Fishing For Customers

Ten “Dids” to Examine Your Failed Ads and Make Them Work Next Time

noreply@blogger.com (Chuck McKay) — Thu, 24 Mar 2011 09:59:00 +0000

There are some pretty silly statements made about advertising. Many are quite obviously irrational.

“I can’t advertise in July, the circus will be in town.”

“Don’t talk to me about advertising. Your publication carries my competitors ads.”

“I have all of the business I need.”

Some, like “I tried advertising. It doesn’t work,” at first seem to be perfectly logical conclusions. The conviction of the people making this claim is unshakable – most likely because they’re describing exactly what happened to them.

Of course, if they had said, “My kid tried riding a bike, but he fell over. Bicycles don’t work,” or “I tried golf once. I didn’t get a hole in one. Golf is a stupid waste of time,” everyone would recognize the absurdity of the statements.

But every kid, (and every golfer) knows even common activities require some basic skills.

At its basis, advertising is simple.

Incredibly simple. Just deliver to the public your offer to sell something.

The public’s reaction, though, is not as uncomplicated as “I’ll buy” or “I won’t buy.”

Actual responses range from absolutely no interest on the unsuccessful end of the response continuum, to, on the successful end, people pounding on the door because the sign says the store opens at 8:30, and it’s now 8:32.

Why do most ads produce results somewhere between these extremes?

I’ve identified ten factors that could cause your advertising to produce disappointing results.

Causes #1 and #2 involve your offer.

Cause #1: Did anyone want the stuff you had to offer?

Ideally, businesses would identify and research a market, then develop what the customer really wants. In the real world, manufacturers create, and retailers stock things, they believe people will want.

Sometimes, they’re wrong.

When those retailers say to the world, “Hey, come and buy our diamonelle encrusted left-handed can openers,” people don’t say, “I don’t want any, thank you.”

They don’t say anything.

They care so little about the offering, they don’t even notice the ad, and won’t remember ever seeing or hearing it.
__________

Cause #2: Did you offer what people needed when they were most likely to need it?

Think seasonality. Swimsuits don’t sell well in November. Halloween candy won’t get much attention in April.

Causes #3 – #6 involve the content of your message.

Cause #3: Did your ad snag shoppers attention? Were you able to hold that attention long enough to deliver your offer?

There are three broad categories of advertising communication – entertainment, information, and engagement.

1. Entertaining ads can work, if there’s a direct connection between entertainment and the one thought you’re trying to plant in the minds of shoppers. In far too many ads the entertainment is not relevant to the advertising message.

2. Most ads offer information. Unfortunately, its about the advertiser. Good ads are about the customer. Instead of “We have a huge selection of clean, late model cars to fit any budget,” try “Admit it, you’re going to like the way people look at you when you wear Ajax.”

3. Engagement requires the shopper to pay close attention to, and consciously consider, the content of your advertising. Unless that shopper is ready to purchase, catching her with a marginally different offer won’t elevate your ad to consideration status.

Say the same things your competitors do, and rest assured that most shoppers will ignore you.

But say something salient, something highly meaningful, and watch the difference.
__________

Cause #4: Did you engage? Did you actually say anything worth remembering?

Too many ads are tedious, dreary, boring, and monotonous. Are yours?

Just because you have a lot to say doesn’t mean your audience will sit still and pay attention.

Nobody gets emotionally involved in a laundry list of brand names, sale items, or the number of collective years of your staff’s experience..

The most you can expect of any ad is to convey one single, compelling idea. Find that one idea, and express it.
__________

Cause #5: Did your ad persuade? Did you extend an invitation to buy (a call to action)?

Sometimes we notice a highly creative and entertaining ad campaign, only to find out later that the advertiser lost market share while the campaign ran. The “¡Yo quiero Taco Bell!” chihuahua, “Joe Isuzu,” and Old Spice’s “The Man Your Man Could Smell Like” campaigns come to mind. High entertainment value. Precious little persuasion.

Entertainment aside, shoppers are skeptical. No matter how truthful any claim you in your ad, people don’t automatically believe you.

That process which falls between demonstrating your evidence, and leading them to agree with your claim, is persuasion.
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Cause #6: Did your ad complement your image?

People who project different personalities, depending on which group of people they’re associating with, are not trusted. Without trust, you don’t have customers.

Like people, companies have personalities, which are a critical part of their brand. Advertising is an extension of that brand. If it’s loud, insulting, self-centered, annoying, or otherwise offensive, people will assume your business is organized around those qualities.

What is it that people know about you? What is your professional reputation? What is your image among customers? Among non-customers?

Do you have an image?

How do you know?

Causes #7 – #10 involve external factors.

Cause #7: Did you choose the right medium? Did you have the right sized ad?

Think of advertising as your cost to acquire customers.

Costs per exposure, per thousand, or per rating point only matter indirectly. Media efficiency is calculated by dividing the number of dollars invested by the number of new customers you’ve acquired.

Magazines with tiny circulations but active readership may be a great investment. Regional television stations with the highest priced ads in town may also be a great investment.

Until you track the number of new customers each produces, and the average sale of each new customer, you can’t do a meaningful comparison.
__________

Cause #8: Did you schedule your ads at the optimum frequency?

There are two factors which combine to make media impact. One is the size of the ad (in column inches, or seconds, or pixels), and the other is the number of times shoppers read / hear / view it.

Exceptionally salient ads may only need one exposure. Most require multiple exposures to the ad before people respond to your offer.

Under normal circumstances you’re going to need to run that ad several times.
__________

Cause #9: Did you allow enough time for shoppers to need what you sell?

People eat several times a day. They need new tires every year or two. They buy refrigerators and mattresses maybe once per decade. How many of them are in the market for what you sell at any given time?

Ads for short purchase cycle offerings should pay off quickly. The impact of grocery or restaurant ads can be measured in days.

Other products, which have longer purchase cycles require more patience, and more persistence.
__________

Cause #10: Did you start with a clear goal?

What was it you wanted to happen when you bought that advertising which didn’t work?

Did you expect to see new faces in your store? Additional referrals? Greater market awareness for your company (“getting your name out there”)? Sales increases? Additional goodwill?

If you don’t know what you were attempting to accomplish, how can you be sure your advertising DIDN’T work?
__________

Advertising works. I suspect we all know that.

A former boss, when told advertising didn’t work, offered to run some free radio ads for the skeptic. He said, “Let me tell you what they’ll say: Free $100 bills at your business.”

No one ever took him up on it.

Maybe yours is one of those companies which has all of the customers it needs. Congratulations. I envy you.

Most every business owner I talk to, however, needs a steady influx of new customers.

Like playing golf or riding a bicycle, there are skills you’ll need to make it work. You weren’t born with the ability to run your own company, but you learned what to do, and when, and why. Likewise, you can develop the ability to profitably advertise that same company.

You’ll need to invest a modest budget, commit to some seriously detailed record keeping, and allocate enough time to develop and hone those skills. Thirty minutes a day for the next year will give you the rough equivalent of one semester of Intro to Marketing.

Fortunately, there’s a lot of great information available, and much of it free. If you’re ready to get started, drop me a note and I’ll send you a recommended reading list.

And take another look at the “Dids.” If you’re ready to start fishing for customers, isn’t time for you to give advertising another shot?

Your Guide,
Chuck McKay

Your Fishing for Customers guide, Chuck McKay, gets people to buy more of what you sell.

Questions about making your company’s advertising “work” may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

If you know someone who would find this article useful, please share it.

A Marketing Lesson from American Idol

noreply@blogger.com (Chuck McKay) — Thu, 10 Feb 2011 18:00:00 +0000

Roughly 20 minutes into the Nashville auditions for American Idol, the Lovely Mrs McKay turned to me and said, "These people MUST know how awful they are." "They don't have a clue," I sighed.

Have you noticed how often incompetent people are supremely confident? Not just auditioning for American Idol, but throughout life?

Professor Justin Kruger and graduate student David Dunning of Cornell University studied this effect in their 1999 paper, Unskilled and Unaware of It. Their conclusion: those who knew the least rated themselves most knowledgeable, and those who actually understood the topic were far less sure of themselves.

This result has been confirmed in multiple follow-up studies involving several skills and fields of expertise. It is known as the Dunning-Kruger effect.

Which begs the question: why does this happen?

Answer: the basic skills and awareness needed for competency are exactly the same skills necessary to evaluate the competency.

Their lack of knowledge (incompetence) prevents them from recognizing their lack of knowledge (incompetence). People don’t know what they don’t know. They don’t even know where to look or how to look at it.

And it doesn’t dawn on them that skilled performers DO know this stuff, until they’re exposed, dramatically to their own ignorance. Until then, they delude their incompetent selves into illusions of confident competency.

If you’ve ever wondered how:

people who can't articulate the issues, still feel confident casting their vote (or making inflammatory statements);
how people with no experience teaching, know exactly what's wrong with our education system; and
how those who have never studied investing, can blithely plow their life savings into the real estate market

Incompetence leads people to make poor choices. Incompetence prevents them from realizing they make poor choices. This is the Dunning-Kruger Effect (DK). On the other end of the DK continuum, competent people tend to rate themselves lower than they should. Their internal voices seem to say, "Hey, everyone knows this."

The dumb get confident; the intelligent get doubtful. And to a greater or lesser degree we're all guilty.

How Biased Feedback Makes it Even Worse

Imagine a typical Friday nite in any typical neighborhood watering hole. The regular crowd shuffles in. One of them, Miss Karaoke Singer, is recognized by the rest as being the "best" in the club.

What kind of feedback does she get?

Do any of the other contestants tell her that her breath control is bad, her vibrato unnatural, or mention the odd affectation she's developed? Hardly. They don't know anything about nuanced performance. Since the only feedback she gets is positive, she thinks she's good.

Good? No, FANTASTIC! The Dunning-Kruger effect helps her to believe she's ready for American Idol!

Then comes the audition.

The judges tell her she's a poor singer. Her own incompetence prevents her from understanding what they're telling her. These judges must be stupid. After all, she just gave a great performance.

She gets angry. Tells off the judges. Not because she's defending herself. Not because she's trying not to look bad in front of her supporters. But because she's completely incapable of understanding just how bad she is.

Advertising That Doesn’t Work Probably Has More to Do With Dunning-Kruger Than Advertising

Much like our karaoke singer, every city has an advertiser who, rather than admit his advertising strategy and execution are flawed, convinces himself that advertising doesn’t work.

Does anyone in Mr. Businessman's entourage tell him his ads have nothing substantive to say? That they don’t speak to the buyer in natural language, and instead just spew out ad clichés like "fast, friendly, service?" Does anyone tell him that putting his kid and his dog in the ad won’t convince anyone to buy things from him?

Or more technically, does anyone tell our businessman that his ads don’t have enough frequency to make an impact? That he’s using the wrong medium? That his competition has effectively co-opted his position?

No. His friends get a kick out of seeing him on TV, or in the paper, or on radio, and the only feedback Mr. Businessman gets is positive. He thinks he's good.

Until he sees his sales figures. Plummeting or flat-lined sales force a confrontation with reality, and it’s the rare businessman indeed who doesn’t address his frustration and anger at advertising medium - or on advertising in general. Hence, the near-ubiquitous refrain of: "I tried advertising and it didn’t work."

Unfortunately for Mr. Businessman, if he doesn’t want to follow Miss Karaoke Singer back to waiting tables, he still needs to get more customers. And fast!

How Small Clients Can Get the Best Ads And Grow to Become Big Companies

The thing about big fish / small pond business owners is, they often believe their success in one field translates to competency in almost everything else. Rather than leveraging the expertise of their ad man, they’ll bully him until they get the kind of ads they want - ads full of Dunning-Kruger-esque
follies.

But sometimes business owners who are genuinely good at what they do manage to overcome the Dunning-Kruger effect. They find a professional to bring to them the same hard-won competency and
expertise they offer to their own customers.

Its much like what happens when a truly talented singer gets on American Idol: with the right direction and promotion, some dreams do come true.

What about you?

Are you an average karaoke singer? Or a true star in search of the right stage and the right spotlight?

Knowing which is critical when you're fishing for customers.

Your Guide,

Chuck McKay

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about finding your spotlight may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

More SEO and PPC. We must save the General!

noreply@blogger.com (Chuck McKay) — Sun, 16 Jan 2011 22:54:00 +0000

They called the procedure venesection – puncturing a vein to remove blood from the body. From the time of the ancient Greeks, physicians had prescribed bloodletting as treatment to “balance the body's four humors.”

It was December 14, 1799. General Washington had come down with a sore throat. He called for his estate overseer, Mr. Albin Rawlins and asked for venesection as treatment for his distress. Washington accepted as fact the conventional wisdom that bloodletting was the cure for most physical ailments. After all, he'd seen it cure various maladies of his Negro slaves.

Rawlins estimated that only a small amount of blood need be removed to cure Washington's sore throat, and took half a pint (8 ounces) of Washington's blood.

When the General didn't show signs of improvement, doctors were summoned.

Dr. James Craik was Washington's personal physician. Arriving to to attend the General, and noting the sore throat had not improved, he performed another venesection, this time, 20 ounces.

When the General didn't show improvement, he performed a third venesection, removing another 20 ounces.

Hours passed, and the sore throat persisted. Assuming that Washington's humors were much farther out of balance than he had imagined, Dr. Craik removed 40 more ounces of the General's blood in the forth venesection.

Dr Elisha Dick, a prominent physician from Alexandria arrived, confirmed with Dr. Craik, and took the only reasonable action. He removed another 32 ounces of blood from the General's forearm.

Roughly 90 minutes later, having been drained of 130 ounces (seven units) of whole blood, the Father of His Country lay dead.

The Treatment Isn't Working. We Need More Treatment.

They called the procedure Search Engine Optimization – using choices of specific words to help the pages being “optimized” to rank higher in organic search. From the time of Google's launch, Internet experts have prescribed SEO, and its step-sister, Pay-Per-Click advertising to “increase traffic to your website.”

In January of 2010 Robert Smith developed a software product which standardized a procedure he called “Diversified Thinking.” Robert built a website to make the software accessible, and offered memberships to his site.

Robert's brother-in-law was “getting into SEO.” Like many entry-level business people, Robert accepted the conventional knowledge that “more traffic” is the cure to nearly every marketing problem. After all, he'd seen before and after screenshots of successful SEO'd pages.

Robert's brother-in-law charged only $800 (family discount) for the work necessary to SEO Robert's site. The brother-in-law optimized the pages on Robert's site to rank well for the key phrase “Diversified Thinking.”

Other than the odd, unpredictable response from random visitors to his site, Robert's website wasn't selling memberships. The brother-in-law suggested Robert consult an expert in pay-per-click advertising.

PPC Experts, Ltd. agreed to handle an Adwords campaign for Robert, charging him $2,000 for their service. Robert waited patiently for two weeks, then called PPC Experts and told them he still wasn't selling any memberships to his website.

PPC Experts explained that they had purchased keyword phrases involving the phrase “Diversified Thinking.” They suggested that additional related phrases were likely to change public response. Unfortunately, Robert's retainer had been spent, and they needed another $2,000 to implement those changes. Robert sighed, and wrote the check. Another week went by.

Robert called PPC Experts. They examined the analytics program, and told him the traffic to his website appeared to be increasing. Robert demanded to know when the increased traffic was going to turn into sales. PPC Experts concluded that Robert was poised on the cusp of success. They recommended that he invest another $4,000 in PPC advertising to push past the last market resistance and to protect the investments he'd already made. Robert took a deep breath and gave them his Visa number. PPC Experts charged $4,000 to Robert's account.

