nurturing' but the outcome is exactly the same – to slowly nurture your leads so that they have a greater chance of making a purchasing decision at a later stage. Order-hungry salespeople may need their customers to purchase when they want, but as decision cycles move out so does the likelihood of this occurring to the same degree it may have in the past. Only today I read in the NZ Herald how a Newmarket furniture shop owner used to have people walk in off the street and purchase a $5000 couch in one visit. Nowadays people will come back for multiple visits and involve their friends and family in the decision all to buy a $400 table. Heaven knows how long your prospect nurturing campaign will need to run to convince people to buy a couch. And I bet he doesn't have any prospect marketing in place to carry this message.
Tweak #2: Re-align the Economics of your Marketing
This point came up in discussion with a customer only a few weeks back. Most people would think it would be just crazy to spend so much on prospect marketing that they effectively lose money on each new customer gained. Sounds like a path to economic failure, doesn't it? Well, not in all circumstances – a few massive corporations have been built upon such a strategy.
For instance, Guthy Renker, who is an aggressive infomercial marketer with operations worldwide, has very successful businesses that operate exactly this way. It goes something like this. You sign up to purchase their face cream, which costs a once off $29.99 with the opportunity to renew each month for, say, another $19.99. Those first purchase customers come in at a loss, which is only turned into a profit when they make the second or third purchase. Guthy Renker's businesses have such large cash reserves that they can manage to carry this 'debt' for the first month BEFORE they purchase again and the tide starts to turn and boy does it turn in their favour. It's this 'economic power' they have to, say, take on 100,000 new customers at a first stage loss of just under $3 million, that makes them one of the big boys of infomercial fame.
The same theory applies to other businesses too. Going back to the discussion I had with this customer. The latest reports from their AdWords account showed that, with the Google Marketing costs and our management fees, they were just about breaking even on their new customer acquisition process, whereas previously they had sneaked through with an OK profit. Now this business offered a range of products that had a very strong likelihood of repeat purchase – I would pick a conservative estimate of around three times a year. However, times were now different, cash was short, and so people were clicking on their ads but not necessarily buying – when they wanted.
Their AdWords traffic delivered a sizable proportion of their new customer sales but still, for them, no profit = pain so they stopped their campaign. I showed them that they were effectively running breakeven on customer acquisition and how their email marketing efforts needed to be ramped up to turn this into a good profit but to no avail.
They stopped and in a very short time saw their sales fall by 40% and the likelihood of future revenue drop with it. They just didn't have the 'economic power' to make the online marketing work.
For them, in their market, the marketing economics had shifted – and they weren't able to shift with it. And, yes, there is an equivalent to Guthy Renker in their market that is 'vacuuming up' what's left of these prospects as new customer acquisition costs go to breakeven, and will probably remain there even when they move into negative numbers.
Tweak #3: Turn up the Value Volume
This month's newsletter includes a review of a book all about doing less. Now this may seem to be a very strange subject to cover when most are trying to increase their activity levels. But, as usual, it's the converse that's true. Taking the route to doing less enables you to increase your focus on each task. And, by applying this increased level of focus to the right areas of your business – like increasing your value proposition to prospects – then things really start to take off.
So, getting back to that Furniture store owner I mentioned earlier. If the value you provide is a warm and dry floor space for prospects to walk around your stock while they decide what they want, then things are looking quite grim. Every furniture shop I know of has this. Gee, you can just hop on TradeMe and scan hundreds of pictures of second-hand (and new) furniture from all over the country without even having to brave the wet of winter.
Likewise, I read a recent article by a bicycle parts importer in which he complained that sales were a real struggle as cyclists were now choosing to buy from overseas websites and skipping over the locally stocked product. As one who has done this on occasion I can tell them why – the price difference – it's huge. The margin between locally sourced and overseas products is just way too high, so it is still worth the effort and the hassle of ordering it yourself. The internet has destroyed most of the value that was there for those who used to spend their time locating unique overseas products and then try to charge a steep margin for the privilege. Only last month Permission purchased some specialist software on Trade Me from a distributor with all the legitimate commercial license keys and, by doing so, saved over $1250 in the process when compared with using the local distributor.
Within all this value degradation sits my local restaurant Ragu as a shining example of people doing it right. They have recently leased a space at the top of Pt Chevalier shops that was bare for quite a while. Prior to them taking over, the space had hosted a few restaurants/bars that all seemed to splutter to a slow, and what must have been an expensive, halt. But these guys are thriving. I was in there on a Wednesday night a few weeks back for an evening meeting with a community group I am involved with and the restaurant was half full and the bar was comfortably buzzing. It just smelt successful.
This time we were eating. The waitress greeted us at the door, showed us into the bar while we waited for others to arrive, and helped us organize our drinks. All with a nice warm and welcoming smile. This high level of service carried on throughout the evening. The food was great, the price reasonable, and there wasn't even a grumble from the cashier when we asked if it was OK for us to pay individually for what we ate and drank. No problem at all.
