Customer Lifecycle Management,  (also called  CLM) is the measurement of different customer metrics, with the goal of helping long-term organization performance. While traditionally practiced by businesses, the same principles can be used by non-profits, government agencies, or any group that seeks to serve a large group of people over an extended time.

CLM shares some conceptual overlap with Customer Relationship Management (CRM). The most important difference between the two is that CLM always factors in time.

Parts of the customer lifecycle:

And that’s all you really need to start with!

To make sense, CLM has to be practiced by everyone in a company, with special emphasis on frontliners in sales and marketing.  CLM involves knowledge of how customers arrive at decision, in which case, an idea of the sales/decision funnel and sales process is needed.  Customer acquisition, retention, cross and up-selling, and lapsed customer win-back are some of the major ideas encountered in most CLM frameworks .

Some detailed CLM models also include provisions for:

• acquisition
• introduction to products
• profiling of customers
• growth of customer base
• cultivation of loyalty among customers
• termination of customer relationship

Regardless of your Customer lifetime management program, it’s important to understand two basic concepts- the customer buying window, and customer lifetime value. They are exactly what they sound like, and an idea of both is needed in any meaningful CLM approach.

The Customer Buying Window

The “buying window” or “purchase window” refers to a period of time where:

• A product or service is available

• A product will be available in the forseeable future.

• Customers have already made the decision to purchase that product/service.

• BEFORE a purchase or exchange is made.

Key concepts:

• The purchase window is at the “action” stage of the purchase funnel, or approaching it.

• It does not necessarily mean that they have decided to buy your product in particular. If there is no differentiation between your product and others (as in the case of most staples) availability, functionality and low cost will often be the deciding factor. For instance, not many people have a particular favorite paperclip brand.

• As soon as the decision has been made, it’s a marketer’s job is to make it as simple as possible for customers to get what they already want. Reduce the number of steps they must go through before they could make a purchase. Make sure not to confuse them with extraneous options.

• Customer buying windows are extremely variable. It can take mere moments for impulse purchases, or years as is common with some government or corporate purchases.

• Different marketing channels  and products motivate  in different ways .

• You control product availability. A product with a perception of exclusivity can be marketed and sold differently than one without.

• Frontliners in your sales and marketing teams are especially crucial in any CLM framework.

Customer Lifetime Value

Customer lifetime value (CLV) (or  CLTV), lifetime customer value (LCV), or user lifetime value (ULTV) or lifetime value (LTV) is a prediction of revenue and sometimes intangible value a customer gives over the course of their relationship with a seller/provider.

The idea that customers should be valued over entirety of their interactions with a buyer instead of  on every sale is the reason for having Customer lifecycle management programs in the first place.

CLV should not be confused with customer profitability which is a purely historical view, without future projections.

Reasons for tracking customer lifetime value:

• To determine differences between different kinds of customers

• To allow better allocation of resources according to types of customers, especially for promotions and retention programs

• To provide a better idea of how CRM programs are running

• To give an accurate idea of customer acquisitions costs and how to reduce them

• Gives business managers a long-term view of customer behavior, necessary for stable growth

There are no real disadvantages at all for tracking customer lifetime value. Problems only arise when data is misinterpreted or if market conditions are not well understood. It’s also possible to create unacceptably inaccurate models by using the wrong inputs.

There are several ways of calculating lifetime value. It isn’t generally feasible to create accurate models for every possible combination of product, customer, and future outcomes.

Some ways of calculating CLV:

• Where  is yearly gross contribution per customer,  is retention costs per customer per year,  is the horizon in years,  is the yearly retention rate,  is the yearly discount rate.

One of the more popular simplified versions:

• Assume constants for contribution margin, retention rate, and discount rates.

And others:

• CLV = Margin ($) * (Retention Rate (%) ÷ [1 + Discount Rate (%) - Retention Rate (%)])

• CLV = (Average Value of a Sale) *(Number of Repeat Transactions)*(Average Retention Time in Months or Years for a Typical Customer)

• CLV = (Avg Monthly Revenue per Customer * Gross Margin per Customer) ÷ Monthly Churn Rate

• CLV = (latest month’s Average Order Value) * ( [lifetime AOV] / [AOV]) * (Gross Margin)

Popular inputs:

• Churn rate 
• Retention rate
• Discount rate
• Interest rate
• Inflation rate
• Contribution margin
• Gross Contribution
• Retention cost
• Period

Why so many formulas? 

The  Marketing Accountability Standards Board does not officially endorse any method for calculating customer lifetime value for many good reasons.

• CLV — and therefore CLM— is dynamic, and completely dependent on the current marketing conditions

• Different goods have different intrinsic qualities – making it hard to use just one formula for multiple products and services.

• Different CLM and CRM programs may require different outputs and degrees of accuracy.

CLV should not be the sole factor for making decisions on marketing strategy for the following reasons.

• Intangible values and differences in demographic behavior are difficult to include as inputs
• Serving only “high-value” customers might lead marketing strategists to neglect opportunities to convert other customers.
• The risk of saturating high-value customer is high (they cannot buy an infinite number of cars, donuts, etc)
• The nature of product-customer-seller relationships is often difficult, if not impossible to accurately predict.

Customer lifecycle management is a major but crucial undertaking for any business that hopes to serve a any market for an extended time. While CLM programs clearly require frontliners with good customer service chops, they also require analytical mindset and plenty of strategic forethought. Developing quality products as well as identifying new ways to delight customers will also require including production, quality assurance,

It’s not just something you leave to marketers and salespeople, but something nearly everyone in any business has to be involved with.

Image Credits

Nina Matthews Photography via photopin cc

muscolinos via photopin cc

gordonr via photopin cc

Spyros Papaspyropoulos via photopin cc

Sources:

1.  “Basic Definitions: Advertising, Marketing, Promotion, Public Relations, Publicity, and Sales”. Managementhelp.org.
2. McNamara, Carter. “Marketing – A Commonly Misunderstood Term”.
3. Barry, Thomas. 1987. The Development of the Hierarchy of Effects: An Historical Perspective. Current Issues and Research in Advertising, 251-295. 
4. The customer decision journey – McKinsey Quarterly(2009)
5. salesboom.com/whitepapers/what_is_clm_whitepaper.pdf
6. Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project.
7. Shaw, R. and M. Stone (1988). Database Marketing, Gower, London.
8.  Peppers, D., and M. Rogers (1997). Enterprise One to One: Tools for Competing in the Interactive Age. New York: Currency Doubleday.
9. Hanssens, D., and D. Parcheta (forthcoming). “Application of Customer Lifetime Value (CLV) to Fast-Moving Consumer Goods.”
10. Ryals, L. (2008). Managing Customers Profitably. ISBN 978-0-470-06063-6. p.85.
11. Berger, P. D. and Nasr, N. I. (1998), “Customer lifetime value: Marketing models and applications.” Journal of Interactive Marketing, 12: 17–30. doi:10.1002/(SICI)1520-6653(199824)12:1<17::AID-DIR3>3.0.CO;2-K
12. Gary Cokins (2009). Performance Management: Integrating Strategy Execution, Methodologies, Risk and Analytics. ISBN 978-0-470-44998-1. p. 177
13. V. Kumar (2008). Customer Lifetime Value.

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The terms “purchase funnel” and “sales funnel” are the most popular, but they’re also imperfect since you can use the same models for things other than sales, promo sign-ups and survey participation among the most common non-sales actions. The same principle also applies to social media likes and shares. For every like or share that you have, you can be confident that several other people came in contact with your posts. The AIDA model, (standing for Awareness, Interest, Desire, and Action), is a classic marketing framework that has managed to be part of pop culture.  Skip to 2:52 for the part about AIDA. Makes more sense if you watch the whole clip. Warning: profanity-laden speech ahead:

We don’t advocate Alec Baldwin’s approach for every business. In any case, you will notice they didn’t even use the funnel in their model, as it was just a rundown of the stages.
AIDA is now often considered to be a historical model and has been superseded by TIREA ( Thought, Interest, Risk (Evaluation), Engagement,  Action), REAN (Reach, Engage, Activate,  Nurture) and many others.

There isn’t any standard purchase funnel, and different marketers, salespeople, and business writers advocate different models for different situations. Here are a few examples:

Is it worth adding complexity to a pretty straightforward idea? It depends on your business model and what you hope to achieve form your marketing.  For smaller companies where the role of sales and marketing isn’t differentiated all that much, it might be better to stick to simpler traditional models.