Another ten days went by before Robert fired PPC Experts.

He called the head instructor at the local IT School, and asked for their opinion. The professor looked over Robert's site, looked at his PPC campaigns, examined the analytics, and concluded that the original SEO was too narrow. He said it should have included secondary phrasing beyond “Diversified Thinking.” The Professor offered to turn Robert's site into a hands-on experience for his SEO students, and to personally supervise the changes, for only $3,200.

Robert, looking shell shocked, pulled out his MasterCard, and paid the Professor.

On the first of the following month, his savings account and two credit cards having been drained of $13,000, Robert refused to put another dime into his project. His web host shut down his site for non-payment, and his dream of owning a home-based business lay dead.

Conventional, maybe, but not much wisdom.

Robert's experience is common.

Ridiculous example number one: Lars and Sven purchase hay in Kansas at $2.00 per bale. They sell it in Nebraska at $2.00 per bale. When Lars notices that they don't seem to be making any profit, Sven says, “I told you we needed a bigger truck.”

Ridiculous example number two: Mr. Car Dealer throws a party with free hot dogs, free face painting for the kids, and the presence of a radio disc jockey, all of which are designed to get more people to his dealership. If enough of those people buy cars, the event is a success. If not, he concludes the radio station brought the wrong people.

Ridiculous example number three: Web site owners who believe the “secret” to making millions of dollars on the web is to tap into “more traffic,” “increased traffic,” or even better, “unlimited streams of free traffic.” They spend hundreds of dollars on the latest “marketing secret” and are left with nothing to show but fewer dollars in their bank account.

The problem with every one of these examples is pretty obvious. They suffer from the delusion that more of what isn't working will fix their problem. Instead of searching for qualified buyers, they follow the conventional wisdom "more traffic" solution, and purchase more of what isn't working.

Its human nature to want to believe anyone who promises instant results.

For hundreds of years people believed that the cure for nearly every physical ailment was bloodletting. (That belief was so pervasive that people didn't feel the necessity of finding a surgeon** to perform the procedure. Anyone with a sharp instrument could open a vein). In the majority of cases*, venesection did no good, and likely harmed the patient.

In much the same way, convention wisdom calls for additional traffic to solve marketing problems. Sometimes business people get lucky. Most of the time they spend the money and have nothing to show for it.

A technique from direct marketing.

Direct response marketers choose their “lists” carefully. They will invest in prospect lists which are more likely than average to yield customers for what they're selling. They know each list will be consistent.

If mailing to a particular prospect list returns 7 sales per 1,000 offer packages, it will return 70 sales when they mail 10,000 packages. However, direct response marketers NEVER project the sales from list one against list two. Direct marketers are very picky when it comes to lists.

Both retailers and Internet website owners would do better if they followed direct response examples. Your success isn't defined by the number of people who pass through your store, and pass up your offering. Your success depends on your ability to narrow your offer from “more traffic” to qualified buyers.

More of what doesn't work is a sign that there's a serious flaw in your strategy.

Lest anyone think I'm opposed to either SEO or PPC, I use them both. However, I promise that they are tied directly to a plan to attract qualified buyers, and to a reasonable time frame.

One last thought.

Short-term strategies tend to focus on transactional shoppers. Long-term strategies tend to focus on relational shoppers. It only makes sense that it takes longer to build relationships.

So if your marketing professional tells you you need to invest more money and wait patiently, evaluate which shoppers you're trying to attract. If you're targeting transactional shoppers, and not getting response, the cure is never “more traffic.”
__________

* Side note: In a few isolated cases, there is evidence that bloodletting actually does some good. Hypertension (high blood pressure) is relieved by lowered blood volume. People at risk for cardiovascular disease may have, by virtue of lowered blood volume also lowering system iron content, suffered fewer heart attacks. Lowered iron content may also ward off staph infections. And there is anecdotal evidence that lowered blood pressure may aid in pain management.

** Second side note: the red and white striped barber pole hearkens back to the middle ages – an approximation of bloody bandages to let illiterate townspeople know the barber and his sharp razors were ready to bleed them for a fee.
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about attracting qualified buyers may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Is There Money in Accomodating Early-Stage Shoppers?

noreply@blogger.com (Chuck McKay) — Wed, 12 Jan 2011 01:22:00 +0000

You carry a cellular telephone. You're reasonably happy with the service, the rate, even with the quality of your phone calls. Still, the phone you purchased two years ago was already proven technology by those standards, and is now considered old. Plus, you're seeing the ads on TV for the newer touch screen phones, and you're getting curious.

You're vaguely aware that your two year commitment to your current carrier is drawing to a close, and you keep seeing all those ads for the newer touch screens. You head out to the mall. It seems a good idea to quiz a couple of salespeople at the cell phone kiosks.

You've just become an early-stage buyer.

Salespeople have names for early-stage shoppers: "lookie loos," "tire kickers," "time wasters." Early-stage shoppers, very aware of their own ignorance, would feel much more comfortable at this point if salespeople were removed from their buying process. Early-stage shoppers say things like, "I'm just looking."

Shoppers identify themselves by the questions they ask.

Early-stage shoppers don't know what they don't know. They are are becoming aware of an itch, but don't know yet how (or where) to scratch. Early-stage shoppers tend to ask questions about the process.

Current early-stage questions in the cellular industry are along the lines of "What's Wireless-N," "Are you telling me I can use my phone to connect my laptop?" and "What exactly is a 4G Network?"
Whether conscious of it, or not, mid-stage shoppers have eliminated the offers which don't solve their problem, and are honing in on the solution which is exactly right for them. Mid-stage shoppers ask questions about specific equipment and its implementation.

Middle-stage questions sound like, "How good is reception on this phone?" or "What's the battery life on the Model 22XJ?"
Late-stage shoppers are ready to buy. If they're talking to you, there's an excellent probability that you'll get the sale. Late-stage shoppers ask questions about pricing and purchase terms.

Late-stage questions might be "What's the total price including the upgraded memory chip and sales tax?" or "Can you give me a better price on the hardware if I accept a longer service commitment?"

Salespeople pray for late-stage shoppers.

To most salespeople, selling will always be a numbers game. "Pitch" the offer to a large number of people and a few will purchase. If those few spend enough money, salespeople are rewarded for all of the time they spent with those who didn't buy.

If you show signs of buying, salespeople will pay close attention to you. Show the opposite signs and they will move on to better prospects. They call this process "qualifying the lead."

But, suppose you're one of those ideal customers the cellular companies lust over. You buy expensive phones which lead to expensive add-on services, you buy the additional warranty, and you never invoke early termination. You're not a tire kicker or a time waster. You're a highly-qualified early-stage buyer who has very real questions about changes in technology and services since you last upgraded.

Wouldn't you be more likely to trust someone who helps you understand the alternatives rather than pushing you to make an immediate purchase? Isn't this the basis of relational selling?

Nurturing shoppers through the stages.

Put yourself into the mindset of an early-stage shopper for anything. If you found a reliable source of information, wouldn't you automatically be more inclined to buy from that source when you've decided to purchase?

So far, the best side-by-side comparison I've seen for cellular service and phones is offered by c/net. The sad part of this analysis is that c/net doesn't sell telephones or cellular service. Any cell company could publish this information. It is widely available.

Of course, the danger of inviting side-by-side comparisons between your company and your competitors is the risk of not being competitive. Maybe that's why the cellular providers not only hide this information, they all bundle services differently which makes comparisons even more difficult.

But some businesses understand how to grow new customers.

Distinctive Kitchens Culinary Arts Center in Pensacola, Florida is a family business that for 80 years has sold premium appliances, and more recently wines and culinary accessories. Distinctive Kitchens offers demonstrations, classes, and in-store experts. Shoppers new to gourmet cooking or experienced cooks brushing up on new technique will find the answers they need, and a great source of product, too.

Sweet Maria's Coffee in Oakland, California offers all of the information any coffee drinker could possibly want, from reviews of various equipment, to articles, to instructional videos, to selections of green coffees from all around the world. Plus, Sweet Maria's hosts a community forum in which members discuss their opinions of coffees, roasting, brewing methods, blending, storing, and the selections of green coffees. Care to bet they have very little customer turnover?

Home Depot has a series of in-store workshops designed to give customers hands-on experience using materials, tools, and supplies in their Home Improver Club.

Think about the number of gallons of premium paints, glazes, and other supplies you can sell over the customer's lifetime once you teach a homeowner how to apply a faux painting technique.

Can your business offer early-stage information while competing for late-stage shoppers?

Why not?

Could your insurance agency create a checklist for homeowners, listing all of the common furnishings, and leaving space for the homeowner to estimate the replacement cost of each?
Could your photography store set up “good, better, best” packages of cameras, lenses, flash attachments, and instructional videos?
Could your HVAC company produce a chart that shows how quickly a new furnace or air conditioner will pay for its self in savings due to higher efficiency?
Could your furniture store create a layout grid with scale pictures of common furnishings and help shoppers envision their home with new sofas, beds, and entertainment centers?
Could your music store create posters which explain the advantages of specific guitars in the performance of specific genres of music?

Of course you could. It only takes a little planning, and a little time. When you give early-stage shoppers the basic information they need, those shoppers will come to you now, and are likely to return as they move through the buying stages.

When you give early-stage shoppers the basic information they need, those shoppers will come to you now, and are likely to return as they move through the buying stages.
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about attracting customers at different buying stages may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

How to Calculate Lifetime Customer Value

noreply@blogger.com (Chuck McKay) — Mon, 25 Oct 2010 14:07:00 +0000

In “How to Make Money by Losing Money,” we introduced the concept of back end sales, and suggested it was worth giving away a $400 (retail) cellular telephone in order to get a $100 per month cellular telephone service contract.

How did we know? We simply subtracted the cost of the premium (the front end transaction) from the sum of back end profits over the lifetime of the vendor/customer relationship. In Part 3 we'll learn how to use the Customer Lifetime Value to calculate useful things, like ad budgets.

Our hypothetical telephone company is a small start up. It has 3,500 customers, each locked in to a twenty-four month service agreement. The company's net profit is $297,500 per month.

Over the first year of the contract those 3,500 customers will produce $7,140,000 in profit - approximately $1,020 each.

They will also produce $955 each in the second year. (There will frequently be a difference between year one and year two. More on that in a minute).

This means that even if every single customer stops doing business with this company, the lifetime value (profit) of every new customer this phone company can acquire is still $2,040.

Calculating LCV for your business.

This LCV number is important. Without it we can only guess at how much we are able to spend to acquire a new customer.

A. What is the profit on your average sale? $ _________

B. How many times will the average customer repurchase from you? _________

C. Multiply A by B to estimate your average customer's lifetime value. For your company that value is: $ _________

Lifetime Customer Value = Pt (profit per transaction) x R (number of customer reorders)

Of course, this is overly simplistic.

In the real world, Lifetime Customer Value is a moving target.

Under most conditions, not all of those cellular telephone customers will complete all 24 months of the service agreement. If 14 percent cancel during the first 12 months, 3,200 customers will enter year two of their relationship with the cellular provider.

At the conclusion of the second year we can estimate that, freed from their mandatory minimum service agreement, 70 percent will either upgrade to a new phone with the same company, or sign with a competitor. Either way, they'll be entering into a new 24-month agreement.

But the remaining 30 percent will appreciate the month-to-month nature of their new relationship with their cellular provider. 1,050 will enter year three with the company.

Also, the profit margin actually increases the longer a customer stays a customer, since older customers tend to consume fewer support services.

So, applying a bit more accuracy to our figures, the actual customer lifetime is three years. She'll generate $2,205 in value to the company during that lifetime.

Calculating Customer Reorders for your business.

Your average sale figure is pretty straightforward. Simply divide total revenue by number of transactions. Estimating the number of times a customer will make another purchase is a bit more difficult.

You could divide the number of total sales by the number of customers, but that leaves us with a bit of a problem. Can you spot it? Exactly. Newer customers will not have ordered as many times as a long-term customer would have.

We'll get more accurate data if we remove data from all customers who have not finished their relationship with you. But that means you must already have a good estimate for the length of time a customer is likely to continue to purchase from you. And if we knew that, we wouldn't have to estimate. (Author makes “I'm going crazy” sound of index finger thrumming on lips).

OK. Let's reconsider.

If you've been in business for several years, you can create a fairly accurate estimate by removing from your list of customers any who haven't ordered anything from you in the last 12 months. Now, select every fifth (or seventh, or thirteenth) remaining customer until you've created a significant sample. Fifty may be acceptable. One hundred is much better. The larger the sample, the more accurate your results.

Calculate the number of days between each customer's first order, and their last order with your company.

D. What is the number of days between the first purchase and the last for each customer in your sample? ___________

E. Sum the number of days as customers from each customer sample. The total is: _________

F. Now divide by the number of customers in your sample. ___________.

This is the average length of a customer relationship, in days. If you're a younger company and don't have records going back years, study your sales data. As closely as you can, estimate the length of the average customer relationship, in days.

G. Whether calculated, or estimated, how many days does this work out to be for your company? __________

Trim the database.

From your complete customer database, remove all data back as far back as the number of days in your average customer relationship. Count the number of sales transactions which remain, back to day one. Count the number of customers which remain, back to day one.

H. For your company the number of sales is: __________

I. For your company the number of customers is: __________

Divide the remaining total sales by the remaining number of customers and you'll have a highly accurate customer reorder number.

J. Divide H by I. The average number of reorders for your typical customer is: __________

The final step.

Divide the average profit per sale (from A, above) by the average number of reorders (from G).

K. That number, your true lifetime value of a customer, is: $___________.

You can add a degree of sophistication (and accuracy) by discounting the value of future cash flows. It's a bit complex, but if you're curious, drop me a note.
____________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about budgeting with lifetime customer value may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

How to Make Money by Losing Money

noreply@blogger.com (Chuck McKay) — Fri, 09 Jul 2010 15:54:00 +0000

Would you buy a dollar for 50 cents?

OK, that one was easy. If you could hand me 50 cents, and get a dollar back every time, you'd push as many fifty cent pieces in my direction as I'd be willing to accept.

What about for 99 cents? Would you be as excited about that exchange?

Maybe. As long as there's a profit to be made you might be willing to make it slowly.

How about $1.35? Could you imagine spending $1.35 to get back one dollar? Your first reaction is likely "no," but the correct answer isn't so obvious.

How could anyone stay in business losing 35 cents on the dollar?

Pretend with me that your music store consistently sells twelve guitars a week, at an average price of $850, and an average profit of $332 (39 percent).

You're planning an Anniversary Week guitar sale, and have budgeted $10,000 for advertising. Knowing that you'll get to keep 39 cents of every dollar you take in, it would seem that to recover your $10,000 advertising investment you'll need to generate $25,641, or roughly 30 additional sales (for a total of 42) just to break even.

But wait a minute. Selling 42 guitars this week doesn't have you showing a profit. You're merely recovering your costs.

And what happens if you don't sell 42 guitars? Wouldn't you have been better off not advertising this sale at all?

Maybe we need to re-think this Anniversary Week sale idea.

Then again...

We probably will sell a lot of accessories. We'll probably draw some new people into the store, and remind former customers that they used to enjoy shopping with us.

OK. Even if we can't sell enough guitars to pay for the Anniversary sale advertising, we might sell enough other items to recover the ad budget.

And then there are the rumors of the way the new competitor does business. You've heard he will happily lose money on the first sale if he gains a new customer in the process. What the... How can anyone stay in business with a silly business model like that?

