Faster Results
For Small Businesses With Small Marketing Budgets
2000 & 2004 by
Dennis S. Vogel
(This article contains applications of the theories
described in it.)
Since this is about faster results, let's get right to
the subject.
I'm writing this based mostly on bricks-and-mortar
businesses and
direct sales.
People have debated about this idea, I & others
have, about using
database marketing to determine who are a business's high-profit
customers. They think a business needs any customers it can get.
This is almost true of some businesses, but totally false for others.
It can be financially dangerous to serve
low-/no-profit customers on a
long-term basis. They may demand the same amount as or more ser-
vice from the staff than high-/medium-profit customers. This means-
1) Some (valuable) customers may not be served
satisfactorily & go
to competitors because the staff is too busy with low-/no-profit
cus-
tomers.
2) It's bad for staff morale if they're being pulled
in too many direc-
tions at once.
2a) Staff may be able to serve fewer customers &
still bring in enough
to cover overhead & generate profits, if they're serving
high-/medium-
profit customers.
3) It uses up payroll inefficiently.
Now you may be wondering how somebody can be a
no-profit cus-
tomer. Here are some ways this can happen:
1) They browse and seldom buy anything but still
require somebody to
watch them for security.
2) They talk a lot (to the sales staff), but buy
little or nothing. Your staff
may use this as an excuse to avoid other - important - tasks.
3) They buy things and use them, then return the
products even if the
products aren't defective.
4) They're hard to please no matter how much effort is
expended to
satisfy them.
5) They seldom, if ever, buy anything at full price
& wait for sale prices.
6) They complain about what they don't like but won't
say what they like.
7) They usually only come when they want a donation
for something
they're involved in.
8) They may take a lot of time in front of displays
and block the view
of high-profit customers.
9) They mistreat the staff and/or other customers.
10) They make messes but don't clean them up.
So, we all understand whom we're discussing, I'll
describe high-profit
customers.
High-profit customers are apt to be those who may 1)
buy often;
2) buy a lot per transaction; and don't tie up the sales staff up for
long
periods of time.
So,
What's This Database Thing, You Keep Talking About?
What you record about your customers depends on your
preferences
and your business. You can record -
1) Every transaction or their last three transactions.
2) What they typically buy.
3) Which other businesses (near yours) they buy from.
4) Whom they've been referred by or whom they've
referred to you.
5) Their birth dates or approximate ages.
6) Their contact information.
7) The news/advertising media they use.
8) Their preferred payment methods.
9) A picture of the customers.
10) Their family/marital status.
11) Names of their family members/pets.
If I included everything you could practically record
about them and an
explanation why you may want to record each item, it would take up a
lot of space & be beyond the scope of this article.
Let's Stay In Touch, OK?
Since the average American moves every 4-5 years
and/or changes
e-mail addresses often, it's vital to give them ample incentive(s) to
keep their information in your database up-to-date. What constitutes
ample incentive(s) is up to them to decide, not up to us. (Ask them.)
Since high-profit customers probably value your
products/services, it
shouldn't be hard to get their input. Here's a sample script-
"Since it seems you enjoy what we offer as much as we
enjoy serving
you, I think it may be important to you to keep getting notices of
offers
& new products/services. If we're able to send you notices by
e-mail,
we could offer you lower prices because e-mailing notices saves us
money.
"Would you like to receive our notices personally - by
mail, or through
the mass media? What is your (e-mail) address? -OR- Which radio
station do you listen to most? Which newspaper do you read most
often?
"Thank you for the information, to show our
appreciation, here's __.
Would you please be sure to keep us updated on changes of your
(e-mail) address, so we can keep you updated?"
Whatever you say, practice it so you can say it
smoothly and con-
fidently. If you're shy about asking, then your customer is apt to be
shy about answering the questions. Just ask calmly, reverently and
matter-of-factly as if it's just a regular part of business. (It should
be.)
By using database marketing, high-profit customers can
be called or
sent letters (e-mail or postal). This means attractive, compelling
offers
can be sent to them instead of to the general public or the whole cus-
tomer-base.
I realize some low-/no-profit customers may become
high-profit cus-
tomers in time. But if they have more than three of the ten traits I
listed
above, I doubt they'll change much. Being a low-/no-profit customer
seems to be a mind-set more than a financial situation. So, it may be
best to refer them to a business (a competitor) that has a different
cost structure and can serve them better and profitability.