TOFU, MOFU, and BOFU

It’s more important to know which projects are generally TOFU (top-of-the-funnel), and which ones are MOFU or BOFU (middle and bottom of the funnel). This can help illustrate why certain projects are better than others at attracting customers, versus converting or retaining them.
Social media campaigns and branding for instance, tend to be (but aren’t always) TOFU projects. Lead generation can be TOFU or MOFU. Customer relations management tends to be MOFU or BOFU. There are no hard and fast rules, and it all depends on the channels you use and how you use them.

Major Limitations of Purchase Funnels

• Most do not reflect he fact that customers can move back and forth between different stages
• Classic models may not sufficiently emphasize the need for repeat business and CRM
• Some marketing and sales campaigns affect multiple parts of most funnel models at the same time

In the end it doesn’t really matter which models you use so long as you could use them to help your team understand their roles as marketers and sales people . It works best as a visualization tool- not as a guiding factor in an overall marketing strategy.

Tell us about your thoughts on Sales Funnels! We’d love to know! Comments welcome below.

Sources:

1.  “Basic Definitions: Advertising, Marketing, Promotion, Public Relations, Publicity, and Sales”. Managementhelp.org.
2. McNamara, Carter. “Marketing – A Commonly Misunderstood Term”.
3. Mirna Bard, NuReachGlobal,
4. leadformix.com – Demand Generation vs  Lead Generation – Tell them apart
5. socialmediaexplorer.com – The Death Of The Sales Funnel As-We Know It
6. b2bmarketinginsider.com – Lead generation, Demand generation and Content marketing
7. J. A. Howard, Marketing Management, Homewood 1963; cf. M. B. Holbrook, “Howard, John A.” in: P. E. Earl, S. Kemp (eds.), The Elgar companion to consumer research and economic psychology,Cheltenham 1999, p. 310-314.

Image Credits

Funnel: Charles Haynes via photopin cc

socialmediaexaminer.com

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It’s not quite Thanksgiving yet, but a lot of small business – particularly in retail – are eager to get a bit of the Black Friday (and Cyber Monday) action. While it might be too late for you by the time you read this, the same principles apply for nearly any long holiday and shopping season in most markets.

If you have a business in a shopping center or any other place that gets Black Friday traffic, go through the list to see if you’ve missed anything:

4.) Start Early!

Might be hard to imagine, but Black Friday and its sister “holiday”, Cyber Monday are pretty recent phenomena.  Both are just fairly arbitrary days for businesses to announce the start of the holiday shopping season – which has gone progressively longer and longer throughout the years. They didn’t even have a particularly high volume of sales to begin with.

It’s not uncommon to see holiday tie-ins as early as August and September. If you project or feel that business will pick up during the holidays, it makes complete sense to start as early as to get the most out of your promotions and marketing expenses.

On the actual day, you might also consider opening your doors earlier than other businesses, but if you’re cutting your employee’s family-time, you might not want to do that.

3.) Don’t Stop Promoting!

This doesn’t mean you have to inundate your social media followers and mailing list with Black Friday reminders. That would be a good way to lose followers. Your Black Friday promotions have to be fairly regular, yet not intrusive enough to annoy your market.

“But that’s just like every other promotion!” you might be saying. Yes and no. Yes, you’d want to go with basic “inbound marketing” principles most of the time – especially if you run a small business.

While your customers might be aware of you and your services, they probably won’t be aware of your Black Friday offers the first time you execute your promotions. This means you have to apply steady, calculated efforts to inform both old and new customers.

Who would you want to appeal to? You decide.

2.) Mix Traditional and Online Promotions.

There is almost no business that couldn’t do better without an online presence. Even a Facebook Page works to begin with. Following the basic sales funnel principle, a business webpage and online promotions can give your funnel a very wide mouth and while traditional promotions help you establish some semblance of “realness” and is especially important if you’re targeting a specific locality. Even Google prints banners and has business cards after all.

1.) Check Your Sales Process

If your business has has an actual physical location, and you expect crowds (not uncommon if you decide to set up shop in a shopping center, or participate in a fair or convention), make sure that the way you present and sell  goods doesn’t cause any bottlenecks that can delay decision times and cause customers to be dissatisfied.

Your promotions have to be straightforward and easy to understand. If you confuse customers you may very well end up damaging your own brand.

Here’s a more detailed look at the basic principles behind sales processes and reducing decision times.

What other Black Friday promotions ideas for small business would you like to share?

Sources and Additional Reading

1.  Comparison of U.S. online revenue on Thanksgiving and Black Friday. ComScore.
2. Neil Irwin (Nov. 23, 2012). “Black Friday is a bunch of meaningless hype, in one chart”.Washington Post.
3. Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI: ASQ Quality Press. p. 23. ISBN 0-87389-418-9.
4. William H. McNeese and Robert A. Klein (1991). Statistical Methods For The Process Industries. Milwaukee, WI: ASQC Quality Press. ISBN 0-8247-8524-X.
5. Selden (1997). p. xxii. Missing or empty |title= (help)
6.  “The Sales Funnel”, www.mindtools.com
7. When choice is demotivating: can one desire too much of a good thing? Iyengar SS, Lepper MR. Graduate School of Business, Columbia University, New York, New York 10027-6902, USA. ss957@columbia.edu
8. Understanding Impulsive Aggression: Angry Rumination and Reduced Self-Control Capacity Are Mechanisms Underlying the Provocation-Aggression Relationship Pers Soc Psychol Bull June 1, 2011 37: 850-862
9. How are habits formed: Modelling habit formation in the real world,  Phillippa Lally, Cornelia H. M. van Jaarsveld, Henry W. W. Potts, Jane Wardle; Article first published online: 16 JUL 2009; DOI: 10.1002/ejsp.674

Image Sources

Black Friday Crowd: Malingering via photopin cc

Clock: FJTUrban (sommelier d mojitos) via photopin cc

Google Outdoor Ad – sostav.ru

Jams and Jellies: archer10 (Dennis) via photopin cc
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A typical answer would explain that it happens when at least one thing of value gets exchanged for another. That’s exactly what happens in the sales process.

But this begs plenty of questions: How did you find someone to sell to? How did you figure out the value of your offer against theirs? How eager were they to make an exchange? How did you present your offer? Did you give them a reason to continue doing business with you?

Every single time a sale is made, there are several things going on leading up to its conclusion. Like blinking or breathing, you don’t have to think about these things for them to happen. But they will happen anyway, regardless of whether or not you are conscious of them.

Each part of the sales process represents an immense opportunity for any enterprise. For starters, much of what you learn from your interaction with customers at different points of the process will help develop all your other strategies. R&D, marketing, hiring, workspace design, website and content development — you name it — will all be affected by things that happen during your sales process in one way or another.

Why Bother?

It’s surprising that many businesses are able to function or even succeed, without so much taking a good look at what happens when sales are made, basically just by doing everything by the seat of their pants. People have succeeded in business for thousands of years without ever caring about it. Does knowing the sales process matter?

To use yet another imperfect analogy, you could be a bodybuilder by eating five dozen eggs a day (aka the Gaston method) and just lifting whatever heavy weights you have lying around – but you’d be stupid to try.  A serious bodybuilder will study their own physiology and match that with the right diet and exercise regimen to develop the right proportions and bulk up with the least amount of wasted effort.

Sales Benchmark Index, a marketing agency that focuses on sales states on their site:

“Companies that deploy a formal sales process, when compared to the mean, win 48% more, have sales cycles 37% shorter and generate 2x the revenue per head. The reason they have been able to consistently produce above average results is due in part because they have a formal sales methodology that the sales follow to manage their opportunities.”

Take this with a pinch of salt, since this is from a company that’s got a vested interest in marketing and sales consultancy.  But the logic is sound and even if the truth were just a quarter of those figures, it would still be a massive improvement over doing nothing.

Sales Process(es)

Great! You’re ready to take a crack at optimizing your sales process. All you have to do is figure out what the steps are.

Unfortunately, if you’re looking for a definite answer that perfectly suits your business, you won’t find it here – or anywhere else. While many business and marketing writers have come up with excellent frameworks you could copy or play around with, it’s unlikely any single process would be a perfect fit for every business.

For example, in Management of a Sales Force by Rich, Spiro and Stanton, sales are broken down into these steps.

1. Prospecting /First contact
2. Planning the sale
3. Approach
4. Customer needs assessment
5. Presentation
6. Meeting objections
7. Gaining commitment (closing)
8. Follow-up

Rich, Spiro and Stanton are writing from the perspective of sales team managers for sales team managers. Not every business would prioritize sales in the same way. You might not need to do active customer needs assessment all the time, nor would they want to develop relationships (such as when a product is understood to be a fad with a short product cycle) for example, and this step might be a useless distraction for some businesses.

