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When times are good, it’s relatively easy for most small to mid-size businesses to be successful in spite of themselves.
Paying a little extra on fixed and/or variable costs can easily be absorbed by price increases. Throwing some extra money at SEO (Search engine optimization), marketing, advertising, and public relations can’t hurt. Not maximizing current customer value can be forgiven. Finally, a lack of customer service and follow up can often be the byproduct of keeping up with demand that outpaces capacity. In contrast to this, when the economy slows down, dollars are tight, consumer confidence is down, budgets are being trimmed and the self-fulfilling prophecy of the news media takes hold, the rules change.
From a marketing standpoint it’s not good enough to just communicate that you have the right product and/or service at the right place at the right time. You need to present a compelling reason to buy. Hint: selling only price isn’t the answer. Your competition can always sell at a lower price than you creating a downward spiral. Just as important, you need your marketing efforts to target and reach the customer base that is most likely to be attracted and capable of taking advantage of your offer. Finally, you need to maximize every selling opportunity once it exists.
Let’s look at one of the more successful optical distributors in the country who went from startup to a run rate of over $100 million over the last 3 years. With an initial marketing/advertising budget of 2% expected sales, a brand was developed that defined a unique value proposition, “More than just product.” Everything supports this message, from the value-added programs, and operational efficiencies to customer service. Though primarily a relationship-based sale, they leverage every touch point and maximize every selling opportunity with cost-effective marketing and advertising tools. Very little is spent on traditional trade print advertising, and nothing is spent on SEO; rather the current 1/3% of sales budget is allocated to opt-in e-mail marketing campaigns, memorable and useful collateral materials, sales-oriented package and statement stuffers, fax alerts, flyers, on-site sales tools, attention grabbing direct mail programs and appealing catalogs.
Contrary to this, a software company that allocates, 7% of sales to maintain its, better-than-current industry standard of a 6 month pipeline leverages traditional media. For them, it is necessary to maintain a high profile in the appropriate trade magazines. What has changed is the focus on brand building advertising to a strong feature benefit appeal with a time critical call to action. In addition, a very aggressive stance was taken during media negotiations to reduce placement costs by 15%. Trade show expenses were reviewed based on a cost per lead/cost per acquisition model and some shows that were deemed ineffective were dropped. A greater emphasis on public relations also helps facilitate the sale process.
A window replacement company, which in reality is first and foremost a marketing machine, spends approximately 9% of sales to maintain and grow market share in a very challenging environment. One of the more competitive market segments, home improvement, is directly affected by the credit crunch resulting from the subprime meltdown. As such, media budgeting, re-messaging, and cross-selling opportunities have become very important. Rather than just cutting media placement, dollars were re-allocated based on cost per sale. This new focus has enabled the company to achieve on average a 10% of sale marketing cost. As where the competition is selling price, this company is offering real and perceived value while making their offers more relevant and time-critical. They have gone from ROP (run of press in newsprint) to a greater focus on FSI’s (free standing inserts in select newspapers) as well as radio and mailing packages. Google key word search as been increased.
A car dealership, which in the past was able to build sales solely based on the brand of car they sold and “sale events,” has repositioned itself in the market by promoting its superior after sale support and service. This brings people in the door as well as its unique “pre-owned” 100% satisfaction guarantees. Rather than waste money on ROP advertising that pushed purely a lower sales price (research demonstrated that less than 3% of the people who visited the dealership looked in the Auto section), zip-select direct mail programs and localized FSI’s supported by brand-based cable advertising has been shown to be more effective. They also make sure that everyone who leaves the showroom takes with them more than just a car-specific brochure with a business card stapled to it. They insert a dealer benefit/feature pamphlet in every brochure with service related coupons.
Each makes it clear that no one solution fits all, but that you need to look at how you’re spending your marketing dollars with an eye towards ROI and be creative in how you position your company to be more relevant to whoever you are trying to sell. Here are some other suggestions for those that don’t have someone who is charged with overseeing the marketing/advertising function. Start with the assumption none of your advertising and/or marketing efforts are working. List each on a matrix and with a critical eye evaluate its cost of sale. If the cost is not in relation to your profit, you have three options: drop it, reduce size or frequency, or renegotiate its cost.
Concurrently, you should develop a reference book of your competitors’ marketing efforts. By doing so, you can objectively see the strength of your value proposition in the marketplace and determine if you need to reposition or strengthen your message. ON SALE is not a message, it’s a poor excuse for the lack of a clear benefit. Even Walmart, which promotes the brand statement “Everyday Low Prices” spends millions to create an “apple pie, support your neighborhood, understand your pain” message.
Once you decide upon that message that makes you relevant, and re-evaluate your marketing/advertising budget (as a rule of thumb, between 1% and 8% of gross sales, though there are many variables, including average cost of sale as well as certain industry standards make sure you evaluate in advance of placement, how to maximize each sale as well as a plan of action and marketing tools to facilitate the sale process and create incremental contiguous sales.
Most importantly, under-promise and over-deliver. Do that and you’ll be able to prosper even during the worst times. Fail to do that, and no amount of marketing/advertising or cost cutting initiatives will be able to help your business
Gary Blum is president of the Laurus Group, based in Purchase, New York, a boutique, full-service integrated communications firm focused on the needs of small to mid-size companies. To learn more go to: http://www.thelaurusgrp.com. He can be reached at 914-251-9300
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