CALL US NOW AT (847) 665-9134
magnify

Marketing 101d

This is the fourth installment in a series of basic marketing concepts.  First we described what marketing is, and what it is not.  Then we talked about the problem your service or product will solve, the need it will fill, or the want it will satisfy.  Next we talked about a competitive advantage and why you need one.  Now we need to talk about the “who” in the marketing equation.  We may think we know exactly who our customer is, but research shows otherwise.  Too often we waste a lot of time and effort chasing prospects who are never, ever going to buy from us.  For more on this, please read below.

Who has a problem to be solved, need to be filled, or want to be satisfied and is a good “fit” for what your company does?  No product or service has universal appeal, so we need to understand who our prime prospect (ideal customer) is so that we can focus our sales resources precisely and not waste them with a shotgun approach.  Here are some things to consider as you think about who you are trying to serve.

●  Are there geographic limitations?  Maybe your product or service only has value within a certain geographic area.  Or you might be limited by distance.  A local plumbing contractor, for example, may only be able to effectively serve customers within a 20-mile radius of his shop.

● Are there ethnic or cultural factors to be considered?  Some foods, for instance, might be very popular in one culture, completely unacceptable in another.

● What about age?  Does your product or service appeal equally to a 15-year old and a 55-year old?

● How about gender?  Does your product or service appeal equally to men and women?

● What are your prime prospects willing to pay for your product or service?

 If your targets are other businesses rather than consumers, age, gender and ethnicity may not be as important as other considerations such as:

● What kinds of businesses use your product or service?

● Within those target businesses are there size considerations?  For instance, if you’re selling software, can you serve everyone equally, or only those with 20 to 75 computer users?

● What about payment terms?  If  you need to be paid within 45 days to maintain positive cashflow, you may want to avoid customers who demand 120-day terms.

The list goes on and on, but you get the idea.  You need to know as much as possible about your prime prospects . . . who they are, where they are, what they like and don’t like, how they behave, and how they make buying decisions.  And once you know everything there is to know about your ideal customer, the final key question is: are there enough of them to support your product or service?

Understanding everything you can about your ideal customer is critical.  If you don’t have a clear picture of who they are, how can you reach them?  How can you attract their attention?  How can you tell them your product or service even exists?  You can’t . . . at least not efficiently.  As a small business owner, you can’t afford to waste advertising and promotion dollars on targets who are unlikely to buy from you, nor can you waste scarce sales time calling on those people. 

There can be many reasons that an individual sales efforts fails to close a sale, but over time, if the percentage of prospects you are able to close is too low, it’s likely that you are simply targeting too many of the wrong prospects.  So you want to improve your closing rate?  Just get a better understanding of who is really a legitimate target for your business.  Like many aspects of marketing, this may take some up front time, effort, and maybe money to research, but it’s worth it.  Any resources spent here are miniscule compared to the expense of offering a poorly targeted product or service that misses the mark and ultimately fails.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

Marketing 101c

Maybe you remember the old Jim Croce song that goes, “You don’t spit into the wind, you don’t tug on Superman’s cape . . . “ etc.  The idea is that there are some things in life you just don’t do.  Case in point.  Last time I wrote (Marketing 101b), I talked about problems, needs, and wants . . . your product or service must solve a problem, fill a need, or satisfy a want, or you won’t have any customers.

OK, so I have this mentor in marketing (and most other things) who I knew . . . that’s right, I knew . . . was on my mailing list.  But how was I to know the guy would actually read my stuff?  He’s the teacher, I’m the pupil for cryin’ out loud.  He already knows more than I do, so why would he?  Well, go figure, he did.

The lesson here is simple.  If you’re going to write about stuff  in your mentor’s area of expertise, DON’T SEND IT TO HIM!!  I think Jim Croce would agree.