For those who went to business school in the 90′s through the 2000′s, this is probably the process (more or less) that you’re familiar with.

1. Prospecting
2. Building Rapport
3. Identifying Needs
4. Delivering Persuasive Presentations
5. Overcoming Objections
6. Closing the Sales
7.  Getting Repeat Sales and Referrals

Pretty similar to the 8-step framework, except that  planning the sale isn’t emphasized and getting repeat sales and referrals is. Does it make the 7-step process any more or less correct than the other one? Of course not. It all depends on what you feel suits your business.

You will find no shortage of alternate processes, some with as few as 3 steps, others with as much as 10 or more stages. If you feel it will work great for you, by all means, go for them.

But what does “working great” really mean when we talk about sales processes?

Sales Processes Work When They:

1. Improve data gathering and forecasting
2. Help isolate problems with customer interaction
3. Help sales and marketing empathize with customer needs
4. Allow repeatable success
5. Help improve chances of repeat business
6. Address both short-term sales and long-term marketing goals

What Most Sustainable Sales Processes Lack

Here’s another example of an even shorter sales process framework. We’re not too enthusiastic about this one because it doesn’t directly address getting repeat customers or anything that happens after a sale.

1. Identify Needs
2. Present Solutions: Features, Benefits, Proof
3. Check Progress: Trial Close
4. Overcoming Objections
5.  Close the Sale

Again, it might not be a problem for your business model, but…

a sustainable sales process must address what happens after a sale.

Going back to the Pareto Principle, a stable business would normally have around 20% of its customers  responsible for around 80% of  all sales. If stability is desired, repeat business is a prerequisite. Servicing, warranties, offering complementary products – these are just a small fraction of the money-earning possibilities your frontliners could inject after you make a sale.

Why Does This Happen?

We were hoping you’d tell us in the comments, but we’ll go with something less reliable instead. I have a personal hypothesis why so many sales process models lack this crucial element – they were developed by salespeople, not marketers or long-time business owners.

Before you lynch me, I know sales is a really challenging job, and very few people are cut out for it. And it is called the “sales process” after all.

But like they say, if you only have a hammer, every problem looks like a nail. Successful career salespersons are often supremely equipped mentally and professionally– for closing sales. The problem is that sales goals tend to be short-term. Without experience from another perspective, it might become easy to lose sight of other things that matter.

Marketing teams and planners for enterprises that are fully intended to last will tend to look at the bigger overall picture and are more likely to sacrifice the short-term results in favor of something that would be better overall in the long term. However,  marketers may not have the direct boots-on-the-ground closeness of sales people and may find it difficult to understand more immediate issues.

If you have to create a process for the long haul, it should help managers address both short-term sales concerns and long-term marketing needs.

What’s your sales process? We’d love to know!

Sources and Additional Reading

1. Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI: ASQ Quality Press. p. 23. ISBN 0-87389-418-9.
2. William H. McNeese and Robert A. Klein (1991). Statistical Methods For The Process Industries. Milwaukee, WI: ASQC Quality Press. ISBN 0-8247-8524-X.
3. Selden (1997). p. xxii. Missing or empty |title= (help)
4.  “The Sales Funnel”, www.mindtools.com
5. Paul H. Selden (November 2000). “The Power of Quality Thinking In Sales and Management”. Quality Progress: 58–64.
6. Barry, Thomas. 1987. The Development of the Hierarchy of Effects: An Historical Perspective. Current Issues and Research in Advertising, 251-295.
7. A modern purchase funnel concept – Marketing-made-simple.com (2009)
8. The customer decision journey – McKinsey Quarterly(2009)

The post Basic Marketing Concepts Demystified! – Part Four: The Sales Process appeared first on The Art Of Small Business.

No point of being in business if there’s no demand for what you’ve got, right? Luckily for most of us, it is possible to create demand - within limits and context of course.

For demand to exist, a couple of things must happen. Your market will have to be:

1. Aware of your offer (or your existence, for that matter)
2. Aware of their need

Demand generation involves making one or both these things happen.

Almost everything you do that gets public notice figures into demand generation by helping your market recognize your brand. Recognition isn’t the only goal, however. Most businesses would benefit from having a positive association with their brand.

The second part of demand generation is helping your market recognize that they have a need. “Need” as used in a marketing sense is related to, but quite different from colloquial use and can refer to anything a customer feels like acquiring.

Not all needs are the same. “Hunger” and “variety” for example, are needs with different characteristics. Everyone gets hungry eventually, but few want to eat the same thing all the time, even if you could.

Major Channels for Demand Generation Campaigns

1.) Branding

Brand names and logos should communicate (or at least suggest) what a business is all about.  The value of a descriptive yet concise brand name and logo can’t be overstated, especially when you haven’t started building up your brand yet.

2.) Inbound marketing/Permission marketing

This is normally taken to mean “earned” marketing, where businesses passively offer something of value to customers, or ask permission before proceeding with the rest of the sales process. It’s sometimes called “permission marketing”, after Seth Godin’s book of the same name.  Inbound marketing includes:

• Search engine optimization
• Viral marketing
• White Papers
• Social media marketing
• Content marketing
• Email marketing
• Pay-per-click marketing

3.) Outbound marketing/Interruptive marketing

Outbound marketing once meant “marketing communications” in general. However, it’s now increasingly used to refer to “interruptive” marketing, in contrast to “permission marketing”. Depending on who you’re talking to, this could lead to miscommunication.

In any case, while often seen as more obnoxious than inbound marketing ads, they remain effective in the proper contexts, and it would be a mistake to rule these out. Some examples include:

• Telemarketing
• Door-to-door marketing
• TV
• Radio
• Traditional Print
• Pop-ups/Pop-Unders (arguably)
• Outsourced lead generation
• Outsourced appointment setting

TOFU!

One buzzword making its way through marketing departments and ad agencies all over the world is “TOFU” or Top Of the Funnel. You will often encounter this or some other similar acronyms and ideas wherever demand generation and lead generation are discussed.

The funnel here refers to any of a number of sales and purchase funnel models, the most popular being “AIDA”, representing Attention, Interest, Desire, and Action. There are hundreds of similar takes on the idea of a funnel, usually modified to suit specific industries, and occasionally hubris and ego.

Here are just a few examples of different sales funnel models:

There is no real single correct model and there is no real standardization of terms. It helps to understand that demand generation is almost always placed at the top of any sales funnel model, with lead generation either under it or at the same level.

Some managers consider demand generation “strategic” and lead generation “tactical”, while others consider them complementary. Both are often necessary for growing any business. In the end, your actual sales funnel model is a lot less important than understanding the principles behind it and why demand and lead generation are on top.

Demand Generation Vs. Lead Generation

There is plenty of confusion about the differences between these two ideas, and some companies or marketing departments that claim to do one are often doing the other. While both are “TOFU” practices, they have a very different set of goals.

In contrast to demand generation’s more classic “awareness-building” approach, lead generation involves:

1.  Collecting market information (i.e. through registration forms, etc)
2.  Build a database for future campaigns.

The direct outcome of lead generation is new contacts available for targeted sales or marketing efforts. In contrast, demand generation is just that – drumming up demand.

But Wait! There’s More!

To make things more confusing, increased awareness (not necessarily demand) can also result from a lead generation campaign. Think of all those promos and offers that you’ve seen on and off line for stuff you don’t really want at the moment. Those are direct examples of lead generation campaigns that also help with demand generation. You might not be interested now, but you might be in the future.

On the flip side, structure or execute a lead gen campaign badly (by making it look spammy for example – you’d think we marketing types would have learned by now), and people who don’t act might develop some awareness of your brand — for all the wrong reasons.

Why does it matter?

There is one very good rationale for not confusing demand and lead generation. When these ideas and goals are confused with each other, it’s often way too easy to choose the wrong channels or develop the wrong processes and content for the desired outcomes. In other words, mix up your definitions of these two and you’ll waste time, money, and plenty of opportunities.

Conclusion

Demand generation is an absolutely crucial part of growing your business. While it’s a simple concept, the misuse and non-standardization of terminology- even among marketing professionals – has made its role confusing for many managers and entrepreneurs.  Hopefully we’ve helped clear up some of the confusion.

Tell us about your demand generation strategy! We’d love to know! Comments welcome below.