Well, your competitor has recognized that the customer who buys the guitar will also need a case, maybe a strap. Over the next weeks he'll see the value of a battery-powered tuning standard, or a capo. He'll need picks, and strings. Over his lifetime as a player, he'll need lots of strings.

Then, too, over his lifetime as a player, he may purchase several other instruments, and all of the accessories. Maybe he'll even need lessons.

If a business is willing to invest money in advertising to gain new customers, why not invest in the customer himself?

When we consider the probability of all those additional purchases, and all of the profit derived from them, would you be willing to lose a few bucks on the "front end" of this relationship to "buy" the customer, and gain a profitable "back end?"

Twenty years ago Jay Abraham brought up the concept of back end sales by telling the story of a coin dealer. The dealer offered a $23 starter coin set at cost, and gained 60,000 new customers.

Within six months, 6,000 of those 60,000 new customers each bought another $1,000 worth of coins.
Two months later 2,000 of the 6,000 customers each purchased roughly $4,000 in additional coins.
Finally, 500 of the 2,000 bought another $10,000 each.

By being willing to break even on the initial sale, the coin dealer was able to generate a list of qualified customers who were responsible for $19 million dollars in additional sales:

And this part is critical: every one of the 60,000 names on the initial list turned out to be worth $317 in additional sales, even though nine out of ten of those new customers never spent another dime.

This is a great illustration of Lifetime Customer Value (LCV).

Make your profit on the back end.

How many customers would you be willing to sell at no profit, if it meant each would directly or indirectly generate $317 in new sales in the next year?

Would you maybe even be willing to lose money on the front end, if there was enough profit on successive back end deals?

Would you give away the $400 (retail price) cellular telephone, in order to gain the 24-month usage contract at $100 per month?
Would you give away the new $60 (retail) chrome plated coffee brewer to gain a customer who spends an average of $234 on your gourmet coffees?
Would you be willing to sell gasoline at an average profit of $14.32 per month (four, 20-gallon tanks), when that driver will spend an average of $31.92 each month in interest and carrying charges on your company credit card?

Yes, I suspect you would.

Next time, in "How to Calculate Lifetime Customer Value," we'll determine in dollars and cents the value of each new customer. We'll also get a handle on how long that new customer will continue to do business with us.
____________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about making money with back-end sales may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Zen and the Art of Persuasion. Part 3 of 3.

noreply@blogger.com (Chuck McKay) — Mon, 14 Jun 2010 03:51:00 +0000

There’s a gas station at one of the Interstate 20 off ramps in Columbia, South Carolina that is rumored to have the lowest prices in town. If they don’t have the lowest prices, they certainly have convinced a large group of drivers that they do. Most hours of the day they have a constant line of cars at each of the eight pumps.

A casual observer will notice a young man drifting from car to car, speaking with each driver in sequence. The young man you notice on Monday will not be there on Thursday. Another young man will have taken his place.

And should the observer become an eavesdropper, he’ll hear the young man explain that he works for a glass company “up in Greenville,” has his materials with him, and can repair the dings and chips in the driver’s windshield for between forty and sixty-five dollars. He opines that the motorists insurance will cover it, reimbursing the driver so there will be no “out of pocket” expense.

Apparently, enough people accept his offer that it’s profitable for the young man, or one very much like him. They keep coming back.

Occasionally one of the motorists, wanting to “think it over,” will ask the young man du jour for a business card. He never seems to have one on him. Although he can name the company he works for, he can’t remember it’s phone number. No, he doesn’t carry a cell, so he can’t provide that number either.

In any buyer / prospective seller relationship, there are two basic reasons that people choose not to buy, and the young man carrying the battery-powered drill and pocket epoxy illustrates them vividly.

People don’t buy when they don’t feel the need for what you’re selling.

They don’t buy when don’t trust you.

People avoid risk on three levels.

The biggest risk is that they’ll purchase the wrong solution – that they’ll have spent the money and still have the problem.

But, there’s also the risk that the solution they purchase won’t last, and their problem will be back. (The variant on this is buying from a company who won’t warrant the purchase, or even be in business if the purchaser ever needs their support).

And finally, if all of the solutions seem roughly equal, there’s the risk of over paying.

Put yourself in the mindset of someone who’s just become aware of a problem, which could be anything from “ring around the collar” to “my back hurts every morning when I wake up.” Whatever the problem she’s identified, she’s now looking for a solution.

Ring around the collar? One of the oldest formulas in advertising was perfected by major packaged goods companies like Lever Brothers and Proctor and Gamble. The familiar presentation is called slice-of-life, and is presented as if we, the viewers / listeners / readers are peeking in on a conversation between real people.

The formula is basic: State problem. Agitate problem. Announce solution.

First, our slice of life dialog establishes that “ring around the collar” is an easily noticed condition which will reduce social standing.

The off-camera announcer states the problem: “You’ve got ring around the collar.”

He now agitates the problem: “Those dirty rings. You’ve tried scrubbing. You’ve tried soaking. You’ve tried powders. And nothing works.”

We’re treated to a close-up demonstration of Wisk liquid laundry detergent being poured on the offensive sweat stain. The camera cuts to a close up of the same collar without the stains.

The off-camera announcer proudly announces the solution: “Wisk around the collar gets ring around the collar every time.”

This is a good example of a single-step ad. Its also known as an order generation ad. Its purpose is to get the prospect to recognize her problem, accept the solution, and purchase it. Now.

Does order generation advertising work? Most assuredly, it does. You’ve seen examples of it every day of your life.

The catalog from Sears or Terry’s Village. Every Yellow Pages ad. The “cash for gold” ads on television. The long-running television or magazine ads for Miracle Grow. A significant percentage of the letters in your mailbox from companies you’ve never heard of.

Let’s review those three risks.

Our slice-of-life laundry lady is highly likely to purchase Wisk, now that she’s seen, and accepted, the premise of the ad: “Wisk around the collar gets ring around the collar.”

Is she risking the wrong solution (no pun intended)? She recognizes ring around the collar as her problem, because she sees the sweat stains every time she does laundry. This appears to be an exact solution. Minimal risk.

Is she risking that her solution will be temporary? No. It’s a disposable product. If it doesn’t work as well as she expected, she can simply not replace it when she runs out. Again, no real risk.

Is she risking paying too much?* Probably not. If our shopper purchases the economy size “32 load” bottle of Wisk, she can expect to pay roughly $7.50. If she pays $7.83 will that price increase damage her cleaning budget? Hardly

Without the perception of risk it shouldn’t surprise us that this customer will quickly decide to buy the product.

Single-step ads tend to work best for simple, non-technical, and inexpensive products. The simpler the proposal, the easier it is to explain in a small ad. This is the principle which makes classified advertising work.

But what if the product or service needs more explanation than will fit into a small space ad, or half a minute on TV or radio? In general, the more complex the product, the more technical the nature of the product, the higher the price, the less likely a single-step ad will convert people from prospects to customers.

Back to the lady with the backache.

She wakes up, and groans while getting out of bed. By her second cup of coffee she’s moving freely and has forgotten about the stiffness.

But one day she realizes that this “back hurts first thing in the morning” business has gone on for weeks. In her mind (which is where it counts), that realization moves her backache to the status of a problem. Problems need resolution.

She begins to pay attention to what web marketers call “keywords.” Keywords aren’t limited to the Internet. Regardless of medium, they are one or two word phrases that trigger her reticular activation system and reach her conscious brain. In her case, the words will be “backache,” and “morning backache.”

Now that her subconscious is aware that they are important she begins to notice the advertising messages which surround her. As her eye skims the newspaper the keywords seem to leap off the page. She’ll be riveted to certain radio ads. She’ll stop talking during television advertising in which the keywords resonate in her conscious mind.

“Morning backache is a sign of a too soft mattress. See how good you feel after 30 nights on a Simmons Beauty Rest.”

“Morning backache is a sign of poor posture. WalkFit Orthotic Shoe Inserts helped over 90% of the people tested reduce pain levels in their feet, knees, spine and pelvis.”

“Morning backache is a sign of poor spinal alignment. Should that stiff neck or sore back persist, call your Doctor of Chiropractic.”

“Morning backache can be treated with Doan’s Backache Pills. They relieve the aches and pains and that helpless feeling of stiffness, so that the system can be restored to full health.”

“Morning backache is a sign that the vital magnetic energy from the earth’s natural magnetic field has been interrupted. Magnetic insoles provide penetrating magnetic therapy for the entire body while soft massage nodes stimulate reflexology points.”

Multiple products promise to relieve her discomfort. Multiple disciplines claim to treat her condition. With the limited knowledge she possesses as an entry level shopper, she could easily choose the wrong solution, or one that doesn’t last. Without knowing which solution is appropriate she could easily overpay. She’s swimming in risk.

Sellers would love for her to buy from a single-step ad.

From the seller’s perspective a single-step order generation ad is a quick sale. It doesn’t require any follow up. Done well, salespeople may not even be necessary. The process seems so simple, so straightforward, so easy. “Here’s my offer. Come buy it.” There is no intent for these ads to build image or “brand” the advertiser. Their only purpose is to get the sale. Miss Prospect will buy, or not. No second chance.

But Miss Prospect may not be ready to buy when you want to sell. She may not need it today. Even if you do, she doesn’t know you. She doesn’t know your product. From her perspective she’s surrounded by risk. Did I mention that she doesn’t know you?

She needs information about how you can solve her problem. She needs information about your professional reputation. She requires more information than can fit into a small newspaper or magazine ad; more than will fit into a radio or television ad.

When she’s in the early stages of seeking a solution for her problem, Miss Prospect will want to see a demonstration, read a specification sheet, see an estimate, meet for a consultation, or expect a presentation before she buys.

See the problem? One-step ads work best when the offer is simple, and inexpensive. They work when the prospect is a late stage shopper, and is very close to making a purchase. But when Miss Prospect is an entry stage shopper, is bewildered by the sheer number of choices, and feels overwhelmed by risk, they tend not to work at all. Mr. Advertiser schedules his single-step offer to run in the noon newscast, and at 12:15 is standing at the door wondering where all of the buyers are.

If we’re selling mattresses, orthotic shoe inserts, chiropractic services, analgesic pills, or magnetic therapy – if we’re selling anything which takes a more detailed explanation than “this detergent gets the dirt out” – we’ll do better breaking the sales process into two or more parts.

Instead of asking Miss Prospect to commit to the purchase, we ask that she only commit to the risk-free next step in our selling process.

What’s the risk-free first step?

Example 1:

How do Proctor and Gamble minimize the customer’s $7.50 risk for any of their new detergents? They offer a free sample of the product. Enough for two or three uses. Miss Prospect tries the soap, likes the way it cleans, really likes the new fragrance, and adds the product to her next shopping list.

Summary: the manufacturer invests roughly 57₵ to acquire a new customer of their consumable product. Its likely that she’ll spend roughly $90 per year re-purchasing it.

Example 2:

“If we pre-qualify you and your claim is denied, the Scooter Store will GIVE you your new power chair or scooter, FREE.”

Summary: by offering a “pre-qualification,” the advertiser gets the complete personal information on an active prospect.

Example 3:

“Well I married my dream girl, I married my dream girl, but she didn’t tell me her credit was bad…” This delightful ad for Free Credit Report dot com offers a three bureau credit report, at no cost to the caller. There are two reasons this one is worthy of note. First, it uses network television (with only :30 seconds to tell a story) to drive traffic to a web site where there’s no limit to the amount of information which can be presented to the prospect.

But, pay close attention to both the tiny screen writing and the subdued voice over, each of which say, “Offer applies with enrollment in Triple Advantage.” Did you catch it? The entire 30 seconds pushes the free credit report which people get by enrolling in a monthly credit monitoring service for $14.95 per month.

Summary: for the price of a single credit report (no incremental cost to the advertiser), and by focusing ONLY on the premium – the free report – they get a subscriber who will pay nearly $180 per year.

Imagine trying to convince people to sign up for a monthly credit monitoring service in a :30 second single-step TV ad. “Call now. Protect yourself from identity theft for only $14.95 a month. Operators are standing by…..” But asking them to identify themselves by requesting their own credit report? How elegantly simple.

They call it two-step marketing, but…

It may be the second, third, or forth step which closes the sale after the first step provides the “lead.”

Or it may be a series of progressively larger sales. Roy H. Williams says the subscribers to his free newsletter may become familiar enough with his writing to purchase a $12.95 book. Some of the book buyers may purchase a $49.00 video, or a $495 training program, or a $3,000 three-day seminar. Some of those purchasers will become consulting clients. Roy calls this his “gravity well.”

Whether you call the two-step process a prospect funnel, a gravity well, or lead generation, there are a few things you can do to maximize its effectiveness.

Create a free brochure, a white paper, or report that will be of interest to people who are seriously considering the purchase of what you sell. Your information becomes a no obligation, low risk, non-threatening reason to start a relationship with you.

Instead of trying to sell your service, or product, sell the value of your information. Make it useful. Make potential customers feel that there’s information they must have before they make a final decision to buy. “The seven things you must ask your HVAC contractor before you sign the contract for a new air conditioning unit.”

Send an e-mail or a conventional letter. Run a radio ad, offer it on your website, or print an insert for the local newspaper. Get the word out that you’re offering valuable information for anyone considering buying what you sell. At this point, your hot prospects will identify themselves by asking for a copy.

You did capture their contact information, didn’t you? Names, addresses, phone numbers, and e-mail addresses? Because now is time for the follow ups, in which you cultivate a relationship and turn them into customers. Sign them up for your newsletter. Invite them to an open house. Offer a free consultation, or an invitation to a free seminar. Offer a special promotion. Offer more information. Build the relationship.

Not everyone you meet will be a qualified prospect for what you sell. And remember that qualified prospects still won’t buy if they don’t believe they need what you’re selling, or if they don’t trust you.

Two-step marketing allows you to persuade your prospects that what you sell is the exact solution they’re seeking. More importantly, it allows them to experience your trustworthiness. And both are critical to the reduction of perceived risk among your prospects.

___________

*Doesn’t it strike anyone else as odd that so many business people skip by the two more critical perceived risks, and immediately cut price to stimulate sales?
___________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about single-step and two-step advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

How to Steal Your Competitor's Customers. Part 2 of 3.

noreply@blogger.com (Chuck McKay) — Mon, 07 Dec 2009 00:59:00 +0000

Is this a good ad?

Does it make you want to buy a can of John's Tomato Juice?

A good ad would.

A good ad would catch the attention of someone who wanted tomato juice, and offer compelling reasons to choose John's brand.

But this ad?

People expect tomato juice to be pure and fresh. The “whole tomatoes” part isn't an expectation, but it's not surprising, either. Nope. Not a single reason to choose John's Tomato Juice.

Without a demonstrable difference people tend to buy the more familiar over the less familiar. Even after they've seen advertising for the lesser known brand? Unfortunately, yes.

John's ad may well encourage a shopper to pick up a can of tomato juice. Odds are, though, it will be a can of Del Monte's, or Hunt's, or Campbell's.

Ouch.

John's, like all of the rest of us, needs a compelling difference to become the brand of choice. If shoppers believe John's Tomato Juice is just like all of the other brands, the only reason a shopper would choose a lesser known brand like John's would be price.

Awareness.

But suppose I point out that tomato quality makes a difference in the taste of the juice. John's Tomato Juice uses only heirloom tomato varieties, chosen for exceptional flavor. John's tomatoes are individually selected and hand picked at the peak of ripeness. They are processed within hours to capture their freshness.

