Why market in a tight economy?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in September 2016 and is posted here by their kind permission
Times are tough, sales are down, is marketing the best way to spend scarce cash?
The economy is limping along and lower sales means having to save costs. The marketing budget is a tempting target for cuts. Developing the company and product brands is a long term investment, and it is difficult to show returns on expenditure. Even lead generating marketing has a time lag between spending marketing funds and bringing in cash from sales. Cost cutting is usually driven by accountants who may have little understanding of customer needs or branding.
Should you cut marketing expenditure? Only as a last resort to ensure survival and then for a defined time, otherwise emphatically no. There are better ways to cut costs. See the July 2016 My Mentor column in Entrepreneur “Cutting Costs”
There is plenty of evidence to suggest that cutting marketing spend in a recession is a seriously bad idea. A Wall Street Journal study of the last recession showed that companies which cut back on marketing lost sales and market share, while those that held their marketing increased profits compared to those which reduced marketing. Repeated studies going as far back as the Great Depression have shown the same results. Savings you make from reduced marketing may be more than wiped out by lower sales. You need every sale and every customer you can get in these times. Some studies have shown that it even pays to increase marketing in bad times. Recessions can be a great time to go on the offensive, to grab customers and market share from competitors. Continue reading
Making sales when nobody is buying
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2016 and is posted here by their kind permission
Buyers are scarce and highly selective. How do you get a share of their business?
The business climate has been bad for several years. The mining sector is in decline, manufacturing has been shrinking and consumer spending has reduced. In tight economic times buying patterns change; projects are postponed, companies are reluctant to replace machinery, individuals stop buying nice-to-have things and financial managers slash budgets. Cutbacks like these can affect suppliers seriously, even fatally. Buyers become much more selective when they do buy. They negotiate harder and look for better deals, so competition increases for the little business remaining.
While this is going on you need to keep your sales at a profitable level. It is too risky to plan to break even; the tough times are likely to continue and your costs will increase so you risk making losses. Loss making companies do not survive bad times very well.
Attitude
How do you maintain or even increase sales? A good starting point is your attitude. In my experience entrepreneurs who focus on how bad things are will often see their fears come true. Those who ignore doom-and-gloom conversations and show determination often succeed in making sales despite the economy. It is also crucial to put the downturn into perspective. The majority of buying continues. All of the savings and deferred expenditure makes up a small portion of all purchases. Even depressed economic sectors, like mining, spend billions of Rand on goods and services. Your challenge is to be a supplier who gets a slice of the buying that still takes place. Continue reading
Channel choices
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2016 and is posted here by their kind permission
Which channel will achieve the best returns for your business?
You face many choices of how best to get your products and services sold. The most common channels include a field or counter direct sales force, various models of reseller from freelance agents to sub distributors with their own resellers. E-Commerce is becoming a significant channel and self-service in stores has been around for years. Inbound and outbound telesales offers very wide reach; exhibition and catalogue sales work in many sectors like spare parts and curios. Then there are many mixed models; telemarketing followed up by salespeople is one example. For some the best or only channel may be defined by the product. High end cars need a network of showrooms and salespeople so branches or resellers are required, but music is distributed primarily over the internet. For most entrepreneurs making the right choice is difficult and may come with some risk; many companies stay with traditional methods even if that is not the best model for them.
Generally there is a trade-off between cost and control so if you want tight control be prepared to pay for it. Continue reading
How important is your brand?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in May 2016 and is posted here by their kind permission
What does brand really mean to SMEs?
Brands and branding have become the focus of much marketing attention and some hype. Hands up all who recognise all or most of these brands: PrivateProperty™; Sorbet™; Rocking the Daisies™; Turrito Networks™; GetSmarter™; The Creative Counsel™; MiX Telematics™ and Paycorp™? These are all highly successful fast growing businesses which have featured as success stories in Entrepreneur in the past twelve months. Their chosen markets must have valued their brand for them to have achieved such remarkable successes, and yet they are far from household names. So just how important is your brand to your entrepreneurial business? Who should be familiar with it? What values should it portray?
Back to basics
A brand derives from the brand mark burned on livestock to mark ownership. Technically it is a trademark for a company or product, but in the modern sense it is the value which consumers place on the advantages or qualities of the person, company or product. There are many definitions of brand and branding and this adds to the confusion about what to do about branding your business and products. This is a good one: “Brand is the image people have of your company or product. It’s who people think you are.” Anne Handley with CC Chapman. Continue reading
Plan for a better year ahead
This year has been a bad year for many companies – here is how to make sure 2017 is better
The past 12 months have not been a great time for many businesses. It started with the economy struggling to recover from the effects of the double change in finance ministers, was threatened by potential downgrades to sub investment grade by the rating agencies and characterised by shocks like Brexit, the Trump victory in America, local government elections, the #feesmustfall movement and the State Capture report. The serious drought saw food prices rocket and water restrictions added to the difficulty of doing business. All these issues make buyers nervous, and nervous buyers will delay all but essential purchases.