Sources:

1.  “Basic Definitions: Advertising, Marketing, Promotion, Public Relations, Publicity, and Sales”. Managementhelp.org.
2. McNamara, Carter. “Marketing – A Commonly Misunderstood Term”.
3. Mirna Bard, NuReachGlobal,
4. “telemarketing definition and meaning”. Investorwords.com.
5. “direct mail definition”. wordnet.princeton.edu.
6. “Outbound Marketing – Traditional Isn’t Always Best”. WordStream.
7. “Email Blast Definition – Direct Marketing Glossary”. Marigoldtech.com.
8. “Inbound Marketing vs. Outbound Marketing .
9. “Outbound Marketing Traditional is not always best
10.  Halligan, Brian (2010) Inbound Internet Marketing Blog
11. “Inbound Marketing vs. Outbound Marketing
12. leadformix.com – Demand Generation vs  Lead Generation – Tell them apart
13. b2bmarketinginsider.com – Lead generation, Demand generation and Content marketing
14. smallbusiness.chron.com – Basics Marketing Demand Generation
15. work.deerdigital.com – What Is Demand Generation Anyway?

Image Credits

Funnel: Charles Haynes via photopin cc

Tofu: arimoore via photopin cc

Cash: quaziefoto via photopin cc

Analysis: kenteegardin via photopin cc

Cattle Brand: Steve Corey via photopin cc

Megaphone: garryknight via photopin cc

Phone: socialmediaexaminer.com

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One mistake many inexperienced entrepreneurs and managers make is to look at business from a purely transactional (one-time exchange) perspective. A large part of a marketer’s job — some would argue the main part– is to cultivate relationships. Of course, relationships are a two-way street. You can’t force relationships to develop, and the vast majority of your customers will make purchases with a purely transactional intent.

Why Manage Customer Relationships?

Customers with a transactional intent will typically comprise roughly 80% of any businesses’s clientele, following the Pareto Principle. If this is the case, why bother managing customer relationships? Why cater to that other 20%?

Following the same principle,  that same 20% will be typically responsible for around  80% of your sales. This slideshare, while made from a narrower advertising perspective, illustrates why it’s important to consider interactions with customers as opportunities to develop relationships, instead of  as just a way to get more sales.

Keeping track of the habits of thousands, if not millions of customers is a huge challenge. Attempting to systematically develop long-lasting relationships even more so. It is however, worthwhile for several very good reasons.

A good Customer Relationship Management strategy will:

• Create a stable flow of income.
• Create a positive impression of your brand.
• Turn customers with otherwise negative experiences into advocates.
• Allow you to gather customer information that would be unobtainable without a CRM strategy.
• Reduce your dependence on additional manpower for external sales and promotion. New customers will come to you from outside the scope of your direct promotions.
• Increase the positive impression given via word-of-mouth.  Not all word-of-mouth is good for you!
• Speed up customer decisions, allowing more to be served per unit of time. Increased trust from good CRM will reduce time spent waffling on details.
• Help you retain existing customers
• Increase opportunities for joint ventures and promotions with other highly regarded brands.
• Increase sales!
• Ultimately reduce the cost of each sale.
• Improve long-term profitability.

What counts as transactional or relational?

This is infinitely debatable, but common answers that contrast the two include:

Of course, you aren’t in business to develop relationships– you’re in business to earn a profit. A relational approach is desirable in most businesses for many reasons, but it always needs to be done with the intent of closing sales. An overly soft approach might leave you without any.

The Sales Process

The first step to a systematic, trackable CRM system is to take a look at your sales process. At casual glance, a sale would seem like just an exchange of one thing of value for another.  But there are actually several things going on in any transaction.

In Management of a Sales Force by Rich, Spiro and Stanton, a sale is broken down into the following steps.

1. Prospecting /First contact
2. Planning the sale
3. Approach
4. Customer needs assessment
5. Presentation
6. Meeting objections
7. Gaining commitment
8. Follow-up

Whether or not you believe in this model or another, more things are happening in any sale than a casual observer (or a casual entrepreneur) might expect. Each step is an opportunity for any CRM system, whether for directly improving customer experience, or for tracking and data analysis.

The Purchase Funnel

A Purchase funnel (also known as a Sales funnel, or a Decision funnel) is any of a number of different models that illustrate how a customer arrives at a decision. Doesn’t have to be a purchase, necessarily. The funnel could be used to look at any of a number of customer actions, from participating in surveys, to sharing your promotions.

You might already have heard about the parts of a  classic purchase funnel. The AIDA model, with acronym standing for  Awareness, Interest, Desire, and Action, is one of the most popular ways of explaining what goes on in a sale.

provenmodels.com

The idea has been misused and misunderstood a lot as well. Some business writers may omit the inverted pyramid or funnel concept altogether. But the shape actually illustrates that “acting” (i.e. paying) customers will always represent a small fraction of the people who are actually made aware of your product or service.

There are always fewer people taking action compared to those who merely desire to take action. There are always fewer people who desire your product than are merely interested in it. There are always fewer people interested in your product than people who are merely aware of it.

While not a perfect way of saying things, it might be useful to think of it this way: A marketer’s job would then be to widen each stage of the funnel. Widening on top implies increasing your reach, widening the middle or bottom implies higher conversion rates.  Indeed, this pathway is often called the chain of conversion.

Customer Lifecycle Management

Speaking of the chain of conversion, the Customer Lifecycle refers to the measurement of customer behavior as they move through that chain, as well as subsequent interactions over time. Customer Lifecycle Management involves controlling factors that influence customer behavior as they interact with your business, hopefully leading to positive outcomes for your business (repeat sales, better branding, etc.)

A simplified customer lifecycle is often represented as:

• Acquisition – When someone first becomes a customer.

• Service – When goods are exchanged.

• Retention - When a customer comes back for another transaction.

Customer Lifecycle Management is often confused with Customer Relationship Management, or CRM. They are mostly similar, except CLM involves the element of time.

The Customer Buying Window

The “buying window” or “purchase window” is a period of time when:

• A product or service is available or will be available in the forseeable future.

• Customers have already made the decision to purchase that product/service.

• No sale or exchange has been made… yet.

This means that your customers are at the “action” stage of the purchase funnel, or are at least getting there. It does not necessarily mean that they have decided to buy your product in particular. Staple items such as office supplies for instance, are not usually purchased based on brand as much as they are for function, cost, and availability.

As soon as the decision has been made, it’s a marketer’s job is to make it as simple as possible for customers to get what they already want. Reduce the number of steps they must go through before they could make a purchase. Make sure not to confuse them with extraneous options.

Some things to consider:

• Customer buying windows are extremely variable, ranging from a matter of moments (impulse purchases) to years (i.e. real estate, some preordered tech items).  Up until recently, Google Adwords measured conversions (purchases and opt-ins) using a 30-day period, but recently (and extremely belatedly) have allowed customization from 7 to 90 days to reflect this wide variability.

• Different marketing channels  and products motivate  in different ways . You are more likely to buy food when you close enough to smell it, for example. On the other hand, banking services are typically less of a hassle online than they are in the real world. You might feel a less immediate need to buy clothes distributed online than you would in a brick and mortar store.

• You control product availability. Limited time or distribution offers give customers a sense of urgency or exclusivity. These can be tied in to promotions and branding. Luxury or aspirational brands for example, benefit to some degree by not being readily available. Limiting availability can also be used to test new products as well as drum up support for your brand.

• A good sales team is indispensable! Your salespeople will often have firsthand experience about the market that is often unquantifiable or difficult to otherwise observe. Your customers will also often develop relationships with your salespeople- not necessarily your brand. It’s crucial that your salesforce understands the goals and the intent of your CRM strategies and are a part of your marketing campaign planning process as well.

Customer Lifetime Value

Customer lifetime value (CLV) (or  CLTV), lifetime customer value (LCV), or user lifetime value (ULTV) or lifetime value (LTV) is a prediction of revenue and sometimes intangible value a customer gives over the course of their relationship with a seller/provider.

Customer lifetime value should not be confused with customer profitability which is a purely historical view, without future projections.

There are several good reasons for tracking customer lifetime value:

• To determine differences between different kinds of customers

• To allow better allocation of resources according to types of customers, especially for promotions and retention programs

• To provide a better idea of how CRM programs are running

• To give an accurate idea of customer acquisitions costs and how to reduce them

• Gives business managers a long-term view of customer behavior, necessary for stable growth

There are no real disadvantages at all for tracking customer lifetime value. However, it is easy to misinterpret data or use the wrong models if there is a lack of understanding with regards to market context.

There are several ways of calculating lifetime value. It would not be feasible to create accurate models for every possible combination of product, customer, and future outcomes.

