Part 1 in our video series on Business Management. We’re focusing on the Top Reasons Why Small Businesses Failed followed by videos on “How to overcome these top reasons.”
The statistics are shocking on the number of small businesses that fail in their first year. Sadly only 20% of all new start-ups don’t make it past their first year. 50% close their doors for good within 5 years.
Amazingly, when we look at the Top Reasons why small businesses fail, there is a pattern of mistakes they have in common.
Every marketing plan should include these five elements
Doing business without a marketing plan is like driving without a map. You may get to your destination—eventually—but you risk making time-consuming and costly errors along the way. You might be assuming there’s a demand for your product when there isn’t, for example. Your services might be priced too low. Or you could be venturing into a market that is impenetrable because of regulatory restrictions.
Marketing plan = confidence
The only way to start a business venture with confidence is to develop a good marketing plan—one that’s backed up with facts and research. This document clearly shows how you’ll attract customers to your product or service and persuade them to buy. The marketing plan also builds confidence with financial institutions, showing lenders that your business has a good chance of being successful.
Contrary to popular belief, a marketing plan is not a one-time effort destined to sit in a binder on your desk. On the contrary, it should be updated on a regular basis to reflect the changing needs of your business and customers.
There are many different models for marketing plans. Here are five essential ingredients.
1. Do a situation analysis
Many companies start with a SWOT analysis, looking at their firm’s strengths, weaknesses, opportunities, and threats. This involves identifying your competitors, understanding exactly how they operate and becoming familiar with their strengths and weaknesses.
Strengths are any competitive advantage, skill, expertise, proficiency, talent or other factors that improve your company’s position in the marketplace and can’t be easily copied. Examples are a well-trained sales team, low staff turnover, high consumer retention or low production costs due to superior technology.
Weaknesses are the factors that reduce your company’s ability to achieve its objectives independently. Examples include unreliable delivery, outdated production tools, insufficient marketing efforts and a lack of planning.
Opportunities are ways for your business to grow and be more profitable. These can include seeking new markets, managing technological change or addressing new consumer trends. You need to look at how your company’s main skills can be used to take advantage of these opportunities.
Threats are barriers to entry in your primary markets, such as a labour shortage, legislative hurdles or detrimental economic or political developments.
2. Develop a target market profile
Demographic portrait
Here you want to demonstrate that you know your customers inside and out, including their expectations and their whims. Your profile should include basic demographic portraits that paint a clear profile of your clients. Look at characteristics such as age, sex, profession or career, income level, level of educational attainment and geographic location.
Estimated demand
You’ll want to provide research that shows the estimated demand for your product or service as well as the rate at which that demand is expected to grow. This builds confidence within financial institutions that your business has growth potential.
Purchase motivation
It’s also important to understand exactly what motivates customers to buy. Are your clients looking for savings or a way to simplify their lives, for example, or are they just shopping for pleasure? Ask yourself why they would buy your product or service. In the same vein, you may want to know what keeps customers away from your competitors’ products or services. Are they too costly? Do they lack something unique? These insights will help you develop a product or service that outshines the competition.
3. Set clear marketing objectives
Here you describe the desired outcome of your marketing plan with attainable and realistic objectives, targets and a clear time frame.
The most common approach is to use marketing metrics. For example, your market objectives could include:
total market share and segments
total number of customers and retention rate
the proportion of your potential market that makes purchases (penetration rate)
Once you’ve determined your objectives and targets, it’s time to look at how you’ll promote your business to prospective customers.
Strategies typically cover the Four Ps of marketing:
product
price
place
promotion
Your choice of marketing vehicles will be governed by the profile of your target market, so you need to understand how different vehicles reach different audiences. Don’t always assume you have to spend money on costly advertising. If you have a niche audience, for example, you can take advantage of low-cost marketing strategies such as e-mail.
The costliest options are usually advertising, sales promotions and public relations campaigns. Referrals and networking are lower-cost ways to reach customers. Digital marketing is a powerful strategy because it is inexpensive and effective in reaching target markets.
5. Create your financial plan
A marketing plan without financials has little clout. Financials can also be included in a general business plan.
One document you’ll need to produce is a budget and sales forecast. This doesn’t have to be complex; in fact, it’s wise to keep it simple. It may help to start with the following questions:
How much do you expect to sell?
What will you be charging?
What will it cost to produce your products or deliver services?
What will be your basic operating expenses? Be sure to include recruitment costs and salaries here.
How much financing will you need to run your business?
Answering these questions will help you determine your projected income and expenses.
A break-even analysis is another important step in developing your marketing plan. This analysis shows exactly how much you need to sell to cover your costs of doing business. If you can surpass your break-even point and easily bring in more than the amount of sales revenue needed to meet your expenses, you stand a good chance of making a profit.
You know it’s going to take a marketing push to meet your sales goals this year. But your budget is tight and you’ll need to use your imagination to make it. Where to start?
For many business owners, marketing doesn’t come naturally. They lurch from one tactic to another without a clear idea of whether the efforts are going to pay off in higher sales.
If that description sounds familiar, here are some time-tested, low-cost techniques to improve your marketing and help you reach your goals.
1. Conduct a survey
It’s critical to create a marketing plan before moving on to tactics. And the first step in developing a marketing plan is to understand who your target customers are and what they want from your company.
A good way to gain a better understanding of your customers is to conduct a survey about your products or services. If you can’t afford to hire a research company, do it yourself by creating a short questionnaire and recruiting existing and prospective customers to participate.
2. Pamper your existing customers
It’s typically five times as expensive to make a sale to a new customer as it is to an existing one. So make sure you’re not neglecting the people who already know and trust you.
Consider, for example, taking your best customers out to dinner or golf and using the opportunity to ask them about how to improve your business. You could also personally write to your top 10 customers to thank them and tell them they’re part of your new loyalty program or invite them to sneak preview your latest product.
3. Commit to online marketing
The Internet provides you with an inexpensive 24-hour virtual storefront. You can build relationships with prospective customers by offering them high-quality content on your site such as blogs, how-to articles, videos and a newsletter.
You can also extend your reach by using social media. One word of caution, however: If you’re not willing to devote six to eight hours a week of an employee’s time, you’re better off going with a simple, well-designed website.
4. Use all your real estate
Your building and surrounding land or sidewalk are great places to put up signs and banners. And don’t forget to use your vehicles as moving billboards. But remember: Your images and messages should focus on what you’re selling, not your company’s name.
5. Work at public relations
A media story about your company is generally much more valuable than an advertisement because of the credibility it confers on your business. But in this era of media cutbacks, it’s harder than ever to attract journalists’ attention. Keep in mind that they’re looking for a compelling story to tell. So help them by letting them know about your innovative product, unusual customer contact or high-stakes gamble that paid off. And keep at it—building relationships with the media will pay off.
6. Turn employees into ambassadors
Your employees are part of the community and have all sorts of contacts that could help you. How about inviting employees and their extended families to a fun event at your business? You may find you get new word-of-mouth business or hear about a potential new business partner. At the very least, your team will come back to work on Monday feeling energized.
7. Give back
By sponsoring a hockey team or participating in a charity drive with a cheque and a collection jar in your lunchroom or by the cash register, you’re not only doing your part for the community but also generating goodwill with customers and prospects.
A good customer loyalty program can generate significant gains in recurring revenue for your business by improving the return on your marketing and sales budget.
Here are some facts:
Keeping an existing customer costs up to five times less than winning a new one.
It’s easier to persuade a customer who already knows you to buy again and/or buy more from you.
20% of customers are typically responsible for 80% of a company’s revenue.
Is a loyalty program right for your business?
Before developing a customer loyalty program, you need to know whether this will be a useful tactic for your business.
The first thing to determine is the value of a customer to your company and how much it costs to acquire one. This will help you decide whether to invest more money in developing new customers or on retaining and developing the ones you already have.
The value of a customer
Let’s say a good customer at a B2B company buys $30,000 worth of product in a year.
At the same time, you spend $175,000 a year in marketing and business development activities that yield, on average, 10 new customers a year. Therefore, your average customer acquisition cost is $17,500.
If you have several existing customers who don’t spend $30,000 with you in a year, why invest $17,500 in finding a new customer? With a good customer loyalty program, you will most likely boost your sales to existing customers at a much lower cost.