How could you do it? If they ask for something you can
say, "Do you
know what? I think they have that at (your competitor's name)." Even
if you know you've got one in your back room. It's not lying unless you
say you don't have it or if you know the competitor doesn't have it.
How would you know if a first-time customer will be
high-profit or not?
You probably won't. So, how will you track them? You'll have to get a
way of identifying them, preferably by getting their names.
How can you get their names? By having purchase
bonuses and get-
ting their names to enter into your system. (As far as I know, it's
legal
to give purchase bonuses everywhere. You can ask a lawyer if it's
legal for your business category.)
Here's how you can do it -
It could an extra product or service (possibly from
another business
that wants access to your customer base) or a percentage off of the
price based on the number of times and/or the amount they've pur-
chased from your business before.
This may inspire many people to buy more than they
ordinarily would
have from you instead of from a competitor. It may also mean you'd
have fewer low-/no-profit customers, because people may buy more.
When you prepare postal/e-mail offers, just send them
to the people
who have shown an interest in that kind of offer and who will buy
enough to make it worth your while. You'd get that information from
your database.
This, by itself, can make it well worth buying a computer system &
database software.
The Value Of High-profit Customers
Small businesses have small sales staffs but they have
high payroll
costs, relative to their size. (If daily payroll is $50 and daily sales
are
$400, that's a high payroll cost.) So, it's vital to find and
cultivate
high-profit customers.
There's a maximum number of customers any one business
or
salesperson can serve. This is true even of a business that's open
24-hours every day of every year. There are safety/fire laws in the
U.S.A. that limit how many people are allowed to be in a building.
Since Wal-Mart gives very little service (if any), its
cost of fulfillment
is low. So, it can afford to get small amounts of money per customer,
as long as each store takes in a minimum dollar amount everyday.
But a service intensive business with a high cost of fulfillment can't
afford to have a lot of small transactions, why? Because small trans-
actions may take up just as much time & energy as big transactions.
(In one of the smaller W-M stores - If daily payroll is $1,000 &
daily
sales are $70,000, that's a low payroll cost. The management would
still squawk about it.)
Plus, how will another retailer with similar products
compete with
Wal-Mart? Probably by providing more *AND* better service!
In the beginning of a business or a sales career, it
may be neces-
sary to serve whoever is able to buy. Serving whoever will buy, in
the beginning, may be necessary to 1) Determine who the high-
profit customers are; 2) Gain experience; and 3) Build a favorable
reputation.
After the business or career is established, it's vital to concen-
trate on customers who are most interested in what you offer &
can pay (prices profitable for you) for it.
Finding More High-Profit Customers
You can get more high-profit customers with referrals.
If you're
going to ask any customers for referrals, I advise you to ask
your high-profit customers. They're more apt to know others,
like themselves, who may become high-profit customers.
Some business owners say or write - "We appreciate
referrals"
or something like that. I'd be very surprised if that works much.
Don't ask for referrals until you provide exceptional
products or
services. If your business in mediocre, your customer may tell
a friend, "XYZ does 'A.'"
That friend may reply, "Big deal, everybody does 'A.'
UVW does
'B' & 'C.'"
Not only would your customer be embarrassed & not
risk more
embarrassment, but s/he will probably start buying from UVW.
One way of asking for referrals is by inspiring your
customers
to comment on how well you treat them. When they do, you can
say, "Thank you for acknowledging that. I don't think you ought
to expect anything less. Do you know anybody who is settling
for less? You could do them and me a favor by telling them how
well you're served here."
You should say it matter-of-factly, but with some
enthusiasm
and don't act surprised. If you're serving people well, compli-
ments shouldn't surprise you.
Word Of Mouth - Gossip, What's The Difference?
Some small business owners say they rely on Word Of
Mouth.
So, of course, they're struggling.
Please don't call 'Word Of Mouth' a form of marketing
unless
it's a managed program.
Referral marketing is good but not effective if the
business's
customers aren't articulate or motivated enough to refer their
relatives and friends to the business.
Some businesses use customer testimonials that are just
generalities like- "It was terrific." JM St. Paul MN
That doesn't seem compelling, does it? But that's the
way
some people talk about their good experiences with busi-
nesses. That's why referral marketing doesn't always work.
When you talk to customers, ask them for specific
examples
of what pleased them. That will give you better feedback you
can take action on (implement on a wider scale) & also may
help them bring you referrals because they'll have something
specific to say.
You may have to softly coach them by saying something
like-
"So, what you're saying is- We took the time to find out what
you needed instead of trying to sell what would bring us the
most profit. Is that what you mean? Thank you for the feed-
back." Then when they talk to others they'll have a clearer
statement to make.