Here are some of the more popular inputs:

• Churn rate 
• Retention rate
• Discount rate
• Interest rate
• Inflation rate
• Contribution margin
• Gross Contribution
• Retention cost
• Period

Examples of different formulas for calculating customer lifetime value:

• Where  is yearly gross contribution per customer,  is retention costs per customer per year,  is the horizon in years,  is the yearly retention rate,  is the yearly discount rate.

One of the more popular simplified versions:

• Assume constants for contribution margin, retention rate, and discount rates.

And others:

• CLV = Margin ($) * (Retention Rate (%) ÷ [1 + Discount Rate (%) - Retention Rate (%)])
• CLV = (Average Value of a Sale) *(Number of Repeat Transactions)*(Average Retention Time in Months or Years for a Typical Customer)
• CLV = (Avg Monthly Revenue per Customer * Gross Margin per Customer) ÷ Monthly Churn Rate
• CLV = (latest month’s Average Order Value) * ( [lifetime AOV] / [AOV]) * (Gross Margin)

Why so many formulas? 

Customer Lifetime Value is dynamic, and the required inputs will likely change over time. Formulas should be chosen or developed in the context of your products, environment and Customer Relations Management strategy. The  Marketing Accountability Standards Board does not officially endorse any method for calculating customer lifetime value for this and many other reasons.

CLV should not be the sole factor for making decisions on marketing strategy for the following reasons.

• Intangible values and differences in demographic behavior are difficult to include as inputs
• Serving only “high-value” customers might lead marketing strategists to neglect opportunities to convert other customers.
• The risk of saturating high-value customer is high (they cannot buy an infinite number of cars, donuts, etc)
• The nature of product-customer-seller relationships is often difficult, if not impossible to accurately predict.

Why Your Approach to CRM May Be Wrong

There is much confusion about the role CRM plays in businesses, given the non-standardization of terms and methods, and the amount of data gathering and analysis that takes place. Despite the extensive demands it puts on number-crunching, Customer Relationship Management is by no means an exact science and it is a mistake to treat it as such.

CRM, like most marketing practices, should also be seen as an art, and from both hard and soft science perspectives. A purely numbers-based approach has been the downfall of many attempts at CRM.

Once this is understood, it’s clear that a balanced, rational CRM strategy and prudent execution – as opposed to blindly following set processes – is needed not only for repeat business, better branding, and customer satisfaction, but for sustainable growth as well.

What’s your approach to Customer Relations Management?

Sources

1. Barry, Thomas. 1987. The Development of the Hierarchy of Effects: An Historical Perspective. Current Issues and Research in Advertising, 251-295.
2. A modern purchase funnel concept – Marketing-made-simple.com (2009)
3. The customer decision journey – McKinsey Quarterly(2009)
4. “The salesman should visualize his whole problem of developing the sales steps as the forcing by compression of a broad and general concept of facts through a funnel which produces the specific and favorable consideration of one fact. The process is continually from the general to the specific, and the visualizing of the funnel has helped many salesmen to lead a costumer from Attention to Interest, and beyond” (p. 109).
5. salesboom.com/whitepapers/what_is_clm_whitepaper.pdf
6.  Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear inMarketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project.
7. Shaw, R. and M. Stone (1988). Database Marketing, Gower, London.
8.  Peppers, D., and M. Rogers (1997). Enterprise One to One: Tools for Competing in the Interactive Age. New York: Currency Doubleday.
9.  Hanssens, D., and D. Parcheta (forthcoming). “Application of Customer Lifetime Value (CLV) to Fast-Moving Consumer Goods.”
10.  Ryals, L. (2008). Managing Customers Profitably. ISBN 978-0-470-06063-6. p.85.
11. Berger, P. D. and Nasr, N. I. (1998), “Customer lifetime value: Marketing models and applications.” Journal of Interactive Marketing, 12: 17–30. doi:10.1002/(SICI)1520-6653(199824)12:1<17::AID-DIR3>3.0.CO;2-K
12. Adapted from “Customer Profitability and Lifetime Value,” HBS Note 503-019.
13.  Gary Cokins (2009). Performance Management: Integrating Strategy Execution, Methodologies, Risk and Analytics. ISBN 978-0-470-44998-1. p. 177
14. V. Kumar (2008). Customer Lifetime Value. ISBN 978-1-60198-156-1. p. 6

Image Sources

Window: The Uprooted Photographer via photopin cc

Formula: trindade.joao via photopin cc

Haggle: TheeErin via photopin cc

Service: Lynn (Gracie’s mom) via photopin cc

Quote: deeplifequotes via photopin cc

Transaction CarbonNYC via photopin cc

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Just as coherent stories have a plot, defined characters, settings, themes, and conflict, sustainable marketing campaigns will need the right mix of ingredients. The classic marketing mix is made up by the Four P’s of Marketing:

• Promotion
• Price
• Product and
• Place (distribution)

Literature and marketing have a couple of other similarities. Both are meant to address an audience and convince them of ideas. Both are meant to meet certain needs. Anyone can write a short story or create a marketing strategy without ever knowing the necessary components ever existed. And people do this all the time- often with poor results.

A story that fails to include conflict, a plot, interesting characters, interesting themes, and interesting settings would in most cases be difficult to like, let alone read.

Likewise, not learning about the necessary components of the marketing mix makes it very difficult to consistently come up with coherent marketing strategies that actually help your organization meet actual needs. Not only will learning the Four P’s save you time and resources, it will becomes simple to steer your business towards a desired direction.

In other words, learning the Four P’s is not only good for you, it’s great for your customers as well.

Marketing vs. Sales

Ask almost anyone the difference between marketing and sales, and chances are, they’d have to pause to think about it. One potentially fatal mistake many novice entreps and marketers make is to confuse selling with marketing.

Before the components of the marketing mix can be discussed, it’s important to distinguish the general differences between sales and marketing.  Here’s a rough idea of what the differences are:

You’ll notice that the Four P’s fall squarely under the scope of marketing.  Addressing these four things are absolutely central to what marketers are all about.

The 4 P’s of the Marketing Mix 

Developing the right set of strategies for each “P” is a basic part of creating sustainable marketing campaigns. Here’s how they affect your marketing.

4.) Product

Every business offers a product or service.  These can be tangible, meaning they actually exist in space; or intangible. The clothes you wear and the devices you’re reading this through are examples of tangible products. Haircuts and legal advice are examples of intangible services.

Some products are also intangible, such as computer applications.  However, with the increasing value and importance of intangible products and services in today’s world, there’s still plenty of debate going on about the differences between intangible goods and services.

Important ideas include:

• Consumer demand – Learning what your potential customers actually need is the first step towards developing marketable products and services. It would be pointless to offer a product or service for which there is no real demand. However, it’s completely possible to create a demand when there was previously none, through promotion.

• Product development - products and service features and design should address consumer demand. Testing should also be done to ensure better customer experiences.

• Product life cycles - The circumstances around which a product is sold is constantly changing – tastes change, competitors emerge, new technologies are developed, etc. Some products will also realistically have a short-lived appeal for one reason or another. Fads, fashion items, and computer software are common examples of these. Even staple items will often be sold in a different way. Coca-Cola for example, has been sold and promoted in different ways in different circumstances, despite the actual product remaining essential the same throughout its long history.

• Product positioning - How you want your product or service perceived in relation to competition, if any. The design and features of your product, as well as the other P’s are all important factors to consider when determining this.

3.) Price

Pricing can be a lot more complicated than new entreps might expect. Set prices should also complement the other parts of your marketing mix and help recover the cost of promotions, distribution, and product-expenses. Your market’s perceptions of your product and brand are also affected by pricing.

Basic pricing strategies include:

• Market skimming pricing  - Pricing high upon introduction for early adopters, then lowering prices to meet demand

• Market penetration pricing - Pricing low, often at a loss in order to increase market share

• Neutral pricing - Pricing more or less the same as competitors with similar offers.

• Premium/Prestige pricing  - Pricing high to raise product/service perceptions

2.) Promotion

This is probably the part we’re all familiar with. Advertising, public relations, personal selling, sales promotion, and word-of-mouth are just some of the parts of this marketing mix component.

One extremely important development in the past generation is the widespread use of social media tools. These let you do so much more than just promote brands online. They allow real-time feedback and are unprecedented in speed and scope as a data-gathering tool.

The promotions channels and strategies you use will have to be complementary to the other parts of your marketing mix. A product with premium pricing and exclusive distribution for example, might be better off advertising in lifestyle magazines rather than on television.

