Ensuring you have a steady supply of future new customers is a critical component of any business. How you do that is called Marketing. Tools involved in marketing are things like advertising, networking, etc. Understand Marketing is the strategy, the tools are the means of executing your strategy. Understanding the difference between them is critical.
I often hear my clients talk about marketing. In almost 100% of the time they are talking about advertising efforts. “I market in the newspaper, I market on the radio, etc. What they really mean is they advertise. When I ask them if they knew if their efforts were successful in getting new customers none could say anything definitively, yet all assumed it was working.
If you are blindly advertising simply because you think it is how you market your business you are most likely spending more money than you need to. Do you know what the return on investment is in your marketing efforts? Can you answer that same question in regard to your advertising efforts? Simply because your local newspaper has several hundred thousand readers doesn’t mean it is THE RIGHT PLACE FOR YOUR BUSINESS TO ADVERTISE.
Measuring it is simple, incremental revenue driven by a marketing campaign divided by the cost. In other words the increase of your revenue after the advertising divided by the cost of the advertising, is your return on investment.
Different businesses will have different ROI’s from different advertising methods. Advertising is not a one size fits all proposition, so don’t let the slick advertising sales person take advantage of your marketing dollars. Insist on a positive ROI. If all your advertiser can commit to you is their audience or a number of views, then reconsider the advertising.
I want to address your marketing strategy so you know where and how to effectively advertise or use other tools to promote your business. Now I am not opposed to marketing so please do not think this is about how bad marketing is. In fact, marketing should be a part of your fixed operating costs. Lets first define what marketing is:….
MARKETING SHOULD: Define, Identify a sufficient level of revenue dollars in new, 1st time prospect opportunities from a variety of sources.
In other words marketing is responsible for identifying new leads that are worth a certain percent of your normal monthly sales, from multiple sources. That is NEW LEADS, not REPEAT CUSTOMERS. If your marketing efforts are not accomplishing that then you need to reassess your marketing efforts. Marketing is an investment and if you are not getting the proper return on that investment then it is an un-returned expense; a cost, a waste of financial resources.
It doesn’t matter what kind of marketing activity you undertake. What does matter is that it is viable for your type of business and reaches the markets your business serves or produces for. If too much of your revenue is tied up in one or two customers, individual companies or persons, your business is at risk of rapid failure. It could conceivably happen overnight. You must identify different markets.
So start by identifying where your customers come from. Not Bill, Joan, Judy and Tom, but the actual markets that provide those customers. You are looking to identify any Market with five or more customers, with SPECIFIC needs, that have given your company an indication that they will annually be purchasing a verifiable minimum product or service type that you offer, collectively equal to 10 percent of your Normal Monthly Sales average.
For example, your business gets customers from the following Markets:
Hardware stores Hospitals Referrals Radio Advertising Internet
Your specific market will of course be different based upon your business. Most small businesses that do this for the first time are only able to identify three to six different mature markets; the goal is to have ten. Why Ten? If each market is to be considered viable only if it equals at least 10% of your normal monthly sales revenue then obviously you must have 10 markets. If a market has less than 5 customers in it then it is not truly a viable source and needs to be developed until it has five or more, or you determine it is truly not a dependable viable source.
With this information and a bit of analysis you can not only determine if your marketing efforts are well run and performing as they should, but also that you have developed enough sources for new business to both sustain and grow your business. Of course sustainment and growth are never solely the responsibility of marketing and do require careful equal coordination with process management, product assessment, sales, customer service, customer retention, process improvement and team building. All of those functions may be performed by you or they could each have their own representative in your business. Regardless operating each segment of your business, in balance with the others, can help ensure a long and successful future for your small business. Investing your efforts into areas with clearly measured and defined results will help ensure long term success. Simply spending money on activities will do little for you but it will make who ever you are paying quite happy…and potentially rich.