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We humans are creatures of habit. In relation to your prospective purchasers: 1. They procure your product/service from someone else and are happy; 2. They are looking to make a change; 3. They don’t need your product/service (or don’t know they need it).

In order to get your prospect “off the fence”, it is helpful to offer an inducement of some sort. The second element of a successful marketing campaign is your offer. On a scale of 1-10, it rates a 5 in terms of importance. Remember your last trip to the supermarket? You turn a corner and there is a friendly person offering you a sample of something just prepared. You take a bite—if you like it, we have a supply right here (and it’s on special today!). If not, you go on your way. Your business has the ability to offer your customers something. It could be a free sample, free trial, buy one get one free (BOGO), buy 12 get 13th free (baker’s dozen), free demonstration, guarantee, etc. You control how often, how long, or how many offers you extend. (By the way, discounting your price is NOT an acceptable offer! This creates other problems which I’ll discuss at another time.) So ask yourself: WHAT do my customers want? (Hint: it’s not your product/service—it’s what that product or service does for them.) WHAT will you offer them to convince them to give you a try?

Since buying decisions are 80% emotion and 20% logic, ask yourself: WHY would they purchase your product or service? (See WHAT do they want above.) The most common excuse given to turn you down is cost. When all else fails, this is the “fall back”. Emotion drives a decision that is “justified” by logic (costs too much, don’t have the money, etc). In most cases, what this really means is that the VALUE of your product or service has not been sufficiently communicated. This underscores the importance of understanding WHY they buy. Ask your current customers why they buy, and continue to buy, from you. This will give you some valuable insight as to the emotional “hot buttons”. Also consider what resonates with your target market. Then you can put together several great offers to test and measure. A campaign without an offer is a waste of your time and money. Make sure you always extend an offer.

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Who is your Target Market? The answer is not “anyone with a pulse and a checkbook”! Having success at attracting new customers requires some careful thought and appropriate answer to this question.

Big companies figured this out long ago and we entrepreneurs need to adapt this learning. Think back to the last small appliance or power tool you purchased. As you unpack your new item, out falls the “registration card”. The implied purpose is to register the warranty (which, by law, you get anyway…). The card starts out with name, address, phone number, product, model, number, serial number, date & place of purchase, etc. We’re OK so far. Then, notice what comes next. Questions about number of household members, education level attained, household income, hobbies & interests. What does that have to do with this purchase? The answer: EVERYTHING. Over the years, customers have willing provided information that effectively “built” the profile of the attributes of the purchasers of each product. This is valuable information and can assist greatly with marketing efforts.

Now to the “who”. Look at your current mix of customers. Are they male or female? (It’s never 50/50) What age ranges? What other common denominators do you notice about your customers?

Next, where can you find them in the highest concentration? What publications do they read? What types of events do they attend (sport, social, cultural)? What TV shows, movies do they watch? What music do they like? What clubs, groups, organizations do they belong to?

Some of this information can be gathered by surveys and just getting to know your customers. Then, begin to assemble the common denominators that will help you make informed marketing decisions. In the next two installments, I’ll discuss the other two essential components of a successful marketing campaign.

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Do you want to take quick, easy, and inexpensive action to improve your bottom line? Focus on your margins. This is the quickest and least expensive way to improve immediate profitability.

Margins, like many of the 5 Ways metrics, can be measured, tracked, and improved in a number of ways. Gross Margin is a measure of how much profit is in each sale of a tangible product. For service-based businesses this margin approaches 100%. Net Margin is what’s left over after the bills are paid.

If you’re selling widgets, gross margin can be improved by raising prices, buying in larger quantities to get a price break, changing suppliers, and up to 64 other methods as listed in the book Instant Profits. Net margin is a function of how well fixed and variable costs are controlled. Every improvement to these line items “drops through” to the bottom line. We recommend scrutinizing income statement, balance sheet, and cash flow statements monthly to identify areas for improvement. Every business Owner/Leader should have a great relationship with a trusted insurance agent who can advise on the myriad of coverage options available. Items such as Workers Comp, Property & Casualty, General Liability, Umbrella liability, Health, Life, Dental, Business auto, etc. should be reviewed at least annually to assure proper coverage at competitive rates. Also, check your phone and internet plans as cost savings are usually available here if you pursue it. Remember, what you measure you can manage; what you manage you can change.

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How much do you measure? What is the average dollar sale per week? Per hour? Per salesperson? Per product? Per customer? There are so many opportunities for learning and improvement when we measure and strategize this metric in the 5 Ways.