On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. We know that water restrictions and high food prices will continue well into 2017 and the ruling party will have an elective conference which could be abrasive in the coming year. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading
Strategic competitive positioning
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2016 and is posted here by their kind permission
Attack, defend, innovate or do nothing
We know that 2016 will continue to be a difficult year. Entrepreneurs I speak to believe competitive pressures are increasing as businesses chase shrinking markets. Price cutting is common as competitors do anything they can to get a slice of the limited business available. Some entrepreneurs may respond to this situation by assuming there will be less income and cutting costs to remain at least marginally profitable. Others will look for new markets or slash prices, and some will simply hope things do not become catastrophic. The problem with all these plans is that almost all competitors will to do similar things, so competitive pressures will be unchanged.
This is a good time to think strategically about positioning your business to get through bad times while increasing your competitive advantage. I suggest you take a deliberate competitive position and I have listed three possible strategies for your consideration, and a fourth which you could fall into if you do nothing. Continue reading
Are you driving your business or is it driving you?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2016 and is posted here by their kind permission
Why so many strategies fail to deliver and what can be done about it
It is almost a caricature. The executives go away on a strategy planning weekend. They have a successful think tank and come back fired up with great strategies and enormous enthusiasm. Then the day-to-day tasks demand attention and three months later nothing has changed. The idea may still be discussed in management meetings but this is becoming embarrassing. Why did it all go wrong?
It is a lot easier to think about how to grasp opportunities and solve problems than it is to implement the plans. A central problem of implementing new strategy is that it usually relies on people who already have busy jobs with little time or energy to execute additional demanding tasks. The planning session seldom takes this factor into account so strategy implementation remains project-based and dependant on spare time availability within the busy management team. Nothing changes and the company drifts on as it always has.
Entrepreneur style
The style of many entrepreneurs may also be the root cause behind failure to implement strategy. The phrase ‘working in your business instead of on your business’ is almost universal. Entrepreneurs naturally fix problems, manage people on a daily basis, sell, manage the finances, pacify irate customers and liaise with suppliers because they have always done so, and are now very good at these tasks. They work long hours doing things that others would be less effective at doing. Working in the business becomes a comfort zone, and the area they gravitate to when the business faces problems. Continue reading
Customer base or new business?
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2015 and is posted here by their kind permission
How should you deploy limited resources for best returns?
Entrepreneurs know that they do not have unlimited sales and marketing resources. You face the question of how to get the maximum output from what you have. Should your energies be directed at more sales to customers, or more customers? Is it wise to split your resources between these?
A partial answer can be found in the nature of the business. If you sell things that customers buy very seldom like flooring or wedding facilities, your effort should go towards positioning your brand as one to consider and delivering beyond expectations to grow word-of-mouth and referral business. Similarly if your product set is applicable only to a small total market and you are the major supplier you want to ensure that all customers use as much as possible of your product range.
In cases where you offer highly differentiated products or have a unique market focus your priority should be new business before imitators become a problem. Where you have a ‘me too’ product set, very similar to that of your competitors your first priority should be to ensure loyalty of your customers and differentiate by excellent service.
Some new business is essential. Customer attrition will come through closures, relocation and competitive attack. Costs will increase and without new business you will have to cover this increase with price hikes, which make you less competitive. Continue reading
The power of focus
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2015 and is posted here by their kind permission
Concentrate your resources on the target to improve performance
It seems logical to spread your net as wide as possible, to develop all available sales opportunities and markets if you want to grow. This makes sense if you are the dominant player in the market with an abundance of resources, one who can afford to waste resources on loss making sales simply to deny them to competitors. For everyone else it is a bad idea. Military strategist von Clausewitz wrote “Where absolute superiority is not obtainable, you must produce a relative one at the decisive point by making skilful use of what you have”, echoing the much earlier Sun Tzu maxim of concentrating your forces where the enemy is weak.
This military strategy applies equally to business. If you concentrate your resources and focus on a particular target, you gain many advantages: Sales costs reduce, sales become easier through customer referrals. Salespeople become expert in the area and competitors recognise your expertise and go elsewhere, so your strike rate increases. Customer support and administration costs fall and service levels increase. Your company becomes the go to company in that market.