I've just made you aware of a significant difference offered by John's Tomato Juice, and provided enough specific detail to make my claim of improved taste believable.

Ideally awareness (and in this case curiosity) might prompt you to sample John's. If you like the taste, John's could become your preferred juice. And if large numbers of customers sample and prefer John's, that will lead to increased demand, increased market share, and through economies of scale, greater profits.

Awareness → Preference → Market Share → Profitability

This process always starts with awareness, which happens in one of two ways: though large amounts of advertising, or more spontaneously because the product (service) is noticeably different.

Cognitive Overload.

Thinking is hard. Remembering, not so much. And once a preference is established in the mind of a consumer, that decision won't be revisited.

Unless, of course, that consumer is presented with a compelling new reason to reconsider.

Have you ever talked to a homeowner who has decided she needs a new home? Listen carefully to her descriptions. She may only vaguely be able to describe what she wants in her new home, but she will explain the shortcomings of her current house in great detail. Her dissatisfaction will nearly always be a predictor of her purchase behavior.

You could build an ad around her specific irritations. Other disgruntled homeowners would immediately identify and pay attention.

Unfortunately, too many companies don't bother to research their customers. When it comes time to make something happen their inclination is to cut price. Long term this is seldom a valid strategy.

Why? Because there can only be one lowest-price producer in each market, and chances are its not you. That lowest-price strategy is nearly impossible to sustain, and there's no particular advantage in becoming second-lowest.

Distinguish.

Advertising becomes more effective when there's a difference upon which to build the ads. But difference for its own sake is only weird, and weirdness doesn't sell.

To persuade a customer to buy, the difference must be meaningful to her.

As noted in How Do You Educate A Customer?, most businesses don't have enough time or money to convince non-users to enter the market.

Most can, however, convert customers who've already been persuaded by the market leader to enter the category.

Stealing someone else's customers is the most efficient use of your advertising dollars.

Therefore, the only advertising strategy that makes sense for most businesses is to influence your competitor's customer to switch brands. For highest return on your advertising investment, do this close to the time of purchase.

Effective advertising solves a problem.

What's the one clear and overriding reason that will get your business noticed, provide new information, and persuade some other company's formerly satisfied customers to try your brand?

Here's a hint: most opportunities will not be the direct opposite of the market leader's strategy, but rather in exploiting an opportunity that is either too small or too far removed from the market leader's primary focus.

McDonalds sells fast, fresh, and fun. Subway is best-known as the provider of non-fried low-fat sandwiches.

Wal-Mart is positioned as the lowest price retailer. Target's more sophisticated image is that of the “hip discounter.”

Goodyear focuses on quality: “The best tires in the world have Goodyear written all over them.” Michelin's appeal is safety: “Because so much is riding on your tires.”

Michelin didn't create the desire to keep family members safe. They did, however, recognize and exploit a genuine need already felt by a significant number of customers. A need that Goodyear's quality/value position can't fulfill.

Will Michelin ever overtake Goodyear in gross sales? Unlikely. However, among people who's primary concern is the safety of their families, Michelin is much more likely than Goodyear to be their first choice.

Being the first choice in your own unique category is the basis of developing a solid U.S.P. This makes it tremendously difficult for any competitor to counter your advertising.

The market leader can't do what you're doing without abandoning his own highly-profitable position in the market. And when the other smaller competitors try to copy what you're doing (and they will) their ads will only remind people of you.

In his book, The Ad Contrarian, (great read, by the way), Bob Hoffman says:

"We don’t get them to try our product by convincing them to love our brand. We get them to love our brand by convincing them to try our product."

Care for a glass of tomato juice? Its John's. You'll taste the difference those heirloom tomatoes make.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about the strategy of converting your competitor's customers may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

How Do You Educate a Customer, Part 1?

noreply@blogger.com (Chuck McKay) — Sun, 18 Oct 2009 19:53:00 +0000

“Everyone needs our product,” said Bob. “All we need to do is to tell them about it.”

Bob's enthusiasm is contagious. He's convinced that America's tap water isn't safe to drink because of the presence of pollutants. The water filter he sells removes minerals, microorganisms, toxic metals, and organic chemicals.

If sales is truly a transfer of confidence from the seller to the buyer, Bob is going to sell a lot of water filters. Assuming, of course, he can get his message to enough people.

He thinks advertising problems in the water supply is an excellent way to attract potential customers to his business.

He's wrong.

Bob has two problems. Each will affect his marketing strategy. Can you identify them?

First, he offers a solution to people who don't recognize that they have a problem. They will naturally be skeptical.

Second, as small as his industry is, he has competitors. That means if he chooses to educate potential customers about the need for water filtration, they may well buy filters from some other company.

Bob is not alone with this "Teach them why they need it" vs "Ask them to choose mine" dilemma.

A manufacturer can't sell his brand of coffee to people who don't drink coffee. First, those people must choose coffee as their beverage. Only then can the manufacturer persuade them to choose his brand instead of another.

The provider of high-speed Internet can't sell connections to households without computers. First, the family must choose to purchase a computer. Secondly they must elect to be connected to the Internet. Only then can the provider convince that family to select his service over that of a competitor.

And Bob can't sell his brand of water filters to consumers who find the quality of their tap water to be quite acceptable.

Why Shouldn't Bob's ads explain and educate?

Because even the most effective marketing message can only advance the decision making process by a single step at a time, and there are too many steps between "Have you ever wondered what's in your drinking water?" and "Will you buy my filter today?"

Convincing people they have a problem is tough enough. Persuasion becomes even more difficult when they know you benefit from the sale.

“You have a problem that you're not aware of. Really, you do. And I'm here to help. Just buy my product...”

Selling to an existing need may eliminate the credibility issue, but it doesn't eliminate those additional steps.

Consider the local automobile dealer who no longer needs to convince people cars are superior to horses or bicycles. He still has three decisions standing between each prospect and each sale.

First, the prospect must decide she needs a car.

Then she needs to select a brand.

Finally she has to choose a dealership.

Advertising can advance the process by only a single decision at a time. Which of those choices should the dealer's advertising try to influence?

Sometimes competitors join forces to inform.

Cooperation can be a smart move when increasing the size of the market benefits all of those who serve that market, even those who compete directly with each other.

The Cattlemen's Beef Board pools the individual members marketing dollars in the “Beef. It's what's for dinner” campaign.

The Las Vegas Convention and Visitor's Authority promotes all hospitality providers in the city with their promise of “What happens in Vegas stays in Vegas.”

The Florida Citrus Commission helps to create demand for all Florida growers with, “Florida orange juice. Healthy, pure and simple.”

You may see this cooperation on a local level when the county veterinary association pools dollars to encourage pet vaccinations, or a group of chiropractors each contribute to an educational campaign explaining the benefits of chiropractic treatment.

Short term, with enough concentrated advertising, programs such as this can create a bump in the sales curve. Unfortunately, most co-operative advertising programs don't have the resources long term to significantly grow the number of buyers.

Which is the smarter strategy?

Convincing people who don't already feel the need is hugely expensive. More expensive than most small companies can afford. Educating customers is not a cost effective advertising strategy for most small business.

Instead, consider addressing "pre-educated" potential customers - those people who already understand the issue. They will be searching for solutions. They will consider yours.

The car dealer should concentrate on drivers who are already inclined to buy the brand he represents and invite those people to his dealership.

The Internet service provider should address his ads to people actively seeking connectivity, and explain the advantages of his service.

And Bob needs to stop trying to tell everyone about his product. He needs to find people who share his concern for unfiltered tap water. He needs to target those customers with every advertising dollar he invests, and persuade them to purchase their filters from him.

Bob needs to seek out those folks who are already looking for him, but don't know it yet.
__________

Part Two of this series will look at the effect brands have on each other when advertising.

In Part Three we'll consider a multimedia solution for growing the size of the market (and our individual share of it), as well as an exception to the conclusion you just read in Part One.
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about the strategy of educating customers may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Is a Radio Remote Broadcast a Good Investment?

noreply@blogger.com (Chuck McKay) — Sun, 04 Oct 2009 22:06:00 +0000

One of the advantages electronic news has over print is the capability to deliver information in real time “live from the scene.” As you might imagine it didn't take long for this proficiency to migrate from the news department to the sales department, giving birth to the radio “remote broadcast.”

Remotes are traditionally expensive. But as advertising sales remain weak in this economy, advertisers are being offered discounted rates on almost all advertising, including remote broadcasts. And that prompts a critical question: is a radio remote a good investment of advertising dollars?

Like everything else in business, the correct answer is “possibly.”

The problem is there are at least four different people involved in the decisions effecting such a broadcast. Most of the time each has a different objective. Those four people are:

the Manager/Owner of the business,

the Radio Sales Person,

the Radio Program Director, and

the Disc Jockey.

What do each of these people want?

The Manager/Owner wants buyers.

His objective is to sell merchandise in such quantity that he can pay for the advertising and still show additional profit for his efforts.

He believes his store offers value. He believes when large numbers of people hear about his offers, they'll flock to the store to buy. This is usually expressed as “you get people in the door, and we'll sell 'em.”

The Radio Sales Person translates this instruction.

“Get them in the door” becomes, in her mind, “your job is to attract a crowd.”

She will arrange all of the crowd drawing techniques at her disposal. These will include a clearly identified station vehicle in front of the store as an attention-getting device. It will be augmented with banners and sound system.

She'll provide tee shirts emblazoned with the station logo and other station paraphernalia to give away to listeners who come to the event.

She'll try to arrange to have clowns, balloons, and face-painting to attract kids, free food to attract their parents, and the ever-popular “register to win” entry box. (The prize will, of course, be provided by the customer).

The Radio Program Director will coordinate.

After determining there are no conflicts on the proposed broadcast date, the Program Director will assign a Disc Jockey as “talent.”

The Program Director's job is to keep listenership high. She hates remotes, considering them to be interruptions to the programming (music), and potentially harmful to ratings. The Program Director will thus limit the number of reports from the scene, limit the length of each report, and do her best to disguise the reports by running instrumental music under the Disc Jockey's voice.

The Disc Jockey will be expected to attract a crowd.

Feeling pressure from the Manager/Owner and Radio Salesperson, the Disc Jockey will attempt to bribe listeners. He'll repeatedly emphasize “C'mon down. We're having a great time,” and will list all of the free items they could win just for showing up.

A few listeners will be impressed by being close to a celebrity. He'll be tempted to talk to those people who come to him, rather than introducing himself to other potential customers. Part of this, believe it or not, is shyness.

The results are entirely too predictable.

In order they will be:

Reacting to the offers made during the broadcast, people will come to the event for the free food, the clowns, the balloons. They will register for the prizes. They will then leave without buying anything.

Frustrated by the lack of sales, the Manager/Owner will accuse the Radio Sales Person of bringing the wrong people to his event.

The Sales Person will explain to the Manager/Owner the benefits of branding and name recognition. She'll explain the positive effects of today's high-profile advertising might not be immediate, but will definitely impact future sales.

Back in the privacy of the radio station she will find fault with the Disc Jockey who spent too much time socializing with fans and not enough persuading them to buy.

Of the four people involved, the Disc Jockey will take the majority of the heat when the outcome is disappointing. He's not a seller. He's an entertainer. And even though he feared it might end this way when he agreed to accept the talent fee, he will bitterly resent being held accountable for lack of sales, which he believes are beyond his control.

Oddly, the Program Director has the best grasp of the situation. After listening to the Sales Person's criticism, will resolve to discourage future remotes as too much hassle. “Next time sell 'em a schedule of ads” will be her recommendation.

By doing her best to hide the event from her own listeners, she's created a self-fulfilling prediction of failure.

Unfortunately, the Disc Jockey did attract the wrong people. When listeners hear words like "fun" and "free" instead of compelling reasons to purchase right now, they react accordingly.

Equally unfortunate is the Sales Person's claim that future sales will benefit from today's advertising of an event. Although branding and image building ads do take a while to affect customers, and do frequently work better over time, event advertising is quickly forgotten.

No immediate sales. No future sales. Conclusion? Most remote broadcasts are a waste of money.

Which is why, in general, I don't recommend them.

However. . .

When done correctly they are powerful marketing tools that provide opportunity for greater sales. And at some of the prices we're now seeing, this may be an excellent time to consider adding one, or more, to your marketing plan.

In our example the four people involved had mutually contradictory objectives. To have a successful event all four must embrace the same purpose: greater sales during the event. That goal must guide every decision effecting the broadcast.

Here's how to assure higher remote broadcast ROI.

Mr. Manager/Owner, take a step back. Recognize that you are more excited about the things you sell than the public will ever be. Expect them to be less excited about your remote broadcast, too.

Think of it this way: a remote broadcast is not an event. Much like a newscast, it is only coverage of an something newsworthy which is already happening. People want to know the news.

A strong concept works well if promoted in the newspaper, on television, or through direct mail. It doesn't require creativity of the medium to make up for lack of customer interest. If your event that exciting, continue planning the remote. If not, abandon the idea. There's no sin in passing up an inexpensive opportunity which won't benefit your company.

OK. You have a strong concept. Good. Don't use the station as your only source of publicity. We're not trying to prove this station can draw a crowd. We're focused on attracting as many buyers as possible. Buy a newspaper ad or two. Keep those ads customer focused.

The headline should address the primary benefit you're offering. The body copy should say the things your best salespeople say to customers on your sales floor. Put your logo, as well as that of the station, at the bottom of the ad. If your headline catches people's attention, and your body copy offers strong reasons to buy, only then will they care who's making the offer.

Miss Radio Sales Person, give your client's business the benefit of your experience. “Great savings throughout the store” is much too generic and won't persuade anyone. Make sure all of the parties agree on a message which is both specific and highly beneficial.

Is the proposed remote broadcast the best use of your client's money? As you know, grocery stores make dozens of offers in a “double truck” two-page newspaper layout. They focus so many reasons to buy into a single space every week because it works. If you believe you could create more sales impact with an intense, highly-focused schedule of recorded ads packed into a single time period, do that instead of the remote. The cost to the advertiser is the same either way. Give him the choice with less risk.

Miss Program Director, stop compromising. Either refuse to interrupt your music with talk, or commit to making the talk segments so compelling that your music listeners don't want to be left out.

Would you refuse to interview the top artists in your format? Of course not. Listeners don't resent talk. They resent people blathering on about topics that don't interest them. You, Miss Program Director are uniquely qualified to find the exciting appeals that your listeners will want to learn more about.

Your presentation skills can turn this potentially dull and boring jabber into the most exciting information available on the day of the broadcast. Hype won't work. You've got to dig for genuine value, and then make sure it's presented in a way that helps your listeners imagine themselves owning what the advertiser sells.

Schedule three reports per hour during the broadcast. Have the Disc Jockey announce his location during the FCC required legal ID. Require your studio talent to plug the event during each music segment. That works out to acknowledging the remote seven times per hour. Just as you wouldn't allow your station to go a quarter hour without reminding listeners to whom they're listening, this proposed broadcast will also need that frequency of repetition.

Give your Disc Jockey the latitude to react with his own personality from the scene, but make sure each key point is included in each remote break by scripting a standard beginning and ending.

Here's the part you're going to hate: kill the music bed during reports from the scene. We want people to take note that something unusual is going on. Play a quick attention-getting intro (think fanfare) as he's introduced, and then, other than the Disc Jockey's voice, let the natural ambiance of the event be the only sound.

Can you commit to promoting this event for maximum advertiser impact? If not, do both the client and your listeners a favor and offer to help create a persuasive advertising campaign for him instead.

