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
This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2015 and is posted here by their kind permission
Does unique mean it will make millions for you?
You have created an innovation; congratulations. It may be a unique product, a brand new service, a new way of distributing things, a unique business model or a combination of these – but will it fly? Hopefully it will be a success and reward you, but just because it is unique is no guarantee of commercial success. The great innovations are generally those where potential customers immediately see the value, and perceive the value to be higher than the cost. Think of prepaid airtime which opened cell phone use to those who could not afford a contract.
Innovations which struggle to get off the ground are often those where the entrepreneur is passionate about it and believes potential customers should share his or her passion. This is a good way to learn that even great and creative products must be sold. Many wonderful innovations have never been launched or failed when they were introduced.
Preparing to launch
Ask yourself: Is this innovation is in response to a real market need, does the market recognise this need or are they not aware of it yet. If you are in the second category be prepared to spend a lot of time and money convincing people they really have this need.
There are two key requirements for a successful launch of a unique product; reasonable certainty that customers will buy at the proposed price and sufficient money to develop and market the innovation. Please do not ignore the marketing costs. Commercial failure of many innovations stemmed from entrepreneurs who spent all their money on perfecting the product and had nothing left to tell the market about it. Marketing innovations is expensive; the market must be convinced that the innovation works, is cost effective and gives advantages over old ways of doing things. Do not underestimate marketing costs. Continue reading
The importance of getting people talking about your company
This article was published as the Sanlam Business Tips for Business Owners December 2014 edition. This publication is a great resource for entrepreneurs, well worth subscribing.
People telling others about their positive experiences with your company sends a far more powerful marketing message than any advertisement. Word of mouth is credible, personal and admiring. The best advertising cannot match that. Word of mouth is also free, so it is a great marketing medium and deserves more attention that it normally gets.
You cannot simply ask people to talk about your company. Larger organisations use ‘brand ambassadors’ to promote their products. The audience knows the brand ambassador is being paid to promote the products, so the message lacks credibility, it is not true word of mouth. Few of us will tell others about a reasonably good experience with a supplier, unless we are asked for a recommendation. How then can your company use this valuable marketing tool?
The best example I know comes from many years ago when I routinely bought lunch at a deli called The Shop Around the Corner in downtown Johannesburg. Their pizza slices came from large round pizzas, roughly cut into segments, and every time I bought one the counter hand would carefully select the biggest one on the tray for me. That felt great! I soon realised that every customer got the biggest available slice. When the slices ran low a fresh pizza was cut and the slices added; the process of serving the biggest slice first continued. I talked to many people about how wonderful their service was and I am sure many others did too I am still talking about it almost thirty years later. Total cost of this exercise – one pizza slice each lunchtime. The Shop Around the Corner is still there, through all the changes in central Johannesburg, under the same ownership. With that great customer service, good food and smart marketing I am not surprised. Learn from them. Continue reading
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.
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
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 2013 and is posted here by their kind permission
You have to tell potential customers what you offer – even with no money
It is almost a caricature. A new business is launched. The entrepreneur has used all the available funds to perfect products. There is no marketing and consequently no customers and all the technologically wonderful products remain unsold. The world does not beat a path to the door of the person who has the better mousetrap; it continues to buy whatever it has done in the past.
The message is clear – you have to tell people who could buy from you that you exist and why they should consider you. You can do this with little or no money for marketing promotions, but there are some rules.
The first one is to realise that with limited funds you needs to reach the people likely to buy from you as efficiently as possible; you cannot afford to market to people who will never be your customers. It is amazing that this simple piece of logic is so often ignored. Identify who your most likely customers are, and then to figure out the best way to get a marketing message to them with as little wastage as possible.
The right media
Another rule is that you have to use the right media. It does not make sense to advertise wedding dresses by flyers in business post boxes. Instead you must be on the internet – unless you can afford to be at bridal exhibitions or to advertise in specialist magazines. Find out which information sources are used by your target market and then use the most cost effective ones. A useful cost saver is to form an alliance with a non-competitive supplier to the target market. The allies agree to share exhibition or other marketing costs, but they also introduce each other to their customers.
Barter is an ancient and honourable way of saving cost – you print my brochure and I will plan your conference for example. Community service by you and your staff can attract the attention and goodwill of community minded businesses and individuals and it is free. Continue reading
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in July 2013 and is posted here by their kind permission
What makes your business the supplier of choice for your customers?
I occasionally ask groups of entrepreneurs why they think their customers buy from them. After an awkward silence some in the group will give answers about product uniqueness, price advantage or better location, or easily copied ones like good quality and better service. At least some entrepreneurs in the group will really not know.