You will have highs and lows in transaction amounts, so it’s important to track your average dollar sale on a regular basis. The improvement of this metric lends itself well to sales contests and other measures of Team performance. It is affected by changes in costs of goods, sales follow-up, cross-selling, add-on selling, new product introductions, etc. Because it is an average, albeit a weighted one, it is easy to calculate. Simply divide the sales volume, in a date range, by the “aspect” (customer, product, invoice, etc.). One of the most obvious ways to improve is to ask your customer to upgrade. McDonald’s has found that 3 out of 10 customers will upgrade if asked. The key is to ask and it costs virtually nothing to ask. Another mistake most businesses make is assuming that their customers know all the products and services offered. They don’t and, in most cases, would be glad to give you the business on these ancillary products and services if you point it out.

Brainstorm ideas to improve your average dollar sale at your next Team meeting. The “cost” is negligible and the potential rewards are great!

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Do you measure repeat business? Is the trend increasing, decreasing, or about the same? When you know how often, on average, your customers come back, you can implement strategies to increase the frequency.

Often it’s as simple as inviting them to return, yet few businesses go to the “trouble”. Of the 5 Ways, this one usually involves some marketing effort or direct (invested) follow-up. Look for an excuse to throw a party, even for an obscure “holiday”. By injecting an element of FUN, the Team has a good time, the customers enjoy something a little different, and everybody wins. Another simple idea to increase return frequency is with hand-written thank-you notes. Again, so few send them anymore that yours will really stand out. If you are a high volume retail store, this may be difficult to do for all new customers. In this case, set a purchase threshold beyond which a special note is sent.

There are 68 strategies discussed in Instant Cashflow that can help you increase transaction frequency. Start by measuring where you are right now, adopt a strategy that makes sense for your business, and monitor the results at least monthly. Remember: change doesn’t have to be monumental, only incremental. Change one thing today, this week and imagine how your business will look a year from now with 52 changes. Now that’s something to get excited about!

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What is your batting average? (And I’m not talking about baseball!) Your customer acquisition and growth is determined by how many prospects to engage with (“at-bats”) times how many you convert (hits, home runs, etc). Depending on your business, there may be several conversion rates and it is important to measure your success at each step in your sales process. In this way, you know which areas, if any, need work.

For example, you meet a lot of people. Not all are prospects for you (although they could generate referrals). So, the ones that are prospects will make appointments to talk to you in depth. This is your conversion rate from contact (first meeting) to appointment. For every appointment, it may be a next step to make a proposal or estimate. Now you have a conversion rate from appointment to proposal. You will sell some of those proposals so you now have a conversion rate from proposal to sale. If you have 100 contacts and 50 make appointments, that’s a 50% conversion rate. If 10 of those request a proposal, that’s a 20% conversion rate. If 4 buy from you, that’s a 40% conversion rate. Overall that’s 4 out of 100 or 4% from contact to sale but it’s also important to measure at each step in your process.

Many business owners think their conversion rate is higher than it really is. When they measure it, they’re usually shocked! The good news is that this means there is a lot of room for improvement. Conversion rate is also among the easiest and least expensive to change so it is important to measure frequently and act quickly. Some of the best tactics to put into place to improve conversion rate are USP, Guarantee, testimonials. Start measuring today!

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What is the most expensive and riskiest aspect of business-building? Lead Generation! Of the 5 Ways to Super Profits, this is the one we work on last. Yet, many business owners want to increase the inflow of prospects immediately, wrongfully assuming this will solve all their problems. This is an example of the old adage: ”Be careful what you wish for.” You can generate a boatload of new prospects and then get “bottle-necked” by the limitations of your Team, systems, suppliers, equipment, etc.

Now that I’ve touched on what can go wrong, let’s focus on the importance of lead generation. Remember when we talked about why customers leave? 1% die, 3% move away, and 5% give their business to a friend. That means your marketing should “re-generate” at least 10% of your prospect base annually just to keep up with normal attrition. So, on-going marketing and prospect-building are vital to long-term success. Bear in mind that your database is one of your most valuable business assets. An up-to-date accurate list of contacts with pertinent information is worth real money and the amount varies by industry. In some businesses, the customer list may be the ONLY asset that has any tangible value because of the potential for future revenue/profit. Growing the list of contacts allows for targeted marketing across different demographics and with various campaigns.

The net growth (and this implies that you will clean up the list periodically) of your lead generation (database) is accomplished by your marketing plan. Remember we recommend a 10×10 marketing plan that is tested and measured so that you can make informed decisions about where to best invest your marketing dollars. It’s the failure to consistently test and measure that makes lead generation so risky and, ultimately, expensive. It’s also important to consider the quality of the leads, not just quantity. Generating leads that are not in your target market (absurd example: a lawn maintenance company marketing to a high-rise apartment building!) is a waste of time and money. There are 5 important questions you must ask before you market your business: Who (is the Target Market); Where (will you find them in the highest concentration); What (will you offer them); Why (do they buy and why from you); How (will you get your message to them)? Make sure you ask and answer in the exact order before you embark on your next marketing campaign.