Wal-Mart goes into its stores and makes commercials
that
seem like real testimonials from customers and employees.
W-M spends big bucks on airing them. (They should, how-
ever, be required to post the notice "Your actual experience
may vary." Or "WILL vary.")
Small businesses don't have enough money to match that.
But small business owners have a better chance (than big
businesses) of tracking who refers others to them because
big businesses have more customers to track. By tracking
it, business owners can thank and maybe reward their vocal
customers. In some cases, people won't want rewards for
making referrals. Some think rewarding referring customers
may be tacky.
Remember - whichever behaviors you praise a person for
will probably be repeated. People want positive strokes.
Thanking and praising are good in any business.
Yes, I know about The Overjustification Effect. When some
are paid/rewarded for doing something, they stop doing it.
I heard it also applies to referral marketing. So, I suggest
testing different ways of getting referrals. Depending on
the quality of what you sell & how important it is to people,
you can emphasize how important quality is to people
your customers love.
This makes product/service differentiation even more
valuable to you & your clientele. If you sell a commodity
or something perceived as a commodity, it doesn't mat-
ter (except to you & your competitors) whom people
use as a source.
If you serve people as clients, you'll do what you realistically
can to protect them & people they love. This also means hav-
ing a caring relationship with your clients. Some people don't
want business relationships like that. Oh, well, let them go - -
to giant competitors. There are people who won't like your
business, no matter how many customers you have & how
much they like your business.
Some local salons are beauty salons, I don't go to them for
hair-cuts. Beauty salons are in business to style hair, not
just cut it. So I'm not in their target market.
Are You Still Not Convinced?
Some hair salon owners I've talked to say they rely on
Word-Of-Mouth. They're the ones with the small shops.
It may not be bad, some people don't want what they
consider big businesses. That's up to them.
There are still some barber shops near where I live.
But I go to a hair salon. The salon owner, Gloria, has
a vibrant business. Not just growing, she & her busi-
ness have energy. She expanded recently into an-
other building. Since styling my hair is actually just
cutting it, I haven't seen the back area of her building
(she owns the business & building).
The area I'm familiar with has 6 stations/chairs. She
has enough staff to accommodate customers who set
regular appointments, plus people like me. I rarely set
hair-cut appointment more than 4 hours ahead of time.
So, the point is, Gloria has a high volume business.
She'll accept Word-of-Mouth. She doesn't rely on it.
She has marketing messages going out regularly.
She knows people have more things to talk about
than her business.
Some of the marketing research I do involves asking
about referrals & recommending a business. Question-
"Would you recommend (client's name) to friends &
relatives?"
Here
are two common responses I get -
"No,
that's up to them to make their choice."
"Sure, if it would come up in a conversation."
Referrals From The Right People
High-profit customers will refer more high-profit pros-
pects to you than low-profit customers.
I know it sounds mercenary, but as a marketing
consultant, whom would you want me to help you reach-
people who will pay you $2,000 per year or
people who will pay you only $20 per year?
As I understand it, my job would be helping you reach
& keep those who will pay a lot of money. These would
people who pay, stay & say. Mike Basch, Fed-Ex co-
founder & now consultant says these customers don't
quibble about price or keep trying to negotiate lower
prices. They also stay with a vendor instead of often
switching. They also say good things about your busi-
ness & refer others to you.
But I also advise you not to turn up your nose at anybody.
The way you handle low-profit customers is up to you
&
depends on your business category. I'd advise you to
use a form of what I'd say to somebody who can't afford
my service.
"What I can do for you is give you some high power
information & my free introductory service. This way,
you can keep the money you take in. You can invest
that money back into your business & help it grow even
faster. After using these, you're business will grow to
the point where you're serving more customers & you
won't have time to run your marketing program. At
that point, you'll have money you can spare & you'll
need my full-service."
Does The Name Matter?
Yes, I realize I harp on the name
issue a lot. But why do
I & other guys feel comfortable getting our hair cut by
Gloria or your staff? 2 Things.1) G.J.'s Hair & Tanning
Salon is a gender-neutral name.
2) Gloria has poster-sized pictures of men's heads
with well-styled hair.
It's not the name of a high-differentiated business, but
the city I live in has a population of less than 13,000.
If Gloria was in Chicago, I'd advise her to differentiate.
Among the possibilities she could emphasize are
A) serving families, men or women; B) quick basic hair-
cuts or the latest styles.
