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.