The Facts of Business Life: What Every Successful Business Owner Knows That You Dont

by Bill McBean

  In other words, marketing is not one specific thing, like telling customers you exist, but a whole series of things, from offering products the public wants, to presenting and selling them profitably, to following up on sales, to making sure your employees are always knowledgeable and professional, just to name a few. Marketing is the vehicle that connects your products to the customer. What that means is that if it affects your customers, marketing is involved in some way. And it’s this kind of customer focus that owners have to instill at every level of their companies.

  As essential as marketing is, though, it’s important to remember that no matter how good your marketing may be, unless you also have a good product, you may not be successful in the long term. General Motors and Coca-Cola are two well-known companies that forgot this and paid dearly for it. In the late 1970s and early 1980s, when GM redesigned their midsize, full-size, and some of their luxury vehicles as “look-alikes,” it became hard to tell a Chevrolet from a Pontiac or an Oldsmobile from a Buick. GM was a good marketing company, but as good as they were, customers revolted and moved to other companies because GM’s cars were no longer distinctive, especially when compared to each other and some of their competitors’ cars. Coca-Cola was another great marketing company, and its flagship product, Coke, was the undisputed heavyweight of all colas. But then they developed a product called New Coke to replace the original, and although they spent an enormous amount of money marketing it, their customers didn’t like it and didn’t buy it. Eventually, the company went back to its original product and New Coke disappeared from the shelves. The point here is that marketing is a powerful tool, but it can only do so much. Marketing needs a good product and a good product needs marketing.

  Nike and Apple are two good examples of this. Both companies have great products, but so do their competitors. Both became successful by establishing strong brand awareness backed by solid products. Nike used the “swoosh” as its symbol, and its marketing showed creative, colorful, and attractive Nike running shoes, clothes, and other accessories just like the pros used, pitched by famous sports figures like Michael Jordan and Tiger Woods. In fact, the “swoosh” became a product of its own, getting customers to buy Nike’s products just because of the symbol and the statement it made about them. Apple, of course, created the symbol of an apple with a bite taken out of it. They also strove to market products that were unique in some way, making them easy to identify as Apple products, and clearly differentiating them from their competitors’ products, which appeared to be out of date by comparison. Apple’s uniqueness of design and style, constant upgrading of products, cutting-edge technology, and willingness to not just create new products but completely new product categories all added to the company’s mystique—and to its success.

  The Benefits of Marketing

  Marketing lets prospective customers know that your company exists and what you do.

  Marketing allows you to shape customer perception of your company.

  Marketing differentiates your business from your competitors.

  Marketing allows a business to deliver your “why buy here” and “why buy now” message.

  Marketing helps your company capture market share and maintain success.

  Marketing enables you to develop brand recognition and expand your product lines.

  Marketing can help reinforce, or shore up, your business’s reputation.

  Marketing enables your company to protect itself from competitors by promoting a competitive edge or advantage they can’t duplicate.

  The Realities of Marketing

  Everyone in the company has to have marketing in his or her job description in one form or another and be able to deliver on the business’s marketing promise, one customer at a time, and every time.

  All the various elements of marketing—advertising, public relations, community activities, and others—are useful tools, but they must be coordinated if your marketing is to be as effective as possible.

  As an owner, you have to make sure your company’s marketing efforts, message, and—especially—money are clearly aimed at your target market.

  It is essential for you to keep up with the market, if not be on its leading edge, as well as be able to “read the tea leaves” to predict which products will be “hot” and which will cool off in the future.

  Everything you do in marketing must be designed to attract the customer, sell the customer, or keep the customer—that’s why your business exists.

  The Elements of Marketing

  Marketing is an enormous challenge for many people. It often seems like the more you learn about it, the more you need to know. But like anything that’s complicated, the easiest way to understand it and gain confidence in dealing with it is to break it down into manageable elements. And marketing can be easily broken down into three such elements: attracting the customer, selling the customer, and keeping the customer. These three elements have remained largely unchanged since people started marketing products and services, and they form the backbone of any marketing activity.

  Attracting customers means getting their attention, and the first step in doing so is finding out where they are. This is not always easy to do, and often requires some trial and error. Pfizer, one of the world’s leading biopharmaceutical companies, does not advertise Viagra on MTV, because the people who watch rock videos are not concerned about erectile dysfunction. However, they do advertise it on cable TV sports shows and in health magazines that cater to older men, among other places. They do this because they know their target market, which consists largely of aging baby boomers who are interested in any product that will help their flagging libidos.

