How Do You Educate a Customer, Part 1?

“Everyone needs our product,” said Bob. “All we need to do is to tell them about it.”

Bob's enthusiasm is contagious. He's convinced that America's tap water isn't safe to drink because of the presence of pollutants. The water filter he sells removes minerals, microorganisms, toxic metals, and organic chemicals.

If sales is truly a transfer of confidence from the seller to the buyer, Bob is going to sell a lot of water filters. Assuming, of course, he can get his message to enough people.

He thinks advertising problems in the water supply is an excellent way to attract potential customers to his business.

He's wrong.

Bob has two problems. Each will affect his marketing strategy. Can you identify them?

First, he offers a solution to people who don't recognize that they have a problem. They will naturally be skeptical.

Second, as small as his industry is, he has competitors. That means if he chooses to educate potential customers about the need for water filtration, they may well buy filters from some other company.

Bob is not alone with this "Teach them why they need it" vs "Ask them to choose mine" dilemma.

A manufacturer can't sell his brand of coffee to people who don't drink coffee. First, those people must choose coffee as their beverage. Only then can the manufacturer persuade them to choose his brand instead of another.

The provider of high-speed Internet can't sell connections to households without computers. First, the family must choose to purchase a computer. Secondly they must elect to be connected to the Internet. Only then can the provider convince that family to select his service over that of a competitor.

And Bob can't sell his brand of water filters to consumers who find the quality of their tap water to be quite acceptable.

Why Shouldn't Bob's ads explain and educate?

Because even the most effective marketing message can only advance the decision making process by a single step at a time, and there are too many steps between "Have you ever wondered what's in your drinking water?" and "Will you buy my filter today?"

Convincing people they have a problem is tough enough. Persuasion becomes even more difficult when they know you benefit from the sale.

“You have a problem that you're not aware of. Really, you do. And I'm here to help. Just buy my product...”

Selling to an existing need may eliminate the credibility issue, but it doesn't eliminate those additional steps.

Consider the local automobile dealer who no longer needs to convince people cars are superior to horses or bicycles. He still has three decisions standing between each prospect and each sale.

1. First, the prospect must decide she needs a car.


2. Then she needs to select a brand.


3. Finally she has to choose a dealership.

Advertising can advance the process by only a single decision at a time. Which of those choices should the dealer's advertising try to influence?

Sometimes competitors join forces to inform.

Cooperation can be a smart move when increasing the size of the market benefits all of those who serve that market, even those who compete directly with each other.

The Cattlemen's Beef Board pools the individual members marketing dollars in the “Beef. It's what's for dinner” campaign.

The Las Vegas Convention and Visitor's Authority promotes all hospitality providers in the city with their promise of “What happens in Vegas stays in Vegas.”

The Florida Citrus Commission helps to create demand for all Florida growers with, “Florida orange juice. Healthy, pure and simple.”

You may see this cooperation on a local level when the county veterinary association pools dollars to encourage pet vaccinations, or a group of chiropractors each contribute to an educational campaign explaining the benefits of chiropractic treatment.

Short term, with enough concentrated advertising, programs such as this can create a bump in the sales curve. Unfortunately, most co-operative advertising programs don't have the resources long term to significantly grow the number of buyers.

Which is the smarter strategy?

Convincing people who don't already feel the need is hugely expensive. More expensive than most small companies can afford. Educating customers is not a cost effective advertising strategy for most small business.

Instead, consider addressing "pre-educated" potential customers - those people who already understand the issue. They will be searching for solutions. They will consider yours.

The car dealer should concentrate on drivers who are already inclined to buy the brand he represents and invite those people to his dealership.

The Internet service provider should address his ads to people actively seeking connectivity, and explain the advantages of his service.

And Bob needs to stop trying to tell everyone about his product. He needs to find people who share his concern for unfiltered tap water. He needs to target those customers with every advertising dollar he invests, and persuade them to purchase their filters from him.

Bob needs to seek out those folks who are already looking for him, but don't know it yet.
__________

Part two of this series will look at the effect brands have on each other when advertising.

