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10 Big Money Wasting Marketing
Mistakes Made By Small Business
By Gene Stark - Stark Reality
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Mistake 1 - Lack of planning
Estimates by the CPA Australia are that one in three new small businesses in Australia fail in their first year of operation, two out of four by the end of the second year, and three out of four by the fifth year. This means that approximately only 8% of small businesses succeed. This is not surprising when you consider that only a small number of businesses conduct a formal feasibility study and prepare a business plan before they commence the business: estimates are that only three to five per cent of Australian small businesses starting from scratch prepare a business plan – that is, know that their business is feasible and have a formal plan to operate that business. A plan is a statement of intent - to organize effort and resources to achieve an outcome. In this context a plan is in written form, comprising explanation, justification and relevant numerical and financial statistical data. The most important driver for almost any business plan is return on investment. Without a formalised plan, it is much like trying to drive a car without a map to an unknown destination.
A recent study by the University of Technology, Sydney, cites reasons for business failure in order of frequency as:
1. Financial mismanagement, (32%)
Lack of business experience
Cash Flow Problems
Being undercapitalised from the start Excessive drawings Overuse of credit No budgets Inadequate provision for tax payments 2. Bad management, (15%) 3. Poor record keeping, (12%)
4. Sales and marketing problems, (11%)
Poor promotion
Marketing and advertising causing poor image
Insufficient knowledge of competitors 5. Staffing problems, (9%)
6. Failure to seek external advice, (3%)
7. General economic conditions and (12%)
8. Personal factors (6%)
In most cases, it is a combination of several reasons that ultimately causes the failure. Based on the fact that a Feasibility Study, and a SWOT Analysis are a part of any Marketing Plan and the Business Plan itself is an extended Marketing Plan (covering Product, Price, Place, Promotion) we can attribute approximately 80% of all business failures and almost 100% of lack of business growth, to inadequate Marketing.
Solution 1
Marketing Planning and Strategy is about “Thinking Now to Save Later rather than trying to Save Now and Paying Later.” Any entrepreneur keen on avoiding these traps should first of all do a feasibility study and then, depending on the results, determine their strengths and weaknesses (SWOT analysis) and draw up a formal business plan. These templates are freely available from the CPA as well as many other sites and a good accountant can be a great source of help Stark Reality encourages business owners, both established and start ups, to complete as much of the business / marketing planning process by themselves and offers a cost effective Planning Support Package – teaching owners to fish for themselves instead of just putting a fish on their plate. Firstly this approach shows the owner’s dedication and commitment to their business, secondly it educates them and prepares them for the long road ahead. The planning process dispels any misconceptions the business owner has and it presents the spectrum of different financial possibilities in the tangible form of print on paper making it real. Too many great concepts fail due to lack of planning and preparation for this most crucial stage not to be done properly. No Marketing (Business) Plan is complete without a Budget and your budget should allow for what you are going to do in case of an emergency? For example your competitor runs a big promotion. Will you have the funds to combat it? Your industry gets some bad publicity. Will you have the funds to defend your company? As you can see there are times and events that may affect how and where you communicate /advertise during the year. Make sure you keep a little in reserve to combat any adverse condition that may occur.
Mistake 2 - Assuming business owner knows best
Most business owners are experts at their industry or service but have very little or no idea on how to get their essage to customers. Most people couldn't walk in off the street and run your business so why should anyone expect you to somehow be an expert in advertising and marketing? Most business owners are too close to their own business to be objective. Very few have the ability to place themselves into the shoes of their customers. Too much product knowledge leads business owners to answer questions no one is asking.
Solution 2
One of the challenges of being a Small Business Owner is that today you have to be a:
1. Tax collector.
2. Manager
3. Marketing executive
4. Accountant
5. Legal adviser
6. Business planner
7. Debt collector
8. Market researcher
9. Technology expert
10. Receptionist/secretary
11. Customer relationship manager
12. Product or service development expert
A business owner can study to become a marketer, a copywriter, a project manager or they can contract a professional marketing consultant and concentrate on running their business. Marketing is about common sense so it is best to interview a few providers and see who makes most sense to you. Make sure to get references and see examples of their work before making the final decision and most importantly get an understanding of how well they understand the key drivers in your business. If a marketing consultant can’t come up with a few innovative ways of promoting your business in your first meeting, they are probably not right for you. Be aware that ideas and strategies are their tools of trade and they maybe hesitant to give those away for free, but they should be able to at least provide you with some constructive observations on how your business can be improved.
Mistake 3 - Not knowing and understanding your customers
How can a business best satisfy the needs of their customers if they don’t understand who the customer is and what they really value? As approximately 80% of a businesses’ Sales and Marketing Budget is spent on reaching /communicating with your customers and prospects, you will be wasting the majority of your effort and money by “Communicating the wrong message in the wrong medium”.
Solution 3
Get to know your customers as much as possible. Create a survey for them to fill out. Ask them what radio stations they listen to. What newspapers or magazines do they read. You need to construct a profile of your target market before you can reach them effectively. One of the simplest and most cost effective ways of learning about your customers is to collect information about them.
