Why Is Marketing Important?

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Why Is Marketing Important?

Let's start with a definition of marketing for small business owners. For business owners, marketing is a system that has three main functions: 1)Creating awareness 2)Getting new customers to try your product or service 3)Getting your customers to spend more

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Creating Awareness1) Creating awareness for your business can be

costly. 2) Awareness is measured by how well your

prospective customers know that your product or service is available.

3) Measuring changes in your customer base's awareness is difficult and costly to monitor over time. Therefore this is not an area for small business owners to focus on intently.

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Getting New Customers to Try Your Product or Service

• Every business needs new customers. Each year you will have some attrition or erosion of your customer base.

• Customers quit doing business with companies for five main reasons:

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5 main reasons:

1) 4% will move, transfer, quit their job, get promoted, or die.

2) 5% will patronize a different business on the recommendation of someone else.

3) 9% change because your competition offers a better benefit than you do.

4) 14% change because they are unhappy with the results of the product or service you're providing.

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5 main reasons:

5) 68% change because someone inside your company has expressed a lack of caring. In most instances, this is caused by little or no contact, indifference, missed deadlines, or budget overruns

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The Facts:

• What you can see from the list is that each year you'll need to replace some customers, or eventually you will not have any.

• Let's look at some marketing methods that work well for getting new customers to try your product or service.

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The three most effective are…

1) free trials2) guarantees3) word-of-mouth marketing

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Free Trials

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Free Trials1) Here's an example of how a free trial can

work to generate new customers. 2) Kashi is a natural foods company that makes

whole grain food products. 3) When Kashi introduced a new granola bar,

they offered new customers the opportunity to order a free sample.

4) Kashi then began a relationship with the consumers who ordered the free granola bar.

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Can you think of some examples…

• What companies you know of that gives free trials?

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Apply to your business!

• You can create a similar free trial method for your own business.

• The key is to establish some form of contact with the customers who take advantage of your offer, whether it's a street address, an e-mail address, or a telephone number.

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Guarantees

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Guarantees The next method, a guarantee, can be a powerful marketing tool.

1)Potential customers might be reluctant to try your product or service because of perceived risk. 2)What if they make the wrong decision? 3)What if they lose money or don't feel they got what they paid for?

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Guarantees

4) Offer a guarantee that reduces or eliminates your customers' perceived risk. Then they'll feel more confident about considering your product or service. You give them a reason to buy today without the risk of regretting it tomorrow.

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Can you think of some examples…

• What companies you know of that gives guarantees?

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Word of Mouth

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Word of Mouth

• One of the most successful word-of-mouth campaigns was conducted by Google, when it launched its Gmail feature. Google made a Gmail account available only to its power users, who could then extend a personal invitation to others to sign up.

• This quickly generated a word-of-mouth buzz, an intense interaction among potential customers. Since a Gmail account was hard to get, people salivated over them.

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Can you think of some examples…

• What companies you know uses word of mouth?

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Apply to your business!

• Small business owners can create their own buzz. What you're aiming for is a core group of customers who will promote or give testimonials about your product or service.

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VenuesYou have many media venues available to generate buzz:1)Face-to-face communication 2)Telephone calls 3)Web sites (including blogs and message boards) Example?4)E-mail messages 5)Text messages and instant messages

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Venues

• No matter what medium you use for creating buzz about your business, the goal is the same.

• You want your existing customers to spread positive information and recommendations to help create new customers.

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Getting Customers to Spend More• Not only do you want customers to spend money

with you the first time, but you want them to come back again and again.

• It can be based on the number of people on your customer list. You'll make more money over time by marketing to your current list of customers than you will by always trying to find new customers.

• Existing customers will spend more with you if given the chance.

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Market Tactics

A couple of marketing tactics that work well to entice existing customers. •cross-selling •up-selling.

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Effective Marketing Tactics

Cross-selling and up-selling can be very effective marketing tactics to get people to spend more money with you.

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cross-selling

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cross-selling

1) allows you to offer similar products or services to your customers that are like ones they have purchased in the past.

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Can you think of some examples…

• What companies you know who uses cross selling?

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cross-selling

Amazon.comFor example, if in the past a customer has purchased a book on investing, the bookstore owner might try to sell that same customer the new version of the book when it comes out.