In part three we'll consider a multimedia solution for growing the size of the market (and our individual share of it), as well as an exception to the conclusion you just read in Part 1.
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about the strategy of educating customers may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Is a Radio Remote Broadcast a Good Investment?

One of the advantages electronic news has over print is the capability to deliver information in real time “live from the scene.” As you might imagine it didn't take long for this proficiency to migrate from the news department to the sales department, giving birth to the radio “remote broadcast.”

Remotes are traditionally expensive. But as advertising sales remain weak in this economy, advertisers are being offered discounted rates on almost all advertising, including remote broadcasts. And that prompts a critical question: is a radio remote a good investment of advertising dollars?

Like everything else in business, the correct answer is “possibly.”

The problem is there are at least four different people involved in the decisions effecting such a broadcast. Most of the time each has a different objective. Those four people are:

1. the Manager/Owner of the business,


2. the Radio Sales Person,


3. the Radio Program Director, and


4. the Disc Jockey.

What do each of these people want?

The Manager/Owner wants buyers.

His objective is to sell merchandise in such quantity that he can pay for the advertising and still show additional profit for his efforts.

He believes his store offers value. He believes when large numbers of people hear about his offers, they'll flock to the store to buy. This is usually expressed as “you get people in the door, and we'll sell 'em.”

The Radio Sales Person translates this instruction.

“Get them in the door” becomes, in her mind, “your job is to attract a crowd.”

She will arrange all of the crowd drawing techniques at her disposal. These will include a clearly identified station vehicle in front of the store as an attention-getting device. It will be augmented with banners and sound system.

She'll provide tee shirts emblazoned with the station logo and other station paraphernalia to give away to listeners who come to the event.

She'll try to arrange to have clowns, balloons, and face-painting to attract kids, free food to attract their parents, and the ever-popular “register to win” entry box. (The prize will, of course, be provided by the customer).

The Radio Program Director will coordinate.

After determining there are no conflicts on the proposed broadcast date, the Program Director will assign a Disc Jockey as “talent.”

The Program Director's job is to keep listenership high. She hates remotes, considering them to be interruptions to the programming (music), and potentially harmful to ratings. The Program Director will thus limit the number of reports from the scene, limit the length of each report, and do her best to disguise the reports by running instrumental music under the Disc Jockey's voice.

The Disc Jockey will be expected to attract a crowd.

Feeling pressure from the Manager/Owner and Radio Salesperson, the Disc Jockey will attempt to bribe listeners. He'll repeatedly emphasize “C'mon down. We're having a great time,” and will list all of the free items they could win just for showing up.

A few listeners will be impressed by being close to a celebrity. He'll be tempted to talk to those people who come to him, rather than introducing himself to other potential customers. Part of this, believe it or not, is shyness.

The results are entirely too predictable.

In order they will be:

1. Reacting to the offers made during the broadcast, people will come to the event for the free food, the clowns, the balloons. They will register for the prizes. They will then leave without buying anything.


2. Frustrated by the lack of sales, the Manager/Owner will accuse the Radio Sales Person of bringing the wrong people to his event.


3. The Sales Person will explain to the Manager/Owner the benefits of branding and name recognition. She'll explain the positive effects of today's high-profile advertising might not be immediate, but will definitely impact future sales.
   
   Back in the privacy of the radio station she will find fault with the Disc Jockey who spent too much time socializing with fans and not enough persuading them to buy.


4. Of the four people involved, the Disc Jockey will take the majority of the heat when the outcome is disappointing. He's not a seller. He's an entertainer. And even though he feared it might end this way when he agreed to accept the talent fee, he will bitterly resent being held accountable for lack of sales, which he believes are beyond his control.


5. Oddly, the Program Director has the best grasp of the situation. After listening to the Sales Person's criticism, will resolve to discourage future remotes as too much hassle. “Next time sell 'em a schedule of ads” will be her recommendation.
   
   By doing her best to hide the event from her own listeners, she's created a self-fulfilling prediction of failure.

Unfortunately, the Disc Jockey did attract the wrong people. When listeners hear words like "fun" and "free" instead of compelling reasons to purchase right now, they react accordingly.