Retribution was swift and sure.  He was all over me like a cheap suit.  How could I, he asked, engage in a marketing discussion and leave out the Holy Grail of marketing, “competitive advantage?”  Of course, I tried to defend myself, but it was pointless.  He was right.  I knew he was right, and he knew I knew he was right.  I narrowly escaped a trip to the woodshed by promising to set the record straight.  So for a woodshed-induced discussion of “competitive advantage,” and with apologies to my friend and mentor Bad Bad Leroy Bill. please read below.

In my last posting (Marketing 101b), I pointed out that nobody’s going to buy your product or service unless it solves a problem, fills a need, or satisfies a want.  After all, why would they?  What possible reason would there be to buy any product or service if it doesn’t do one of those three things?

But there’s more to it than that.  If your product or service solves a problem, fills a need, or satisfies a want but does it in a way that is indistinguishable from your competitors, what have you achieved?  Not much.  As far as the marketplace is concerned, you’re just an also-ran.  You might as well be selling sand because in the eyes of your prospective customers, they can get the same thing you’re selling lots of other places.  There’s no special reason they should buy from you versus all the others.

So you need that special reason for customers to choose you over your competitors.  You need something to distinguish your product or service from everybody else’s.  You need a “secret sauce.”  In short, you need a “competitive advantage.”  Whatever problem you’re trying to solve for your customers, you need to solve it better/faster/cheaper than your competitors.  Your solution needs to be unique.  It needs to be more elegant, more user-friendly, or more value-driven than everybody else’s solution.  Likewise for filling needs or satisfying wants.

Now here’s the hard part.  Your competitive advantage can’t just be lip service.  It has to be genuine.  You can’t just say your product or service is better than everyone else’s (although lots of people try to do just that).  You have to demonstrate that your product or service is better in a way that’s convincing to your prospective customers.  You may believe you have a superior product or service, but if your prospective customers don’t believe it, you’re still an also-ran, just one more in a sea of offerings that are more or less the same.

The competitive advantage is different for every company.  A machine shop may be able to promise higher tolerances with fewer defects than anyone else.  A wholesaler may be able to guarantee faster delivery times than its competitors.  A software developer may be able to boast of efficiencies not possible with any other product.  The list is endless, but you get the idea.  The key is that your customers value the competitive advantage you offer, and believe you can deliver it dependably.

If you have a hard time figuring out your competitive advantage, ask your customers.  They could be doing business with one of your competitors, but they have chosen to do business with you.  Ask them why.  They’ll be happy to tell you.

So what is your competitive advantage?

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

Marketing 101b

This is the second installment of a series on marketing.  The first installment set the groundwork by defining what marketing is . . . and what it is not.  Now we’ll dig a little deeper into some of the major components of marketing.

The foundational question for marketing is, “What product or service do we intend to offer to the marketplace?”  Our product or service must solve a problem, address a need, or satisfy a want.  The only reason consumers buy anything is to solve problems, address needs, or satisfy wants.  So if our product or service can’t do one of those three things, we won’t have any buyers. 

For instance, let’s say we want to open a restaurant.  Since we’re Greek, we’ll open a Greek restaurant.  There’s a large Greek population nearby and our friends all tell us we create superb Greek dishes.  So the “want” we’re going to satisfy is the want for really good Greek cuisine.  But wait, there are already ten Greek restaurants in the area and they all provide really good Greek cuisine.  Now the question is, does the market really want an eleventh Greek restaurant?  And if so, what “want” does the market expect the eleventh restaurant to satisfy that isn’t already being satisfied by the other ten.

We’ll talk about differentiating yourself from your competitors later, but for now, focus on the problem you expect to solve, the need you plan to address, or the want you intend to satisfy.  This may take some market research but it’s well worth some time, effort, and even expense to get this part right, because if we get it wrong, our product or service won’t even make it out of the starting gate.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

Marketing 101a

This begins a series on marketing.  I’ll dispense with the quotes I usually use because I couldn’t find any that I thought were appropriate for this discussion.  If you consider yourself to be a pretty savvy marketer, this may be too elementary for you, but for everyone else, please read on.

