Small Business Marketing Sucks

I’ll be on vacation the next few weeks, so I thought I’d share the spotlight with one of my favorite speakers and authors:

In this video, marketing consultant/author Simon Sinek gives a great presentation based, in part, on his book, Start with Why: How Great Leaders Inspire Everyone to Take Action. Whether you’re a salesperson, business owner, marketer or entrepreneur, there’s something for everyone here.

Any good salesperson worth his salt knows that no one buys anything on the basis of a product’s features, that to communicate value you must translate the feature into a benefit.

“Features versus benefits” is Marketing 101. Yet, even if you master the basic skill of effectively translating features into benefits, you’ll may still fail in the final and most crucial step of the buying process – triggering the need or desire that causes your prospect to act.

You see, it’s not the benefit per se that motivates a person to buy. It’s power-packed words describing those benefits that trigger the emotions which motivate us to spend our money, time or energy. In other words, people buy because of the emotions associated with the benefits, not the benefits themselves.

Let me give you an actual example. Recently, my oldest son’s Boy Scout troop did its annual popcorn sales fundraiser. We set up (with permission) in front of a local gas station/mini-mart and arranged two-hour shifts of two scouts each. When our turn came, I instructed the boys on some basic etiquette (“Stand up straight,” “Allow people to enter the mini-mart; don’t block their path,” “Speak firmly but politely,” etc.)

Forgetting who I was for a time and what I do for a living (hey, it was the weekend), I didn’t pay much attention to the boys’ canned pitch (“would you like to buy some Boy Scout popcorn?”) to which most people politely replied, “no thanks,” or sometimes even rudely ignored them.

It wasn’t until one customer asked, “What’s this for?” to which the boys replied, “It’s for the Boy Scouts!” that my sales-trainer radar finally engaged. After telling the woman that they were raising money for a trip to Gettysburg, I took the boys aside and presented a new approach. I instructed the boys to say the following:

“Would you like to buy some popcorn to help us earn money for a trip to Gettysburg?”

You see, their original pitch did not address prospective popcorn-buyers’ unasked question: “What’s in it for me?” The additional “help us earn money for a trip to Gettysburg” provided something beyond the (questionable) benefit of over-priced, average-tasting popcorn. It triggered a desire that caused people to act. In other words, it provided a buying motivation: a desire to help the Boy Scouts. Buying the popcorn satisfied that desire with the good feelings everyone got from helping a worthwhile cause.

The result? Over the next 45 minutes, until our shift was over, every single person that walked by either bought popcorn or gave a donation towards the trip. In the words of the boys after their first sale using the new approach: “It works!”

Over the years, I’ve participated in a number of online forums, where business owners gather to discuss various issues that affect them. On one such forum, someone who had just started a carpet cleaning business posted this question: “What’s the best way to get new business?” The answers that followed were typical, if not predictable:

• The web designer said, “Get a website.”
• The direct mail guy said, “Send out some postcards.”
• The newspaper guy said, “Take out a classified ad.”
• The promotional items guy said, “Get some pens and fridge magnets made.”
• The yellow pages guy said, “Take out an ad in the Yellow Pages.”

And on it went...

Instead of searching for the one “magic bullet,” think of your advertising mix as a “team.” By adding members to the team, you can accomplish more than just one member could by himself. This is the best way to improve the response you get from your marketing.

Direct mail, for instance, has a typical response rate of 1-3%; but you can dramatically improve that by adding telemarketing to your direct mail campaign. A rescue mission that combined telemarketing with their direct mail fundraising got a 28% higher response rate from the group that received both a phone call and a mailer than from the group that received only the phone call.

In the same manner, Yellow Pages extends the reach of other advertising – Internet, radio and television by 22%, newspapers by 19%, and magazines by 23%. That’s because, once a consumer has seen or heard your other advertising, he or she still needs to find you. And one place they look is for you is in the phone book.

To put together a strong “team,” Gill Wagner, author of Honest Selling, recommends you choose “at least three marketing activities that you believe will produce your best results.” Some of the things he recommends considering are:

• Cold-calling to set sales appointments
• Conducting research projects and writing case studies
• Conducting workshops
• Creating lead-sharing groups or strategic partnerships
• Creating your own website
• Helping community, government, charities or nonprofit organizations
• Hosting exhibits at trade shows
• Mailing items of interest to clients and prospects
• Networking at business gatherings, association meetings and community functions
• Offering interviews to newspapers, magazines and radio or television programs
• Providing free advice on your website or through list-server participation
• Sending direct mail
• Serving on trade association or community boards of directors
• Speaking at trade associations and conferences
• Writing a book or books
• Writing a company newsletter and/or e-newsletter
• Writing articles for publication in relevant periodicals
• Writing cold-letters to targeted markets

My advice to the carpet cleaning guy? (Despite the fact the I owned a web design business at the time, I did not recommend that he “get a website” as a means to immediately find new customers.) My advice was a combination of Yellow Pages, direct mail and, if he had the nerve, cold calling.