Ragu gets some space here because it fits within an industry category that must be doing it especially hard at the moment. Hospitality – especially restaurants – must be right there on the firing line when it comes to cutting back the family budget. But there they are, fighting for all they are worth to make you feel very happy indeed when you spend your hospitality dollars with them. Yes, they have invested in great staff, while others could be pulling back in this area and, yes, they have launched a business in a category at a time that most would have thought it to be completely barmy – but from where I'm sitting things look very good indeed.
They are a great example of a business that has taken control over their fate in this economy while others are just sitting back and letting it happen to them. Doing nothing is not something that fits with my character and based on you reading this far I'm sure it doesn't fit with yours either. So I hope the three points that I have delved into here make it on to some part of your list for some 'focused' attention to get things started. Let me know if they do and keep me updated on the success they bring in the weeks ahead.
Some of the smartest people I have met freely admit to knowing the least. For example, a few years back I was fortunate enough to meet one of New Zealand's more wealthy souls – hundreds of millions in assets sort of wealthy. He had made all his money in the challenging local retail sector. Fortunately, he was a relation of a close friend who had done me a favour and weaseled me a few moments with him over a cup of coffee in the rather modest Auckland office. Permission was in its early stages of development and I was looking for as much guidance as I could get.
Anyway, during the short time we had together, he politely answered every question I posed. And, surprising to me, he shared freely on the many parts of his business that he had struggled to know all about. Product selection, in-store placement, store position – really big parts of his success, but still areas he admitted to not trusting his own judgment on. To fill this gap, he invested heavily in technology and conducted extensive research to find the best answers available. And even as his success grew – and with it his confidence – he still ensured that he remained true to his conviction and returned back to research and other types of statistically valid evidence to find the right decision. He knew exactly what he didn't know and found as much smart data as he could muster to seek a solution.
I think a passage of text from a book I read last month on investing goes a step further in supporting my thoughts here. In it the author mentioned how Warren Buffett, not surprisingly, neatly fitted into a similar method of decision-making as my retail mogul. Apparently, while others claim Mr. Buffett reached his mega wealth by knowing more than anyone else, he puts it down to knowing what he doesn't know.
"We have a ton of doubt on all kinds of things" says Buffett, "and we just forget about those". So he and his business partner Charlie Munger put all those things they don't know how to evaluate into the too hard' pile. Apparently this is where over 99% of the probable investing ideas that come their way end up.
I have a close friend who is starting a business and who I wish was more like these two in the way he approached his upcoming decisions. I care for his success, I really want him to achieve, but deep down I know that it's probably going to be a hard road ahead. I formed this opinion after meeting him for lunch the other week, a few days after he had left his job and kicked out alone. So just a few days in and his plans focused upon securing a nice premise to run his one-man operation from and ensuring he charged people what he was "willing to get out of bed for". So I sat there, stared at my tuna salad, and gradually got more and more confused.
It's a consulting business, so that means with today's technology all that's required is a laptop, a printer, a mobile phone and place to hog at Starbucks for too long, nursing a rather average coffee. (There wasn't a Starbucks nearby my home when Permission started so I was forced to move aside some boxes and turn the spare bedroom into an office.) Back then, I had a very long list of things I didn't know. They included big chunky things like: a) if there was a market for what I was offering; b) if people were willing to pay for the services; and c) how I could find prospects to present my wares to that very week before I had to return the laptop I had borrowed.
All this was very different to how my friend approached those first few weeks. As our lunchtime chat progressed I could see that there wasn't much he didn't seem to know about how to make it the success it was sure to be. So we ate and talked and I shared all the mistakes I have made – there have been quite a few. I left the restaurant hoping that some of it would prompt him to think that perhaps he don't know as much as he thought. But I was wrong – from what I hear nothing has changed and the lease is close to being signed.
Charles Darwin had a few words to say in his time. I think one or two fit neatly into this area, too. So, in defining how natural evolution works, Darwin proposed that it is not the strongest or the most intelligent of the species that survives but those that are the most adaptable. Now, surviving as a species is motivation enough to make most people adapt. Either change or die – now that would seriously get people used to making some alterations to their lives. However, when it comes to business and the changes that can affect you there – well, things tend to change as fast as the business owner is willing.
And in these situations it is perhaps those who expect that changes are going to occur and who are willing to implement them that are the ones with the real advantage. Therefore, if you set yourself up knowing that there are areas of your business that you will never know the full story on your own, then accepting change and dealing with it is just a natural process of uncovering more about what previously lay hidden. Here at Permission, we tend to meet a lot of people who know what they don't know. It's a common characteristic of the people who end up working with us. And it would be fair to say that the vast majority of them either own very successful businesses or are employed by those that do.