Many small business people are unsure what marketing really is.  Everybody engages in marketing or they couldn’t be in business.  But often, marketing activities are not done in a systematic, coordinated, strategic way.  So let’s begin by talking about what marketing is . . . and what it is not.

Small business people sometimes use the terms “marketing” and “sales” interchangeably as though they are two different names for the same thing.  They are not.  Sales and marketing are entirely different activities.  A friend of mine says it this way:  “The job of marketing is to deliver prospects for the sales force to sell.”  That’s a pretty good definition, I think.

Remember the safari movies we’ve all seen?  The ones where the “beaters” are making a lot of noise to flush the quarry from hiding and driving it toward the hunters?  Well, think of the beaters as marketers and the hunters as sales people.  If the beaters don’t do their job well, the hunters will be going home empty-handed.

In order to deliver prospects that our sales force can sell, marketing must answer a number of fundamental but critically important questions.

–          What product or service do we want the sales force to sell?

–          What problem will our offering solve, what need will it fill, or what want will it satisfy?

–          Who is our prime prospect (the ideal customer who has the problem, need, or want we’ve identified)?

–          How will we communicate with our prime prospect(s)?  Through print advertising?  Radio?  Television?  Email blasts?  Direct mail?  Social media?

–          How do we intend to deliver our product or service?  Through retail channels?  Via the internet?  Through distributors and wholesalers?

–          Where should we set our price?  That is, what is our prime prospect willing to pay for our product or service?

–          Who else is already in the marketplace selling a similar product or service, and how will we differentiate ourselves from them?

The list goes on, but you get the idea.  Marketing is the highest strategic activity in any company because if we get marketing wrong, it doesn’t matter how strong we are financially, how efficient we are operationally, or what a great sales force we have.  If marketing is wrong, we can’t survive as a company.  If we offer a product or service that doesn’t address the problem or need or want it was intended to, we won’t be able to sell it.  If we offer it at too high a price, we won’t be able to sell it.  In short, marketing will have failed in its mission to deliver prospective customers to the sales force.

OK, so now we know what marketing is and what it’s supposed to do.  In the next few postings, we’ll explore in more detail some of the questions above that marketing needs to answer correctly.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

“Give up trying to grow the bottom line. Grow your people and your people will grow the bottom line.”

I was in a conversation recently with a guy who works for a technology company, and during the course of the conversation, the subject of “training” came up.  He said that his company has a training budget for their technicians, but not for their managers.  He said he knows this because he wanted to attend a management seminar, but the owner of the company denied his request.  When he pressed the owner about it, the owner said, “We don’t have any budget for management training.  We don’t believe in management training here.”

I was shocked.  Not shocked that his company doesn’t offer any management training because unfortunately, that’s a fairly commonplace condition in smaller companies.  But I was shocked that the owner would say it in such a casual, matter-of-fact way.  Obviously, this owner either doesn’t believe that managing takes much skill, or he believes that managers somehow manage well instinctively.  Either way, he’s wrong.

Management training isn’t and shouldn’t be the private preserve of large corporations.  Small companies might not have the resources to run big, formal programs, but with very little expense, they can still offer effective management training.  For instance, I know of a small company that has a book club composed of the CEO and his managers.  They agree on a business subject they want to explore, select a book on that subject, then spend an hour each week discussing a chapter.  The CEO doesn’t always lead the discussion.  He takes a turn, but so does everyone else in the group.  As a result, the management team gets excited about various business concepts, has a good learning experience, and bonds more firmly as a group.  And the only cost is for a few books.

I know a company owner who likes to hold “lunch and learns.”  He sets aside periodic lunch hours for his managers and orders in pizza or sandwiches.  He then invites someone from the outside to give a brief presentation followed by Q&A.  This outsider might be his banker, his lawyer, his CPA, or a whole host of other friends, colleagues, and acquaintances in his rolodex who have some business expertise to share with his managers.  And it only costs the price of a lunch.