If you’ve just started a business and need help marketing, I’d recommend you read the follow books:

Everyone in business want to decrease their costs, so here are three sure-fire ways to reducing your advertising costs:

1. Increase your close ratio
2. Increase your response rate
3. Decrease your cost per month

In my previous post, we looked at two ficticious business owners and compared how the cost of their advertising stacked up against these three factors. Let’s see how Advertiser A would fare by improving in these three areas.

Increase Your Close Ratio

If Advertiser A could close two people a month, instead of just one, he would more than double his return on investment and cut his cost-per-sale in half. (Although this doesn’t involve increasing the cost of your adverting, it may require spending money on sales training for yourself or your sales staff.)

Increase Your Response Rate

Even if Advertiser A’s close ratio remained the same, he could achieve the same results as above by doubling his response rate. If six people a month called instead of just three, he’d close two sales a month, increasing his return and cutting his cost-per-sale.

What most businesspeople don’t want to hear is this: the only way to increase your response rate is to increase your advertising. For direct mail, that might mean a larger mailing. On the Internet, it would mean achieving a higher ranking on the search engines. For yellow pages advertising, it means a larger ad. We know from independent research that just doubling the size of a quarter-column ad produces 5 times the response, and quadrupling its size produces 15 times the response.

Decrease Your Monthly Cost

Many people who want to decrease their advertising costs do so by decreasing their advertising. Unfortunately, this is the only method that negatively affects your bottom line, because it decreases your response rate and ultimately, your sales.

If you are doing any sort of advertising then each month, year or whenever it’s time for the next campaign, you are faced with a choice: continue with what you were doing, increase your advertising, or decrease/cut your advertising. When it comes to reducing costs, most people naturally focus on the actual cost of the thing, but you don’t cancel your phone service simply because your telecom costs are too high. You might consider a reduced service plan, but not without taking into account exactly how that might negatively affect your business, right?

Advertising is no different. The goal of marketing is to get responses and ultimately sales. So you cannot look at your advertising costs outside of the context of: (1) What your current advertising produces in terms of responses and sales, and (2) What the potential negative effects of reducing that advertising would be.

Most people decide to cut advertising because they believe or perceive that it’s not working. Assuming that’s not the case with you, here’s how to make the most from your advertising dollars.

Let’s imagine that business has taken a downturn, so you’ve decided to increase your advertising. If you’re going to spend more money on advertising, the increase must justify its cost by producing better results. This means that the basis for measuring the cost of your advertising must never be cost per month. Instead, it must be a results-oriented measurement, such as cost-per-sale and return on investment.

Return on Investment (ROI)

The first factor you must consider for any type of advertising is Return on Investment – will my return exceed its cost?

Advertiser A pays $25 a month for a bold listing in the Yellow Pages and gets an average response rate of about 3 people a month. Since he closes an average of 1 out of 3 calls, his advertising results in 1 sale a month. His average sale is $100, so by deducting the $25 cost of his advertising we see he’s made $75 from his bold listing.

Advertiser B has a Yellow Page display ad for which he pays $150 a month. Advertiser B also closes 1 out of 3 calls, with an average sale of $100. But the monthly response rate from his larger ad is 30 people, resulting in 10 sales. So when we deduct his monthly advertising cost from $1,000 in sales, he makes $850 a month.

Since both are getting a positive return on their investment, each adverting program could be considered a success. But would it surprise you to know that, although Advertiser A’s cost per month is less than B’s, his advertising is actually more expensive? Here’s why:

Cost-Per-Sale (CPS)

We said that Advertiser A’s bold listing results in 1 sale a month. This means that the cost-per-sale is $25. (One sale a month, for which he pays $25 a month.)

Advertiser B, however, is receiving 10 sales a month, for which he pays $150, so his cost-per-sale is only $15. Although both are getting a positive return on their investment, Advertiser A’s ad is more expensive, because he’s paying $10 more per sale than Advertiser B, even though he’s paying less per month. Make sense?

Remember: Cost-per-Sale and Return on Investment are the true measurement of what your advertising costing you – not cost per month!

It’s important to know your product, as this video so amply demonstrates: