How true is the old chestnut “those who do not know history are destined to repeat it”?
It is an unfortunate truth, but in a business environment where 75% of new businesses fail, and 61% of actively trading businesses have no employees, it may be understandable. The new ‘entrepreneurs’ come and go, many having no background in business for themselves, and little beyond an often significant functional skill that they think will lead customers to their door.
That strategy may have worked in the past, but no longer.
Being an employee is generally a lousy training to be an entrepreneur, of any type.
Following are a number of the most common causes of those failures I see, several on a disturbingly regular basis.
Funding ‘institutional’ advertising & promotion.
Most advertising I see is for an institution, or business, not for the benefit of the customer and potential customer. The “buy from me, I am better” type advertising. Instead, advertisers should think about every piece of communication as a piece of direct response advertising, something that requires and points to an action. Advertising should be just a media centric form of direct response, otherwise, why do it? Spending money on advertising without directing people to a course of action is a waste.
Many will wail at that, and point to the need to build a brand. True. But it gets the order in which things happen back to front. You do not build a brand just by advertising to attract customers/consumers, you build a brand by performing, delivering value to those who try you out, then come back again and again because the value is terrific, and in the process tell their friends. Advertising is just a tool to apply leverage to this process.
Not testing.
These days everything, or almost everything can be tested. Test so you can generate the maximum leverage for your activity. Any marketing activity costs a fixed amount of money, it is the maths of the responses that give you leverage. Spend $100 on an activity, and you get $150 back might seem OK, but if you got back $300, or $500, or $5,000 how much better would that be? The leverage you are generating from your activity is greater. Test for the elements that will generate you the leverage, as adverting is just leverage applied in a different form.
Not having some sort of differentiator
Delivering value to your specific target audience that they cannot get elsewhere is essential. Whatever is your key value, it has to be unique to somebody or you are just competing on price, and when you compete on price, even if you win, you lose.
Not sufficiently recognising the value of their existing customers.
We all know at some level that is it easier to get more from an existing customer than it is to get a new one, but we still insist on going looking for new customers and to some degree ignoring the value still to be gained from the existing ones. Even if you bring them value for someone else that is complementary to what you can deliver, and perhaps clip the ticket, by bringing them that value you ensure you are always on their radar, and they are receptive to any offer you make. This applies as much to heavy machinery and capital intensive industries as it does to the way Amazon flogs you more books by knowing what you have bought and looked at in the past, and comparing that to others that seem similar.
Insufficient customer research and understanding.
The clearer the understanding you have of your customers and prospects needs, the better able you are able to craft a compelling offer, negate objections, and solve their problems. Once you solve their problems they are yours forever, they will always have you on the short list, if not be the only choice.
Do not have price as the only motivator to a sale. Winning the race to the bottom of the price curve, you also lose. When you use price as the motivator, as you might if you make a blue and have a warehouse full of stock you need to flog, find some other way to add value. Provide a a guarantee, or assurance that this cut price is only available for a short time and then only to the most valued customers you have, there are many tried and true tactics . This puts a sense of urgency and exclusivity in the offer which obscures the discount as a motivator, so it does not erode the full price that you need to be profitable when things return too normal.
Not making it easy to do business with you.
We all know how annoying it is to be shunted from person to person, not getting answers, we all hate it, so why do we do it to our customers?? Make it easy to do business with you. Often this requires that you give the decision making power to those at the front lines, those who have the first contact with the customer. Ensure they are sufficiently well trained and informed that they can answer all the questions that may be asked. How bloody annoying is it to ask a question, and be asked to wait while they go and get their supervisor! Make it easy, even fun to do business with you, find ways to add that bit of extra value that others leave out, the little things make all the difference.
Not being transparent and answering “Why‘.
‘Why does this cost more than the opposition?’… ‘Because it is hand made from rare materials, not some imitation, or it is twice as durable, so is really cheap at the price’. Failing to communicate your ‘Why’ is a grave failure. If you have lots of inventory, and want to get rid of it quickly, as often happens in many forms of retailing, tell them why, that this is a one time only limited to available stock offer, created by your buying ability with your suppliers. Tell them why, is a very powerful tactic in selling.
Not being persistent
When you have done the work, be prepared to stick with it, and not change tactics mid stream just because there is a bump in the road. Strategy is about the long term. When activities are consistent with the strategies and add to the long term, be prepared to hang in there, and not be seduced by the newest shiny thing that comes along and seems attractive, Most businesses get tired of their own marketing well before the market does, so stick. An old boss of mine used to say that consumers were just getting to see our advertising about the time we were getting sick of it, and that is so true. Stick with what works, vary the tone and tactics to keep it fresh and new as necessary, but stick to the strategy.
Lack of focus. Any sort of activity should be directed at a specific target, the more focused the better. When others see it and act on it, great, but the clearer the focus on a benefit to a target customer you have the better. This clearly requires that you have a very clear idea of the ‘where what how and why’ of your ideal customer, but without that you are just spraying messages and hoping they hit something that looks like a prospective customer, rather when focusing on one and ensuring that you are adding value to them.
Not educating your customers.
Never sell to customers, educate them to the benefits they will see by the use of your solution to their problems and opportunities. By setting out to add value to your customers by educating them, you can earn the right to have them buy from you. The old fashioned hard sell rarely works any more. Instead, educate, appeal to their emotions, and show them the benefits, as did Don Draper in this Man Men classic.
lack of understanding ‘lifetime customer value’.
In most markets, customers are customers more than once, so understanding the arithmetic supporting the value of your customer is crucial. If you spend 150% of the first sales value to acquire a customer who then stays on for a further couple of sales that cost you little to get, you are way ahead. Never burn off a customer once you have them by failing to live up to expectations. Over-delivering to customers is always a great strategy, and maximises the lifetime value.
Ignoring the value of Social media.
Social media is deceptively hard to get right, and getting it wrong can be a disaster. However, every business should be leveraging the potential power of Social media, recognising the downside. The help of the 14 year old down the street can be useful, but it can also be hugely misleading, and potentially commercially dangerous.
There are many more, but these 12 are the most common marketing mistakes, but I cannot leave without adding another. Know your numbers. Failure to understand the financial realities of a business brings more unstuck than all the rest put together.