Besides producing more highly trained managers, simple programs like these produce another valuable side benefit: lower management turnover.  People tend to stay longer in jobs where they feel they are learning and refining skills that will be useful to them in building their careers.

Small business owners often complain that they can’t afford management training, but usually they can.  Just because you don’t have the money for fancy executive seminars doesn’t mean you should just give up on management training.  As I’ve tried to illustrate above, there are lots of ways to deliver very effective, but inexpensive, management training.  It just takes a little creativity and a commitment to making your company a “learning place.”

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

Now, Discover Your Strengths

In his excellent book, “Now Discover Your Strengths,” author Marcus Buckingham and co-author Donald Clifton discuss the work they did for The Gallup Organization to find out what makes successful people successful.  What do those successful people have in common that makes them high achievers?

So they sifted through over two million interviews that Gallup had conducted over the years.  Two million!  The interviewees were doctors, lawyers, policemen, and firemen, white collar and blue collar alike, from many different occupations.  The only thing they had in common was that they were successful at whatever work they did.  Buckingham and Clifton wanted to find out why.  Here’s what they learned.

Successful people understand their own strengths, and they work to nuture those strengths, focus on them, and leverage them.  They don’t spend a lot of time trying to shore up their weaknesses.

In our culture, if a child is really talented at math and science, let’s say, but struggles with English and history, what do we do?  We get that child a tutor or Mom and Dad work with the child to improve in English and history.  Buckingham and Clifton would argue that it makes more sense to invest that extra effort in math and science.  That’s where the child’s natural talent lies, so we should work to develop that talent to its utmost.

The lesson for those of us in business is two-fold.  First, look at ourselves.  Are we wasting time struggling with activities that we’re just not very good at?  If so, wouldn’t we make a bigger contribution to the company if we off loaded that stuff we don’t do very well to someone else and focused on things where we really excel?

Second, look at your employees.  When you identify someone who is not performing well, consider the possibility that they have been put in a position where they are unable to use their real strengths.  Instead of trying to give that person remedial help in an effort to make him or her better at the job, maybe you should ask if the job could be modified to take advantage of the person’s strengths, or if not, maybe those strengths would make the greatest contribution to the company in another job.

When asked, “At work, do you have the opportunity to do what you do best every day?”, out of 1.7 million employees in 101 companies from 63 countries, only 20 percent answered in the affirmative.  Twenty percent!  While that’s an appallingly low number, it reveals an enormous opportunity.  What if we could position the other 80 percent to do what they do best every day?  It boggles the mind.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

“Increased productivity comes from continually identifying areas where you can achieve 80 percent of your results from 20 percent of your efforts.”

Vilfredo Pareto was an early twentieth century Italian economist who gave us the 80/20 rule.  We hear it most commonly used in reference to sales . . . 80 percent of your business comes from 20 percent of your customers.  But the mistake we often make is to spend too much time trying to get the marginal 80 percenters to perform like our superstar 20 percenters.  Wouldn’t it make more sense to spend most of our time working with our superstars?  After all, they “get it.”  They understand and appreciate our value proposition, and if we nurture them and are attentive to their needs, they may have the potential  to become even better customers.

Where else might we apply the rule?  Is it possible 80 percent of our customer service headaches are coming from the bottom 20 percent of our customers?  The customers accounting for the least of our sales are often the most demanding and time-consuming.  It’s not a bad idea to comb through your customer list periodically looking for customers who demand significantly more service than they are worth, and make them available to your competitors.

How about your employees?  Think of the activities that are key to your company’s success.  Do you believe that 80 percent of those key activities are being achieved by 20 percent of your workers?  Again, doesn’t it make sense to invest time and resources in the 20 percenters . . . the people who are really making a difference . . . rather than spending most of your time trying to improve the 80 percenters?