1. Invest in database software that is suitable for your business, and make sure it can integrate with our business framework, such as for example both your retail outlet and your Internet site.
2. Treat the information like gold and mine it regularly, keeping in touch with your customers.
3. Make sure to get permission to communicate with your customers (it is now illegal not to and there are hefty penalties for doing so)
4. Make sure your communication adds value to your customers and prospects.
Make it relevant, provide rewards such as special offers and competitions and you will start to form a relationship with your customers that will lead to loyalty and higher sales. Many businesses spend so much time trying to attract new customers that they forget the loyal customers who made them successful. A famous Harvard Business study found that it takes six times as much effort to attract a new customer than it does to keep an existing one. Having a well-maintained database will assist you tremendously in achieving this. Are your customers unhappy for some reason? Is your competitor giving them better service or a better product? Maintaining contact will allow you to know the questions to these answers and it will show each customer that you are interested in their business.
Mistake 4 - Lack of Branding – Not having a point of difference
Many Small Businesses have a poor company image or don’t have one at all. Would you as a consumer buy something from someone that didn’t come across as professional?
No, so don’t expect your prospects to buy from you unless you provide them with the confidence to do so. Often the look and feel of the promotional material produced by small business doesn’t match the business that they are in. Their business and / or product name is not reinforced let alone leveraged within their communication to their target market. Today's customers aren't just buying what you sell; they're buying who you are. In any business, big or small, people buy from people - they buy your personality, so your brand also has to be a reflection of who you are down to your personal appearance. The perception your customers have about your business is directly related to your profitability. World’s most famous brands are the most profitable. A famous survey of 25 leading brands in the USA from 1923 illustrates the point perfectly. After 72 years, in
1995:
* 20 of those brands were still in first place in their category
* 4 were in second
* 1 was in fifth
Most small business owners think of branding as something for Big Business, something that is unaffordable. In fact the opposite is true. Branding is more important for Small Business, as by definition Small Business is more competitive and the need to be noticed, to differentiate is greater:
How many major Telephony companies are there in Australia? 5
- Telstra, Optus, Virgin, Vodafone, 3
Which companies dominate the Australian Canned Foods? 3
- Heinz, Edgell, SPC
Which brands own the majority of the Soft Drink Market? 3
- Coke, Schweppes, Pepsi
Which 2 companies dominate Australian Confectionary?
- Mars and Cadbury
How many Breweries are there? 2
- CUB and Lion Nathan
How many major banks are there? 4
- Commonwealth, ANZ, NAB, Westpac.
On the other hand*:
Now how many Mortgage Brokers are there in Melbourne? 51
How many Accountants are there in Caulfield? 44
How many Interior Designers are there in Melbourne? 41
How many Real Estate Agencies in Caulfield? 20
How many Naturopaths in Armadale? 29 and 5 Herbalists!
* Source: Yellow Pages Online Nov 2005
Solution 4
Branding is about creating relationships with customers, building trust between the brand and the consumer. Brands offer reassurance through customer recognition and familiarity, they promise reliability. The goal of branding is to become the name people think of immediately when they need what you sell. Your communication must be immediately Comprehensible, Clear, and Consistent. Most small businesses need to pay more attention to their Brand Image. From their Positioning Statement, logo, business cards, and stationary through to the way goods are displayed in a store, or the look and performance of their internet site, to the way the phone is answered, can all project either a positive or a negative image for your business. However communication alone does not create positive brand feelings. Positive customer feelings come from the total Brand Experience. Brand proposition must be extended through your entire business – another words every interaction between your business and the customer must be carefully managed. Create a visual image for your company and stick to it. Logo, colours, and even the language of the messages should have the same look and feel.
Mistake 5 - Not knowing whether your advertising is working
Reaching your target audience is on average going to take about 80% of your total Sales and Marketing Budget, so to not know how well or poorly this investment is working is a recipe for disaster. In many cases business owners have no idea how to track results and adjust their advertising efforts to be more productive. They advertise in the local paper or on the radio, distribute brochures and then hope this works.
Solution 5
Key your ads / communication pieces. Put something in each ad that will alert you to the fact that the customer is doing business with you because of your ad. The most common response mechanism is a coupon. If the customer redeems the coupon it is a sign that the communication is working. No coupons redeemed can mean that:
* The ad is in the wrong place / you have not reached your target audience, or
* The coupon offer is not what customers are looking for or
* The creative execution was very poor and was not noticed by the intended recipient.
Until you have a good understanding, through testing, of what works and what doesn’t in your business, do not communicate through more than one or 2 channels so that you can properly track your responses. Rather than sending out an offer to all of your customers, first test it on 10% of them, see what the response is and then adjust it to improve. This way you will save money and generate higher sales by learning what works in your business and what doesn’t.
Mistake 6 - Trying to reach more people than the budget will allow
Many small businesses adopt a shotgun approach to communication and end up wasting their hard earned dollars. They create ads instead of campaigns: It is foolish to believe a single ad can ever tell the entire story.