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up-selling

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up-selling• When you up-sell, you offer additional

products and services at the time a customer is making a purchase.

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• Think about the last time you ordered a hamburger at McDonald's. I can almost guarantee you were asked, "Do you want fries with that?“

• McDonald's up-sells its other products at the same time their customers are ordering hamburgers.

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Can you think of some examples…

• What companies you know who uses up selling?

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Marketing Touch Points

• Nearly every aspect of your business is connected to marketing.

• Those aspects of your business that directly impact your customers are called marketing touch points.

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Marketing Touch Points• Product quality • Speed of service • Advertising • Location • Customer service • Business cards • On-hold and voice mail messages • Employee appearance • Web site content and appearance • Credit and collections department attitudes

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Marketing Touch Points

• Each of these areas will have a direct impact on whether a customer will purchase from you the first time and whether they will purchase again.

• When creating your marketing plan, be sure to carefully examine all the different places where customers interact with your company. Plan and design them to have the greatest positive influence on your customers.

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direct response marketing

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direct response marketing

• Direct response marketing is different from other types of marketing because results can be tracked and measured.

• You, as a small business owner, must use this type of marketing in all your advertising because you cannot afford to continue marketing campaigns that aren't returning an appropriate amount of sales.

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direct response marketing

A great example of direct marketing is a grocery store coupon. When a coupon is redeemed at the store, the company that issued the coupon can track how many were used to purchase a particular product. The industry term for the number of coupons collected is the response.

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ideas on how you can use direct response techniques

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ideas on how you can use direct response techniques

1) Have customers bring in a postcard for a free item or a percent discount off one item in your store.

2) Host a customer-only private event for customers that come with a secret saying or password.

3) Offer a bigger discount if customers bring in a friend. 4) Advertise in the newspaper a special sale and

include a discount coupon. 5) In your yellow pages ad, offer customers a free item

if they tell you how they heard about your company.

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Tracking Basics

• Now that you know the importance of testing and tracking, let's talk more about what you should be tracking with your different marketing campaigns.

• The best way to track your marketing campaigns is to create a spreadsheet system.

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ideas on how you can use direct response techniques

5) In your yellow pages ad, offer customers a free item if they tell you how they heard about your company.

All of these examples allow you to track the effectiveness of your marketing campaign.

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• Here is a great example: of how a furnace company got more business even though its price was the same as what other companies advertised.

• A customer was looking for a special offer to have the furnace checked. Furnace company ads in most of the newspapers advertised a special rate of $89.

• But then the customer receive a postcard in the mail that offered a free $20 Target gift card if customer ordered the furnace cleaning at $109.

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• The bottom line of all the offers was the same, but the second offer with the free Target gift card was irresistible.

• Further, the response was so great that customers could not get an appointment for 10 days.

• This is an excellent example of how effective direct response can be to your business. The furnace company could track and measure the response. At the same time, it benefited from a unique offer that generated many new customers.

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The Statistics

• When you send an offer to prospects, typical response rates, according to the Direct Marketing Association, are from 0.5% to 1%.

• This means for every 100 pieces of mail (or e-mail) you send, fewer than one will act on your offer.

• If you are sending a marketing piece to existing customers, you will receive an approximate 2% to 3% response rate.

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The truth

• These tiny response rates force small business owners to watch the cost of marketing campaigns very closely.

• But even though the response rates are minuscule, they are much better than not knowing which ads are producing results for you.

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create a spreadsheet

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Let's examine the categories

• Description of campaign: Your marketing campaigns might use postcards, sales letters, yellow pages advertising, newspaper ads, telemarketing, or e-mailing.

• List used: If you marketed directly to a list of people, did you send your offer to your own list, a portion of your own list, or a purchased list?

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the categories

• How sent: How did you send the campaign—by e-mail, first-class mail, or bulk mail?

• Date sent: When did you start the campaign? This allows you to see if there is any seasonality in your response.

• Leads received: How many new customers did you add to your list?

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the categories

• Total dollar amount sold: In total, how much did you sell with the campaign? For example, if you used a coupon, add up the total amount of sales that resulted directly from your coupon.

• Number of transactions sold: How many different transactions did you have? For instance, how many coupons did you collect?