Entrepreneurs who do not know why customers buy take a huge risk of customers drifting away for unknown reasons. The question is even more important for start ups. Anyone who plans to open a business and does not identify clear reasons why customers would buy risks opening a business which will make no sales.
Why customers buy
There is a huge body of research about buyer motivations which is good to study. In my view the most important business differentiators are uniqueness or competitiveness
Uniqueness may mean innovative products or services, but can also be the uniqueness of the business principal. Products like trousers, perfumes, sporting equipment and coffee bars have thrived from being driven by a famous sports or entertainment star. For the average entrepreneur who is not famous or an inventor there are still options to be unique. Businesses which use a unique pricing model will rent when others sell, offer last minute sales at incredible discounts, or develop other pricing innovations. They will not simply sell at lower prices. Continue reading
This article was written by Ed Hatton, the Start Up Coach for the South African edition of Entrepreneur magazine, as the My Mentor column published in June 2013 and is posted here by their kind permission
Entrepreneur optimism in sales forecasting
Entrepreneurs are natural optimists; they have great belief in themselves and their products, they see even ordinary products as being irresistible to potential customers. There is nothing wrong with self-belief; without that we would see few new businesses being launched.
Optimism in sales forecasting is much more serious. There could be disastrous consequences if the venture fails to make unreasonable sales targets.
Before the entrepreneur even thinks about forecasting the sales volume he or she must define the target markets; groups of people or businesses most likely to become customers. These groups must see a good reason to buy from the new venture rather than their existing suppliers, and be able to learn about the goods and be motivated to buy. The entrepreneur must identify the processes to achieve these requirements. Please do not skip these steps. The belief that ‘everyone will want this product and my website will bring enquiries’ has produced many poorer and embittered ex-entrepreneurs. Continue reading
You have the idea, but what are the steps needed to turn the idea into a business
I meet and communicate with many people who have an idea that they think can be turned into a payable business but do not know where to start, and many such ideas never become enterprises, which means no new economic boost or jobs, and we need both to take the focus from large organisations and ever increasing government bureaucracies.
So here are a few steps to convert ideas to enterprises.
Who will buy it?
Without sales there is no business and yet too many start ups have only an optimistic guess at sales income. To reduce the risk of early failure the target market has to be clearly identified, it has to have the disposable income to buy the product or service and it has to be one that the new business can communicate with and sell to.
Break that sentence down into its components and you will see the need for a whole lot of research, thinking and planning. The advantage of doing this is it is easier and less expensive to communicate the values of a product to a tightly defined market and much easier to attract them to the ‘storefront’ – whether that is an actual store, an internet site or a salesperson. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in May 2012 and is posted here by their kind permission.
Getting a response from initial e-mails is a challenge
This entrepreneur started a company to market advertising for digital publications and mobiles. Like most start-ups he has a challenge in making initial sales, and he has identified a weakness in his initial e-mails to generate interest. For instance his e-mails promoting a new product for organisations sending electronic statements has produced no response. He asks what he should include in the e-mail.
This entrepreneur actually faces two challenges: He needs to attract attention from potential customers who do not know his business or his products. To do this he has tried using e-mail as an inexpensive way to communicate his offer, but has been unsuccessful. His second challenge is that he is promoting advertising in the digital world, so his digital communications have to be arresting and effective, he cannot use traditional media to market his products.
E-mail is incredibly efficient at sending messages but this has brought about the major problems of e-mail overload and spam. As a result defences against unwanted mail have been built. Many of this entrepreneur’s e-mails will never be read, victims of spam filters or the delete button. If they are read, it will be a quick scan, so messages which don’t immediately attract attention will be ignored. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in April 2012 and is posted here by their kind permission.
Start ups in small towns need excellent marketing strategies
This entrepreneur plans to start an event business that will offer wedding and party planning and a catering service offering African gourmet meals with a twist. He requests advice on marketing and penetrating the limited market in his small town. As an unknown young black entrepreneur he has concerns about succeeding in marketing to a predominantly white and older community.
The first step is market and competition evaluation, to determine if there is enough market, and whether his business could win against established competitors. If either of these are negative then the entrepreneur needs to answer totally different questions.
Assuming this has been done and the market is available, then there is a mix of good and scary news. The good is that he is thinking of how to be different. The idea of gourmet African meals is exactly the sort of unique selling proposition that great businesses are made of. The scary part is that any market is really hard to penetrate. What is usually in the target’s mind on first approach is something like:
A business with no sales needs to change or close
This entrepreneur started a model and artist management company and signed up models, planning to take a commission of their earnings. But there have been few castings and very little income. E-mails to potential clients go unanswered. She asks if she should change her way of finding clients.