Alternative choices
By contrast trying to hit everything that moves is costly; implementation and procurement complexity increases, as does the risk of cancelled sales. Your people become frustrated because they continually need to learn new industries and seldom re-use their expertise. Poor customer service is frequently an outcome and you lose the power of relevant reference customers. Continue reading
Your sales machine
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2015 and is posted here by their kind permission
Turn your whole company into an enthusiastic unit that aids and promotes your sales
It is in the interests of any employee to do anything they can to ensure the business makes sales, or at least not put sales at risk. Aside from loyalty to their employer, a healthy and growing business means everyone is better off and has improved prospects for promotion. Strangely there are employees, and some managers too, who damage the company through carelessness, incompetence or deliberate obstruction. They are hurting themselves as much as their employer.
Contrast that situation with companies where everyone is customer centric, and frequently attract praise from customers they have been in contact with. There are typically no unresolved complaints on consumer forums, and every employee seems to know why customers should buy.
Review yourself
To build a company like them, some introspection may be a good idea. Do you really deliver goods and services that meet customer expectations, or have customers had to lower their expectations to your standards? Think of the grudge purchases you make, or the times you have been distressed but did not change supplier after a bad experience. You cannot expect your employees to be champions if your company supplies shoddy products, uses untrained technicians and seldom delivers on its promises. Fix the real problems and you will be pleasantly surprised by the change in your staff. Continue reading
The right workload
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2015 and is posted here by their kind permission
Entrepreneurs work hard but should get the balance right
It is routine for entrepreneurs to work very hard for long hours. Hard work is a part of entrepreneurship, but how balanced is that workload? Do you handle customer complaints, check quality, answer e-mails, expedite deliveries, do progress chasing, and fix problems? These are all reactive. Your may also do some proactive work like designing the website, selling to customers, developing products and similar tasks. Even these may really be reactive – arising from the lack of a website, no trusted salespeople and customer gripes about product deficiencies. If this sounds like you, you are working in the business, not on it, and working at a low level as well.
You should be focused on beating competitors, innovation, customer retention, structuring finances, building the brand, managing budgets and forecasts, getting the right people in place and a host of other managerial tasks. These are working on the business not in it. At least some of your time must be devoted to strategy – have you got the right products? Are you in the right markets? Should you buy competitors or be bought? Is your buying strategy right? Your pricing? Does your structure support your strategy?
Life balance is equally important. Family, health, friendships, networking, learning, spirituality, hobbies, holidays and entertainment will often be sacrificed for long days working, but there is a cost. Continue reading
Breakout
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2015 and is posted here by their kind permission
Planning and executing real growth strategies
The year 2015 stretches ahead, and many entrepreneurs I speak to are still cautious. This is understandable, 2014 was a horror year of violent strikes, power cuts, limited postal service, slow economic growth and uncertainty. The temptation to proceed with caution into 2015 is very strong.
Beware though, caution can become a habit, business plans showing a modest growth on last year can become the norm. The company does not invest in new products, markets or channels, research, marketing and training are put on hold and the company develops a culture where innovation becomes too risky “for now”.
Breaking out from the limited growth habit can be a challenge, but a very worthwhile challenge, if only as a defensive move to stop competitors getting bigger and threatening you. Continue reading
Need a quick profit boost?
Five ideas you can implement quickly and inexpensively
All businesses need an occasional profit boost and very few would have the luxury of saying they were already making more than they dreamed of. Here are five relatively painless and inexpensive strategies to improve your business.
- Sell more to your existing customers by cross selling. Cross selling means you sell products in your range to customers who now only buy other products in your range. They may be buying products which you carry from your competitors and this is often because they do not know the extent of your product range. It does not matter that you have explicitly told them about other products in newsletters or advertising, they may not have noticed. Do this by listing your known customers, and then making a matrix of what they buy. You should have this information in your sales analysis. If there are too many customers, take a selection of maybe 50 or 100. Assuming you are sure they could use your other products, make a series of individual direct approaches by e-mail, messaging or in person. Offer trial periods, initial order discounts or anything to get their attention
- Stop throwing things away. Unless your organisation operates on very lean principles, chances are that you are throwing a lot of valuable stuff away. This will include packaging material scrap, damaged, stolen or obsolete goods, operational time, space, managerial time and a whole lot of other stuff. Start a ruthless campaign to cut down on waste. Pay particular attention to wasted time like idle time waiting for some needed thing to happen, wasted time making things which will have to be remade and wasted time in inefficient processes. Also pay attention to scrap and rework whether you are a manufacturer or distributor. Check the scrap bins and figure out ways to stop throwing away stuff you paid for. If you don’t have the right systems or training to manage that then buy them, it’s cheaper in the long term.