Mr. Disc Jockey, your role needs to change. You're no longer being asked to host this broadcast because you're popular and have fans who are likely to come see you. You're being asked to use all of the presentation skills you've acquired in your career to introduce your listeners to the advertiser's business.

Why would you do that? Because they will benefit from the resulting relationship. Believe it, or recommend another talent. Use that conviction every time you open the microphone.

Get rid of every cliché in your vocabulary – especially those things which you've grown used to saying on similar occasions. Repeating the same old verbiage will only produce the same old results.

Watch for customers leaving the store. People who've purchased something are sold on the value of their purchase. If they're reasonably articulate, invite them to briefly answer a couple of questions during your next break. Tell them what you'll be asking, and help them to quickly express their reasons for buying. These people have exceptional credibility with other folks listening to your broadcast.

And don't worry about what the station provides for you to give away. We're now looking for different responses from different people than you've invited to past events. Truthfully, you'll make more money persuading people to visit the store who don't care so much about meeting you as they are interested in the client's offer.

By the way, shaking hands with everyone in the crowd and personally welcoming them builds listener loyalty in a way nothing else can.

Finally, Mr. Manager/Owner . . .

The question was, are remote broadcasts good investments? Normally, no. But with the prices now being offered, maybe.

If you decide to try it, don't choose a station as your promotional partner because of ratings, or even because of price. Instead, choose a partner committed to getting qualified buyers to your event. You'll know whether you have the right radio station early in the planning process.

Get the station's Sales Person, Program Director, and Disc Jockey into a planning meeting. Bluntly ask if the station will commit to the three breaks per hour, plus the legal ID, plus three more mentions by the on-air host. Ask if the station will eliminate any music during reports from the scene. Ask if they are willing to make your broadcast the single most important event on the air.

If they are not willing, call a meeting with a different radio station. If they are, commit your resources and schedule the event.

And remember that media partners who put your needs first have earned a significant part of your non-event advertising budget, too.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about advertising schedules or remote broadcasts may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Does a Successful Zebra Need Its Stripes?

noreply@blogger.com (Chuck McKay) — Wed, 02 Sep 2009 03:46:00 +0000

Imagine you’re a lion. It’s dawn on the Serengeti, and you’re hungry.

Off in the distance is a herd of zebra. You’re down wind. You can smell the herd but they can’t smell you. You crouch closely to the earth, stealthily move closer, your padded feet not making a sound.

The zebra slowly mingle in the herd. Your only hope of catching one is to single it out from the rest, but which? The stripes of one blend seamlessly into the stripes of the next, creating a vermiculite tapestry of white and black. How do you focus on any individual when you can’t determine where one begins and the other ends?

Wait. What’s that? One zebra is grazing apart from the others. You can see every detail. It’s nostrils contract with each inhale and expand as each breath leaves its body. You watch its tail idly swatting at flies as it slowly steps forward to reach the next succulent blade of grass.

You are now focused on the one, rather than being confused by the many.

And the many? They have taken advantage of the safety of the herd. Herd animals like zebra, or sheep, or even people protect themselves by looking and acting like every other herd animal.

Taking risks is… risky.

Taking a risk gets you noticed. It exposes your vulnerabilities. And what’s the upside? Is there an upside?

No banker has ever been fired for refusing to make a loan. No investment broker was ever fired for buying IBM. Not taking risks is instinctive.

So we do the things we’ve seen other businesses do. We recite the same messages, replicate the same images, and deliver them through the same media. We stick with what works. We choose the tried and true and smugly congratulate ourselves on not taking any risks.

What passes for most business strategy is simply a “me too” game of “We do what they do, but you should buy from us instead.”

Unfortunately, “we do what they do” makes your business blend back into the herd. You’ve made the very things that make you the best solution to your customers problems impossible for the lions (uh… the customers) to single out.

Brace yourself.

“Me too” as a strategy fails because you’ve hidden your strengths.

Successful marketing of your business requires behavior that’s not only risky, it runs counter to instinct.

Successful marketing requires you to step apart from the herd, and draw attention to yourself.

Successful marketing requires you to shed your stripes.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about business differentiation may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

There Is No Word-of-Mouth "Marketing."

noreply@blogger.com (Chuck McKay) — Sun, 23 Aug 2009 17:08:00 +0000

Pay close attention to Stephanie's story:

“Roger's feet get cold easily, so I bought him a pair of sheepskin slippers. He loved them, but it wasn't long before the wool lining started wearing off. So I called Lands' End to see if I could get them replaced under warranty. The lady I talked to was very nice, but she couldn't find any record of my purchase, and she couldn't figure out which slippers I was describing. But, she cheerfully told me that she'd be happy to exchange them, and gave me a return authorization. I was pretty excited when I told Roger that Lands' End had agreed to replace his slippers even though I couldn't find the sales receipt. He told me that was because I bought those slippers from LL Bean.”

Stephanie tells her story well. People laugh at it. It's the kind of story that people tell each other daily. It's the kind of story likely to be repeated by people who don't know either Stephanie or Roger.

There's a critical lesson, though, in Stephanie's story. Did you catch it? No problem. We'll come back to it in a minute.

Stephanie's story is an example of Word-of-Mouth.

It's not, however, an example of Word-of-Mouth “marketing.”

And apologies to WOMMA aside, I'm not convinced that Word-of-Mouth marketing exists.

Why? Because adding the word “marketing” assumes that it's something the business causes to happen. Word-of-Mouth may be influenced by business, but by it's very nature it can never be controlled.

Go back to Stephanie's story for the critical distinction. Is she telling a story about customer service at Lands' End? No. She's telling a story about her own experience as a customer. People love to tell stories about themselves.

Exactly how important is your product or your service in the telling of any customer's story? If the stuff you're selling fits into her narration, it might be included. But whether it is or not, Word-of-Mouth in any of its forms is always about the experience of the buyer. Only indirectly is the seller even involved.

Which makes Word-of-Mouth "marketing" a misnomer.

Word-of-Mouth is not marketing for several reasons.

Marketing becomes cost effective when there are efficiencies of scale. Word-of-Mouth takes place on a one-to-one basis.

In marketing, a company sends its message directly to prospects. Word-of-Mouth is farther removed from the company with each iteration of the story. People who know the story teller will be influenced. People who know those people may be slightly influenced. At three degrees removed there will be minimal effect, if any. (And yes, I'm fully expecting a few e-mails pointing out "Viral Marketing" as an example to the contrary. Can anyone even predict what goes viral? I thought not).

Finally, people may get your message wrong, and you can't stop it from happening. In a few more tellings Stephanie's story could easily mutate into a tale about a lady who had a funny interaction with Sears.

Word-of-Mouth is not marketing. It's not advertising.

Word-of-Mouth existed long before advertising. When most people lived in smaller communities, walked to the market, talked to their neighbors, and gathered in churches or meeting halls, Word-of-Mouth was simply conversation.

Advertising became important communication when our communities got too big for the people selling stuff to personally know their customers. Mass media carried the message from the manufacturers of goods to the new post-war middle class.

But for the last century, probably due to over exposure, we've all become less susceptible to advertising's claims. Customers now are more likely to believe the opinions of total strangers than the advertising messages of local companies.

Ouch.

Word-of-Mouth is now more critical to business success than at any time since the dawn of mass media. And yet, you can't make a customer talk about you. You can't make her not talk about you. You're going to be mentioned when you're part of her story. No more. No less.

Change your role in her story.

Although you may view Miss Customer as a purchaser of the things you sell, she sees herself as the protagonist in her own story. When you try to make the story about your company, Miss Customer will dismiss your whole effort as irrelevant.

But if your business is willing to become the secondary character in Miss Customer's personal narrative, is willing to engage Miss Customer, and indeed to make her story possible, that's when she'll take you along for the ride. Your business "character" will be portrayed in much the same way as her interaction with you happened in real life.

Treating her well may be the only influence you have in the creation of positive Word-of-Mouth. Treating her badly ads drama to her story. This not only makes your appearance in her story more likely to be negative, dramatic stories tend to be told more often, and over a longer period of time.

Which leads to what may be the most important question: when she does business with your company, do you treat Miss Customer as the star she is?

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about Word-of-Mouth may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Free Coffee and the Incremental Discount Coupon Tactic

noreply@blogger.com (Chuck McKay) — Tue, 04 Aug 2009 02:41:00 +0000

As I headed out the door the Lovely Mrs. McKay handed me a coupon from the new C store in our neighborhood, saying “You've got to stop for gas anyway. Here's a coffee for the road.”

The coupon offered a “free coffee beverage” from, oh, let's call 'em “Comfort Brothers Gas Station and Convenience Store.” I thanked her and slipped it in my pocket.

Does a lower price boost sales?

Will the availability of a discount, or a membership card, or a “get one free after purchasing ten” punched card appeal to everyone? Of course not. Some shoppers enjoy clipping, collecting, and organizing coupons to take advantage of reduced prices on household goods. Others see the time required by that process to be part of the price they pay for your service (or product), and will happily agree to full rate not to be bothered with it.

If you offer a discount to shoppers who would have paid full price, you lower profitability. On the other hand, not discounting for the undecided leaves some inventory unsold. That reduces potential gross sales.

How can you tell which is which?

The answer is to let them select themselves.

Make multiple offers at different price points to maximize sales. Those who wish to pay full price may do so, and those who won't will find a subsequent price/value ratio which works for them.

Here's how to make it work:

Let's imagine you have purchased a mailing list of high probability prospects for your new service. Send a letter, or post card, or other mailing piece to the entire list. Offer to sell them your service. Explain why you offer a good value. Some will purchase. Move their names from your “general” list to the “paid full price” list. Guard this new list. The names are golden.

A couple of weeks after your first mailing, send a twenty percent off coupon to everyone who remains on your “general” list. Segregate the names of those who respond to your second mailing into a “twenty percent discount” list.

In ten more days send the remaining names on your “general” list a thirty percent off coupon. See how this works?

You're accomplishing two things through this process.

First, you're maximizing sales at every price point. Second, you're segmenting your general list into groups of people who have now revealed the price at which they're likely to find your future offerings appealing.

The percentage who bought from your very first mailing, divided by the total number of pieces mailed, is your base conversion rate. Over the next few months you might get as much as ten percent more than your base conversion rate, by offering these incremental increases in discounts. Expect the biggest response to be to your first coupon mailing. Each successive offer will produce a smaller number of buyers who will decide the price is finally right.

Of course, the biggest factor which determines your base conversion rate is the offer itself.

Specific dollars (cents) off tend to be more appealing than do percentages, although that can be affected by the market and the range of prices. Another proven appeal is to offer a reward such as free shipping or gift wrapping, or a free upgrade to anyone who spends a minimum amount.

And you'll always want to print expiration dates as part of your call-to-action to force a decision. “This offer good this weekend only,” or “Offer limited to the first 100 customers or close of business Friday, whichever comes first.”

But, I digress from my personal coupon story.

After gassing up the car, I went inside to pay and to pick up a cup for the road.

The coffee menu offered “a full-line of latte and mocha beverages served hot, iced and frozen, with gourmet flavored syrups and chocolates." Every conceivable latte, espresso, and cappuccino. Full caffeine, half caf, caffeine free. With and without sweeteners, cinnamon, or chocolate. Iced lattes and mochas. Frozen lattes and mochas.

Thinking of my blood sugar, I finally decided on a simple cup of house blend.

I presented my coupon and was told that they couldn't honor it as payment for plain coffee. The offer, as I could plainly see, was for one of their prepared coffee beverages. Not for a simple cup of coffee.

“Are you serious,” I asked? “You're willing to make a generous gift of a $4.50 banana caramel iced mocha, but you won't let me have a simple sixty-nine cent cup of coffee?” Again, the attendant pointed out that the coupon clearly offered a “free coffee beverage,” and not a free cup of coffee. I handed the woman a dollar, took my change, and headed down the road.

Years ago I watched an older lady present a coupon for a Big Mac at a Burger King restaurant. The young man behind the counter said, "Ma'am, this is a coupon for a McDonald's sandwich. We have a very similar sandwich called the Whopper. May I get one for you at this same price?" This young man gracefully helped his customer avoid embarrassment. Care to bet she became a loyal customer?

I hope my experience was not typical. I hope that the tens of thousands of coupons the Comfort Brothers spent on their grand opening paid off handsomely. In truth they have a beautiful store. It's spotless, modern, and well laid out. The staff is friendly, well trained, well dressed. Shopping in their store should be a pleasure. I'm sure for most people it is.

But I only remember that when I presented my coupon, they told me "No." And that's a tough first experience to overcome.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about implementing an incrementally discounted coupon tactic may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Grocery Shopping, Rising Tides, and Maintaining Market Share

noreply@blogger.com (Chuck McKay) — Sun, 26 Jul 2009 15:25:00 +0000

Presented for your consideration two very similar conversations.

The first never happened. (Well, technically, I did call a few friends and irritate them with the opening question).

The second most assuredly did.

Conversation #1:

Q: I think I need to cook. What should groceries cost me?

A: Huh?

Q: What should I have to spend on groceries? I haven't been cooking. I need to.

A: How in the world could you expect me to answer that? There are too many variables.

Q: I asked Bob. He said, “$200.”

A: Will you cook for yourself, or your family, or do you intend to have guests? How big is your family? How many guests? Will you cook one meal or several or all of them? What foods do your family like? How much variety is important to you? How do you feel about leftovers?

Q: You're making this way too complicated. Just give me a number.

No one would take the “what will groceries cost?” question seriously. As ridiculous as it seems, though, the quite similar “what will it cost to advertise?” question is common.

The following exchange took place about a week ago between me and the absentee owner of a shop which sells handbags and accessories.

Conversation #2:

Q: I think I need to advertise. What should ads cost me?

A: What?

Q: What should I have to spend on advertising my store? I haven't run any ads in months. I need to.

A: I have no idea. There are too many variables.

Q: I asked Bingo Radio. They said “$1,000.”

A: Why do you think you need to advertise?

Q: Business is off a bit. I probably need to spend a few bucks to bring customers back to my store. I have an ad we used to run. I just want to know what it should cost.

A: How will you know that your ads are working?

Q: People will come in and sing my jingle to get a discount.

A: Has that worked for you in the past? Because I've never seen an audience react positively to “mention you heard this ad.”

Q: You're making this way too complicated. Just give me a number.

There's an old saying that a rising tide lifts all boats. Even the leaky ones. Even those which aren't ship-shape. Even those which are too unsafe to be allowed out of port. The tide doesn't care.

For the last couple of decades the financial tide has kept leaky, non-ship-shape, unsafe businesses afloat, too. Money has been cheap. Credit has been easy. And it seemed that anyone with an idea could find someone to finance it, purchase inventory, rent a location, and open for business. And as the financial tide kept rising, operators of these marginal businesses were able to sell enough to stay in business.

And why not? Money and credit were not only easily obtained by business, but also by shoppers who bought stuff they didn't need with money they didn't have, just because they could.

And now comes the reckoning.

Three years ago when the economy was robust the companies which did the best job of marketing themselves doubled or tripled in size. Today, phenomenally successful marketers are working to repeat last year's sales. Most companies are shrinking. And too many small businesses don't even have a marketing program.

For operators who understand the minds of customers, we now live in a time of great opportunity. The loss of sales volume across both retail and service industries has taken a corresponding toll on the media. Today's advertising prices are a bargain. For the first time in my experience, even the price of your Yellow Pages ad is now negotiable.