Steps to develop a customer loyalty program
1. Study your current customers
Here are some questions to ask about each customer:
How much does this customer buy in a year?
What type of products do they buy and how frequent are purchases?
How long have they been a customer?
Can we sell them other products?
Do they use other suppliers, and, if so, who are they?
How much profit do we earn on their purchases?
How fast do they pay?
How satisfied are they with our company?
How could we improve our business relationship?
2. Prepare your customer loyalty program
Before launching a loyalty program, you need to assess your customers’ current level of satisfaction through such techniques as surveys, interviews, and monitoring customer comments.
Then, identify employees who are good at dealing with customers and who will be available to participate in the program. You will need to target customers who purchase frequently from you but could become more profitable, according to your analysis. If the purchase cycle is long (more than three years), this type of program is generally not recommended.
3. Set goals, and measure them with a CRM
Set your goals for the program from the beginning. For example, if your customers purchase on average three times per year, set a goal of 3.3 times a year. This will increase your sales by 10% with few additional expenses. Use CRM software to manage this program. If you are looking for a low‑cost or free CRM solution, you may want to consider our list.
4. Set a budget
Set a budget for managing customer retention and a separate one for developing new customers. To do so, consult your industry average if you are looking for above‑average growth, increase your budget accordingly.
5. Decide which customers to target
Based on the study described above, categorize your customers (e.g. A, B, C) according to evaluation criteria that are adapted to your needs and objectives.
Volume of purchases
Ability to purchase more products and services
Speed of payment
Customer profitability
Loyalty over time
6. Choose tactics that will encourage client loyalty
Choose loyalty enhancing tactics that are related to a customer’s purchases, but also to the quality of your business relationship. Here are some examples:
Monthly visits from a sales representative.
Annual visit and business lunch with the vice president of sales.
Personal invitation to a seminar and dinner given by the president.
Premium service—guaranteed 24/7.
Emergency phone line and secure website access.
Additional discounts when purchase milestones are reached.
Sponsorship of an annual event.
2. Prepare your customer loyalty program
Before launching a loyalty program, you need to assess your customers’ current level of satisfaction through such techniques as surveys, interviews and monitoring customer comments.
Then, identify employees who are good at dealing with customers and who will be available to participate in the program. You will need to target customers who purchase frequently from you but could become more profitable, according to your analysis. If the purchase cycle is long (more than three years), this type of program is generally not recommended.
3. Set goals, and measure them with a CRM
Set your goals for the program from the beginning. For example, if your customers purchase on average three times per year, set a goal of 3.3 times a year. This will increase your sales by 10% with few additional expenses. Use CRM software to manage this program. If you are looking for a low‑cost or free CRM solution, you may want to consider our list.
4. Set a budget
Set a budget for managing customer retention and a separate one for developing new customers. To do so, consult your industry average if you are looking for above‑average growth, increase your budget accordingly.
5. Decide which customers to target
Based on the study described above, categorize your customers (e.g. A, B, C) according to evaluation criteria that are adapted to your needs and objectives.
Volume of purchases
Ability to purchase more products and services
Speed of payment
Customer profitability
Loyalty over time
6. Choose tactics that will encourage client loyalty
Choose loyalty enhancing tactics that are related to a customer’s purchases, but also to the quality of your business relationship. Here are some examples:
Monthly visits from a sales representative.
Annual visit and business lunch with the vice president of sales.
Personal invitation to a seminar and dinner given by the president.
Premium service—guaranteed 24/7.
Emergency phone line and secure website access.
Additional discounts when purchase milestones are reached.
Sponsorship of an annual event.
If your customers are businesses, there’s a good chance this type of program is good for you.
But a customer loyalty program doesn’t mean you can neglect new business development. It’s a never‑ending job to increase your portfolio of loyal customers.
Contrary to popular belief, customer relationship management (CRM) is not just another type of business management software; it is a business strategy to acquire, grow and retain profitable customer relationships. This distinction is important. CRM can only succeed if the CRM technology supports a truly customer-focused strategy and fits your unique requirements.
How does CRM help?