Equally unfortunate is the Sales Person's claim that future sales will benefit from today's advertising of an event. Although branding and image building ads do take a while to affect customers, and do frequently work better over time, event advertising is quickly forgotten.

No immediate sales. No future sales. Conclusion? Most remote broadcasts are a waste of money.

Which is why, in general, I don't recommend them.

However. . .

When done correctly they are powerful marketing tools that provide opportunity for greater sales. And at some of the prices we're now seeing, this may be an excellent time to consider adding one, or more, to your marketing plan.

In our example the four people involved had mutually contradictory objectives. To have a successful event all four must embrace the same purpose: greater sales during the event. That goal must guide every decision effecting the broadcast.

Here's how to assure higher remote broadcast ROI.

Mr. Manager/Owner, take a step back. Recognize that you are more excited about the things you sell than the public will ever be. Expect them to be less excited about your remote broadcast, too.

Think of it this way: a remote broadcast is not an event. Much like a newscast, it is only coverage of an something newsworthy which is already happening. People want to know the news.

A strong concept works well if promoted in the newspaper, on television, or through direct mail. It doesn't require creativity of the medium to make up for lack of customer interest. If your event that exciting, continue planning the remote. If not, abandon the idea. There's no sin in passing up an inexpensive opportunity which won't benefit your company.

OK. You have a strong concept. Good. Don't use the station as your only source of publicity. We're not trying to prove this station can draw a crowd. We're focused on attracting as many buyers as possible. Buy a newspaper ad or two. Keep those ads customer focused.

The headline should address the primary benefit you're offering. The body copy should say the things your best salespeople say to customers on your sales floor. Put your logo, as well as that of the station, at the bottom of the ad. If your headline catches people's attention, and your body copy offers strong reasons to buy, only then will they care who's making the offer.

Miss Radio Sales Person, give your client's business the benefit of your experience. “Great savings throughout the store” is much too generic and won't persuade anyone. Make sure all of the parties agree on a message which is both specific and highly beneficial.

Is the proposed remote broadcast the best use of your client's money? As you know, grocery stores make dozens of offers in a “double truck” two-page newspaper layout. They focus so many reasons to buy into a single space every week because it works. If you believe you could create more sales impact with an intense, highly-focused schedule of recorded ads packed into a single time period, do that instead of the remote. The cost to the advertiser is the same either way. Give him the choice with less risk.

Miss Program Director, stop compromising. Either refuse to interrupt your music with talk, or commit to making the talk segments so compelling that your music listeners don't want to be left out.

Would you refuse to interview the top artists in your format? Of course not. Listeners don't resent talk. They resent people blathering on about topics that don't interest them. You, Miss Program Director are uniquely qualified to find the exciting appeals that your listeners will want to learn more about.

Your presentation skills can turn this potentially dull and boring jabber into the most exciting information available on the day of the broadcast. Hype won't work. You've got to dig for genuine value, and then make sure it's presented in a way that helps your listeners imagine themselves owning what the advertiser sells.

Schedule three reports per hour during the broadcast. Have the Disc Jockey announce his location during the FCC required legal ID. Require your studio talent to plug the event during each music segment. That works out to acknowledging the remote seven times per hour. Just as you wouldn't allow your station to go a quarter hour without reminding listeners to whom they're listening, this proposed broadcast will also need that frequency of repetition.

Give your Disc Jockey the latitude to react with his own personality from the scene, but make sure each key point is included in each remote break by scripting a standard beginning and ending.

Here's the part you're going to hate: kill the music bed during reports from the scene. We want people to take note that something unusual is going on. Play a quick attention-getting intro (think fanfare) as he's introduced, and then, other than the Disc Jockey's voice, let the natural ambiance of the event be the only sound.

Can you commit to promoting this event for maximum advertiser impact? If not, do both the client and your listeners a favor and offer to help create a persuasive advertising campaign for him instead.

Mr. Disc Jockey, your role needs to change. You're no longer being asked to host this broadcast because you're popular and have fans who are likely to come see you. You're being asked to use all of the presentation skills you've acquired in your career to introduce your listeners to the advertiser's business.

Why would you do that? Because they will benefit from the resulting relationship. Believe it, or recommend another talent. Use that conviction every time you open the microphone.

Get rid of every cliché in your vocabulary – especially those things which you've grown used to saying on similar occasions. Repeating the same old verbiage will only produce the same old results.

Watch for customers leaving the store. People who've purchased something are sold on the value of their purchase. If they're reasonably articulate, invite them to briefly answer a couple of questions during your next break. Tell them what you'll be asking, and help them to quickly express their reasons for buying. These people have exceptional credibility with other folks listening to your broadcast.

And don't worry about what the station provides for you to give away. We're now looking for different responses from different people than you've invited to past events. Truthfully, you'll make more money persuading people to visit the store who don't care so much about meeting you as they are interested in the client's offer.

By the way, shaking hands with everyone in the crowd and personally welcoming them builds listener loyalty in a way nothing else can.

Finally, Mr. Manager/Owner . . .

The question was, are remote broadcasts good investments? Normally, no. But with the prices now being offered, maybe.

If you decide to try it, don't choose a station as your promotional partner because of ratings, or even because of price. Instead, choose a partner committed to getting qualified buyers to your event. You'll know whether you have the right radio station early in the planning process.

Get the station's Sales Person, Program Director, and Disc Jockey into a planning meeting. Bluntly ask if the station will commit to the three breaks per hour, plus the legal ID, plus three more mentions by the on-air host. Ask if the station will eliminate any music during reports from the scene. Ask if they are willing to make your broadcast the single most important event on the air.

If they are not willing, call a meeting with a different radio station. If they are, commit your resources and schedule the event.

And remember that media partners who put your needs first have earned a significant part of your non-event advertising budget, too.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about advertising schedules or remote broadcasts may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Does a Successful Zebra Need Its Stripes?

Imagine you’re a lion. It’s dawn on the Serengeti, and you’re hungry.

Off in the distance is a herd of zebra. You’re down wind. You can smell the herd but they can’t smell you. You crouch closely to the earth, stealthily move closer, your padded feet not making a sound.

The zebra slowly mingle in the herd. Your only hope of catching one is to single it out from the rest, but which? The stripes of one blend seamlessly into the stripes of the next, creating a vermiculite tapestry of white and black. How do you focus on any individual when you can’t determine where one begins and the other ends?

Wait. What’s that? One zebra is grazing apart from the others. You can see every detail. It’s nostrils contract with each inhale and expand as each breath leaves its body. You watch its tail idly swatting at flies as it slowly steps forward to reach the next succulent blade of grass.

You are now focused on the one, rather than being confused by the many.

And the many? They have taken advantage of the safety of the herd. Herd animals like zebra, or sheep, or even people protect themselves by looking and acting like every other herd animal.

Taking risks is… risky.

Taking a risk gets you noticed. It exposes your vulnerabilities. And what’s the upside? Is there an upside?

No banker has ever been fired for refusing to make a loan. No investment broker was ever fired for buying IBM. Not taking risks is instinctive.

So we do the things we’ve seen other businesses do. We recite the same messages, replicate the same images, and deliver them through the same media. We stick with what works. We choose the tried and true and smugly congratulate ourselves on not taking any risks.

What passes for most business strategy is simply a “me too” game of “We do what they do, but you should buy from us instead.”

Unfortunately, “we do what they do” makes your business blend back into the herd. You’ve made the very things that make you the best solution to your customers problems impossible for the lions (uh… the customers) to single out.

Brace yourself.

“Me too” as a strategy fails because you’ve hidden your strengths.

Successful marketing of your business requires behavior that’s not only risky, it runs counter to instinct.

Successful marketing requires you to step apart from the herd, and draw attention to yourself.

Successful marketing requires you to shed your stripes.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about business differentiation may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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There Is No Word-of-Mouth "Marketing."

Pay close attention to Stephanie's story:

“Roger's feet get cold easily, so I bought him a pair of sheepskin slippers. He loved them, but it wasn't long before the wool lining started wearing off. So I called Lands' End to see if I could get them replaced under warranty. The lady I talked to was very nice, but she couldn't find any record of my purchase, and she couldn't figure out which slippers I was describing. But, she cheerfully told me that she'd be happy to exchange them, and gave me a return authorization. I was pretty excited when I told Roger that Lands' End had agreed to replace his slippers even though I couldn't find the sales receipt. He told me that was because I bought those slippers from LL Bean.”