  Once you have the customers’ attention, the next step is to hit them with a powerful message that will motivate them into action. Marketers know they have very little time for their messages to hit home, and that the message can be quickly forgotten, even by those who are interested. That’s why they repeat advertisements again and again—it’s through repetition that the message makes an impact and prompts a prospective customer to go out and buy whatever it is you’re selling.

  It’s at this point that the process shifts to selling the customers. However, those responsible for attracting customers still have one more task to perform—analyzing which message attracted the most customer interest, which media generated the most traffic, and which message and media produced the most actual sales. These and other analyses are a major part of finding out what works and what doesn’t in terms of media and message, and are essential in developing appropriate advertisements and choosing appropriate media in the future.

  Selling the customer, the second element, is paradoxically something that owners sometimes forget is the main purpose of marketing. They spend a lot of time, effort, and money on trying to attract customers, but once they have their attention, they neglect to close the sale. That is, they don’t pay sufficient attention to how customers are handled—from the time they come into the store, open the Web page, or start talking on the phone to a staff member, to the time they leave, log off, or hang up. When your company has an opportunity to sell, your employees have to be ready to do that—sell. And it won’t happen unless you train your staff to do it and make sure there are appropriate sales processes in place.

  The third element, keeping the customer, is similar to selling the customer, in that it’s also something owners don’t pay as much attention to as they should. In fact, developing a tracking system so you can contact customers or potential customers after they leave your business is an essential part of effective marketing. Creating loyal customers is important because they cost so much to get, and they are a limited resource. Moreover, once they have bought something from you, they are far less expensive to connect with, as well as easier to market and sell to. They already know who you are, where you are, and what you sell, and if your staff has done a good job attracting and selling them, a bond is formed. It’s a fragile bond at first, but one that grows stronger with e
very purchase. Developing these kinds of repeat customers not only enables you to build a solid foundation for your business and provides you with a strong competitive edge, it may even be a game changer for your company.

  Level 1: Ownership and Opportunity

  At first glance, common sense would seem to suggest that marketing would have little impact on the decision process regarding ownership or opportunity. And this is true for ownership. But as far as helping distinguish a good opportunity from a bad one is concerned, marketing—particularly marketing research and analysis—can be extremely helpful. In fact, the research that goes into developing a marketing plan can provide a wealth of knowledge about the market, its strengths and weaknesses, its complexities, its challenges, its competitiveness, and how much money will have to be invested in marketing to have an impact in the marketplace. Each of these elements can have a significant effect on which opportunity you choose to pursue, so they should all be researched thoroughly. There is also, however, an additional item prospective owners, owners who are expanding their businesses, and owners who are reengineering their companies often tend to forget: how much gross profit can be generated. Gross profit has to be at the core of any marketing analysis, because ultimately, the reason your business markets and sells its product or services is to generate gross profit. Marketing always seems to concentrate on sales, but the fact is that sales are important only in terms of the gross profit they bring in.

  Unfortunately, most owners don’t begin their research or start to develop marketing plans until after they have chosen which opportunity to pursue because they think doing so prior to making that decision is a waste of time. This is a big mistake, because at this level, making the right decision is the goal, and you are going to have a problem if you commit to an opportunity only to discover, for example, that the market has a huge appetite for what your business offers but not at a price at which you can make adequate profits. It doesn’t matter how smart or talented a marketer you are, if you get the opportunity decision wrong, very little will go right. So whether you are starting a new business, buying one, or expanding your current one, researching the market and developing a marketing plan can bring clarity not only to the opportunity decision but also to the challenges of attracting customers, selling them, keeping them, and managing the gross profit they generate.

  In order to help you decide which opportunity would be best for you, there are several questions you should ask yourself about each of those you are considering. The purpose of these questions is to help you focus on making an accurate assessment of the various opportunities, and they must be answered with facts rather than assumptions. These questions include:

  How large is the market? That is, does everyone need this product or service or just a small number of people?

  Is the market already overcrowded, and is it one that’s easy for new competitors to enter?

  Is the product or service I’ll be offering in the early stages of its life cycle or nearing the end?

  Who are my potential customers, why do they need the product, and how large is the demand for it?

  What will my gross profit margin be, and how will it hold up to aggressive market pricing?

  How much money can I reasonably make in this business, and is it proportionate to the investment in effort and money it will require?

  Why will customers buy from me, and how will my competitors defend their positions when I come into the market?