Common promotions channels include :

• Mailing lists
• Outdoor ads
• Television
• Social media sites
• Radio
• Word-of-mouth
• Trade and consumer fairs
• Product/brand tie-ins
• Celebrity endorsements
• Magazines
• Newspapers
• Events

These are by no means the only ways to promote brands. Also, there is huge variation between different operators of each channel. What works well on Pinterest for example, may not give you the same returns on LinkedIn.

1.) Place (Distribution)

Place refers to how you distribute your goods and services. Now that so much commerce is done online, “place” doesn’t necessarily refer to physical brick and mortar stores. Where and how widely you distribute can not only affect your customer’s ability to purchase your goods and services, but also affect their perceptions of your brand.

Common strategies include:

• Intensive distribution

• Selective distribution

• Exclusive distribution

• Franchising

BONUS: Other P’s!

Some marketers subscribe to a “7 P” model to reflect a more holistic approach. They’re not as well know or cited as the other P’s and they can arguably be folded in to the original “4 P” model. What do you think?

• Physical evidence – the parts of the buying experience that customers can physically perceive.

• People – the employees in direct contact with customers.

• Process – any and all systems that affect marketing processes.

It’s hard to exaggerate how important a balanced marketing mix is for any business.  Focus too much on promotions, and you might not be doing enough to improve your offers. Fixate on delivering the lowest prices, and you might ruin your own reputation over time, even when you’ve got a quality product. The possibilities for messing up are endless. But at least you now  know what to look out for.

Knowing which P’s are at play is the first step not just for creating effective marketing campaigns, but for creating a pattern of success for your business.

Sources

1. Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
2. Borden, Neil. ”The Concept of the Marketing Mix”. Neil Borden.
3. Banting, Peter; Ross, Randolph E. Journal of the Academy of Marketing Science
4.  Kerin, Hartley and Rudelius “Marketing, The Core,” 4th Edition, McGraw Hill Publishing 2001.
5.  ”The 7 Ps of Marketing”.
6.  Don E. Schullz, Stanley I. Tannenbaum, Robert F. Lauterborn(1993)“Integrated Marketing Communications,”NTC Business Books, a division of NTC Publishing Group.
7. Koichi Shimizu (2009) “Advertising Theory and Strategies,”16th edition, Souseisha Book Company. (Japanese)
8. Koichi Shimizu (2003)”Symbiotic Marketing Strategy,”4th edition, Souseisha Book Company.(Japanese)
9.  Brian Solis(2011) Engage!: The Complete Guide for Brands and Businesses to Build, Cultivate, and Measure Success in the New Web, John Wiley & Sons, Inc. pp.201-202.
10.  E. Jerome McCarthy (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin, Inc., p.37.
11. Trout, J., (1969) “”Positioning” is a game people play in today’s me-too market place”, Industrial Marketing, Vol.54, No.6, (June 1969), pp. 51–55.
12. Ries, A. and Trout,J. (1981) Positioning, The battle for your mind, Warner Books – McGraw-Hill Inc., New York, 1981, ISBN 0-446-34794-9
13. Trout, J. and Rivkin, S. (1996) The New Positioning : The latest on the worlds #1 business strategy, McGraw Hill, New York, 1996, ISBN 0-07-065291-
14. Moore, G. (1991) Crossing the Chasm, HarperCollins Publishers, 1991.
15. Levi, K. (2007) “Differentiate or Diminish: The Art and Necessity of Business Positioning”, (March 2007), p. 9

Image Sources

Vending Machine: midorisyu via photopin cc

Price Tag: CarbonNYC via photopin cc

Drafting: fiddle oak via photopin cc

Megaphone: garryknight via photopin cc

Social media: mkhmarketing via photopin cc

Mixer: Bunches and Bits {Karina} via photopin cc

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Management is a series of decisions – some harder than others. The process of decision-making, as well as the mental and physiological mechanisms behind decisiveness has been the subject of hundreds of thousands of studies. What is clear is that making good, timely decisions is a function of both cognition and willpower.

The need for cognition is pretty straightforward. You can’t make good decisions if you can’t understand your choices for what they are. For most people – indeed most managers – the real problem lies in willpower. Willpower  is what keeps you from making choices on impulse. Unfortunately, the line between procrastination and waiting for the best time to act can be extremely blurred – in business, speed is often more important than the small details.

To make matters more complicated, willpower can be negatively affected by huge number of factors,  including but not limited to as how much sleep you got, when your last meal or break was, social pressures, and your genetic predisposition to compulsive behavior.

Better Decision-Making Can Be Trained

In a study for a book conducted by self-help author and University of Pennsylvania author Martin Seligman and his colleagues, they asked two million respondents to rank their personal strengths. Of the 24 given skills, self-control, perhaps unsurprisingly, ranked at the very bottom of the list.

It’s easy to overlook the fact that self-control is a skill. Not only is it learned, the ability to easily exercise it is finite. Think of all the times you’ve been stressed out, then did something you didn’t mean to, like cheat on your diet, or make impulse purchases.

Fortunately, like almost any other skill, self-control can be maximized, and willpower can be stretched considerably. It’s not that simple though. Just ask anyone who’s made a New Year’s Resolution or tried to lose weight.

A popularly cited study (Gailliot et al., 2007) strongly suggests that willpower is tied to glucose levels, citing improved mental endurance in athletes when drink something sweet, or merely swish it in their mouths. Other studies refute this, saying that the activation of reward centers in the brain (when test subjects taste something sweet) is the more likely reason. A recent study asserts that decision fatigue only occurs when people believe it exists, contradicting the evidence presented by previous studies.

Proven Strategies for Better Decision-Making

There’s plenty of convincing arguments from all sides. Decision fatigue is however, very real phenomena, at least for most people, and this is true whether or not glucose is actually responsible for it.

If you’re one of those who believe they get stuck or fatigued at having to make too many decisions, it makes sense to try to expend as little effort as possible when making each choice. These are some of the proven methods we’ve found that can streamline your decision-making process.

8.) Avoid Distractions

We’ve previously discussed the effects of distractions in a work setting in a two-part series. While we all could use a distraction every once in a while, they can lead to serious dips in productivity and cause your brain to have to ramp up again when you go back to your original task. As far as decision-making goes, diversions, even when related to work, can easily derail you and use up mental resources needed to make other future choices.

Office Distractions: Part One – How Divided Attention Costs Businesses

Office Distractions: Part Two – Simple Ways To Stay Focused At Work

7.) Take Naps

We extensively discussed this on a previous post, but this bears repeating. While the lack of sleep doesn’t reduce cognitive capacity as much as popularly believed, it severely reduces your ability to focus, and your mind will be jumping all over the place. Your ability to process memories will also take a hit. Combined, these can make for some bad decisions.

Attack of the Killer Z’s – How Napping Boosts Productivity

6.) Limit Your Choices

In an interview with Vanity Fair, President Barack Obama said “You’ll see I wear only gray or blue suits…I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make”. Steve Jobs also famously wore a black mock turtleneck and jeans almost every day. Albert Einstein also had multiple suits of the same color and type because he claimed he didn’t want to waste any brain power.

Fewer choices often mean more time and mental energy to think about other things. More choices are often downright paralyzing. McDonald’s has recently cut down on the number of items on their infamously bloated menu. One of the many good reasons they had for it was that it would help speed up customer decision time. Having plenty of choices is appealing, in theory. However, the reality is that too many choices can leave you pointlessly bogged down.

In a popularly cited study by Sheena Iyengar from Columbia University, researchers set up a booth with jam samples. They switched from offering  24 different flavors to just six every couple of hours. Regardless of the number of flavors offered, customers sampled an average of two flavors and were given purchase coupons.

What’s fascinating though is that while more people (60%) were drawn to the stand when there were 24 choices available, the researchers were only able to get a 3% conversion rate. When the stand only had 6 flavors, they could get 40% to come over for samples. However, 30% of those who sampled from the small set went on to purchase a jar with their coupons.

While this is all interesting from a sales point of view, what it tells us is that when we have more choices, we are likely to hold off on a decision. In situations where getting something fast is a lot more important than getting it done perfectly, holding off can be a liability.

Something as simple as a pen and paper decision matrix can help you quickly narrow down your choices.  Asking others for their recommendations or finding out which choices are popular for the application you need is also a good way to start weeding out the the options you don’t really want to pay attention to.

Delegating the decision or letting the matter go to a vote can also do wonders for making a wide range of choices less of a problem for managers.

5.) Create To-do Lists Based on Specific Goals

You can’t really plan if you don’t have anything to plan for. If you don’t set clear goals, then you will have a much tougher time narrowing down your possible options. When you have something specific in mind for your enterprise, it becomes so much simpler to make informed choices without as much mental effort. If your goal is too general, then that just leaves you with more options to waste your time thinking about.