Stephanie tells her story well. People laugh at it. It's the kind of story that people tell each other daily. It's the kind of story likely to be repeated by people who don't know either Stephanie or Roger.

There's a critical lesson, though, in Stephanie's story. Did you catch it? No problem. We'll come back to it in a minute.

Stephanie's story is an example of Word-of-Mouth.

It's not, however, an example of Word-of-Mouth “marketing.”

And apologies to WOMMA aside, I'm not convinced that Word-of-Mouth marketing exists.

Why? Because adding the word “marketing” assumes that it's something the business causes to happen. Word-of-Mouth may be influenced by business, but by it's very nature it can never be controlled.

Go back to Stephanie's story for the critical distinction. Is she telling a story about customer service at Lands' End? No. She's telling a story about her own experience as a customer. People love to tell stories about themselves.

Exactly how important is your product or your service in the telling of any customer's story? If the stuff you're selling fits into her narration, it might be included. But whether it is or not, Word-of-Mouth in any of its forms is always about the experience of the buyer. Only indirectly is the seller even involved.

Which makes Word-of-Mouth "marketing" a misnomer.

Word-of-Mouth is not marketing for several reasons.

Marketing becomes cost effective when there are efficiencies of scale. Word-of-Mouth takes place on a one-to-one basis.

In marketing, a company sends its message directly to prospects. Word-of-Mouth is farther removed from the company with each iteration of the story. People who know the story teller will be influenced. People who know those people may be slightly influenced. At three degrees removed there will be minimal effect, if any. (And yes, I'm fully expecting a few e-mails pointing out "Viral Marketing" as an example to the contrary. Can anyone even predict what goes viral? I thought not).

Finally, people may get your message wrong, and you can't stop it from happening. In a few more tellings Stephanie's story could easily mutate into a tale about a lady who had a funny interaction with Sears.

Word-of-Mouth is not marketing. It's not advertising.

Word-of-Mouth existed long before advertising. When most people lived in smaller communities, walked to the market, talked to their neighbors, and gathered in churches or meeting halls, Word-of-Mouth was simply conversation.

Advertising became important communication when our communities got too big for the people selling stuff to personally know their customers. Mass media carried the message from the manufacturers of goods to the new post-war middle class.

But for the last century, probably due to over exposure, we've all become less susceptible to advertising's claims. Customers now are more likely to believe the opinions of total strangers than the advertising messages of local companies.

Ouch.

Word-of-Mouth is now more critical to business success than at any time since the dawn of mass media. And yet, you can't make a customer talk about you. You can't make her not talk about you. You're going to be mentioned when you're part of her story. No more. No less.

Change your role in her story.

Although you may view Miss Customer as a purchaser of the things you sell, she sees herself as the protagonist in her own story. When you try to make the story about your company, Miss Customer will dismiss your whole effort as irrelevant.

But if your business is willing to become the secondary character in Miss Customer's personal narrative, is willing to engage Miss Customer, and indeed to make her story possible, that's when she'll take you along for the ride. Your business "character" will be portrayed in much the same way as her interaction with you happened in real life.

Treating her well may be the only influence you have in the creation of positive Word-of-Mouth. Treating her badly ads drama to her story. This not only makes your appearance in her story more likely to be negative, dramatic stories tend to be told more often, and over a longer period of time.

Which leads to what may be the most important question: when she does business with your company, do you treat Miss Customer as the star she is?

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about Word-of-Mouth may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Free Coffee and the Incremental Discount Coupon Tactic

As I headed out the door the Lovely Mrs. McKay handed me a coupon from the new C store in our neighborhood, saying “You've got to stop for gas anyway. Here's a coffee for the road.”

The coupon offered a “free coffee beverage” from, oh, let's call 'em “Comfort Brothers Gas Station and Convenience Store.” I thanked her and slipped it in my pocket.

Does a lower price boost sales?