  These are not the only questions you have to ask, but they do represent some of the most important ones. You will, hopefully, have noticed that in one way or another all of these questions revolve around profit and product, and the reason for that is simple: it’s profit and product that make everything worthwhile. If there’s no profit, there’s no business. This may not sound politically correct, but it’s true. It’s equally true that profit is what’s important to bankers or other investors, because it represents the sustainability of your business, and that’s ultimately all they are really concerned about. There are, of course, other reasons for going into business—because you enjoy the challenge of it, because of your “love” of the business, or because you like the lifestyle. But none of this will matter if your company can’t make enough money to be self-sustaining. As a matter of fact, if the business can’t be self-sustaining, then all your investment will have done is buy you a job, and you could end up becoming a slave to your business.

  The Benefits of Marketing Research at Level 1

  Marketing research enables you to determine the competitiveness of the market and forecast how far other owners will go to protect their turf.

  Marketing research provides you with a clear understanding of the pricing matrix and the gross profit opportunity.

  Marketing research enables you to analyze and determine the strengths and weaknesses of your potential competitors.

  Marketing research provides you with information you can draw on to work out estimated marketing costs and develop preliminary marketing strategies.

  Marketing research helps you recognize the challenges of selling the customer even before you make the opportunity decision.

  Marketing research provides you with a good overall view of the opportunities you are considering before you choose which to pursue.

  Marketing research draws attention to the important marketing realities and variables that are factors in the opportunity decision-making process.

  Marketing research provides support for the research conducted for the other Facts of Business Life.

  Attracting the Customer at Level 1

  Since at this level there is no business yet, you obviously can’t start to implement any effort to attract customers. And because of that, the majority of businesspeople don’t even think about how to attract customers at this point. If you do think about it, though, you will have a head start on the process. That is, if you do the appropriate market research, you will know the size of the market, your target market, who your customers are, and how the marketplace prices its products, as well as have a good idea of how you will attack the market. And you can learn all this by answering the questions suggested above, in effect killing two birds with one stone—gathering the information you need to make an informed opportunity decision, and preparing yourself to start attracting customers even before you open your doors. Attracting customers is where marketing starts, and where successful owners shine. The lesson at Level 1 is that if you want to shine at marketing, you have to do the kind of research that will enable you to understand your market. This “digging for details” not only helps you determine which opportunity would be best for you but also provides you with a means to attract, sell, and keep your customers.

  Low-Hanging Fruit

  Every business I have owned or mentored has had what I refer to as “low-hanging fruit,” that is, the customers who are the easiest to attract. Low-hanging fruit customers generally come in three types: (1) those who buy from you only when you offer deep discounts or special pricing; (2) those who buy from you because your business has some particular advantage over other competitors, usually location or convenience; and (3) those who have been customers in the past or are current customers.

  When I moved to Texas and purchased an existing business, our marketing and advertising efforts began by targeting these low-hanging fruit customers. Although we used a shotgun approach announcing our presence to the entire market, we also offered grand opening specials to attract the deep discount customer. We then launched a more targeted campaign aimed at potential customers in the neighborhoods where we had a location and convenience advantage. At the same time, we marketed hard to the previous owner’s past and current customers. Although we appreciated those who came just for the discounted pricing, we knew these were customers who only appreciated price and would buy from whoever offered the deepest discounts. We put most of our effort behind marketing to the other two groups—those with whom we had an advantage and past and present customers—because we k
new they could serve as a foundation on which we could build our business.

  Selling the Customer at Level 1

  At Level 1, selling the customer is still a long way off. After all, at this point, you’re still trying to figure out if you’re ready for ownership and, if so, what kind of business you want to own. Developing a sales system—that is, determining how you are going to sell the customer—is always a good idea. But whether you’re ready to do it at this level will depend on how much importance you put on marketing overall. You can’t put enough emphasis on marketing because, as this Fact of Business Life says, “If you don’t market your business, you won’t have one.” And since everything you do is ultimately measured in sales and the gross profit those sales produce, it doesn’t make sense to not think about how your business will sell the customer—even before you have any customers to sell.

  Again, at this level, there is nothing to implement, but there are efforts you can make that will stand you in good stead when the time comes to start doing it. One of these is to learn what your competitors are doing to sell their customers. Find out who the best marketers and sellers in your industry are, and learn how they do what they do. This is easier to do than most people believe and more important than new owners realize. To begin, talk to industry-related national or regional organizations, tell them what you’re thinking about doing, and ask who they would recommend you talk to. The vast majority of owners will be candid about their businesses and give you their opinion of what you present to them, as long as they don’t perceive you as a threat. Besides, you never know—an opportunity may appear that you didn’t even know existed. It happened to me, and it could happen to you as well. This can, in any case, be extremely helpful to you, and you should think very seriously about doing it.