How to navigate a tough economy
Fri 26 April 2019 - 11:56 amEconomy | Editor's Choice | Expert | Featured | Investing | Investment | Managing | Opinion
Ask any established business owner/manager if they have a marketing budget and you will hear a resounding “Yes”. It’s an essential part of their growth strategy and keeping connected to their market.
The average marketing budget ranges from 3-8% of revenue, however, many forget the employment costs of marketing managers and sales people which adds considerably more to the marketing budget. All of this is primarily invested in customer acquisition and the costs of obtaining a new customer can be significantly different across the many strategies used in the sales process.
Know your facts
As W. Edwards Deming said, “Without data you’re just another person with an opinion”. Most businesses cannot provide accurate customer acquisition data. That is the actual cost of buying a new customer. It will vary across the different lead generation strategies and the lag time they take to convert a new customer. It’s vital to know what marketing strategy influenced a new customer to buy from you and what the most successful to the least successful strategies are. This ensures you allocate resources to the most effective strategies.
Most business cannot provide the data to track the ROI of their marketing strategies and which ones are the most successful. The reasons are usually no time or process to do it. This in itself is crazy as there is so much time and money wasted on dud marketing and prospects that increase the cost of customer acquisition.
When the economy is strong the above issues aren’t such a big deal as everyone’s busy and sales are strong. “As long as we meet the sales targets that’s all that matters” is the common view. However, what about when the tide turns and the sales conversions are a lot more difficult and budgets are now really hard to meet? Unfortunately, for most businesses the only strategy they have is to discount and do all kinds of deals to get the cash in. This kills margin and potentially the business and this is where the most common mistakes are made. It’s amazing how many sales and marketing executives do not understand the impact of giving away margin to get the sale.
Have you ever known of a business that seemed flat out and then just out of nowhere it closed down? Plenty of cash coming in but no profit to pay the bills.
The focus for most businesses regarding revenue generation is obtaining new customers. All kinds of deals are done to get them in, and they see their busy-ness as a sign of prosperity. While at the same time the existing customer base is given very little attention and often charged more. Have you ever been frustrated by a supplier offering a great deal that says, ‘new customers only’? Think of your insurance, telco or energy provider? How do you feel when your years of loyalty appear to have no value?
Smart businesses have a clear point of difference in how they assess the most valuable asset they have – their customer base. They see customer service as the most critical process to get right in their business and they can only do it with a great team. A significant point of difference is in how they invest their marketing budget. They actually have a budget for customer retention, they invest in their existing relationships. Its business 101 that it’s at least six times more expensive to buy a new customer than it is to get an existing one to return.
So why is it that very few businesses have a clearly defined customer retention strategy and supportive budget?
A simple Solution
As Jeff Bezos said “obsess over your customers not over your competition”. Make your customers the primary objective in your business strategy and ensure everything you do is delivering on the golden rule of business “Add Value”. When the market gets tough the smart businesses are already ahead of the game.
They have the simple belief and practice that you first take great care of the customers you already have before you chase prospects. Remember the old proverb, ‘a bird in the hand is worth two in the bush’? This is vital when thinking about customer loyalty.
If you’re wondering if this approach still applies, then a great idea is to think about who you know or who locally has a long-established successful business. It doesn’t matter if it’s the same as yours we all sell to people, so primarily, we are all in the same business. Consider taking them to lunch or buying them a coffee and ask them what their golden rules are to stay strong in a tough economy.
The reason why this is so important is that in Australia we haven’t had a tough economy for over 20 years and most business mangers actually do not have the experience of navigating the ship in a financial storm. This is why you need the advice from a business person or business that is at least 30 years old.
You will be surprised at how simple some of their strategies are, regardless of technology and social media. The challenge is they aren’t so easy to implement as it starts with great leadership and a great team. At the core of their strength will be the clear intention they have to everything they do around their team and customer service.
If you find business to be challenging and looking for a failsafe strategy, then consider applying what the leading businesses do every day. They have a simple mantra that “different isn’t always better but better is always different”.
Darrell Hardidge is a customer experience strategy expert and CEO of customer research company Saguity, specialising in driving revenue growth from customer appreciation. Darrell is the author of The Client Revolution and The 10 Commandments of Client Appreciation.