But, a great price on an individual ad doesn't include meaningful content for it's message. Messages which pulled well two and three years ago aren't working any more. And a bargain price on an ad which says nothing salient is a shameful waste of money. Today's most important question isn't “Where should I advertise,” it's “What do I say?”

Our handbag shop owner has noticed that business is off. Fewer people are buying, and she suspects that “advertising” might solve her problem, but she has no understanding of how it works. In her ignorance she's asking questions as silly as the “what do groceries cost?” dialog above. She has no plan. She doesn't even have a goal. Worse yet, she doesn't understand why either is necessary.

My prediction? She'll waste a couple of grand trying to make customers do what she wants them to do, rather than providing what those customers want. Her store will fight to stay open through forth quarter of this year, hoping to pick up some big sales for Christmas. Those sales will not happen. Following a liquidation sale in January her store will close, permanently.

It's not the bad operators that I worry about.

It's the under capitalized, non-niched, owner operated small retail or service businesses. The companies which deliver real value for their customers, but haven't created a marketable position for themselves.

Too many of these operators will effectively become twenty-first century sharecroppers. One hundred years ago they'd have borrowed the money for seed. They'd have planted, and prayed for rain. They'd have worked long, hard hours hoping for a large enough harvest and a market price that would allow them to sell their crop, pay back the loan, and have enough left to feed the family the coming winter.

In a number of conversations with small businesses over the last week the theme which keeps repeating is “I need working capital. I need to be able to purchase inventory.” Credit lines have dried up, and these operators are hurting. Not because they're bad operators, but because the rules of the game have changed. Assuming they find new sources of capital, there will be limits on how much they can borrow and how quickly it must be repaid.

Get used to the new rules. We won't be going back.

What can we expect from these new rules?

Every economic downturn shakes out the poseurs, wipes out the frauds, and toughens the survivors. A few will adapt to the new marketplace reality, and thrive.

Those who thrive are the operators who will learn which items to stock. They will meticulously keep an adequate inventory while simultaneously avoiding items which won't quickly sell.

They'll keep a close eye on customer count, perhaps in increments as small as fifteen minutes, in order to hold labor costs in check.

They'll learn exactly who their customers are, and exactly what is important to them. Every advertising message will attract new customers and persuade existing customers to shop more.

Their companies will be smaller, leaner, and incredibly efficient. And their relationships with those customers will become much more personal.

Great companies are born of adversity. Are you ready for greatness? Shall we get started?

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about effective advertising in this economy may be directed to ChuckMcKay@ChuckMcKayOnLine.com

Hope is Not a Strategy for Greater Return on Advertising Investment.

noreply@blogger.com (Chuck McKay) — Sun, 17 May 2009 22:43:00 +0000

A couple of decades ago I introduced a friend who sold pianos to the manager of a local radio station. The manager suggested that the piano salesman consider radio advertising sales. The salesman refused.

“Sometimes advertising works,” he said, “and many more times it doesn't. The worst part is you can never predict which is going to happen. I couldn't in good conscience sell something that I don't believe will work.”

Ouch. Is advertising more of a gamble than a science?

If advertising is an investment, you should expect to see a predictable profit from that investment. Invest a dollar in advertising, get back four, or five, or six. At the very least, shouldn't you get back a dollar ten?

But if you you don't know whether your ads are driving revenue, you can't very well call it investing. If you don't know whether you'll win, or lose, or break even, you are gambling.

And if you put your money into ads that you “feel” are working, but but can't measure their effect, you're still gambling.

Noted investor Peter Lynch once said, “An investment is simply a gamble in which you've managed to tilt the odds in your favor.”

So, maybe effective advertising is that which has been tilted in your favor. Not so much an answer, as a process, which includes better targeting, more effective messaging, and improved media selection.

The purpose of an ad budget?

The reality is that most of us fear that we aren't turning our marketing dollars into profit. Not consistently. Not directly. Which is why we have advertising budgets. To limit risk.

An ad budget serves the same purpose as going to the casino with a hundred dollars in your pocket and saying “When this hundred is gone I'm done playing. Maybe I'll get lucky. But I've got to set a limit on how much I can afford to lose.”

Think about it. If you knew you were going to get back more than you spent, why would you ever stop spending?

Perhaps you don't need a budget so much as a lever.

The Greek mathematician, Archimedes, understood leverage. He's reported to have said, “Give me a long enough lever and a place to stand, and I will move the earth.”

When applied to advertising, leverage means doing more with less. Getting more bang for your buck. Controlling large sums of revenue with relatively small sums invested in advertising. Stacking the odds in your favor.

But, if you were capable of stacking those odds, wouldn't you also be running more advertising?

A surprising number of companies try to avoid advertising, then force themselves run ads when sales are down or when they have excess inventory.

Unfortunately, they're open for business all of those other days, too. And they need customers to come buy what they sell on every one of them.

That constant need for additional sales makes advertising the most important thing any of us can do for our own business. What other activity can multiply raw dollars with this kind of leverage?

First, measure.

Do you know your rate of return?

Note your sales levels. Run your campaign. Note any change in your sales levels.

Divide increase by the amount spent. This is Return On Advertising Investment (ROAI). If you are bringing in more money than you are spending, your ROAI is positive. Congratulations.

Of course if your advertising is not effective, the negative ROAI produces a constant drain on your resources. Is this why you don't advertise often? Do you justify the resulting poor return as “getting your name out there?”

How effective is your lever?

Is your advertising an investment or a gamble?

The primary question you must ask is the rate of your ROAI. Until you know the answer, this is the only question that matters.

How well does your current marketing stack up? Are you gambling with your advertising budget without even realizing it?

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about Return On Advertising Investment may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Three Levels of Word-of-Mouth Which Determine Your Professional Reputation

noreply@blogger.com (Chuck McKay) — Fri, 01 May 2009 02:17:00 +0000

According to an old saying there are only two things people want to know about you: what you stand for, and what you won't stand for. This is the basis of reputation.

We intuitively understand that people's actions are nearly always in accordance with their values. Someone who embraces fairness and treats other people honorably is likely to treat us honorably. Someone known to be dishonest has a higher likelihood of cheating us, as well.

And like our personal reputations, our companies have professional reputations, built on the experience customers have in dealing with our companies, along with their willingness to talk about those experiences.

Call it Word-of-Mouth.

Another name for professional reputation is word-of-mouth, which comes in three variants. From least to most influential, they are:

1. Awareness - Do I recognize any of these names in this directory?

2. Reputation – Have I heard of anyone who has the ability to help me with my problem?

3. Personal Experience - Do I have knowledge of, or experience with someone who can help me to solve this problem?

Each successive level takes priority over the lower.

Awareness.

At the Awareness level, simply recognizing the company's name trumps never having heard of them. This is the weakest level of word-of-mouth. If you stay in business long enough, you'll achieve some level of awareness. You'll then have a slight advantage over some newer company that has yet to achieve any awareness at all. Why? With no other information to go on, shoppers will usually buy from the company they've heard of.

Awareness is largely a function of repetition. A customer notes your name on the outfield sign at the ball park. Hears your jingle each morning on the radio. Sees your banner ad on the Internet. Catches your sponsorship of the six o'clock news. Recognizes your logo on the pee wee league uniforms. If you're part of the community, eventually people will bump into your name in the course of living their lives. The longer they're aware of you without hearing specific negatives about you, the more generally positive this awareness becomes.

Small businesses like to advertise how long they've been in business, as if years of “experience” automatically translates to a benefit in the minds of shoppers. Unfortunately, shoppers have proven not to care. (Kind of ironic, isn't it? All those years of doing business in the community have lead to awareness of your company - but the benefit is to you, not to them).

Reputation.

The next step up, reputation, beats out basic awareness. “Here's what people say” is the next best thing to first-hand knowledge – provided of course people aren't saying uncomplimentary things.

The size of the community is a factor, too. The fewer people in the population, the more likely a shopper is to run into someone with a story to tell about the business. Reputation is therefore a bigger factor in small communities than in large ones.

According to Wikipedia, one study found that a good reputation added 7.6% to the price businesses received for their goods. Some companies are finding that improving their reputations can actually boost stock prices.

Side note: the Internet has changed the nature of “community.” It simultaneously offers the potential of world wide reach while providing individual gossip to anyone who seeks it. And just as bricks and mortar stores have public relations companies to put a positive spin on community perception, their web-based brethren are now hiring reputation managers to keep track of on-line credibility.

Personal Experience.

And finally, those people who have had actual dealings with the companies in question will have the most convincing word-of-mouth of all.

Shoppers who get what they expect will probably not give the interaction with that business much thought. Word-of-mouth commentary happens when the actual customer experience differs from the expected. Delighted, wowed, or amazed customers spread positive word-of-mouth. Disappointed, disgruntled, or unsatisfied customers will spread negative.

A real life example.

The new guy on the staff has just relocated here to take the job. This morning he heard a strange grinding sound as he drove to work. New guy is worried. The disparity between his lack of knowledge about possible causes, and his pressing need for such knowledge makes him feel vulnerable.

He asks his co-workers for credible information to help him choose a solution, or at least his next step.

“Does anyone know anything about cars?” Note that he starts looking for information at the highest level of credibility - personal knowledge.

Not finding an expert among his co-workers, new guy begins to rely on word-of-mouth. Why? He's trying to lower his risk level. A bad choice in mechanics could have him paying for services he doesn't need. Worse yet, he could choose someone who won't be able to fix his problem (but will charge him for time invested anyway).

His next question: “Does anyone know a good mechanic?” addresses the most credible level of word-of-mouth – personal experience.

In the absence of such knowledge, he will quickly go down the probability scale, asking next what his co-workers have heard about mechanics in town.

Finally, he'll go to his newspaper, or to the Yellow Pages and start studying the ads to see who appears to understand his specific grinding problem, or perhaps which companies may be national chains that he's at least heard of.

Back to the beginning.

There are three levels of word-of-mouth. Only two can be effected by your advertising. The third is strictly a function of the way you operate your business.

So what are your company's values? What do you stand for? What won't you stand for? Do you consistently project those values in each interaction with customers?

Is your business not growing because potential customers don't know about you, or is it because they think they do?

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about word-of-mouth and professional reputation may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Reticular Activation - How the Human Anatomy Prevents Ads from Reaching "Everyone."

noreply@blogger.com (Chuck McKay) — Wed, 15 Apr 2009 01:26:00 +0000

One of the things guaranteed to make copywriters (and to a lesser extent media salespeople) groan is an advertiser who claims he needs to reach "everybody."

No ad can possibly reach everybody. The human anatomy prevents it. If you have a minute, I shall happily explain why.

The Shoppers Mindset

Amazingly, most people are not poised in front of their television sets breathlessly waiting to hear of an opportunity to dump the cash from their purses into Mr. Advertiser's cash register.

Nope. Most people are instead attempting to ignore thousands of radio ads, e-mails, product placements, signs, newspaper and television ads, billboards, matchbook covers, calendars, and the odd Rubic's Cube with some company's logo on it.

Out of self defense human brains are physiologically prevented from paying attention to things that don't directly apply to them. And truthfully, most of what they see doesn't apply.

What does apply to most people? Their kids, plans for the weekend, the empty box of corn flakes, remembering to program the TIVO, getting to the game on time, the in-laws coming to dinner, filing for an extension on the tax return, running late for work, or getting home before “Are You Smarter Than A Fifth Grader?”

They're eager to find information which will solve their problems, and yet, they're not paying attention. They see and hear advertising with their eyes and ears, but they don't consciously notice those ads.

That's because the human brain won't let them. Again, let me explain.

Four Sets of Brain Waves

The synapses of the human brain fire at different rates during four different mental states. They are:

1) Delta – 0.5Hz to 4 Hz – Deep Sleep.
Delta waves trigger release of growth hormone, which helps the body to heal. This is one reason sleep is critical to the healing process.

2) Theta – 4 Hz to 7 Hz – Drowsiness.
Theta states most frequently occur fleetingly as people pass from higher consciousness to deep sleep, or return from it. Theta waves occur during meditation, and have been linked to visual and emotional creativity.

3) Alpha – 8 Hz to 13 Hz – Relaxed.
The alpha state is a highly creative condition of relaxed consciousness. People in alpha state tend to recognize non-obvious relationships. Interestingly, it's also the resonant frequency of the earth's electromagnetic field.

4) Beta – 14 Hz to 30 Hz – Alert and focused.
The beta state is associated with peak concentration, heightened alertness, improved hand/eye coordination, and better visual acuity. During beta state new ideas and solutions to problems literally flash through the mind.

Degrees of Consciousness

The higher frequencies represent more brain activity, and require greater energy consumption. Like every other part of the body, brain activity kicks into higher performance only as necessary. The more familiar the activity a person is engaged in, the less conscious activity is necessary.

Most of us have driven to work only to note upon arrival that we have no conscious memory of the trip. Individuals who drive a lot of highway miles frequently find themselves coming up with good ideas as they drive. Daydreaming while driving is an example of the brain in theta state. It's easily induced by the hypnotic sameness of road markings and sounds.

As long as there are no surprises on the trip, driving to work can also easily produce an alpha state. The driver is relaxed, and the familiarity of the surroundings allow the driver to sing along with the radio, or listen to conversation without planning to respond.

But imagine the car in front of our driver slamming on the brakes. Our driver immediately transitions into a state of heightened awareness, faster reflexes, and instantaneous decision making. This is clearly a beta state of peak concentration.

The Reticular Activator.

At the top of the brain stem, between the medulla oblongata and the midbrain is a collection of nerve fibers known as the ascending reticular formation. Activation of this reticular system is necessary for higher states of brain activity. Think of the reticular activating system as a sentry constantly looking out for conditions which require a conscious response. Anything important or relevant snaps the brain into higher states of consciousness, even from deep sleep.

Anyone who's moved to a home near the railroad tracks has been awakened by a train passing late at night... for the first few nights. While the loud noise is unusual and potentially threatening, the reticular system jerks the brain from deep delta sleep to beta wide awake consciousness. After a few days, when the experience becomes commonplace, the reticular system doesn't even bother to activate, and the resident sleeps through the night.

Mothers recognize their child's cry even in a room full of children. The reticular system catches the familiar tones of the child's voice, activating a beta state in the mother.

And most of us have heard someone call our name in a crowd, only to discover that the caller was trying to catch the attention of someone else with the same name. The reticular system activates a beta state at recognition of the name, and de-activates for the brain to return to alpha mode once the mistake is obvious.

Newspaper readership increases with the addition of a photo, especially when it's a picture of people. Why? Because the reticular activating system zeros in on other people, to see if they're familiar.

Familiar is only one of the conditions the reticular system watches for. It is also ready to draw our attention to unusual, problematic, or threatening conditions. Any of these which appear to be important or relevant activate a beta state. If the conscious mind dismisses this “false beta” as not relevant, the brain returns to a lowered state of consciousness.

Can we plant a reticular activator to trigger a beta mode state at a later time? Yes, we can.

Embed a specific sound and get your listener to recall a whole series of emotions. Law and Order's “Doink Doink” sound when the next scene starts. The sound of Pac Man wilting at the end of play. Duracell's three tone logo. “You've got mail.”

Or embed a visual cue. Since 1997 Liberty Tax Service has done no advertising other than to place people in Statue of Liberty costumes on the street in front of the franchise. From roughly the first of the year until April 15th the Statue of Liberty costume serves as an activator, reinforcing Liberty's function, as well as this location.

Propinquity.

