Properly analyze your small business marketing

Even though I have heard this for years, it still amazes me that small business owners make broad generalized statements like: “The yellow pages never works.” I have heard similar statements about door hangers, yard signs, newspaper ads, and nearly every other form of advertising.

Having worked with and spoken to hundreds of small business owners, I have a pretty good sense of what motivates such comments. Typically, a contractor tries some form of advertising, gets poor results, and puts all of the blame on that particular media. Such analysis is superficial, erroneous, and a waste of time.

Many, many factors determine how effective a particular ad will be. Certainly on is the media used. But the ad itself is often to blame, yet few contractors stop to consider this fact. They blame the media, not their ad.

Consider an ad that states: “Lowest prices in town.” This is going to appeal to a certain type of person—the price shopper. The text in the ad will have a large impact on the types of calls—if any—that you get.

On the other hand, an ad that states: “The best value in town” is going to appeal to a much different clientele. Everything else about the ad could be the same, except for the headline, and you could experience dramatically different results.

Another factor that contributes to such hasty generalizations is the fact that very few small business owners properly track their leads. If you don’t know where your leads are coming from, it is impossible to properly analyze the ad’s effectiveness. And when I say know, I don’t mean guesses—I mean actual concrete numbers.

And that leads to the final error many small business owners make—they don’t compute their return on investment (ROI) for each ad. They go on “gut feeling”, which can be wildly inaccurate. Personally, when I get a “gut feeling” I usually take an antacid.

Before anyone can say that a particular media doesn’t work, he must compute his ROI accurately. Even then, all it tells him is that that particular ad did or did not work. Don’t throw out the baby with the bathwater—a bad ad won’t draw well, and that isn’t the fault of the media.

Collecting seed corn for your small business

I grew up in a rural area. Our nearest neighbor owned a working farm. The oldest boy was my age, so I frequented the farm to ride horses, feed the cows, and assorted other activities.

One day the farmer was taking the kernels off of a load of harvested corn. He had usually stored the corn without doing this, which he then fed to his animals. I asked about this activity. “This is my seed corn,” he said. I still didn’t understand. “Next spring I will need to plant another crop of corn. If I don’t save some of my harvest from this year, I won’t have anything to plant. These are the seeds for next year’s crop.”

So it is with a small business—if we don’t save some of today’s harvest, we won’t have any seed corn for next year. If we don’t save some of this year’s harvest, we cannot grow our business.

In the case of our business, cash is the seed corn. Cash allows us to advertise, to purchase and maintain equipment, to invest in training, to save for a rainy day. Cash allows us to invest in our business and provide benefits. Cash allows us to grow our business. Just as a farmer can’t grow a crop without his seed corn, a business can’t grow without cash.

The farmer gets his seed corn from today’s crop. The businessman gets his cash from today’s sales—but only if it is built into his price. If his price does not include seed corn the cash will not be available. If he does not anticipate tomorrow’s needs he will not be able to meet tomorrow’s expenses.

The farmer plants more corn than he needs today. The excess becomes his seed corn. The businessman must charge more than he needs for today’s expenses, and the excess becomes his seed corn.

I see many small business owners focus on their immediate income and expenses. This short-term approach denies them seed corn. For what will they do when equipment needs replacing? How will they advertise? How will they weather a temporary lull in business? Without seed corn, they can’t. As a result, they get locked into a vicious cycle of feast or famine.

Those who do not collect seed corn will have nothing with which to plant next year’s crop. And without a crop, there will be nothing to harvest come the fall.

Pricing and image

Nobody likes to pay more for a product or service than they need to. Each of us loves to find a good deal. But as a small business owner we must always remember that our pricing conveys a certain image about the products and services we are selling.

While consumers certainly like to think that they are getting a good deal, they also know that they get what they pay for. When you visit McDonald’s you do not expect the same hamburger that you will get at Fuddrucker’s. If you want more value, you understand that you must pay a higher price.

The same is true of your customers. If your prices were half of your competitors, consumers would be suspicious. They would wonder about the quality of your widgets. They would be concerned whether you would be in business to service their product. Your price would convey a specific image regarding the quality and stability of your business.

This is not to say that we should charge outrageous prices simply to convey quality. Our products and services must truly offer value. If we charge more, we must also offer more. And we can offer more in a variety of ways, from better quality to greater convenience, from superior service to a broader selection.

Certainly there are consumers who are more price conscious than others. And there are products and services–commodities for example–that are more price sensitive. But this doesn’t change the fact that cheap prices can convey an image of cheap quality.

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