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the categories

• Total cost of campaign: What did you spend to send out the campaign? Include printing, postage, advertising costs, and an hourly fee for your time or your employees' time to design the campaign.

• Average dollar amount per transaction: This is a calculation from your previous input. Divide the total dollar amount sold by the number of transactions to get the average dollar amount per transaction.

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the categories

• Cost per lead: This is another calculation. Divide the total cost of the campaign by the number of leads received. This number allows you to compare different types of campaigns to each other.

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The Facts

• This may seem complicated at first, but compiling a spreadsheet with this information will help you make better marketing decisions on the basis of solid facts and figures. Plus, you won't find yourself in the same situation as some business owner did.

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The Facts

• A business owner one day said he wants to quit advertising in the yellow pages, saying it was costing him too much at $1,800 per month. So when asked how many new customers he was getting from the yellow pages ad. He said he didn't really know.

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The Facts

• If he was receiving over $2,000 in business from the yellow pages ad, it wouldn't make sense to cancel it. But he had no ability to make a good decision, because he had no system for tracking how customers were coming into his business.

• Tracking is critical to the long-term success of your business.

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U.S. Post Office Direct Mail

http://www.usps.com/directmail/welcome.htm •Learn more about direct mail from the U.S. Post Office Web site. This site has lots of great information about direct mail, creating your first mailing, and other post office regulations and help topics.

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American Marketing Association

http://www.marketingpower.com/_layouts/Dictionary.aspx Marketing is a big topic. This site gives definitions of a wide variety of marketing terms.

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Marketing Worksheets

Marketing Worksheets http://marketing.about.com/od/marketingworksheets/MarketingWorksheets.htm On this site you'll find a variety of marketing forms, including marketing calendars, customer service forms, customer satisfaction survey forms, and other marketing templates.

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Sponsor Health Promotion Events

National Health Observances http://www.healthfinder.gov/nho/default.aspx You can use the special times listed on this site to sponsor health promotion events, stimulate awareness of health risks, or focus on disease prevention in conjunction with promotions for your business.

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What is it that makes your business a busy, happy, thriving place? Why do people come to you instead of your competitor? How does a businessperson get that unmistakable feeling of success?

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The answer is sales—and lots of them. And advertising helps make the sales happen.

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Advertising

• Advertising is often as important to a small business as location, start-up capital, and management.

• Without advertising, you have no way to tell prospective customers about your products or services—and you cannot sell to people who don't know about you.

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The Facts1) To a small businessperson, advertising and

promotion are critically important. Yet they are constantly confounding. You must advertise, or you'll be left behind by the competition and forgotten by your customers.

2) But the small businessperson is the least able to pay for it. Since you don't have a monster-sized budget, you can't afford the high-priced advertising professionals you need to help you.

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The Facts

3) Therefore, you'll be tempted to experiment with your precious cash. Advertising must pay for itself by generating higher sales immediately. Your budget will never be large enough to risk on an ad or promotion just because it sounds like a good idea.

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The Facts

Today you will get the basic information you need to construct an advertising and promotion strategy that will make the most of your budget. You'll see the advantages and disadvantages of the different types of media advertising. And we'll develop a system for implementing your advertising strategy.

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The Facts

Next, we'll dig into free publicity opportunities and learn how to create and distribute a press release. Finally, we'll look at several other low-cost marketing ideas.

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The Facts

• How to do your own advertising and promotion the smart way with a minimum of experimentation and waste. You have to be practical.

• This lesson will help you get your advertising program organized correctly so it accomplishes its purpose of making more sales for you.

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What Advertising Can Do for You

The definition of advertising is the communication of a sales message. Advertising messages are usually nonpersonal; they say, "Hey, pay attention to me!" to everyone at once. Advertising messages can be delivered via a wide range of media, including television, radio, newspaper, signs, calendars, and direct mail.

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What Advertising Can Do for You

• Advertising can do a lot, but it can't do everything. It can't make a better businessperson out of you. It can't get you organized. It can't make a better quality product, and it can't raise money miraculously over the weekend.