Here's an interesting fact: the effect of advertising is greatest closest to the purchase. And if you think about it, that makes sense. Remember, a purchaser only buys when she feels the gap between what she has and what she wants. If she has an empty box of cornflakes, she'll want more corn flakes. Once she's become aware of her need for more flakes (by pouring the last of the old flakes from the box) she will also become more aware of corn flake advertising.

What a great time to present your message. Advertise your brand on television, or send her a letter, or show her a point of purchase display. Give her a compelling reason to choose your brand while her reticular system is most likely to bring your message to her conscious attention.

But how can you predict when that metaphorical box of flakes will go empty? Unless your business is seasonal, you can't. And that pretty much means you need a constant presence in the marketplace.

How Shoppers Use Media.

We read from left to right, from top to bottom. The eye is drawn first to photographs and headlines, seeking, finding, and sorting through the information on the page. The reader scans in alpha state for anything familiar, unusual, problematic, or threatening. When one of those conditions is noted, the reticular activator pulls the readers attention to the words or pictures, and in beta state the conscious mind weighs the evidence.

It makes no difference whether the reader is considering news stories or advertising. If further examination reinforces the condition, the reader is engaged and stays in beta state. When the content has been read, the scan through the paper continues with the reader back in alpha mode, ignoring most of what he sees.

And though the consumption pattern may differ from left to right, top to bottom, this is how we use all media. People watching TV, listening to radio, or driving past outdoor ads will switch from alpha to beta modes and back as the content triggers the reticular activating system, and is accepted or rejected by the conscious mind.

Your corn flake ad will scream for the attention of someone who's out of corn flakes. The rest of the readers / listeners / viewers (those who don't have an empty box, as well as those who just do not like corn flakes) will either note the ad and quickly return to alpha state, or ignore it all together.

Got it? You'll never reach everyone with any ad. We don't all run out of cornflakes at the same time.

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about embedding reticular activators in your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Testing Advertising Response in the Store

noreply@blogger.com (Chuck McKay) — Sat, 21 Feb 2009 22:33:00 +0000

Since 1892 when the English Court of Appeals ruled on Carlill v Carbolic Smoke Ball Company, companies are legally allowed to make claims they can't substantiate. The court ruled that reasonable people don't believe exaggerated promises by advertisers. The legal term for these claims is “puffery.”

The public simply calls them lies.

The practice of puffery is so common in advertising that according to the 2008 Edelman Trust Barometer Survey, only 20 percent of respondents trust corporate or product ads.

Believe it or not, this information will effect the outcome of Ralph's new test of his advertising. At least, it would if Ralph had been paying attention.

Let's talk about Ralph. He owns an appliance store. He purchases four cases of Del Vecchio cappuccino makers from China.

Ralph places an ad in the newspaper explaining that after the Del Vecchio cappuccino maker brews up to four cups of espresso in it's glass carafe, its swivel jet frother will make steamy, frothy milk for cappuccino. The ad boasts that Del Vecchio cappuccino makers are available this weekend at Ralph's Appliances. Not at the $89.95 one would expect to pay for an appliance of this quality, but rather for only $34.95.

But Ralph doesn't display those $34.95 cappuccino makers.

When the ad hits the newsstands, the cappuccino makers are still in Ralph's back room.

Ralph wants to know who's coming in to his store as a result of his ad. He has concluded that the only way anyone would know about the cappuccino makers would be from seeing his newspaper ad. Therefore, if Ralph forces customers to ask for the item, and tallies the sales, he believes he'll have a fair test of the effectiveness of that newspaper ad.

He's wrong.

He's not testing the advertising at all.

What Ralph is measuring is a customer's willingness to ask for something she doesn't see on display. And he's limiting that test to those who've see the ad and come to the store looking for a specific product.

Will shoppers ask for items they don't see on display? Some surely will. Most will look for a Del Vecchio cappuccino maker, and not finding it, will simply leave without making a purchase.

They will also tell their friends not to believe any ads from Ralph's Appliances.

Their friends won't be surprised. “After all,” the friends reason, “doesn't every business lie in its advertising?”

So, if forcing shoppers to do things they don't want to do is a bad test, how does a manager/owner determine the effect of advertising on a specific sale?

Indirectly, My Dear Watson.

Check the day's total sales, and compare to yesterday, last week, and last year. Any significant change in trending can be assumed to be the result of some outside influence. Barring any other influences, we can assume the advertising was the primary factor.
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about testing your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Conduct Only One Advertising Test at a Time.

noreply@blogger.com (Chuck McKay) — Wed, 18 Feb 2009 12:11:00 +0000

The only Chevrolet dealer in Smallburg,Texas, augments his local newspaper ads with a schedule on a regional radio station licensed to the adjacent community, Midville. He's been selling an average of 18-20 cars per month. At the end of his first month with the new radio station he has sold a total of 27.

In his next newsletter the station manger writes, “When you see Ned Vanderslice of Vanderslice Auto, ask him why he's grinning. He'll tell you sales are up 30 percent.”

The newsletter hits the mail. Within hours the manager receives an angry phone call from Vanderslice. “How DARE you claim my success?”

“Ned,” asks the manager, “other than advertising on my radio station, what other changes did you make last month in your advertising? Did you run any additional newspaper? Any additional television? Any additional direct mail?”

“No,” says Ned, “but you had nothing to do with my sales increase. Nobody drove from Midville to buy cars from me.”

Ned thinks advertising cause and effect is common sense.

Is it? Yeah. Most of the time it is.

In this case, I'd bet that Midville's regional radio station has listeners in Smallburg. How many? At least seven. At least seven that were ready to buy new cars. Since no other part of the advertising mix has changed, we can pretty well determine what drove the increase.

The key is to test only one change at a time.

Then watch the outcome. Sometimes it's not what anyone might expect, but it's usually still common sense.

An apartment complex which does a very credible job of tracking the source of each lead has just added radio ads to their marketing mix. I advised them to watch for an increase in ALL of their lead sources.

1.Realtors, hearing the ad, will naturally think of this complex more often. We can expect them to recommend it more than they might have without the reminder.

2.People hearing the ad are likely to look up the phone number of the complex in the Yellow Pages. We can expect Yellow Pages referrals to increase.

3.People keying the name of the complex into Google will, of course, drive up the on line referrals. But common sense will tell you there was only one change in the
marketing mix.

My favorite advertisers intuitively know this. They change headlines, and record the response. They change insertion days, and record the response. They add the weekend edition, and record the response.

Roger de la Paz of Richie's Real American Diner in Victorville, California knows that this particular ad delivers a consistently predictable 118 percent increase in gross sales every day it runs.

How? Because he's already tested everything from ad size, to offer, to headline, to graphics, to the day of the week to run this ad in the Victorville, Ca. Daily Press. Roger systematically changed only one element at a time, and kept careful records of each outcome. He compares the demand for specific food items before the ad runs, and again afterward. He is then able to calculate the increased demand for specific menu items against the cost of the ads.

There are no quick answers. Each test helped Roger to make each successive ad more profitable. It took him three years to learn what he now knows about advertising his restaurant in the Daily Press.

But by carefully tracking the specifics of size, placement, and frequency of his newspaper ads, Roger can now predict to within a few dollars the ROI for each newspaper ad he runs for Richie's Real American Diner.

Persistence, it appears, is also a key element in testing your advertising.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about testing your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Are You Testing Advertising, or Simply Your Offer?

noreply@blogger.com (Chuck McKay) — Sat, 14 Feb 2009 14:11:00 +0000

Somewhere in America a rookie cable TV sales representative is talking to the owner of a men's clothing store. The rookie could have been working in newspaper, or outdoor, or radio. The retailer could have sold sewing notions, or computers, or farm supplies. The the specifics could be variable. The outcome won't change much.

The story begins.

Our rookie is explaining to the owner why his ads are such a bargain. The owner says, “Young fella, you're making a pretty good case for some cheap ads. I'll tell you what. I've got three hundred dollars left in my budget. See that rack of suits back there? You sell those. We'll test just how effective those cheap ads of yours are. Do a good job for me on this sale, and I'll consider advertising with you again.”

The rookie takes note of the rack of pea green suits, and thrilled to have cracked this account, says “Yes, Sir! We'll get right on it.” He calls his production department to schedule a video shoot at the store, and writes up the order.

Unfortunately, it will be his only order. The pea green suits will not sell.

A slightly more experienced media rep would from this point on avoid the client. The more experienced rep has already learned that these kinds of ads only work sometimes, and those times seem unpredictable.

Our rookie, however, is a little less experienced and a lot more conscientious. He will stop at the store to check on the progress of the sale. The owner tells him nothing is happening. Nobody is buying the suits. In fact, nobody has even mentioned seeing the ads.

Back at the station . . .

The rookie tells his sales manager that he's worried about the new account. If they don't make something happen, the store owner isn't likely to advertise again. The sales manager tells the rookie to order a “blind bonus” - ads that the client will never be charged for. The client won't be charged because the announcements will be added to the schedule without hiss knowledge, in an effort to increase the impact of the advertising, and cover up any shortcomings in the original plan.

Not surprisingly, the extra ads don't drive any additional traffic.

When the sale is over, the ads have run, and its time to reconcile the books, our young media rep will apologize to the store owner. The rookie will collect the three hundred dollar payment. He will decide to never again try to sell this advertiser anything.

Worse yet, this conscientious young media representative has now started doubting that advertising works. He's previously seen it work well. Sometimes. Now it seems that sometimes it doesn't work at all. And he can't see any way to predict which.

Did advertising fail the test?

Yes? No? Not sure?

Consider that rack of pea green suits. The regular customers of the store did not purchase them. Why? Are they the wrong color? Wrong size? Wrong fabric? Wrong style? Wrong price? Some combination of wrongness? It is a safe conclusion that something is wrong. The store still has so many of them in stock that those suits have become the entire focus of an advertising schedule.

Unable to sell these suits to his regular customers, the store owner now expects the rookie to magically create new customers. New customers who like unacceptable merchandise.

I submit that this exercise is not a test of advertising at all, but rather a test of whether it's possible to sell goods no one wants. “Won't you please buy one of these previously-rejected suits, despite their wrongness?” No matter how many times people see this ad the outcome is the same.

Oh, and it's also a test of the rookie's willingness to accept responsibility.

It always comes down to the offer.

Not that long ago the owner of a local business wanted me to create ads which said, “Mention you heard this ad and get a free key chain from Acme Widgets.” I agreed that any medium not able to deliver the message should not be included in his advertising budget.

Then I pointed out that a much more fair test would be “Mention you heard this ad and receive a free $100 bill.” He sputtered something about the stupidest thing he'd ever heard and slammed down the phone.

I'm assuming he and I won't be working together.

So, the first decision must always be what we are to test.

Let me save you some time. It all comes down to the offer.

And why would you waste your money testing such lame offers as free key chains or racks of pea green suits, anyway?
__________

Want to learn how to make every ad deliver a positive ROI? I highly recommend the Advertising Performance Seminar next week in Denver, presented by the Wizard of Ads Partners. For only $99, you'll come away with more knowledge of effective advertising messages and positive customer experiences than many of the media sales reps calling on your company.

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about testing your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

How Can We Test Advertising?

noreply@blogger.com (Chuck McKay) — Wed, 11 Feb 2009 04:56:00 +0000

Transcript of actual conversation:

Potential Client: Tell me the truth. How important is advertising in this economy?

Chuck: It's critical. When there is a lot of money in circulation it's not difficult for most businesses to attract their fair share of it. When the velocity of money slows, small businesses have to work harder than ever to keep enough customers coming through the door.

PC: If I had the money, I'd advertise now.

Chuck: Why?

PC: It would help to differentiate me from my competitors.

Chuck: Why do you want to do that?

PC: Isn't being different what makes a company marketable? It's what would get me into people's minds. Prospects would be more likely to choose my company.

Chuck: If I'm hearing you correctly, you're saying that you believe advertising will bring you new business.

PC: Well, yes.

Chuck: Then why aren't you advertising?

PC: I can't afford it.

Chuck: You can't afford new business?

PC: Well . . . new business is important. I need to keep money coming in ahead of my bills. I know, I should be advertising.

Chuck: Why are you hesitating?

PC: I'm in an industry that doesn't traditionally advertise. I don't know if I should or not.

Chuck: A minute ago you said if you had the money, you'd be advertising right now. Is the economy effecting your business?

PC: Yes. We're hurting.

Chuck: How long can you afford not to invite new customers to do business with you?

PC: Honestly? I'm scared. I'm scared of what could happen, or more accurately what might not happen. I'm scared that the return on my investment won't be measurable.

Chuck: I'm hearing you say that you don't have the knowledge to make sure your advertising investment will pay for itself. What knowledge do you need? What information are you lacking?

PC: I lack knowledge of marketing. I don't know enough to understand which is a good idea and which is a bad one. What kind of return will my advertising investment bring? How can I predict it? If there were some resources that I could use to learn the basics of marketing . . .

Of all the reasons to advertise . . .

Increasing sales is by far the most important. It's been said that during good times businesses should advertise, and during bad times they must.

During the rough times, though, the stakes are much higher.

When customer counts drop, its common for businesses to find that operating costs exceed revenues. Most companies have some cash or credit which will allow temporary negative cash flow. The length of time they can sustain operations is their “staying power.”

Every additional day of negative cash flow drains those reserves.

Each day that cash flows out contributes to a chronic, protracted demise. Since none of us can accurately predict any economic downturn, we don't know how much staying power we'll need. Every dollar invested in advertising becomes one less dollar of staying power. That can put a company out of business quickly. The same conditions which create the need to invite more customers also create a danger in doing so.

Sometimes we simply fear customers won't react to advertising because they have no money to spend. We fear the advertising lessons we learned during the good times are no longer valid. These fears become more justification to hunker down and wait for better economic times.

Oh, sure. We believe in advertising. Just not now.

The astute business owner/manager will note that his competitors have abandoned the advertising arena. Their absence leaves great share of mind available to the few with the courage to invite new customers to their places of business.

The courageous owner/manager will seize the opportunity to increase market share.

The prudent owner/manager will attempt to reduce the risk by “testing” his advertising. He'll hedge his bets by doing more of that which proves to work, and eliminating that which doesn't.

Interesting concept, testing. How does one test advertising? I wish there was a simple answer.

Let me rephrase that. Of course there are simple answers. They are worthless. There are also valid answers, but unfortunately they are never simple.

For the next several days . . .

We'll be discussing methods of testing advertising. We'll be calculating ways to make sure that every advertising dollar is held accountable. And most likely, we'll come to some conclusions about media, messages, and scheduling.

We'll explore good ideas, and bad ones. We'll look at the returns that advertising investments should bring. Must bring. We'll determine how to predict those returns. We'll find some resources for basic marketing during tough economic times, or for that matter, during any economic times.

I invite you to participate.

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about testing your advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Guaranteed Advertising ROI in a Tough Economy

noreply@blogger.com (Chuck McKay) — Fri, 02 Jan 2009 05:52:00 +0000

How in the world can they afford to keep advertising like they do?

You've seen 'em. Those companies who offer to do battle with the IRS if you owe large income tax debt. The credit counseling companies. The medical discount programs. Those who will refinance your mortgage or your structured settlement?

How can they afford the sheer number of ads they're running? Is business really that good?

Perhaps. On the other hand, maybe they have a different deal. No, not a better price, but an arrangement under which they don't pay for advertising that doesn't deliver directly attributable sales.

The arrangement known as “Per Inquiry,” or “PI.” You may also hear it described as “Cost Per Lead.” In the U.K. it's called “Cost Per Action.” On the World Wide Web it's known as “Pay Per Click.”