Will the availability of a discount, or a membership card, or a “get one free after purchasing ten” punched card appeal to everyone? Of course not. Some shoppers enjoy clipping, collecting, and organizing coupons to take advantage of reduced prices on household goods. Others see the time required by that process to be part of the price they pay for your service (or product), and will happily agree to full rate not to be bothered with it.

If you offer a discount to shoppers who would have paid full price, you lower profitability. On the other hand, not discounting for the undecided leaves some inventory unsold. That reduces potential gross sales.

How can you tell which is which?

The answer is to let them select themselves.

Make multiple offers at different price points to maximize sales. Those who wish to pay full price may do so, and those who won't will find a subsequent price/value ratio which works for them.

Here's how to make it work:

Let's imagine you have purchased a mailing list of high probability prospects for your new service. Send a letter, or post card, or other mailing piece to the entire list. Offer to sell them your service. Explain why you offer a good value. Some will purchase. Move their names from your “general” list to the “paid full price” list. Guard this new list. The names are golden.

A couple of weeks after your first mailing, send a twenty percent off coupon to everyone who remains on your “general” list. Segregate the names of those who respond to your second mailing into a “twenty percent discount” list.

In ten more days send the remaining names on your “general” list a thirty percent off coupon. See how this works?

You're accomplishing two things through this process.

First, you're maximizing sales at every price point. Second, you're segmenting your general list into groups of people who have now revealed the price at which they're likely to find your future offerings appealing.

The percentage who bought from your very first mailing, divided by the total number of pieces mailed, is your base conversion rate. Over the next few months you might get as much as ten percent more than your base conversion rate, by offering these incremental increases in discounts. Expect the biggest response to be to your first coupon mailing. Each successive offer will produce a smaller number of buyers who will decide the price is finally right.

Of course, the biggest factor which determines your base conversion rate is the offer itself.

Specific dollars (cents) off tend to be more appealing than do percentages, although that can be affected by the market and the range of prices. Another proven appeal is to offer a reward such as free shipping or gift wrapping, or a free upgrade to anyone who spends a minimum amount.

And you'll always want to print expiration dates as part of your call-to-action to force a decision. “This offer good this weekend only,” or “Offer limited to the first 100 customers or close of business Friday, whichever comes first.”

But, I digress from my personal coupon story.

After gassing up the car, I went inside to pay and to pick up a cup for the road.

The coffee menu offered “a full-line of latte and mocha beverages served hot, iced and frozen, with gourmet flavored syrups and chocolates." Every conceivable latte, espresso, and cappuccino. Full caffeine, half caf, caffeine free. With and without sweeteners, cinnamon, or chocolate. Iced lattes and mochas. Frozen lattes and mochas.

Thinking of my blood sugar, I finally decided on a simple cup of house blend.

I presented my coupon and was told that they couldn't honor it as payment for plain coffee. The offer, as I could plainly see, was for one of their prepared coffee beverages. Not for a simple cup of coffee.

“Are you serious,” I asked? “You're willing to make a generous gift of a $4.50 banana caramel iced mocha, but you won't let me have a simple sixty-nine cent cup of coffee?” Again, the attendant pointed out that the coupon clearly offered a “free coffee beverage,” and not a free cup of coffee. I handed the woman a dollar, took my change, and headed down the road.

Years ago I watched an older lady present a coupon for a Big Mac at a Burger King restaurant. The young man behind the counter said, "Ma'am, this is a coupon for a McDonald's sandwich. We have a very similar sandwich called the Whopper. May I get one for you at this same price?" This young man gracefully helped his customer avoid embarrassment. Care to bet she became a loyal customer?

I hope my experience was not typical. I hope that the tens of thousands of coupons the Comfort Brothers spent on their grand opening paid off handsomely. In truth they have a beautiful store. It's spotless, modern, and well laid out. The staff is friendly, well trained, well dressed. Shopping in their store should be a pleasure. I'm sure for most people it is.

But I only remember that when I presented my coupon, they told me "No." And that's a tough first experience to overcome.

__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about implementing an incrementally discounted coupon tactic may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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Grocery Shopping, Rising Tides, and Maintaining Market Share

Presented for your consideration two very similar conversations.

The first never happened. (Well, technically, I did call a few friends and irritate them with the opening question).