It's a rare case to have a struggling business turn up on our doorstep looking for help. But then it's probably just a reflection of how a reverse of this mindset works. I've met a few average business owners in my travels and, as a very general statement, they all tend to have a personality type that makes it very clear that there is very little they don't know about their business. Therefore, with this kind of view of life, the last thing they want to do is engage some help from some "expensive consultants" to tell them something that they "probably already know about their business". Which of course is the exact opposite of what would happen but, nevertheless, it's a mindset that reflects the reason why they are in the situation they are.
Working in an environment where there are known areas of unknown work seems a natural thing to talk about when you relate it to the arts. The author JK Rowling has mentioned how the Harry Potter characters she wrote about seemed to take on their own life as they interacted with each other – all this while she scrambled to keep up with them in her writing. How this would play out through her chapters she had no idea. But still she planned diligently, wrapping a structure of sorts around each chapter, detailing what it should do and when it would be completed. All these bits she knows – she can control them, they are the known bits of her process. To see this in action, look at the image to follow of one of her plans on how one of her books would play out. It's all in longhand, just as she wrote her books.
So what does all this mean for online marketing? Well, quite a bit surprisingly enough. There are a few big chunky areas of this marketing space that at the start of any project are totally unknown to both us and our clients. Here are just three areas that come to mind:
The keywords your best prospects will type into Google when searching for what you offer. You may think you know what they are, Google may even tell you in its research tools the alternative ones that are used each month – but you will need to research which specific keywords actually have behind them people who will arrive on your website and buy your stuff.
The most aggravating problems your prospects want solved by buying what you offer. The old features and benefits sales message tells the tale that people don't buy a drill – they buy the hole the drill will create. But that's just part of the reason – they need a hole so they can hang that shelf, so their partner will finally see them as being the handy person they told them they were when they first started dating. That's the real reason they are browsing along the aisles of Bunnings. Now, that's one very deep problem that I don't expect your average Bunnings' sales person to find out, but hey, it could well be the real reason behind that purchase of the full set of drills they end up walking out of the store with.
Naturally, some problems people will tell you about; others are just too deep and without some serious psycho-analysis you will never uncover them. ( I have read that all our purchases apparently resolve back to the same problem we all want to solve – improving our own level of self-esteem – but that's too deep a rabbit hole to go down in this article.) Anyway, just for now, think about problems rather than colours, sizes and product range. And put the discovery of what they really are into the I don't know' bucket for you to find out all you can. Just to mix it up a bit while doing this work, also be aware that we are dealing with humans here, whose problems wax and wane with changes to their age, lifestyle and other outside forces.
Nevertheless, as clarity comes in this problem area' you will start to look at the words and pictures used on your website in a very different light. Is it all about you and not about them? Most websites fit into this group. Is there a place where you mention the problems your ideal customers could be facing? And do you show them how good you are at solving these problems with some social proof to back up your case (think customer testimonials)?
So, to finish this list of three unknown' areas of online marketing, I'm going to add in one big catch all' – the profile and needs of your ideal customer. Hopefully, we all know what we do and how we do it. That's what we live and breathe in business; we have process documents and strategic plans for this stuff. But what about having the same level of understanding and clarity of our ideal prospect audience? Rarely does this carry as much detail.
For example, last week I sat down with a prospect who sells a business-to-business service and asked him to tell me who his ideal customers were to help me better target them online and grow his operation. "They all are," he replied. "Every business in New Zealand should be our customer – what we offer is valuable to them all." Which, strictly speaking, is true but not that accurate.
So the Chris Price level of polite interrogation continued until we found out their current customer base was skewed towards a certain business category. They also had trouble selling to professional service businesses and struggled to collect debts from one particular industry segment. Then we looked into how the following could positively influence a prospect purchasing – age of business, gender of owner, stage of growth (high, flat or decline), mindset of buyer (stressed, relaxed, busy) and more – all to help define exactly who the best target prospects were.
This process frustrated the hell out of my customer. He wanted to sell to everyone, and not leave anyone out with our marketing message. All this talk about defining a group sounded to him like limiting the marketing success of the business. Things became a bit heated so we broke for coffee and came back once some of the emotion had left the issue. Then I took him through some examples of marketing messages and images that were written with their sell to all' strategy in mind. They were bland, boring and lacked any position or market focus. Very similar in fact to the advertising we received lately in Auckland from our prospective mayoral candidates. No one wanted to upset anyone in what they said or did – it was all very grey, bland and boring.
So the options as I see it are – go after all the market and get hardly anything with your bland advertising, or segment your market and produce messages that talk to their specific needs and achieve more – take your pick. Yes, the latter is the harder of the two, but then who said making a business work effectively was easy!
So to wrap up, knowing more about these three areas will put you in good stead when competing for your customers online. And, by working with Permission, we can help you bridge these points as quickly as possible. Part of our solution comes from some very smart ways to gather the necessary market intelligence to make the unknown more known but, still, when we start there is usually more grey than black. And this is a good thing.
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I have just finished a fascinating book called “Why we buy: the science of shopping”, written by Paco Underhill. It describes how the retail shopping experience can be improved (read ‘sell more’) just by monitoring the way in which shoppers interact with the environment in which they shop. Paco’s team have perfected the art of subtly and unobtrusively following shoppers around stores, recording exactly what they do while in the store.
Big retailers call them in to a fix a whole range of problems. Some of the suggestions they come up with are a lot simpler than you would imagine for something as complex as store design. For instance, Paco mentions the story of an Australian store that was having problems selling cut flowers. There was a wide range on offer in the aisle and great foot traffic passed the display but the category was still underperforming compared with other similar-sized supermarkets.
Paco’s team started their monitoring and gradually the issues came to light. Firstly, the flowers were placed in large plastic bins, which made it difficult to see if they were sold individually or as a bunch. The bins also managed to hide the price of each bunch so shoppers had to pull out a bunch from each bin to see what they cost, and by doing so they promptly dripped water all over the aisle.
The highly technical solution was to pull out a few bunches from each bin and place them in an easier-to-reach container and make the price more obvious. Once this was done the flowers started flying out the door and the category performance came up to standard. No extra advertising, no expensive store display, no change of category mix. Probably the simplest of solutions (most in Paco’s book are painfully obvious but frequently missed by retailers) but nevertheless the best solution for the problem.
Unfortunately, when things fail to perform online this type of user analysis is rarely considered an option. (And yes, there are some tools we use so we can see ‘over the shoulder’ of each of your website’s visitors.) But most people think that traffic – or a lack of it – is the reason why a product or service is not selling online. This is the reason why ‘How do I build traffic to my website?’ is one of the top three questions I get asked each week.
However, just like the flower example, finding more traffic is usually not the solution. It wouldn’t have mattered how many people walked past the flower aisle in its original form, those flowers would still have remained stuck in their over-sized buckets.
So how do you know if your low website conversion rate is a problem that has a solution as easy as this one was? Especially when increasing your visitor traffic takes both time and money, while basic web page changes can usually be made in minutes for little investment.
Sometimes it is easy to pick out – here are a few ideas for you to try.
First, it pays to recognise the need for a fresh pair of eyes to help you see problems that have previously remained hidden to you. I am frequently called in to take on this role. All I’m told is that there is a problem (low sales or low conversions) and I’m then left to wander through the person’s website to buy or register for something along the way.
Just like Paco’s team do, it is ideal if you can look over the shoulder of the person using your site. Technology makes this easy. We use Gotomeeting – it allows you to see the reviewer’s computer screen as they click throughyour site. Couple this with a phone call so you can hear them mutter away about what they want to do but are having problems with and you are set. We go one step further and record the process so website owners can refer to the session later on as they work through making any changes identified.
Fresh eyes will pick up ‘instruction text’ that trips up rather than guides visitors through their shopping experience. For an e-commerce site, the main instruction points occur during these stages: adding product to a cart, checking out the purchase, entering personal details, entering billing details, and confirming the purchase. There’s a lot in here to cause problems for a first-time shopper. (Any website analytics tool should confirm how big the problem is by the percentage of people that fall out of the buying process at each stage of the sale.)
Last week I reviewed a website that had some problems in this area. Their instructions were not clear on how the shipping cost was applied and what you needed to do to register your details. I was running a Gotomeeting session, with the website owner seeing what I was doing, while I talked through what content was causing my confusion. I picked up obvious things that they had missed because they had seen their site too often. So when we reached the problem stages they didn’t really need my comments, they were obvious to them too – it was just that they had missed them before. We found problems with four areas and suggested some small changes that should have a dramatic effect on improving their conversion rates.
Finally, once you have all your ‘instructions’ working well, you need to look at the softer side of the sale – the level of assurance your site provides the first-time shopper. When thinking about how much of this is required I always think of my father-in-law as the shopper we are dealing with. How would he feel as he worked through the sales process for the first time? Would the text be big enough? Are the action buttons absolutely clear? Are all his questions answered in such a way as to make him feel comfortable making his first online purchase on the site I am reviewing?
Assumption is the problem here. You know you have a 14-day money-back guarantee with nice customer service staff to help with any returns but unless you make these statements obvious on your order pages nobody else will know. Remember the recent concern over security of the online payment of Auckland toll transactions? How do you tell your shoppers your site is secure?
These three points done properly should pick up the small, obvious changes that can have a big effect on your site’s conversion rate. Don’t underestimate how much these little alterations can do. As I was once told by a successful retail manager “Retail is detail” – well, the same applies online.
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