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Do you want to have an unlimited marketing budget? The first variable is your Acquisition Cost (reviewed last week) and the second part is Lifetime Value. When you know both of these numbers, you know how much needs to be invested to “buy” incremental business. Calculating this requires the answers to 2 questions: 1. How long do your customers stay with you; 2. How much do they spend during that time?

So how long do you keep customers? It’s important to remember that 1%, on average, will die every year. 3%, on average, will move away. (This may or may not affect your business.) 5% will choose to “shift” their business from you to a friend who has gotten into the same industry. On average, you could lose 9-10% of your customers every year through no fault of your own. That’s why your marketing should be designed to help “recruit” new business to replace the ones leaving for the above reasons. By the way, the single greatest reason that customers leave (and completely within your control) is Perceived Indifference. A startling 68% of your customers will leave if they perceive that you don’t care about them! One more point: it’s generally 6 times easier to retain a customer than it is to go get a new one. This underlines the importance of customer retention strategies. Go back through your customer list and measure how long your customers have been doing business with you. This exercise will yield your average “life expectancy” and may remind you to contact some folks you haven’t talked to in a while.

Next, you need to calculate your average dollar sale. You can figure this by customer and by product or service. Next, review your margins. Depending on the range of products/services you offer and the “mix” that your customers buy, you will obtain a blended average. (We’ll assume here that your fixed costs are covered.) Here is the formula: (Lifespan) x (average dollar sale) x (average gross margin, less direct incremental labor costs) = Lifetime Value. This number will vary with the mix of customers and the products they buy so it’s wise to re-calculate monthly. Once you get in the habit, it doesn’t take long and the information is powerful. And, you’re calculating your 5 Ways already, right? You manage what you measure, and you can change what you manage. Start today.

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Would you like to have an unlimited marketing budget? In this installment, I’ll discuss the first of 2 things you must measure and track to achieve this.

The first thing you need to know is what it costs you for each lead, and ultimately, each converted sale. This is your acquisition cost and is expressed as cost per lead and cost per customer. It can be total (cumulative) and can be tracked for each marketing campaign.

There are two types of acquisition cost. The first is your allowable acquisition cost. This amount is calculated by looking at your average dollar sale (by product, service, category, type, etc) and the margin associated with it. It’s “allowable” in that you can invest up to the amount of profit from first sale to “buy” your next customer. For example, if average dollar sale is $100 and margin is 40%, this results in an allowable acquisition cost of $40 to achieve incremental sales. Consider what you could offer (incentive, trial, bonus, demo, sample, etc), worth up to $40, that would entice a new prospect to buy. Remember to give away something with perceived value (never discount!) as you control the amount and the time of the offer (while supply lasts, to the next 10 customers, for the next 2 weeks, etc).

The other type of acquisition cost is investment acquisition cost. This one is a little tricky and will “bite” you without due diligence. For this one to work, you really have to know your numbers, including conversion rate, repeat business frequency, and lifetime value (discussed in next week’s column). Your investment acquisition cost implies that you will expend (invest) more to buy the next customer than you make on the first sale. Brad used the example of his dog food company to illustrate this. Because the re-purchase frequency was high (4 weeks), and lifetime value (7 years) was significant, this was a good investment. Again, you’ve got to know your numbers.

On a very timely note, Brad’s 15th book Buying Customers, is due out next month which covers this topic in more detail. I have reserved some autographed copies which should arrive soon. Contact me to reserve yours.

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No matter how good you are, you can’t do everything yourself. And why would you want to? One of the advantages of leverage is the benefit gained by building a Team which can then help you build your business.

It starts with the environment in your business. Visualize your ideal Team member. What attributes and characteristics would they possess? What level of experience or work ethic? What values? Now, are you running the kind of business that this person would be attracted to? You might want to make some changes. Start with looking around trying to catch someone doing something right. Look for opportunities to inject an element of FUN into the workplace.

There are six keys to a winning Team. It should come as no surprise that it all starts with the Leader, as no Team will ever out-perform the capabilities of its leadership. What example do you set? Leading a Team is very similar to raising children (those of you that are parents have a real advantage here!). They watch everything that you do and they hear everything that you say. And they do an uncanny job of “keeping score”! The Leader must always exhibit a unified front and apply the rules consistently. Ignore this advice at your own peril.

Your Team also includes a group of trusted advisors. Every business owner or leader should have: 1. An attorney for advice on legal matters; 2. A CPA for bookkeeping & tax advice; 3. An insurance agent to provide for your liabilities and exposures; 4. A financial advisor for retirement and benefits advice; 5. A banker for help with accounts, lines of credit, etc; 6. A Business Coach to help you keep all this sorted out and hold you accountable.

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