- THE MAGAZINE
What comes to your mind when you think of the word “marketing?” For some, it’s advertising. Others might think of networking, branding or the idea of getting your name out there.
Of course marketing includes those things, but marketing is actually everything you do to attract prospects to your business. Phenomenal marketing delivers a meaningful experience that educates, engages and entertains. A phenomenal marketing system is a group of working parts that duplicates results consistently.
What kind of results? Enough of your perfect target prospects to reach your sales goal consistently. A phenomenal marketing system consistently produces your perfect target prospect. If you are attracting the wrong kind of prospect, your marketing isn’t working. And if your sales are up and down because you don’t consistently implement marketing, then you don’t have a system. Too many business owners spend lots of time and money getting their name out there, but have no real system of attracting prospects consistently. Most often, a small business owner’s marketing is a gamble more than a planned effort.
Regardless of the type of marketing you do, it must increase sales. Of course the sales process will determine whether the prospect will actually buy, but that also depends on the quality of the prospect you are attracting. When you attract the wrong kind of customer (because your marketing isn’t what it needs to be), it doesn’t matter how good your sales process is. You may even close the sale, but you won’t build the kind of business you want.
The Only 3 Ways to Increase Sales
Regardless of the type of business you are in, there are only three ways to increase sales under the sun. The three ways are:
1. Increase Sales from Existing Clients:The first (and possibly the easiest) way to increase sales is to get your existing clients to use your services (or buy your product) more often, or to use more of your services (or buy more of your products). This can have a dramatic effect on your income. If you are not marketing to your existing client base, you could literally double your business with this strategy alone. This is assuming that you have something compelling and valuable to offer your past and existing clients.
As you’ll see, marketing to your past and existing clients is one of the most important marketing activities. In fact, not marketing to your past clients is a big mistake. It is estimated that it costs an average of 500% more to gain a new client than to keep an existing one. They already know you. You already know them. They have already paid your price. They are the most likely to do business with you assuming that you have a repeatable service, other products and/or you want referrals from them.
2. Increase Number of Client:Speaking of referrals, the second way to increase sales is to get more clients. This is the one that people usually think of first. Most small business owners say that 85% of their business comes from repeat and referral business. Yet they don’t have a system in place to maintain and increase repeat and referral business. Most small business owners say they build their business through word of mouth, but they don’t have a referral system in place. There are many ways to get more clients, but the best way is through referrals. I’ll show you how to put your word of mouth marketing into a phenomenal system.
3. Increase Price:This is a powerful way to increase sales, but probably the last one that small business owners think of. In fact, you only think of it briefly, because after all, “With the economy being what it is….” I hope to change your mind on this, because when you increase your price without losing too much in sales volume, your top line increases. If you raise your price 20% and lose 20% of your sales volume, you are still making more profit. If you raise your price 50% and lose 50% of your sales volume, you are still making more profit.
By positioning yourself and your company differently - by creating a different message - you will be able to continually raise your price. The beauty is that you probably won’t lose any sales volume! If you do lose clients, it’ll be the unprofitable ones you don’t want anyway. And if you do this right, you’ll quickly replace them with clients who are willing to pay a higher price because you will have developed a compelling experience they want to have.
Speaking of experience, I came across a term some years ago that explained what I was already doing in my marketing and explained how I was able to get the highest prices. The term “experiential marketing” is sort of an unusual, obscure term, but is key to getting the highest prices for your service. In his book Experiential Marketing, Bernd H. Schmitt states:
Today, customers take functional features and benefits, product quality, and a positive brand image as a given. What they want is products, communications, and marketing campaigns that dazzle their senses, touch their hearts and stimulate their minds. They want products communications and campaigns that they can relate to and that they can incorporate into their lifestyles. The want products, communications, and marketing campaigns to deliver an experience…
Notice that it says to deliver “an experience” in the marketing campaign. Hopefully all of us know that we must create the most unique and powerful experience when we actually serve our clients. But what this is saying is that it is created in the marketing campaign.
The quote goes on to say:
The degree to which a company is able to deliver a desirable customer experience (in the marketing) and to use information technology, brands, and integrated communications and entertainment to do so, will largely determine its success in the global marketplace of the new millennium.
You may not be concerned about the global marketplace in your industry, but the degree to which we understand and implement this concept determines the degree of success we will have in getting higher prices.
What is the marketing message of most business owners? How do average, everyday businesses advertise their services? If your industry is like most, you will find that the message is either about price or about how they do their work. If you sell a product, it’s all about the features of the product.
Let’s deal with price advertising first. Price advertising comes in many different ways. The most common type of price advertising is placing an ad that offers a low price. But that’s not the only type of price advertising. The way that you carry yourself as the business owner is a reflection of the value of your service experience.