Please adapt & adjust this information for your situation.
There aren't enough people in narrowly defined demo-
graphic groups here to support highly specialized busi-
nesses. There are some people, mostly women I guess,
who may never be among Gloria's clientele. She doesn't
need everybody. Even in a small population like this,
she'd need a much bigger building if she attracted ev-
erybody in the area.
Why Aren't More Small
Businesses Surviving?
Somebody asked this question in a discussion forum I'm
involved in-
> Can someone tell me why 98% of small businesses
> provide better services (than big businesses) but
> still struggle to survive?
I know there are statistics about under-capitalization.
I agree business owners ought to start out with enough
money to sustain themselves for at least six months.
But would start-up survival be so low if business owners
knew how to do what I'm writing in this article?
The answer to this survival question is that the
business
owners don't market well. They don't reach the right peop-
le with a compelling marketing message. If they did & had
enough products in stock or time/energy to perform their
services, they could probably afford the legal & accounting
services they need to keep them out of trouble. If my as-
sumption is accurate, then it comes back to compelling
their target market to buy.
Most consumers just don't have time or desire to inves-
tigate every business, product or service. It's the busi-
ness owner's job to find the right target market and to
give it a compelling reason to buy products/ services.
That reason has to be compelling to prospective buy-
ers, not compelling to the business owner. An inven-
tory list or spec sheet isn't nearly enough!
Despite all of the people advising business owners to
consider what's in it for their prospects, business
owners just don't get it!
So, What's A Compelling Offer
For the rest of this article, I'm going to assume
you're
a business owner.
Before you distribute a marketing message, read/
listen to it. Every time you read/hear your marketing
statements, ask yourself as if you're a prospect -
"Who cares? What's so important about that?"
"Boys' socks - 2 pairs for $1.00" Is that compelling?
I have two sons who are still growing, I'm never sure
if they're going to wear out their socks or just out-
grow them.
So the socks are cheap, who cares? What's so
important about that? How long will they fit my sons?
How long will they last?
How about this marketing message?
"Boys' tube socks, there are no heels, plus they
stretch. They'll fit your son for years. The cotton
insides are absorbent & soft. The polyester outsides
stand up to wear & tear. $1.50 per pair"
The sales copy above will require more print
space or air time than the shorter message
above it. But it would probably be worth it be-
cause parents of boys are more apt to buy the
socks, if they receive the message.
What To Do Whether There's
A Recession Or Not
(You may have heard constant rumors of the impending
recession.)
First, I want to make it clear I don't advocate
clobbering
consumers with marketing messages wherever they may
go. Doing it will turn them off toward advertising in general
& toward your business specifically. They probably feel
clobbered already.
Second, what I do advocate is finding what consumers
will want in a situation, then offer it to them either at that
point or just before it. Be sure the messages are relevant
to the situation they're currently in or to the situation they're
about to be in.
This highly targeted method may actually mean spending
the same amount or less on marketing (your actual results
may vary) but still bring you better results.
A very simple example would be - Getting a factory
owner
to give the following message to his/her workers.
"I appreciate the fact you've been working in near
record
heat. It's important to refresh yourselves and be sure you
drink enough liquids. Please accept this certificate for a
free 12 ounce beverage at __ as a gift of appreciation."
Now, why would the factory owner do this (and probably
even pay to make the copies)? Because the morale and
health of the work force is vital. And because, other than
paying about ten cents per sheet for the copies to be
made and distributed, it would be free.
Why would a restaurant or grocery store owner want to
do this for free?
1) 12 ounces of soda isn't apt to fully quench the
thirst
of hard working, overheated factory workers. (They'll
probably buy more.)
2) The air-conditioned environment of the restaurant
or store will feel very good. (They'll probably stay for a
while & find things they didn't know the business offered.)
3) The workers may be hungry also. (They may buy some
food, too.)
4) The combination of these factors are apt to register
in the workers' minds. (When they get overheated and
thirsty again, what do you think will come to their minds?)
Warning- If you can only serve 50 at a time, don't have
a message like this distributed to 1,000 or more people.
You and your staff would be overwhelmed and prospective
customers would be ticked off.
In short, don't cut back on marketing, just do it more
efficiently and effectively.
Note: There are also ways of using mass media in
similar
ways.
So, what about my boys' socks example? Let's look at
two possibilities-
1) Mini-media: Parents who have children in day-care
want good care, but at low cost, right?
You can ask a day-care administrator to distribute your
flyers for a share of the profits.