- Target a competitor. Pick your weakest competitor (you do have up to date competitor analysis, right?) and attack yheir weaknesses and cash cow customers with special offers, top rate service, better technology or whatever your business has which makes it different from and better than your competitors. (You do have a clear and distinct statement of your differentiation and advantages, right?). If you cannot do this chances are you either do not know what your competitors are doing or you have no clue why your customers buy from you. In which case fix that quickly before your competitor reads this and you become the victim of this strategy.
- Adjust prices up or down. Do this only on products where a small price change can mean a large change in demand (price elastic products). Often these are small items, consumables, service contracts, add-ons, some fashion items and minor luxury goods. The ideal is to identify a number of high volume price elastic products. Make a guess what would happen to sales at a couple of price points above and below the current price. Then draw a spreadsheet to show what the total gross profit will be at each price point. You will often find the best strategy is to increase the price rather than cut prices. The total margin may be higher and the costs lower because there are less deliveries and other unit sale related costs. If the cost to you is likely to change with volume then factor this in. Test the theory by changing the price on a few items and make sure sales follow your projections before making mass changes. Try to increase some items and reduce others so you don’t look greedy or desperate.
- Get rid of the junk. You probably have customers and products which are not profitable and suppliers and staff you support because of loyalty despite the fact they cost you money. Supporting loyal people and suppliers is a wonderful thing to do but then view this as charitable bequests, do not hide it in the mainstream of your business. You don’t need to be cruel in offering money instead of work, but helping suppliers to become competitive and finding more suitable employment for people who have outlived their usefulness in your company restores their pride and gives them new opportunities. You can now monitor the cost of your kindness. Then kill or replace the unprofitable products, even if it hurts (Keep thinking of Kodak, at one time the world’s second best known brand, which could never tear themselves away from film and make the switch to digital). Politely discourage the bad customers or sharply increase prices of the stuff they buy so at least you make some money from them.
Don’t slow down
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2014 and is posted here by their kind permission
November and December offer many opportunities for alert entrepreneurs
You will all have experienced it – the dreaded November slowdown, with many anticipating the year-end holidays before South Africa shuts down sometime in December. Entrepreneurs complain that it is impossible to sell at this time of the year. Many can’t wait for the start of the holidays.
How much are you contributing to this business slowdown? Are you demotivated by decisions being deferred to next year? Have you gone into pre-holiday slowdown mode, and repeated that this is an impossible time of year for marketing or sales? If you have then you are part of the problem, and this is a self-inflicted limitation on doing business.
Can you really afford to have one quarter of the year, from the beginning on November to the end of January as a time of minimal sales? Is it really true that nobody buys at this time of the year? The truth is there is an enormous volume of business available at this time, but it will not come to you if you ignore the opportunity.
Opportunities
There is an old saying that “everything comes to him (or her) who hustles while they wait”. Many successful entrepreneurs have had great successes during the slowdown by catching competitors napping in preparation for the holiday, or being the only bidder for profitable business. Tenders are published now to limit the number of bidders – really awake entrepreneurs take advantage. To get a slice of the millions spent in the next couple of months you must be alert, work hard and look for opportunities. You should also plan and execute an assertive sales campaign. Continue reading
Competitive strategy
This article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2014 and is posted here by their kind permission
Is this only for the big corporates?
Large IT companies spend millions on market research to see how they stack up against their competitors and use this information to figure out how to be different and better than them. Automotive manufacturers and importers watch every move competitors make, being first-to-market with a new fashion trend can mean the difference between a clothing brand outselling its competitors or disappearing. Even cities position themselves against other cities to attract tourists and businesses. Why should competitive strategy, a vital part of marketing strategy only be relevant to very large organisations? Why not your business?
Being competitive is a core requirement for all businesses irrespective of size. Not-for-profit organisations like charities, schools and religious organisations compete for funds, members and media attention. Very small business and start-ups must wrench business away from competitors or alternatives just to survive. Without a compelling message about what advantages they offer over others many of these organisations will fail as consumers take the easy route of buying the most popular, the most accessible or the most familiar.
Competitive
More than 30 years ago Michael Porter defined competitive strategy as “The plan for how a firm will compete, formulated after evaluating how its strengths and weaknesses compare to those of its competitors”. This plan should be focused on getting a sustainable advantage over competitors so it is much more than simply reducing price or having a special offer. Continue reading
Follow Us!