CRM brings together information about customers, sales and marketing from across your organization. As a result, CRM can help you:
retain existing customers by improving customer service
sell more to existing customers by uncovering opportunities
close deals faster by centrally tracking key information
streamline account management by tracking all interactions with each customer
enhance pipeline management by tracking performance against sales quotas
save time by improving team communication and
empower your field sales force with information on their mobile devices.
What does CRM software do?
CRM software captures and organizes information from current and prospective customers in an integrated system. All employees gain a single view of prospects and customers, allowing them to better cooperate and coordinate activities.
Free and low-cost CRM tools
CRM solutions fall into different categories, from online solutions to complex multi-site implementations. If you are looking for a low-cost or free solution, you may want to consider the following. (SaaS refers to “software as a service.”)
This table lists applications alphabetically and isn’t exhaustive. Hyperlinks to external sites do not constitute an endorsement by Aaron Wealth Management of those websites or any information, opinions, products or services expressed or described on them.
Furthermore, the list is only a starting point and excludes applications that are neither low cost nor free. When assessing CRM solutions for your organization, you will probably consider many other factors.
I’ve previously written about content marketing and its importance to small businesses trying to connect with customers.
An associated concept is marketing automation. It’s a term that gets thrown around a lot these days, but it remains very nebulous for many entrepreneurs. What exactly gets automated? And how does it work? Well, the answer can be confusing, to say the least.
At its most basic, marketing automation refers to software tools that do marketing tasks that small businesses might otherwise do manually.
These tasks include communications with customers and prospective customers via email or social media as well as measurement and tracking of information.
Ease your workload
One example of lessening your workload might be managing social media content on platforms such as Facebook, Twitter, and LinkedIn with a tool like HootSuite. With it, you can schedule posts ahead of time on all your social media properties from a user‑friendly dashboard.
Another example would be sending an automatic thank‑you email when someone submits a request to you, using the “contact us” form on your website. It’s easy and respectful.
These are very simple examples, but they show how marketing automation tools and strategies can save you time in managing communications and marketing campaigns.
Generate more sales leads
The idea of streamlining tasks is very much at the heart of marketing automation, but there is much more to it. Generating sales leads (or nurturing them) is also at the core of marketing automation.
There are many tools that allow you to communicate with prospective customers when they’re making buying decisions. They help you to put the right content in front of the right people at the right time.
Consider, for example, a customer relationship management (CRM) tool that allows you to identify all your customers in Vancouver who have purchased more than $1,000 in the last year. The tool also allows you to identify who in this group follows you on Facebook. Now you can use that information to target those customers with a Facebook ad offering them 10% off their next purchase.
Deliver segmented email content
Another example might be an email segmentation tool that allows you to send specific content in your email newsletter to subscribers based on what you know about their preferences.
So, let’s say a clothing retailer keeps track of the gender of his or her email recipients. The retailer can now send gender-specific content like deals on skirts and blouses to women and pants and shirts to men. Those individuals only see the things that interest them, ultimately increasing the chances that they will make a purchase.
Examples of automation tools
Here are some marketing automation companies that may be familiar to you.
Salesforce.com (customer relationship management and marketing)
These tools and many others like them help businesses collect better data and streamline marketing processes.
How much sophistication does your business need in its marketing automation software? That depends on the maturity of your digital marketing efforts and what kind of resources you can afford to devote to automation.
Use the right tools
Do you have a lot of social media followers and/or channels to manage? Do you have a lot of content to generate and publish in the course of a week? Do you have a lot of communication touchpoints with your customers? Are you collecting information from your customers on a regular basis?
The answers to these questions, and others like them, will help you decide what marketing automation tools you need.
Automation tools can provide awesome benefits to your business, but they don’t give you permission to take your eye off the ball. On the contrary, you always have to be reviewing your communications, customer feedback, and online data so you can continually improve your marketing efforts.
It’s not set it and forget it
For example, you have to be careful about the context in which you are automatically publishing content.
You absolutely do not want an automated tweet to go out at the same time that the Twittersphere is exploding over a major disaster or a horrific terrorist attack. Marketing on full autopilot without oversight is a bad idea.
Does your small business use marketing automation tools? Which ones? How are they working? We would love your comments.