It’s all about leverage.  It’s about identifying the customers, employees, systems and processes that are the keys to your company’s success.  It’s about making sure you’re constantly working with those keys to make them stronger and more effective.  Where can you get an 80 percent result from a 20 percent effort?

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

“Communication is to leadership as the swing is to golf; everyone can do it, but few do it well.”

Consistently, “being in the know” ranks near the top of employee satisfaction surveys. People want to know what’s going on around here. They want to know what their part is. They want to know how events, both good and bad, are impacting the company. And why shouldn’t they? After all, it’s their company and their job. Management should hope that employees are taking an interest in what’s going on. Think what it would say about a company if its work force didn’t know and didn’t care where the company was going. Therefore, it’s an essential leadership function to make sure communication throughout the company is timely, accurate, and honest.

Imagine an assembly line worker at an automobile plant.  His job is to insert the same size bolt into the same hole for each part that comes down the line.  He doesn’t know what the part is, doesn’t know why it needs to be in the car, and doesn’t know how the car would perform without it.  All he knows is that he’s supposed to put the same size bolt into each and every part that comes down the assembly line.

Now let’s assume our worker knows that the part coming down the assembly line is part of the braking system.  He also knows if he inserts the bolt incorrectly, the braking system could fail and cause a collision.  And let’s assume he understands that the company wants to position itself as making the safest car on the road.  Doesn’t it stand to reason that under these circumstances, our worker would be more careful and more diligent in doing his job?

Your employees will help you reach your goals, but only if they know what they are.  They need to know what the company is trying to do and where it’s trying to go.  They need to know why their job is important and how it fits into the overall company objectives.  So if the job of leadership is to get everyone efficiently and effectively pulling in the same direction, then good communication is key.

Good communication is accurate, complete, and truthful.  It’s frequent and sends a consistent message.  It invites feedback.  And it’s offered in a variety of formats . . . newsletters, memos, all-company meetings, departmental brown bag lunches, individual 1-to-1 meetings.  Longer term issues such as the company’s annual goals or its overall direction need to be constantly and consistently repeated, not only to make sure new employees get the message, but also to make sure the message is top-of-mind for existing employees.  If we’re exceeding our goals, tell me so I can help celebrate.  If we’re falling short of our goals, tell me that too and tell me how I can help get us back on track.  If the company’s direction needs to change, tell me what the change will be, why it’s necessary, and how the change may affect my job.

There’s a temptation to withhold bad news or worse, to sugar-coat it.  Always a bad idea.  When you’ve got bad news to deliver, deliver it straight up.  Don’t over-dramatize it, don’t dress it up.  Just tell it like it is and describe how the company intends to respond.  Invite suggestions and feedback.  Your people can’t help you if they don’t know what’s going on.

It’s all about building trust.  Employees need to know that you trust them with important company information.  They also need to know that they can trust the information they are getting.  If you nurture, protect, and validate that trust, you will have created a powerful leadership resource.  If you have their trust, your employees will follow you almost anywhere.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

Key Performance Indicators (KPIs)

I normally begin with a “Quote of the Week,” but I wanted to talk about Key Performance Indicators (KPIs) and didn’t really have an appropriate quote for that topic.  So I guess this is a “Tip of the Week.”

While monthly financial statements provide vital information to the management of a business, they have a significant flaw: they are ancient history by the time we get them.  There’s not much we can do about events that shaped our financial condition when those events happened four, five or six weeks prior to our seeing the financial statements.  So we really need an early warning system . . . quick snapshots so we can see, on a weekly or even daily basis, how the business is performing in key areas.  These are Key Performance Indicators or KPIs.

KPIs are different for every business, but there are a few that are fairly universal.  For instance, many businesses track sales on a daily or weekly basis to make sure sales are on pace to meet that month’s goal.  Cash flow is critical to all businesses, so virtually all of them will watch how efficiently and effectively they are able to collect their receivables.