When you’ve set specific goals, you can work backwards to easily figure out what you want done. When that’s done, to-do lists can be immensely helpful in helping you take action on things without having to spend any more time and mental effort trying to remember them. To-do lists and set plans are great for helping keep you focused and on things that actually need to be done without expending much mental energy – precisely why pilots go through them each and every flight.

Here’s the pre-flight checklist for a Boeing 747-400 jumbo jet. Even if you trained a pilot to be some sort of a mental athlete, it would stretch credibility that they could consistently and mentally safely go through these procedures without accidentally skipping a step after a few hundred flights. Checklists for routine tasks likewise, greatly reduce the chance you’d make a mistake, and help with your own peace of mind.

For routine items on your list it’s also important to set quotas. If you’re new to something it’s important however, to start small, then slowly but continuously ramp your way up to higher numbers, as you don’t want to set unrealistic goals and quotas. Doing so will only set you up for disappointment.

Small Business Management Tip – Celebrate Milestones! 

Goals and quotas always work best though when you:

4.) Give Yourself Time Limits

Back in 1955, Cyril Northcote Parkinson wrote an essay that got published in The Economist . The opening line would prove to be far more enduring than his own name:

Work expands so as to fill the time available for its completion.

The same thing absolutely applies to decisions. Give yourself as limited a time as possible to make decisions. More time means more time agonizing over it and second-guessing yourself.

If faced with no clear choice and no time to gather more details, trust your instincts. A recently published study demonstrates that gut instinct can be surprisingly accurate than was previously been given credit for. Note though that this only works if you have at least some knowledge about what’s going on, so we wouldn’t want you to make rash decisions just to save time.

If you can’t reach a satisfactory decision in the time you gave yourself:

3.) Learn To Let Go

Sometimes, it’s best to take no action on something and just move on.  Try to come back to it later after you’d gotten other stuff done.

Same thing if you decided to go on a less than ideal choice. Fixating on bad choices or opportunity costs that you couldn’t correct anyway is unproductive. If you feel like you did the best you could do with the information you had at the time you made the decision let go. If you didn’t feel you did, then learn from it, and let go anyway. This will help conserve your mental endurance for other decisions you’ll have to make later on.

Another way you could let go is to of course, delegate to someone you trust. Make sure not to hover over them or second-guess them constantly, as that would not only negate the rationale for delegation, it could lead to resentment within your business.

2.) Simple Rituals

Rituals help put you in “the zone”. A few moments of prayer or other forms of meditation, or even focusing on a lucky charm can do wonders for your cognitive ability as well as your willpower. Even if you don’t really believe in them.

Multiple studies (we’re talking dozens, if not hundreds of different studies by reputed universities all over the world)  demonstrate that meditation boosts neural connections, gives a statistically significant increase in wakefulness, cognitive ability, relaxation, while simultaneously helping reduce stress, anxiety, blood pressure – and brain aging. 

Even things that aren’t necessarily thought of as meditative help. There is  evidence that engaging in extra activities that require some self-control will allow you to stretch out your willpower incrementally over time. These activities don’t need to be related to work either. The idea is not new. Martial artists and monks have been doing these sorts of exercises for millennia.

Activities need not be strenuous either. Using your non-dominant hand for example, or committing to do a couple of simple exercises every time you see some arbitrary object should do fine. Something meaningful such as contributing a dollar a day to company Halloween party fund or a charity would be even better.

Increasing the amount of willpower available to you should in theory help you make more decisions throughout the day before your prefrontal cortex finally decides to call it quits.

Lastly:

1.) Make All These a Habit!

The only way to ensure that you set yourself up for consistently making good decisions is by repetition. This might be the toughest thing to do out of everything on the list.What you are trying to do here is to literally rewire your neural connections. As anyone who’s ever tried to learn a specific skill knows, this part takes time.

The problem we often encounter when we try to learn to increase or maximize stuff like willpower or cognitive efficiency is that it’s all abstract, and tracking progress can be difficult or impractical. This makes it far too easy to fall off the wagon.

You can only notice yourself get better at it after an extended period of time, depending on how well you stick to your routine. It’s same as when you learn to paint or play and instrument. Even the best painters and musicians start out pretty horrible. Their transitions through fluency, and eventual greatness are all gradual and as slow as it gets.

So if someone says you could learn how to increase your willpower in weeks, you probably shouldn’t believe them. The process of creating habits involves building neural pathways in your brain – and this takes a heck of a lot of time. How much time? In his book Outliers, Malcolm Gladwell 10,000 hours. Another says it takes approximately 45 days. As everyone is different, and as all authors like a good digestible factoid to throw around, it might be reasonable to suspect it may take much longer 10,000 hours, let alone 45 days.

How long it takes shouldn’t matter though. If you plan to be in the entrepreneurship game for the long haul, learning how to be genuinely decisive is one of the best time investments you could ever make.

Perhaps Daft Punk said it best

A bit old, but if you haven’t seen this yet, do yourself a favor an watch what will be the best 3:45 minutes of your day.

Sources and Additional Reading

Habit Formation  - Psychology Today

Self Regulation Failure – Goal Setting And Monitoring - Psychology Today

Habits are Everything - Psychology Today

Do You Suffer From Decision Fatigue? - New York Times

Here’s What Happens When You Focus Too Hard  - Inc.com

Restricting Temptations: Neural Mechanisms of Precommitment, Molly J. Crockett,Barbara R. Braams, Luke Clark, Philippe N. Tobler, Trevor W. Robbins, and Tobias Kalenscher

Principles of self-regulation: The nature of willpower and self-control. Mischel, Walter; Cantor, Nancy; Feldman, Scott Higgins, Edward Tory (Ed); Kruglanski, Arie W. (Ed), (1996). Social psychology: Handbook of basic principles. , (pp. 329-360). New York, NY, US: Guilford Press,

The Physiology of Willpower: Linking Blood Glucose to Self-Control, Matthew T. Gailliot; Florida State University, gailliot@psy.fsu.edu; Roy F. Baumeister, Florida State University

When choice is demotivating: can one desire too much of a good thing? Iyengar SS, Lepper MR. Graduate School of Business, Columbia University, New York, New York 10027-6902, USA. ss957@columbia.edu

Understanding Impulsive Aggression: Angry Rumination and Reduced Self-Control Capacity Are Mechanisms Underlying the Provocation-Aggression Relationship Pers Soc Psychol Bull June 1, 2011 37: 850-862

How are habits formed: Modelling habit formation in the real world,  Phillippa Lally, Cornelia H. M. van Jaarsveld, Henry W. W. Potts, Jane Wardle; Article first published online: 16 JUL 2009; DOI: 10.1002/ejsp.674

A self-control model of depression Lynn P. Rehm,University of Pittsburgh, Pittsburgh, PA, USA , Behavior Therapy, Volume 8, Issue 5, November 1977, Pages 787–804

“Brain damage and addictive behavior: a neuropsychological and electroencephalogram investigation with pathologic gamblers,” M. Regard, D. Knoch, E. Gutling, and T. Landis, Cognitive and Behavioral Neurology, Vol. 16, No. 1, March 2003, 47-53. Address: Marianne Regard, Dept. of Neurology, University Hospital Zurich, CH- 8090 Zurich, Switzerland.

A family study of obsessive-compulsive disorder, Am J Psychiatry 1995;152:76-84.

Image Sources

Choices: e g g via photopin cc

Obstacle course: The U.S. Army via photopin cc

Distraction: askpang via photopin cc

Chocolates: PetitPlat – Stephanie Kilgast via photopin cc

Jams and Jellies: archer10 (Dennis) via photopin cc

Goal Post: Lars Plougmann via photopin cc

Hourglass: flod via photopin cc

Balloons: practicalowl via photopin cc

Meditate: merwing✿little dear via photopin cc

Synapse: MikeBlogs via photopin cc

Piano: thart2009 via photopin cc

autopilot: williamcho via photopin cc

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Offering professional services of any kind is not as easy as it might seem.

Provided you have the skills to get started, the ordeal of a services business is not without its own set of thorns. You can call your one-person operation anything you like, but it’s a business.

While you may or may not leverage, grow a team, and run it like a typical organization, it’s still a business and it’s going to be just as hard as it is to run any other business. If you are a service provider or any kind, here are some startup commandments for you:

4.) Depend on Marketing– for Life

Make marketing yourself and putting the whole machinery to work on getting clients the first task, everyday, for the rest of your life. It’s hard to survive on your own. As if that wasn’t enough, the pain of thought that you don’t know where your next paycheck comes from is unbearable.