The second most assuredly did.

Conversation #1:

Q: I think I need to cook. What should groceries cost me?

A: Huh?

Q: What should I have to spend on groceries? I haven't been cooking. I need to.

A: How in the world could you expect me to answer that? There are too many variables.

Q: I asked Bob. He said, “$200.”

A: Will you cook for yourself, or your family, or do you intend to have guests? How big is your family? How many guests? Will you cook one meal or several or all of them? What foods do your family like? How much variety is important to you? How do you feel about leftovers?

Q: You're making this way too complicated. Just give me a number.

No one would take the “what will groceries cost?” question seriously. As ridiculous as it seems, though, the quite similar “what will it cost to advertise?” question is common.

The following exchange took place about a week ago between me and the absentee owner of a shop which sells handbags and accessories.

Conversation #2:

Q: I think I need to advertise. What should ads cost me?

A: What?

Q: What should I have to spend on advertising my store? I haven't run any ads in months. I need to.

A: I have no idea. There are too many variables.

Q: I asked Bingo Radio. They said “$1,000.”

A: Why do you think you need to advertise?

Q: Business is off a bit. I probably need to spend a few bucks to bring customers back to my store. I have an ad we used to run. I just want to know what it should cost.

A: How will you know that your ads are working?

Q: People will come in and sing my jingle to get a discount.

A: Has that worked for you in the past? Because I've never seen an audience react positively to “mention you heard this ad.”

Q: You're making this way too complicated. Just give me a number.

There's an old saying that a rising tide lifts all boats. Even the leaky ones. Even those which aren't ship-shape. Even those which are too unsafe to be allowed out of port. The tide doesn't care.

For the last couple of decades the financial tide has kept leaky, non-ship-shape, unsafe businesses afloat, too. Money has been cheap. Credit has been easy. And it seemed that anyone with an idea could find someone to finance it, purchase inventory, rent a location, and open for business. And as the financial tide kept rising, operators of these marginal businesses were able to sell enough to stay in business.

And why not? Money and credit were not only easily obtained by business, but also by shoppers who bought stuff they didn't need with money they didn't have, just because they could.

And now comes the reckoning.

Three years ago when the economy was robust the companies which did the best job of marketing themselves doubled or tripled in size. Today, phenomenally successful marketers are working to repeat last year's sales. Most companies are shrinking. And too many small businesses don't even have a marketing program.

For operators who understand the minds of customers, we now live in a time of great opportunity. The loss of sales volume across both retail and service industries has taken a corresponding toll on the media. Today's advertising prices are a bargain. For the first time in my experience, even the price of your Yellow Pages ad is now negotiable.

But, a great price on an individual ad doesn't include meaningful content for it's message. Messages which pulled well two and three years ago aren't working any more. And a bargain price on an ad which says nothing salient is a shameful waste of money. Today's most important question isn't “Where should I advertise,” it's “What do I say?”

Our handbag shop owner has noticed that business is off. Fewer people are buying, and she suspects that “advertising” might solve her problem, but she has no understanding of how it works. In her ignorance she's asking questions as silly as the “what do groceries cost?” dialog above. She has no plan. She doesn't even have a goal. Worse yet, she doesn't understand why either is necessary.

My prediction? She'll waste a couple of grand trying to make customers do what she wants them to do, rather than providing what those customers want. Her store will fight to stay open through forth quarter of this year, hoping to pick up some big sales for Christmas. Those sales will not happen. Following a liquidation sale in January her store will close, permanently.

It's not the bad operators that I worry about.

It's the under capitalized, non-niched, owner operated small retail or service businesses. The companies which deliver real value for their customers, but haven't created a marketable position for themselves.

Too many of these operators will effectively become twenty-first century sharecroppers. One hundred years ago they'd have borrowed the money for seed. They'd have planted, and prayed for rain. They'd have worked long, hard hours hoping for a large enough harvest and a market price that would allow them to sell their crop, pay back the loan, and have enough left to feed the family the coming winter.

In a number of conversations with small businesses over the last week the theme which keeps repeating is “I need working capital. I need to be able to purchase inventory.” Credit lines have dried up, and these operators are hurting. Not because they're bad operators, but because the rules of the game have changed. Assuming they find new sources of capital, there will be limits on how much they can borrow and how quickly it must be repaid.

Get used to the new rules. We won't be going back.

What can we expect from these new rules?

Every economic downturn shakes out the poseurs, wipes out the frauds, and toughens the survivors. A few will adapt to the new marketplace reality, and thrive.

Those who thrive are the operators who will learn which items to stock. They will meticulously keep an adequate inventory while simultaneously avoiding items which won't quickly sell.

They'll keep a close eye on customer count, perhaps in increments as small as fifteen minutes, in order to hold labor costs in check.

They'll learn exactly who their customers are, and exactly what is important to them. Every advertising message will attract new customers and persuade existing customers to shop more.

Their companies will be smaller, leaner, and incredibly efficient. And their relationships with those customers will become much more personal.

Great companies are born of adversity. Are you ready for greatness? Shall we get started?

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about effective advertising in this economy may be directed to ChuckMcKay@ChuckMcKayOnLine.com

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Hope is Not a Strategy for Greater Return on Advertising Investment.

A couple of decades ago I introduced a friend who sold pianos to the manager of a local radio station. The manager suggested that the piano salesman consider radio advertising sales. The salesman refused.

“Sometimes advertising works,” he said, “and many more times it doesn't. The worst part is you can never predict which is going to happen. I couldn't in good conscience sell something that I don't believe will work.”

Ouch. Is advertising more of a gamble than a science?

If advertising is an investment, you should expect to see a predictable profit from that investment. Invest a dollar in advertising, get back four, or five, or six. At the very least, shouldn't you get back a dollar ten?

But if you you don't know whether your ads are driving revenue, you can't very well call it investing. If you don't know whether you'll win, or lose, or break even, you are gambling.

And if you put your money into ads that you “feel” are working, but but can't measure their effect, you're still gambling.

Noted investor Peter Lynch once said, “An investment is simply a gamble in which you've managed to tilt the odds in your favor.”

So, maybe effective advertising is that which has been tilted in your favor. Not so much an answer, as a process, which includes better targeting, more effective messaging, and improved media selection.


The purpose of an ad budget?

The reality is that most of us fear that we aren't turning our marketing dollars into profit. Not consistently. Not directly. Which is why we have advertising budgets. To limit risk.

An ad budget serves the same purpose as going to the casino with a hundred dollars in your pocket and saying “When this hundred is gone I'm done playing. Maybe I'll get lucky. But I've got to set a limit on how much I can afford to lose.”

Think about it. If you knew you were going to get back more than you spent, why would you ever stop spending?


Perhaps you don't need a budget so much as a lever.

The Greek mathematician, Archimedes, understood leverage. He's reported to have said, “Give me a long enough lever and a place to stand, and I will move the earth.”

When applied to advertising, leverage means doing more with less. Getting more bang for your buck. Controlling large sums of revenue with relatively small sums invested in advertising. Stacking the odds in your favor.

But, if you were capable of stacking those odds, wouldn't you also be running more advertising?

A surprising number of companies try to avoid advertising, then force themselves run ads when sales are down or when they have excess inventory.

Unfortunately, they're open for business all of those other days, too. And they need customers to come buy what they sell on every one of them.

That constant need for additional sales makes advertising the most important thing any of us can do for our own business. What other activity can multiply raw dollars with this kind of leverage?


First, measure.

Do you know your rate of return?

Note your sales levels. Run your campaign. Note any change in your sales levels.

Divide increase by the amount spent. This is Return On Advertising Investment (ROAI). If you are bringing in more money than you are spending, your ROAI is positive. Congratulations.

Of course if your advertising is not effective, the negative ROAI produces a constant drain on your resources. Is this why you don't advertise often? Do you justify the resulting poor return as “getting your name out there?”

How effective is your lever?


Is your advertising an investment or a gamble?

The primary question you must ask is the rate of your ROAI. Until you know the answer, this is the only question that matters.

How well does your current marketing stack up? Are you gambling with your advertising budget without even realizing it?

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about Return On Advertising Investment may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

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