I was making a presentation to a group of small business owners recently and the subject was “Growing Their Business.” This evolved into a discussion on Marketing. In so many words all of them said the same thing, “I market all the time. In fact, my marketing efforts are pretty extensive.”
So I asked them “what does that mean?” Most told me how they were marketing, what activities they were undertaking. I asked them if they were happy with the results. All of them said, again, in so many words, that they were getting customers and it had to be from marketing. I recalled an irritating question one of my sons used to ask me years ago…”How do you know?” One answered. “I don’t know,” he said. “I think my customers are from my marketing but I don’t know for sure. But it must be true.”
Now I am not opposed to marketing so please do not think this is about how bad marketing is. In fact, marketing should not only be a part of your fixed operating costs, approximately 4-5% of your monthly operating costs should be devoted to marketing. Equally important you need to know what value you are getting from marketing. What does that mean…
MARKETING SHOULD: Define, Identify and locate at least 80% of your average Monthly Revenue in new, 1st-time prospect opportunities, defined in dollars.
In other words, marketing is responsible for identifying new leads that are worth 80% of your normal monthly sales. That is NEW LEADS, not REPEAT CUSTOMERS. If your marketing efforts are not accomplishing that then they are not working for your business. You have to measure it to know if it is doing that.
What do your marketing efforts return to you? If you don’t know you need to find out and if you can’t find out then you need to re-evaluate your marketing efforts and expenses as well as who is performing your marketing responsibilities. 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 industries your business serves or produces for? That is right, the industries. 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 potentially happen overnight.
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 companies, 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. To make a distinction here let’s call these sources Channels or Bins (picture a row of storage bins).
For example, your business gets customers from the following Channels’s or Bin’s:
Hardware stores Hospitals Referrals Radio Advertising Internet
Your specific Channels’ 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 channels’s with an appropriate number of opportunities to be viable.
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 all of the other areas of your business.
Investing your efforts into areas with clearly measured and defined results will help ensure long-term success. Not measuring the specific return on investment of your marketing efforts means all you are doing is spending money. Simply spending money on activities will do little for you but it will make whoever you are paying quite happy…and potentially rich. Your goal is to do that for your business.