Solution 6
The most effective, persuasive and memorable ads are those that are like a rhinoceros. They make a single point, powerfully. An advertiser with 7 different things to say should commit to a campaign of at least 7 different ads, repeating each ad enough times (this is called Frequency in “ad-speak”) to stick in the prospect's mind. For a media mix to be effective, each element in the mix must have enough repetition to establish retention in the mind of the prospect. Too often, however, the result of a media mix is too much reach and not enough frequency. Will you reach 100 percent of the people and persuade them 10 percent of the way? Or will you reach 10 percent of the people and persuade them 100 percent of the way? The cost is the same. Make an effort to do one form of communication well and there is every chance that it will place you ahead of your competitors.
Mistake 7 - Selling features not benefits
So many ads just talk about what a product has, not what benefit it delivers. No one ever buys a product for the features it has. People buy a mousetrap not because they want a mousetrap but because they want an absence of mice. People buy a shovel but they need a hole in the ground.
Solution 7
Evaluate every product and service you offer. What is the real benefit of each to the customer? Are you showing these benefits in your ads? If the answer is no, then you are not tapping into the core needs that your product or service satisfies and you are not giving your communication effort the best chance of generating leads, responses and sales. Many businesses resort to using scare tactics and a negative tone in their advertisement. Copious amounts of research prove time and time again this doesn’t work and turns off your prospects. Others over-promise and under-deliver by making unsubstantiated claims. Advertisers often claim to have what the customer wants, such as "highest quality at the lowest price," but fail to offer any evidence. An unsubstantiated claim is nothing more than a cliché the prospect is tired of hearing. You must prove what you say in every ad. Do your ads give the prospect new information? Do they provide a new perspective? If not, prepare to be disappointed with the results. At the opposite spectrum of the over-promise and under-deliver mistake is a business that has a WOW factor. A WOW factor is exceeding your customers’ expectations and delivering value beyond what is normally expected from a business such as yours. This not only a way of differentiating yourself from the competition but it gets people talking and generates referrals WOM – Word of Mouth for your business.
Mistake 8 - No clear call to action
Many businesses fail to clearly communicate their Offer and Price and do not provide a peace of mind through a Guarantee.
Solution 8
Here’s an example of a business that gets it. They changed their headline from: "We guarantee the quality of the diamonds we sell" to:
"If the Gemmological Institute of America doesn't confirm our diamond's colour, clarity and carat weight to be at least as good as we promised you, we'll buy back that diamond for the price you paid, reimburse you for the cost of grading, and pay you an additional five thousand dollars. If other jewellers aren't willing to match this offer, you've got to wonder why." Another solution is to increase the urgency of your offer. If a limited quantity is available, name the exact number. Specifics are more persuasive than generalities. If your offer has a time limit, say so. "Offer ends soon" will be perceived only as shallow hype. Be specific. Be accurate. Tell the truth. "Offer ends Saturday the 17th at 5.30 p.m." Tell the truth, even when it hurts. The fine art of hype has been perfected and refined. Consequently, we've developed immunity to "ad -speak," the language of hype. Consumers see the half-truth of hype as a fact of life and they ignore it in greater numbers every day. Our society is suffering from time-poverty, so we're looking for experts we can trust. Does your advertising convince your customers they can trust you? Today's customers have had a lifetime of experience sifting the truth from a world of hype and empty promises. Your customers are already trying to figure out the downside. Why not just tell them? It's the best possible way to protect you from the backlash when they finally figure it out for themselves.
Here is an advertisement from an Air Conditioning and Heating Company that hits the nail on the head:
"We install the same units and charge the same prices as everyone else. The difference is that we're actually going to show up when we said we would. Always on time, or you don't pay a dime. Seriously. If we aren't there within the exact hour we told you we were coming, you pay nothing. Whatever you need is FREE. No charge. Sorry we were late. We are really sorry. One Hour Heat and Air understands that time is money. Your time. Our money."
Mistake 9 - Bland Creative not catching the prospects attention, or getting the right message across.
Slick, clever, funny, creative advertisements are a poor substitute for informative, believable, memorable and persuasive communication. By thinking that they can save money or thinking that they can’t afford to do it themselves, many Small Businesses produce badly written copy with bad design. Their communication looks unappealing and is hard to read or it may look appealing but places emphasis on the wrong areas. Many businesses try to squeeze in too much information without having enough “white space”. They have images that do not suit the content or their brand.
Solution 9
Look at solutions 1-8!
A good marketing consultant will also have a network of suitable designers and copywriters and will be able to manage and oversee the entire process to get the most bang for your buck.
Mistake 10 - Not utilising the Power of Networking and Strategic Business Alliance
Solution 10
Join groups, which are relevant to your business, such as Chambers of Commerce, clubs or professional associations. There are also professional business networking groups that are local to your area. BNI - Business Networks International, for example, is a business and professional networking organization that allows only one person from each profession to join any chapter providing members with exclusivity and being a great source of referrals and general business education. It’s a great way to meet like-minded people with whom you can form valuable strategic business partnerships.
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