Why bear such pain when there’s a simple solution for it? As long as you plug the sales machinery or the marketing magic to your business, you’ll continue to get clients by the sheer magic of numbers.

For every 10 clients you talk to, you’ll at least be able to sell your services to one. Follow up with 4 others and you’ll have an impressive pipeline in months.

You can choose to work with clients you like and ignore those you think wouldn’t be a good fit. It’s called the power of abundance. Who says you have to go hungry?

3.) Don’t go Cheap — Go Smart!

Let’s assume that you provide web development, web design, and graphic design services. Owning a website to showcase your portfolio, subscribing to Adobe Creative Cloud, and subscribing to a project management tool could then be necessary investments.

Every type of business requires such mandatory investments. Don’t skimp on them.

You could, however, be smart about where and how you invest your money. Bootstrap as much as you can. Sign up for free trials before investing in tools or products. Ignore large time and money investments for starters. For example, make it a point to dig through reviews and compare services before you finalize one, such as WhoIsHostingThis for web hosting, PCMag for tech hardware, and simply the BBB for other service providers!

Use free tools – for all aspects of your business operations – available online today. When the time comes for you to go for a paid version of a much-needed tool, you’ll just know.

2.) Think of Differentiation

Most businesses fall into the “me too” pit. Doing exactly what your competition does doesn’t do you any good. So, you might ask?

 “I am a one-person business. What else can I do to provide value on top of my services?”

Good question. You are a one-person business so you can take the decision right away. As for the second-part of the question, here’s how you can provide value:

• Be incredibly good at what you do: No excuses or exceptions. You are expected to provide services or sell certain goods and that’s the heart of your business. Learn additional skills and make you address your “skill and expertise” part of the equation. Ty Kiisel tells us on Forbes, being the best is indeed possible.

• Work hard and be honest: By being honest, I mean that wouldn’t accept payments that you didn’t work for. You’ll not fool clients and take advantage of the fact that they don’t know things you do.

• Offer them a no-conditions asked, money-back guarantee: It takes guts and ripe honesty to do this for services (because of effort and time involved). Yet, they are an incredibly effective way to prove your worth, credibility, and confidence to your clients. Let them keep the results of your service if any, such as website mockups, blog posts, or other such completed work.

• Communicate promptly, and often: Even if your clients don’t, you will. Time zones could be a problem so factor that in. Keep a running document on work status and share it with clients. Provide reports or other work-related feedback (for services like analytics management, paid campaign management, social media services, and marketing).

• Never miss deadlines or go back on any promises made: Over a certain time-period of your work on projects, you’ll occasionally miss deadlines for legitimate reasons such as ill health or unintended external issues. Apart from anything that important, there’s nothing worse that missing deadlines or going back on promises you made to your clients.

• Don’t work for money: It’s disgusting to let the client think all you do is to work for money. It might be a natural thing to do but it’s unnatural to make clients believe that it’s the “money” that’s on your mind. As Lori Wagoner says on Get Entrepreneurial, guts and intent come first. For instance, avoid asking for invoices too often. Sure, it’s your right to get paid but play out the requests in time intervals.

1.) Work Like No Other

Here are the biggest problem self-employed professionals, one-person business owners, and freelancers face: your earning is limited to the work you produce in the time you have during the day. You can’t make more unless you have more time (which is limited to 24 hours) or when you can charge more (which is unlikely to be too frequent).

To ensure maximum pay every month – assuming a fixed per-hour fee or per project value – your dependence on your own productivity is extreme. For you, every hour counts simply because it pays.

Work, hence, is a never-ending requirement for service providers.

You’ll do better when you offer services to take up work you love doing so that the long-hours don’t count. Pick up clients that you’d love to work with (refer to marketing tip above to ensure you are in a position to choose who you work with) and work hard.

For self-employed professionals and small business owners, there are no vacations, holidays, and weekend getaways. National holidays don’t count, and going sick is a serious liability. You do have the choice to do what you want but not without planning ahead.

If you are planning to launch your services business or if you already run a business by providing services, what tips would you like to share?

Unless otherwise noted, UPrinting does not endorse any company or product that may be linked to or appear in this article. All photos are provided by the author.

Questions? Insights? Just head over to the comment section below. We’d love to hear from you!

The Art of Small Business is part of UPrinting.com. UPrinting.com offers a wide variety of print products all easily customizable down to the quarter-inch with a unique, industry-acclaimed design tool. Get instant quotes with our one-of-a-kind online calculator. All orders are manually proofed by living, breathing, human beings (remarkable really)! Order your FREE stock sample kit today!

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It’s almost always sunny here in LA, and it might seem weird we’re putting a small business winterization post up this early. We do however, have customers all over the US and Canada in areas where winter can pose a significant problem to not just to comfort, but to business efficiency as well.

A properly winterized work area will not only have more comfortable customers and employees - it will also be better for the environment as well. Here’s a few  things to look over now, before winter actually sets in.

9.) Caulking and Weather Stripping

You should be checking this regardless of the climate or season. Properly sealed and insulated workspaces allow both furnaces and airconditioners to work their best, saving you up to 20% in energy expenses. To prevent air leaks, inspect the caulking and seals around windows and doors. Replace any cracked or otherwise deteriorated seals. Make sure windows and doors are actually airtight as well.

Here’s a video that shows how to install weather stripping:

8.) Pipes

Improperly winterized water pipes can burst or cause plumbing fittings to seize up, causing your business quite a lot of grief. Here’s a video demonstrating how to properly winterize pipes in a home setting. It should be the similar for most small businesses.

7.) Ceiling fans

 These are are an often overlooked way of saving energy by allowing both your a/c and furnaces to work more efficiently. Look for models with motors that can turn both both clockwise and counterclockwise. In the summer, turn them on counterclockwise to help circulate cool air from your a/c. In the winter, reverse the direction to draw warm air down to floor level.

6.) Furnace

It goes without saying that you should check the filters to ensure better air quality in your workspace. Also consider upgrading to a newer, more efficient model if your furnace is over a decade old.

5) Heating Ducts

If your workspace has heating ducts, make sure to check if the insulation needs replacing. If your ducts are not insulated, it’s seriously time to install some batting. This should allow your furnace to run a bit cooler while keeping you just as comfy, which all means fewer energy costs.

4.) Emergency Kits

Hopefully you wouldn’t need this, but when you do you’ll be glad you had it. Getting snowed in without the essentials will usually just result in minor discomfort, sure. But a particularly bad storm can kill you. Your kit should include flashlights, candles and matches, thermal blankets, a first aid kit, bottled water, non-perishable food and perhaps most importantly, a battery-powered/solar-powered radio. If you have a vehicle you use for business, include a kit in the trunk as well.

3.) Work Vehicles

 This is a pretty involved process and as a result, there are plenty of accidents that happen year after year as cold weather sets in and people realize (sometimes way too late) that they delayed the necessary seasonal fixes a bit too long.

Here’s a video on how to winterize your vehicles properly:

2.) Gutters, eaves, and Ridge Vents

If your business has its own roof, make sure to check these to make sure these are clear and that rainwater hasn’t pooled in them. Uncleared pools of water may expand, damaging the gutters, and even possibly ruining part of your building.

1.) Windows and Doors

Switch out screen windows and doors for glass or storm windows to further improve insulation. There are also plenty of window and door insulation kits you could install yourself.

Check out this video that explains how to install a typical insulation kit.

Doing some of these will actually net you immediate results now, in terms of helping energy-efficiency. Don’t waste any more time than you have to preparing for winter. It just make more sense that way.

Sources and Additional Reading

Cheap Tips to Winterize Your Home - The Business Insider

DIY Home Energy Audits - Energy.gov

Winterize you Home - The Daily Green

Winterize without Poisoning Your Family -How Stuff Works

Winterize Your Commercial Property (pdf) - NAI Earle Furman, LLC

Image Credits

Polar Bear: ucumari via photopin cc

Snow in Gutters: Rennett Stowe via photopin cc

Ducts mytoenailcameoff via photopin cc

Furnace: pasukaru76 via photopin cc

Boots: rabiem22 via photopin cc

The Art of Small Business is part of UPrinting.com. UPrinting.com offers a wide variety of print products all easily customizable down to the quarter-inch with a unique, industry-acclaimed design tool. Get instant quotes with our one-of-a-kind online calculator. All orders are manually proofed by living, breathing, human beings (remarkable really)! Order your FREE stock sample kit today!

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