• But here's what it can do:

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What Advertising Can Do for You1) Promote products and organizations 2) Stimulate demand 3) Offset competitors' advertising4) Make salespeople more effective 5) Increase the uses of a product 6) Remind and reinforce customers 7) Reduce sales fluctuations 8) Promote goodwill 9) Differentiate your product from your competitors' products • Develop a unique position in your customers' minds

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Advertising Strategy

The first step in your advertising program is to develop a strategy. But you must have a system to help you develop your strategy. Outlined below is a system that will lead you in the right direction.1) Define the purpose of your advertising program by creating specific measurable goals. Focus on what you want to accomplish. Here are some examples:

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Define Purpose

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Define Purpose

– To get people to purchase a particular product – To create company or product recognition – To attract new clients – To build a mailing list– To increase foot traffic through your store – To introduce a new product or company

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Develop a Sensible Budget

In most cases, the advertising budget will range from 1% to 7% of gross sales, depending on the type of business and, of course, your competition. The average for retailers is about 3%.

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Advantages and Disadvantages of Major Advertising Media

• Newspaper• Magazine• Radio• Television• Direct Mail• Internet Advertising• Directories (yellow pages)• Trade Shows

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Newspapers Advantages & Disadvantages

1. ..2. ..3. ..4. ..5. ..6. ..7. ..8. ..

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Newspapers Advantages: 1) High readership within selected geographic area2) easy to reach metropolitan markets; frequent

publication3) short lead time4) favorable for cooperative advertising5) Flexible6) low costs, prompt responses7) assistance available for copy and layout8) volume and frequency discounts

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Newspapers Disadvantages:

1) Ad isn't targeted to specific customers2) ad coverage wasted on nonpotential

customers3) ad can be lost in crowd of other ads4) declining readership of newspapers5) short life and brief exposure for any one ad6) limited reproduction capability (poor quality

of printing compared to magazines)

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Magazines Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Magazines Advantages:

1) High degree of selectivity2) long life span3) good to excellent reproduction quality4) volume and frequency discounts5) ad quality can be achieved through ad

placement6) multiple readers from magazines getting

passed around7) fairly thorough readership.

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Magazines Disadvantages:

1) Relatively high cost (which could be offset by results)

2) long closing times3) ad placement is very important to ad being

noticed.

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Radio Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Radio Advantages:

1) Good selectivity of audience through choice of station

2) can reach large audiences3) flexible timing4) short lead time5) flexible and efficient for changing6) more friendly than print ads7) more active for listener

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Radio Disadvantages:

1) Limited to audio2) short life of message (one minute or less)3) subject to distractions while listening4) need for repetition of ad5) more station selections for satellite radio

listeners

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Television Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Television Advantages:

1) Very large audience possible2) low cost per exposure3) best communication impact via sight and

sound4) good selectivity of audience5) high prestige6) design assistance from stations.

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Television Disadvantages:

1) Highest production costs and high dollar costs for time

2) limited prime time available3) short life of message4) audience size not assured5) ad may be lost in crowd of ads (typical

person sees 3,500 ads per day)

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Direct Mail Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Direct Mail Advantages: 1) Highly selective as to type (letters, catalogs, price

lists, brochures, circulars, newsletters, postcards, coupons, free samples, and so on)

2) highest selectivity of audience3) complete flexibility of timing4) can be personalized5) stimulates action6) hidden from competition7) easy to measure8) rapid feedback and results

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Direct Mail Disadvantages:

1) High cost of distribution2) often discarded as junk mail3) inaccurate mailing lists4) rising postal rates

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Internet Advertising Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Internet Advertising Advantages: 1) Variety of choices available (banner ads,

company Web site, cookies, full-page ads, and push technology like e-mail and instant messaging)

2) Inexpensive3) reduces expenses on other advertising and

office expenses4) visual for customers5) can have international scope.

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Internet Advertising Disadvantages:

1) Need to update often2) slow loading of information loses customers

rapidly3) need clear message for action4) need to monitor Web statistics5) technology changes rapidly

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Directories Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Directories (yellow pages)

Advantages: 1)Prime prospects looking to buy2)long life.

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Directories (yellow pages)

Disadvantages: 1)Lack of flexibility2)books become obsolete quickly.

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Trade Shows Advantages & Disadvantages

1) ..2) ..3) ..4) ..5) ..6) ..7) ..8) ..

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Trade Shows

Advantages: 1)Very specific market2)reach new customers easily3)good place to obtain industry information4)normally low cost per potential customer

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Trade Shows

Disadvantages: 1)Travel costs are increasing2)can be wasted effort with poor planning.