This entrepreneur is faced with a three way choice right now. She can persevere, working hard to make a break through, she can quit, or she can change strategy and tactics. When potential buyers do not buy a product or service as expected businesspeople either become bewildered, as is this entrepreneur, or frustrated and angry at the buyers ‘illogical’ refusal to buy. This is naive; the buyer has no obligation to buy from the entrepreneur.
The key question to ask is ‘why would they buy from my business?’ Are the models more talented, or less expensive? Are my services superior to those of others? Users of models have an enormous choice, and will have their favourites. They know what to expect and the like the look of the models they use. If they want a fresh look there will be a large choice from their current agency. So why would they switch from the known and liked to an unknown agency and model? Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in October 2011 and is posted here by their kind permission.
The answer to insufficient sales may be more money invested, but there are other opportunities
By Ed Hatton
I have just started a college with a unique range of course offerings. Enrolment numbers are poor due to a low advertising budget. How do we get investors involved without having surety?
Existing entrepreneurs reading this will probably be smiling wryly. Cynics say the first two laws of start-ups are:
In this case the entrepreneur has assumed that the only way to increase enrolment is to put a lot of somebody else’s money into advertising. There are a couple of issues with this proposed solution.
Firstly investors put funds into businesses because they believe they will make a good return. So this entrepreneur will have to demonstrate that the project will make money, despite the fact that early enrolments are poor. Facts, figures and hard information are needed, not just self belief and enthusiasm. Continue reading
A new entrepreneur faces a steep learning curve with no mentoring
An entrepreneur started a website to provide youth with a free service for employment and small business opportunities. The income comes from web publishing and affiliate programs. He has no IT background and has to learn operations, marketing, finance and everything at once. He also doesn’t have anyone to bounce new ideas off.
This entrepreneur, operating in a rural area, wanted to make a difference to young people and small businesses. The web site breaks even but he is frustrated at the slow growth and his own lack of knowledge. This is a near-universal problem with new businesses, the learning curve is both steep and multi-disciplined. Affordable advisors are hard to identify.
Learning and getting advice
Finding appropriate learning opportunities and information while running a new business is a challenge. There are many courses advertised and choosing the right one is crucial for entrepreneurs on tight budgets and with limited free time.
Start with the free information on the internet. Entrepreneur magazine’s website at www.entrepreurmag.co.za is a valuable resource, so is the SME Toolkit (www.southgafrica.smetoolkit.org) and many others. There are many great business blogs which starts ups can follow at no cost including my own at http://marketingstrategy.co.za. It takes time and patience to search for good information, but this is time very well spent.
Entrepreneurs should not be afraid to ask for advice, but only when they have done the basics. Many business people are happy to help but don’t expect them to come up with answers when the entrepreneur has been too lazy to investigate options. Start with a successful business nearby that is not in competition with yours and then ask the managers for assistance. This works well in the internet world, where free advice is a part of life. Coaches and mentors are available for a fee, but set the expectations and budget in advance. Continue reading
Starting a new business to supply an innovative solution needs lots of research
By Ed Hatton
I have been developing a product for the health and beauty industry for the past 2 years. How do I sell and market my product both nationally and internationally?
Many wonderful inventions never see commercial reality, let alone international success so the questioner is wise to ask for advice on the way forward. If the market does not see the value of a new creative concept it will not sell. The inventor may get excited about something that solves one of her own problems, but before launching a start up business she needs to be sure that the market has the same need and sees the value of her product in addressing that need. Continue reading
How do you get noticed if you have no money?
Imagine a business with expenses rising, the turnover static or falling. The entrepreneur realises that the business simply has to find new customers, but there is little or no money available for marketing. What should the business do next? In desperation maybe the entrepreneur has thought of doing something like:
Sadly the outcome is likely to be a poorer and sad entrepreneur. One time advertising may bring a few enquiries occasionally but is almost always a waste of money. The post is probably collected by a messenger who will discard the flyer, and a prettier web site will not bring more enquiries if nobody visits the site.
A smarter way is for the entrepreneur to realise that if he has limited funds, he needs to reach the people likely to buy from him as efficiently as possible; he cannot afford to market to people who will never be his customers. It is amazing that this simple piece of logic is so often ignored. The very first step is to identify who his most likely customers are, and then to figure out the best way he can communicate a marketing message to them. For most businesses in this situation this will be a highly focused message, getting to the right people with as little as possible waste. Sometimes this may be as simple as forming an alliance with a non competitive supplier to the target market. This would apply to photographers, event managers, courier companies and many more – maybe almost every business. To make this work the alliance must benefit both parties. The allies could agree to introduce each other to their customers, share exhibition or other marketing costs or offer bundled products. Continue reading