If you are like most of the hundreds of Fairfield County and Westchester County business owners we encounter annually as business advisers, you are struggling mightily to add more business. That”™s a very wise use of your time in this contracted economy ”“ but a mistake many business owners are making is going for quantity, not necessarily quality.
By that I mean their marketing is about simply adding more business when it should be about adding more profitable business. An effective marketing program needs to be a carefully calculated effort that assesses whether prospective customers and product and service offerings will indeed produce maximum profits ”“ not just revenue.
For example, a landscaping company client of ours offers a variety of services. They didn”™t have an accurate measurement of the relative profitability of their various services and they marketed them indiscriminately. We worked with them to determine the profit in each of their services and then developed a program to market most profitable ones to both new and existing customers. As a result, this company”™s bottom line is up 941 percent year over year.
Evaluating targets
While looking for new marketing opportunities, you need to assess each as an investment. Determine what your net profit will be after subtracting your cost to provide the product or service.
More desirable customers will purchase sizable volume with enough frequency to provide a steady income stream over time rather than serve as just a one-time or infrequent purchase event. If possible, they should be prospects for cross-selling other products and services to generate additional revenue.
Be wary of becoming too dependent on a few large customers. They can use this knowledge as leverage to lowball you. Or, if they decide to pull the plug, it could be financially devastating.
Another key factor to consider in developing your marketing strategy is how much you”™ll charge. It”™s a tricky balance: Setting your price low certainly may help attract customers, but it can also bankrupt you.
In addition, think about what kind of payment terms you”™re prepared to offer. Sitting on large accounts receivable can strain your cash flow. Establishing a timely payment schedule with customers is, therefore, critical to sustaining your operations.
If you must make a major cash outlay for setting up a new client, such as for new equipment, consider arranging with the customer for the initial pricing to include a surcharge for a specified period of time and whether a contract deposit is appropriate.
Getting the word out
Once you”™ve identified a target customer, you can begin marketing in earnest. In addition to the traditional marketing methods ”“ advertising, direct mail, publicity ”“ there is a relatively new twist on one of the most effective ones, word of mouth, using the incredible reach of the Internet.
You”™ve probably heard plenty about blogs ”“ the now-common, simple, regularly updated, diary-like websites. A blog offers you a means to “advertise” a product or service while also getting feedback from customers. For instance, Dell used a blog to successfully address customer concerns about faulty laptop computer batteries.
Marketing can be risky business. A misguided campaign can waste time and money ”“ and worse. But the cost of doing nothing these days may be even greater.
James J. Malski is president of Next Level Strategies in Fairfield. He can be reached at jimmalski@gotonextlevel.com.