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BizStats http://www.bizstats.com This site gives you access to useful financial ratios, business statistics, and benchmarks that will be helpful in figuring out your advertising budget.

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PRWeb http://www.prweb.com PRWeb is the leader in online news and press release distribution. You can post your press release for free on this site.

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E-zine Directory http://www.ezine-dir.com Find newsletters and e-zines that are related to your business. Many encourage you to submit articles.

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Free Audio Conferencing http://www.freeaudioconfrencing.com You can get free bridge phone lines at this site. You can hold a conference with up to 150 people at a time for up to six hours.

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Franchising

• A company (franchisor) that already has a successful product or service enters into a continuing contractual relationship with another business.

• The franchisee operates under the franchisor’s trade name in exchange for a fee.

• The franchisor gives guidance to the franchisee.

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Franchising

• As a Franchisee, you use the franchisor’s name, special supplies, and method of running a business.

• You pay for the opportunity and operate the way the franchisor tells you.

• It’s your business, but the franchisor controls what you do.

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Advantages

• All the planning comes prepackaged.• The price is often far lower than if you were to

start fresh.• You avoid the problem of raising large sums of

money, often the most difficult part of establishing a new business.

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More Advantages

• A respected identity• A successful operating system• Training and ongoing management assistance• Site selection help

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A Respected Identity

• The most important advantage a franchisor offer is a good name in the industry.

• The worth of a franchise identity comes from the recognition, reputation, and goodwill of the franchise organization.

• People who invest in franchises are looking for a successful image.

• When you take on a franchise, your franchisor’s character, helps create your identity.

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A Successful Operating System

• When you buy a franchise you are counting on the proven formula for success.

• One of the most important element of franchising is the simplicity with which the organization’s systems and procedures can be transferred to a franchise.

• Some franchise will offer you complete turnkey outlet.

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Turnkey

• When you are finished with franchise school, you receive the keys to a business in which everything has been set up for a ready-to-run operation.

• Other franchisors will provide you with blueprints, manuals, specifications, and training. Then it’s your responsibility to use your own drive to get the business established.

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Training and Ongoing Management Assistance

• Most people buy a franchise have no experience in the business they are entering.

• That’s natural because a majority of them are changing careers.

• In order to succeed, new franchisees must learn a great deal about what’s involve in their new career before opening for business.

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Training

• The best way to learn is to make the most of the franchisor’s training program.

• The franchisor may offer training at a headquarters college.

• These training program are usually well-planned to provide the background and know-how the franchisor has to offer to help you get your business off to a good start.

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Formal Training

• Formal training sessions are one of the most helpful supports a franchisor can provide to a franchisee.

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Site Selection Help

• Each business requires unique features from a location

• The best franchise companies will help you find a good location and acquire it on the best available terms.

• Site selection, new construction, and fixing up an existing storefront are critical in the business mix.

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Disadvantages

• Lack of guarantee• Franchisor strength• Too many units• Strict contractual relationship

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No Guarantees

• Although franchising is the most foolproof way of getting a business going, there are still failures.

• The failure rate is much lower than for independent small businesses

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No Guarantees

• Statistics don’t tell you about the franchisee in Des Moines who invested $100,000 in a business. He eventually had to sell it to someone for $15,000. The business is still in operation. The $85,000 loss is not shown anywhere

• Length of experience is one good indicator of the kind of success that can be expected.

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No Guarantees

• Consider how many years a company has been in business. Also how many years has the company been offering franchise.

• Example McDonald’s been offering franchise since 1955 .

• No enterprise can stay in business unless it is profitable.

• If it passes the test of time, it’s a good bet it knows how to weather the ups and downs of business conditions.

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Other Disadvantages

• Too many Units, there is a point where there may be too many units. This can dilute the strength of your business.

• Strict Contractual Relationship – as a franchisee, you are required by contract to accept the company’s rules, regulations, and method of doing business.

• If freedom and independence are high on your list of priorities, you would not be content to operate a franchise.

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Explore your options

• Find out more about what franchises are available and what business are for sale. Understanding what others are doing can help you even if you are starting a business from scratch

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Websites

• www.franchise.org• www.bizbuysell.com

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