The introductory message can be a letter from the
administrator like this-
Hi Parents:
At Kids' Kingdom DayCare, we know raising kids
today is expensive.
To ease your financial burden, we've arranged for
you to be able to buy what your children need at
(store name).
What you get may be better than a discount.
Every time you buy what your children need at
(store name) & show your Kids' Kingdom card,
0% of your purchase price will be given to Kids'
Kingdom DayCare.
If all of you do this, it will help us avoid raising
our
fees, plus your children will get the good quality
active kids need.
Thank you for letting us care for your children
and thank you for working with us.
Warmly,
Kids'
Kingdom DayCare Administrator
Does this address the questions- "Who cares?"
and "What's so important about that?"
(What? Did somebody say the letter above isn't
smooth? It isn't supposed to be. Even if you use
a similar letter written by a professional copy-
writer, it shouldn't seem like it was written by a
professional. If it's smooth and polished, it won't
seem objective. It also shouldn't have a specific
offer in it. It should be written with a vocabulary
the administrator & the parents would naturally
use. It's not a trick, it's just establishing & main-
taining rapport.
You can include a compelling offer in a supple-
mental flyer that's given with the letter.
You may want to change one of the sentences
in the letter to - "If enough of you do this, it may
help us avoid raising our fees, plus your chil-
dren will get the good quality all active kids need."
As a business owner, this would give you a
way of tracking the effectiveness of your
marketing efforts. Plus, it gets you an implied
(objective) endorsement from somebody your
prospects trust. As an additional big benefit,
your marketing messages will go to people
who are definite prospects.
This message would be received by parents
when they pick up their children at the daycare
center. So, at that time, they're thinking of their
children and it's a time when they may be able
to bring their children in to try on clothes.
Now why would you want to pay for the copies
of the letter and supplemental flyer, plus give
the daycare center 10% of your gross profits
from this? Because -
1) It would build goodwill. Goodwill can be
hard to measure & quantify but is still very valuable.
2) It would probably be more effective & less
expen-
sive than mass media advertising. Plus, in mass
media, you'd probably pay even if you don't get
any positive results from it. In the example above,
you'd only pay for positive results.
Now speaking of mass media -
2) Mass media: If there's a typical time when
parents leave work and go to schools or daycare
centers to pick up their children, that's the time to
run the commercials below. This may be during
what's known as drive-time in the radio business.
Radio stations tend to charge more for this time
slot because there may actually be people listen-
ing to radios at that time.
If you have a 30-second spot, it should be 70
words or less to be sure it's understood. If you
use a 60-second spot, it should be 140 words
long at the most. This is so the announcer
doesn't sound like an auctioneer.
Here's a sample of what you could advertise-
(a 30-second spot)
Remember this morning when you were helping
your child get dressed.
Did those clothes look a bit worn out or tight or
too short?
When you pick your child up today, it may be time
to get some new clothes at Life's Necessities.
What better time is there than
now, when the two of you are in the car together?
Life's Necessities is at 1234 Main Street in Walla Walla.
(a 60-second spot)
Remember this morning when you were helping your
child get dressed.
Did those clothes look a bit worn out or tight or too
short?
When you pick your child up today, it may be time to
get
some new clothes at Life's Necessities. What better time
is there than now, when the two of you are in the car to-
gether?
Boys' shirts are less than 15 dollars, boys' pants
less than
18 dollars.
Socks are 2 dollars per pair.
Dresses are less than 20 dollars. Tights are 3 dollars
per
pair.
Shoes are less than 25 dollars. Jackets are under 40
dollars
Life's Necessities is at 1234 Main Street in Walla
Walla.
Store hours are 9:00 AM to 9:00 PM Monday through
Saturday.
You can use your credit card or check now, if you don't
have cash with you.
Remember Life's Necessities next time you're looking
at your child's clothes.
These commercials bring the listener's mind back to a
situation when s/he was thinking about children's clothing.
It sets the context. Unfortunately, 30 seconds isn't enough
to repeat the business's name enough, set the context
and make a clear offer. (60 second spots usually cost
about 40-60% more than 30-second spots.)
Did you notice the last sentence in the 60-second spot
plants a mental suggestion?
Each marketing message should be a complete sales
presen-
tation. Unfortunately, broadcast advertising spots don't leave
much time for building Attention, Interest, Desire & Action.
But yet, some businesses get good results from broadcast media.
This small article format doesn't give me much space
to give
you a complete marketing course, but it's a good start.
Thank you for reading this.