Then there are KPIs that are not necessarily universal.  If you are a wholesaler or a distributor, you probably need a KPI to make sure inventory levels are where they should be.  If you are a manufacturer, you might need a KPI to watch waste levels, or another one to watch manhours per unit produced.  A service business, on the other hand, may not have inventory or waste to worry about.  It may be more concerned about billable hours vs. non-billable hours, or how many proposals are going out the door per day or per week.

The point is, you need to understand what indicators are the most critical to diagnosing the health of your business.  And you shouldn’t need a lot of them.  If they truly are “key” indicators, you shouldn’t need more than six or eight of them.  Think of it like this.  Suppose you’re on vacation.  You’re having a great time and you would really like to stay a few more days than you originally planned.  But before you do that, you better call the office to see how things are going.  When you make that call, you can ask six and only six questions to determine if you can stay a few extra days or if you need to hop the next plane home.  Those questions are your KPIs.  They are not intended to tell you how every last detail of the business is performing.  They are only intended to tell you that the most important parts of the business are performing within tolerances, and that the business is not in any imminent danger.  If the patient has a hang nail or a sore throat, that’s OK.  We need to address those ailments, but the patient isn’t going die from them.  But if the patient’s heart is showing danger signs . . .

KPIs can be great tools to spot and address problems early.  Used correctly, they can be one of your most powerful management resources.  If you want to learn more about how to use them, pick up a copy of Kraig Kramers’ “CEO Tools.”  He discusses KPIs at length, in easy-to-understand terms.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn

“Cash is king.”

Is it king in your organization?  It should be.  You should be forecasting your cash for the next thirty days, reviewing it daily, updating it weekly.

Some small business owners are unclear on the difference between “cash” and “profit.”  They are totally different.  You can be very profitable and still run out of cash.  Likewise, you can be in a good cash position even if your financial statements are showing a loss.  If you’re not clear on this, have your accountant explain it to you.  But for purposes of this discussion, “cash” is the money you have immediately available . . . usually whatever you have in your checking account plus whatever you have in a bank line of credit.  When you spend more money than you deposit, your cash goes down . . . you have negative cash flow and that’s bad.  When you put more money into the bank than you are drawing out, you have positive cash flow and that’s good.

When you think of a cash flow forecast, think of your check book.  Your check book is an historical record of what you deposited, what you spent, and what your balance was at any point in time.  A cash flow forecast is the same thing except it’s predicting future deposits and withdrawals rather than recording past transactions.

So to start, you record your “opening balance” which is the cash you can access immediately as described above.  Then you schedule the bills you expect to pay (including payroll, taxes, etc.) over the next thirty days and predict the receivables you will collect over the same period.  Of course, your “opening balance” will go up and down during the course of the month as bills are paid and deposits are made.  If you finish the month with a “closing balance” that is below your opening balance, then your cash flow for the month was negative.  If your closing balance is higher, your cash flow for the month was positive.

The real value of this cash forecasting is that it allows you to closely manage your cash on a daily basis.  If receivable collections don’t occur as predicted, you may elect to postpone paying some bills until the expected receivables arrive.  Or if receivables arrive more quickly than expected, you may elect to accelerate some vendor payments.  But most importantly, cash forecasting is an early warning system that alerts you if you are going to run out of cash and gives you time to arrange some bridge financing with your bank

Good cash management is essential to the financial health of a business.  Worrying about running out of cash is one of the things that keeps small business owners awake at night.  But there’s a cure for insomnia.  Each day, look at how much cash you had to start the day, how much was deposited, how much was paid out, and how much cash you had at the end of the day.  It can be a simple report that doesn’t take any time to generate or to read.  Do it.  You’ll sleep better.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
© Copyright 2023-2024, Rock Solid Business Development, Inc. • 601 Estes Ave, Suite 200, Schaumburg, IL 60193 • (847) 665-9134