How you dress, what your company materials look like, what your office looks like, how you answer your telephone, etc. You see, you will take up a position in the marketplace, just by existing. The question is whether you will take up the position that you want or not. You have to design and create your position, rather than letting it happen by accident.
Avoiding the 3 Types of Price Advertising
One of the worst things you can do in marketing is advertise price before value is proven. The most common type of price advertiser is the one that advertises a ridiculously low price never intending to honor that price. Or, they have one in stock at that price. In the worst cases, you could categorize these price advertisers in the “bait n’ switch” category. They bait the prospect with a low price to get in the door. Once the prospect is generated, they switch them to what they really want to sell. In the worst cases, the company would even refuse to offer the low price service.
The bait n’ switch advertiser is only one of three types of price advertisers. The second is what I call the “value choice.” The value choice, unlike the bait n’ switch, is a legitimate business model, but has intentionally positioned itself as the lower price alternative. Think of how Southwest Airlines started. They intentionally positioned themselves as the low price alternative and they were very focused about running their business model accordingly.
Not offering meals on their flights, their point-to-point routes, open seating and the revolutionary “10 minute turn around” have all kept their costs low so they can offer a lower price and make a healthy profit. This model doesn’t work for the small business that doesn’t have the scope or infrastructure that a large company has.
This brings me to the third type of price advertiser. The third type of price advertiser is the small business that doesn’t have the management infrastructure, the reach and cannot handle the volume that a larger company can. Let’s think about a plumbing company. If a plumber is a smaller operator, why would he want to match the price of a bigger operation?
He can’t compete with their margins. He doesn’t have the management infrastructure, the capital, the brand image and the television commercials that the larger company has. His revenue is generated by his sweat. Therefore, even though the overhead is lower, this person should charge more, rather than less. The key is that this plumber must understand what differentiates him from the larger firm, which we will get to in a moment.
But, let’s look at a comparison between the smaller operator and the larger company. Let’s say this is the income statement of the larger firm:
$5 Million Income
- $2.5M Cost of Sale
=$2.5 M Gross Profit
-$2.0M Fixed Expense (40%)
=$500K Net Income
If a smaller operator who billed $200,000 has the same cost structure that produces a 10% margin, he would end up with $20,000 in profit. Not cool! And that’s what is happening in small businesses around the world every day! Obviously there are lots of variables in this scenario, but the point is that you can’t compete with the larger company on price.
Instead, the smaller operator should charge higher prices and leverage the benefits that a smaller operator can offer. So the saddest case of all the price advertisers are the small, independent business owners who just copy the big company instead of understanding how to position themselves differently.
The bottom line is that price advertising attracts price shoppers. So don’t do that!
The Effects of Lowering or Raising Price
(See the chart image at the top of this story.) In this simplified illustration, Job 1 (which could be Product 1 just as well) is priced at $200 and the cost of producing it is $100, which would give you a $100 profit.
Job 2 offers a discount of 20%, which would make the price $160. Guess what doesn’t change? The cost! It still costs $100 to do that job! So that means your profit went down to $60.
That’s a 40% drop!
What if you could position your company in a way that you could charge 20% more instead of less? What do you think would happen?
Let’s take a look…
Job 3 is priced at $240 instead of $200. What stays the same? The cost! $240 minus $100 gives us $140 profit. And by the way, the difference in profit from Job 2 and Job 3 is 2.33 times the amount.
That means you could do half the work and make more money!
Or do the same volume and make more than twice the money. This is a very important concept for smaller companies to understand. It’s not in the volume (with any company), it’s in the profit. It is terribly important as independent business owners to understand this because we don’t have a national brand to generate leads for us. We have an entirely different set of benefits to offer, which are worth far more.
How They Do Their Work
The second way that most small business owners advertise their company is how they do their work. Other than price, what could possibly be wrong with this? Let’s look and see...
Let’s say that Sue Smith is a CPA. When Sue introduces herself at a networking group, it will usually sound something like this, “Hi, I’m Sue Smith with 1-2-3 Accounting Firm and we do taxes. If you need anything to do with taxes, just give us a call. We do everything from soup to nuts, A to Z, you name it, we can do it. If you need anything, just gimme a call.”
Isn’t it true that just about every time you hear someone introduce themselves or you see an advertisement for a company, nothing stands out that makes them unique and different?
The problem is that everyone is saying the same thing. So if you do the same thing, why should people choose you over another company? Why should they pay you a higher price? They shouldn’t. This big mistake is repeated over and over by small business owners worldwide every single day. In today’s competitive marketplace, it is not enough to just tell what you do or to tell the features and benefits of what you do.