How Does PI Work?

The advertiser and the broadcaster agree to turn some of the broadcaster's unsold ad time into PI ads for the advertiser. The advertiser does not pay for the size of the ad, nor for the number of ads run, but only a pre-calculated percentage of the actual sales produced by that ad. No more. No less.

The ads contain toll-free phone numbers unique to each broadcaster, which ring into a call center. Experienced telemarketers convert the calls to sales, and report the number of sales to the advertiser and the station.

This can be a great deal for the advertiser.

Why Doesn't Everyone Use PI?

Television stations, radio stations, and newspapers are looking to sell their time or space for the highest price the market will bear. Most broadcasters won't accept PI at all, which eliminates the option for most advertisers.

Those who do consider PI will grudgingly accept it as better than nothing, but only at the last possible minute, after they've offered fire sale prices to their regular advertisers, after they've offered remnant prices to the standby advertisers, if there's no other way for the broadcaster to turn the unsold time into cash.

That last possible minute schedule will vary from week to week, which makes it hard to achieve enough repetition to help people to remember your product, and imagine themselves using it. Will even the least popular broadcast outlet run a PI ad with enough frequency to make the phone ring? A new direct response campaign will need two or three times the number of ad exposures required for a long term branding campaign.

Another frequency problem becomes obvious when one realizes that PI requires quick response. If they can't see a payoff this week, broadcasters won't continue to run the ads next week.

It All Comes Down to Reduction of Risk.

If one is willing to overlook the cost of lost opportunity, performance based advertising is largely zero risk for the advertiser. For the broadcaster though, there's a serious probability that the ads will never produce any revenue.

Why? Because the advertisers most likely to ask for a PI deal are under-capitalized businesses with ads that aren't working well. Instead of fixing the offer and increasing persuasive appeal of their ads, these advertisers look at PI as a great way to obtain cheaper exposure for their existing lame ads.

And that puts all of the risk on the broadcasters.

The offer is selected by the advertiser. The copy is written by the advertiser. The production is again handled by the advertiser. The broadcaster has to trust that the advertiser has done all of these things well. How much risk will broadcasters take? Frankly, it depends on the amount of unsold commercial time on their stations.

How Much Will PI Cost?

Let's take a lesson from our brethren in direct marketing. Direct marketers know to the penny the amount they are willing to pay for each response to their advertising.

But calculating what the advertiser is willing to pay is only half the equation. How much will it take to motivate the broadcaster to accept performance based advertising? That's the other half, and it's critical.

We can assume a broadcaster will be more willing to accept a PI arrangement if the advertiser is willing to reduce some of the broadcasters' risk.

First, pay those broadcasters the highest amount possible for each response. Experience has shown that a 50/50 split will usually enlist the cooperation of the broadcaster. On most items the math works out to a minimum necessary profit margin of six times cost. Will the product sell for six times the advertisers cost?

If the advertiser can purchase or manufacture say, an orthopedic pillow for $3 each, sell them in pairs for $40, and allow another $5 for fulfillment, there's a gross profit of $29 per order. Split the profit and offer broadcasters $14.50 per sale.

Second, direct marketers also test market. They're sure the numbers work for each mailing piece, each list they mail to, and each new broadcast outlet which carries their ads. The biggest television stations, those which are making a handsome profit in PI, (think “Superstation.”), require proof that the ad has produced significant sales in other markets.

So, if our hypothetical advertiser pays for ads which test the offer, test the presentation, and offer broadcasters a proven product and predictable success, the odds of future PI arrangements go up dramatically.

Then there's the customer.

Consider all that the customer has to go through to place that order. She has to understand the offer while she's being distracted by life. (Most of us don't pay rapt attention to advertising, regardless of the medium).

Then, before she forgets it, Miss Customer needs to remember the number, or to write it down.

Finally, she needs that last emotional push to tear herself away from what she was doing and to correctly dial that number.

There is a theory that, even though PI generates few calls, those who do call convert at higher rates because of all of the pre-qualification steps they've already gone through. But, any skepticism about your offer on the customer's part and she'll never bother to go through all those steps.

Here's where we split from direct marketing philosophy.

In PI, the hard sell of direct response doesn't work as well as does the soft sell of lead generation. An advertiser will dramatically boost results by changing the immediate goal from getting a credit card number to harvesting the names, addresses, and phone numbers of new customers in order to contact them directly in the future.

Offer a free information kit, free video demonstration, free sample, or free trial. Give a free estimate or free quote. Stack on additional value until Miss Customer is compelled to pick up her phone and call now.

The fulfillment program is critical.

Without the cash register ringing, how will your broadcast partner get paid? What will you consider a response? How will you track it? The math is pretty straightforward. If experience shows you'll convert one prospect out of five, and your average profit is $30 per sale, then each lead is worth $6.

You may need to retrain or replace your call center operators. In this new two step process, its critical that they understand the art of the upsell as well as the secondary sell.

Final Thoughts About Making PI Work For You.

Think big. Do you sell manufactured housing? What's it worth to sell an extra home this month? $700? $1,000? Cut a deal with a radio or TV station to pay that much for each unit more than your monthly average. Point out that they can come count the units on your lot to check their progress. Could your broadcast partner make an extra $3,000 this month by running your PI ads in prime time? Watch their resistance to PI melt.

Alternatively, offer cash, but ask for a guarantee. Tell your broadcast partner that you'll place a schedule of $500 per week, but that you'll need to see 25 responses each week. It's been my experience that stations will work harder to protect $500 already on the books than they will to earn an additional $500.

Per Inquiry is not cheap advertising, but it does have the advantage of being accountable and replicable. Done properly an advertiser can generate high quality leads or sales at a predictable cost. Perhaps your company could benefit from PI.
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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about implementing Per Inquiry advertising may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Gamblers, E-Mail, Religious Miracles, Word-of-Mouth, and Customer Delight

noreply@blogger.com (Chuck McKay) — Fri, 28 Nov 2008 17:26:00 +0000

Word-of-mouth occurs when, through surprise, your customer has become emotional about you.

It can happen when astonishment leaves her delighted. Alternately, it can happen when disillusion causes dismay. The first produces positive word-of-mouth. The second, negative.

But either way, for word-of-mouth to sustain and grow, the high level of emotion your customer feels must be unexpected.

You see, routine events never get discussed. In order for an event to be worthy of being talked about, it must be out of the ordinary. And that becomes the danger in each additional step you take to delight your customers. The experience eventually becomes routine.

Offer a free desert in your restaurant to everyone who's ordered an entree, and people will talk.

At least at first.

But as people react to your new generosity, two outcomes become predictable:

1) Your customers will grow accustomed to your new offer, and consider it just part of the meal they're choosing when they enter your establishment. Delight fades quickly when the surprise goes away.

2) Your competitors will copy your idea. You'll lose the competitive edge. When everyone does it, the only possible outcome is thinner margins for the industry. Think “frequent flyer” miles as a classic example.

What we need is a way to keep the surprise element high.

For that, we turn to one of the fathers of behavioral psychology, Burrhus Frederic Skinner.

B. F. Skinner created a branch of psychology known as operant conditioning. He demonstrated that when properly rewarded under specific conditions, living beings will change their voluntary behavior.

At Harvard in the 1950s, Skinner created the “Skinner Box” to condition laboratory rats. The rats were taught to push a lever, and get a food pellet in return.

Once they learned to feed themselves, Skinner split the rats into two groups. The first never got another pellet by pressing the lever. The second group got the reward sometimes, always following a pressing of the lever, but never at any predictable interval.

The first group quickly stopped pushing the lever. The second group never did.

We intuitively grasp the the actions of the first group. It's not so easy to understand the second, but its important that we do. Whether discussing lab rats or your customer base, the second group is where the money is.

Do humans push levers?

Absolutely. And the more random the reinforcement, the more unpredictable the payoff, the more frequently they will push.

Watch someone feed quarters into a slot machine. Isn't the attraction of any form of gambling the incredible delight experienced by the gambler when surprised by a win?

This tendency to keep pushing the lever also describes why the faithful keep praying for miracles. Every now and then, at random intervals, their prayers appears to be answered.

And those folks who check e-mail multiple times a day, hoping that this time there will be something new? Yup. They're also still pushing the lever.

Can you keep your customers pushing the lever?

Yes, you can, provided that you keep the element of unpredictability intact.

If you're the restaurant manager who occasionally comps desert to the birthday party, those customers will tell their friends about you.

If you're the carpet cleaner who is hired to clean only one room, but who treats a spot in the hallway at no extra charge, customers will tell their co-workers about you.

If you're the plumber who unplugs the sink, and then fixes the drip in the faucet for only the cost of the parts, customers will tell their neighbors about you.

If you're the television ad exec who tells the prospective client his budget won't create any impact, then recommend he not buy advertising, he'll tell other business people about you.

If you're the dry cleaner who casually mentions that your customer's shirt was missing a button, and that you've replaced it, customers will talk about you.

Each of these word-of-mouth examples has two components: surprise, and delight.

Delight wears off quickly when the surprise is gone. You must keep both of them active to make word-of-mouth work in your favor.

One last thought: the next time a delighted customer (or the friends, co-workers, neighbors, business people, and customers she's told) needs these services, which restaurant, or carpet cleaner, or plumber, or advertising sales rep, or dry cleaner do you suppose will get the call?
__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about surprising and delighting your customers may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Violated Expectations. Marketing lessons from the Dallas Cowboys.

noreply@blogger.com (Chuck McKay) — Thu, 06 Nov 2008 15:48:00 +0000

The Dallas Cowboys haven't had that bad of a season. Five wins, four losses. Slightly better than average. Unfortunately, the die hard fans are devastated. Care to speculate why?

Probably because their expectations for the 2008 season included the Super Bowl.

HBO's “Hard Knox” may have started some of the hype, featuring the team in four episodes. ESPN picked up on the extra attention given the Cowboys, and focused their considerable airtime (and commentary) on Dallas.

Then, of course, there were all of the bloggers, themselves die hard fans, who enthusiastically trumpeted the inevitable triumph.

Had the fans not been led to expect more, this season wouldn't be all that bad.

Is there a marketing lesson in the 2008 Dallas Cowboys?

Why, yes. Yes, there is.

It has to do with your customers expectations, when compared to their experiences. Outside what they've learned from your ads, many potential customers have no idea of what to expect from your company.

And then they have an actual experience with your company, and you live or die by whether your advertising is contradicted by your customer's reality.

Advertise "fast friendly service," but deliver an experience in which your customer stands in line for a turn with a discourteous employee, and every dollar you've spent on advertising is wasted – at least with that particular customer.

In much the same way that violated expectations have led Cowboys fans believe this season to be awful, your customer's violated expectations may convince her that you deliver bad service.

Worse, that you deliver bad service, slowly.

Violated expectations make people talk. Good and bad.

I wrote about those effects in Love and Indifference, Part 1:

"When you thrill shoppers with their purchases and the way they are treated, they are likely to become customer evangelists. They'll be out preaching the gospel of your company and winning converts to whatever the degree of their persuasiveness.

But the extremely displeased group turn into vigilante customers. In their minds they've been wronged. You could just as well have "Wanted, Dead or Alive" posters up with your name on 'em, 'cause they're out to get'cha. Tell twenty more? Count on it."

But what if your customer's experience is only slightly off?

What if you don't deliver great service, but you don't do a bad job, either?

If the customer expects “a gourmet meal exquisitely prepared using only select ingredients,” and gets a meal that's reasonably good, she may attribute superior qualities to the food.

That's exactly what Antonio Rangel, associate professor of economics at the California Institute of Technology demonstrated in a recent wine tasting. Rangel altered the prices on the bottles, and found:

"The volunteers consistently gave higher ratings to the more "expensive" wines. Brain scans also showed greater neural activity in the pleasure center when they were sampling those "pricey" wines, indicating that the increased pleasure they reported was a real effect in the brain."

Without any major disconnects between expectation and experience, there's a good chance that people will accept what they've been led to expect. Which leads us to a simple formula for advertising success:

1. Use your ads to create an expectation of the experience your customer will have when she does business with you.

2. Then, ensure that her experience delivers on those expectations.

3. And though we haven't yet discussed it, hold something back from your advertising. Use it to "WOW" your customers, and make their experience better than expected.

We'll give that idea some consideration next time.

In conclusion, the most effective advertising reinforces what people already believe. The most successful businesses do nothing to contradict those beliefs.

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about delivering on your customers expectations may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

What's the Boss's Most Important Job?

noreply@blogger.com (Chuck McKay) — Sat, 25 Oct 2008 17:06:00 +0000

The boss has a unique responsibility. And it's not the one most people think of when they describe the duties at the top.

Robert Kiosaki, in his best selling business book Rich Dad, Poor Dad, explained that as an employee, you have a job. As a self-employed professional, you own the job. And the owner of a business hires people to perform the job.

So, in terms of making business happen you are either someone else's employee, or you're responsible. There are no other options. And though there's an outside chance that in good times any business can just muddle through, over the next few years if you're not aggressively pursuing new business you're not likely to make it. Sorry.

Some people are just cut out to be employees.

Consider a carpet cleaning business. Not just any carpet cleaning business, this one was being contemplated by a young man who asked my help creating a marketing plan. He had worked for another, similar, business, enjoyed the work, and saw the profit potential.

We spent two days together researching and building that plan. When it was finished, I offered my best advice: DO NOT OPEN THIS BUSINESS.

The market was strong, there was room for another competitor, and the young man with the ambition and the new marketing plan actually enjoys cleaning carpets.

Unfortunately, he hates selling.

And, as we've already established, the owner's primary function is to bring in the work.

Does that mean face-to-face selling? Possibly. But it definitely means that the owner can't simply place an ad in the Yellow Pages and wait for the phone to ring. Business owners who avoid selling end up with skinny children.

At any given time, roughly 2 percent of any market is actively seeking what you sell. That 2 percent will come looking for you, or someone else who sells what you sell.

The other 98 percent?

You're missing them. Most of your competitors are missing them, too.

Most of your competitors.

Care to know who's attracting that other 98 percent? Those who actively sell the value of doing business with their companies.

The competitors who have television ads that are being watched by potential customers are getting some of the 98 percent. Those competitors who's postcards and letters are making it to the homes, who's public speaking and referral programs are producing familiarity, and who's Yellow Pages ads are being read by the very people who need their goods or services are tapping into the other 98 percent.

But, like the young man waiting for carpet cleaning customers to find him, those businesses which wait for customers/clients/patients to seek them out are hoping that their “share” of the 2 percent will pay the bills. It won't. After all, we're discussing 2 percent of a pie that may be shrinking for a while.

What will grow your slice of that pie?

There are two things you can implement immediately, and you should be doing them both.

Find a reason to get back in touch with every customer and every former customer, then remind them of the reason they chose to do business with you. That reason shouldn't be price.

If they were originally drawn to your business because of your selection, remind them that you can help them find exactly what they're looking for. If customers chose you for the speed of your service, point out all the other things they can be doing when they finish with you. If they chose you for your detailed knowledge, help them recall the value of getting exactly what they need.

You may indeed lower prices, but only do it if it will help you to gain some of your competitor's customers. And remember that he's going to be strongly tempted to lower his prices, too. Reminding people of why you're their best choice keeps you profitable.

Bringing in the business is the boss's most important job.

Are you the boss?

It's time to start selling.

__________

Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about marketing your business during tough times may be directed to ChuckMcKay@ChuckMcKayOnLine.com.