Marketing on a shoestring

• Bernard Tanner
• 2 April 2009
• Page 1 of 2 : single page

You could call it a vicious cycle. All too often, business owners respond to stagnating sales by cutting costs, starting with their marketing spend. But less marketing means fewer leads, which means fewer sales, which leads to more cost-cutting… eventually it can end in a death spiral, with your sales revenue and marketing budget chasing each other towards zero.

The truth is that an economic slowdown is not the time to stop marketing. If anything, just the opposite. Right now, effective marketing will help keep sales buoyant and could also allow you to steal market share from your less organised competitors, leaving you in a great position when economic growth picks up again. But that doesn’t mean you have to empty the chequebook.

Recent research from Commonwealth Bank and Investment Trends suggests that some of the most effective marketing techniques are also the least expensive. The trick is to thoroughly understand your value proposition and make your marketing as targeted as possible, then test and measure it rigorously so that it’s as cost-effective as it can be.

 

What works and what doesn’t

Let’s start by looking at what works in practice. In September 2008, Commonwealth Bank and Investment Trends surveyed more than 1200 small business owners around the country and asked them which marketing methods they found most effective. The graph on page 50 shows what we found.

Business owners say email newsletters, networking and word of mouth are the most effective marketing methods. Remarkably, these three marketing techniques rated most effective by business owners were also three of the least expensive. And yet only 6% of businesses surveyed used networking and email newsletters.

In contrast, around 15% of businesses used local press advertisements, even though most found them only moderately effective.

Clearly, many businesses could be driving their marketing dollar further. So how do you go about it?

 

Creating a proposition that sells

The first step is to develop a truly compelling unique selling proposition (USP). Your USP is what sets you apart and makes you different from your competitors. It could be your quality products, your outstanding service or your unbeatable convenience. It doesn’t have to be complicated, but it does have to be distinctive – and it must be something you can deliver on.

According to Phillip Allan, CEO of Business Advisory Services Inc, a great USP has always been important, but in 2009 it’s more vital than ever.

“People will no longer just walk in your door and buy something,” he says. “You’ve got to have a marketing proposition that leaves them no choice but to buy.

“What we’re saying to our clients is that you have to look at your customers’ needs and differentiate yourself from your competitors.”

With your USP in place, everything else follows. In fact, your marketing is really just an expression of your USP, coupled with an offer or immediate call to action. It’s the thread that binds everything together, from your logo, to your staff uniforms, to the signage on your delivery trucks and the way you answer the phone.

 

Plan it, then measure it

Next, plan your marketing strategy. Start by analysing your existing customers. According to the Pareto Principle, 80% of your sales are likely to come from 20% of your clients, so you need to identify the crucial 20%, and then work out what makes them different and go out and find more of them.

Once you’ve defined your target market, you can set some concrete goals. For example, you might aim to increase leads by 50%, then increase your conversion rate (the number of leads that become sales) by another 20%. Ensure your goals are realistic, specific and measurable, and put a date against each one, so you have something to track against.

Now comes the important part. To make your marketing cost-effective, it’s essential that you measure everything you do. That means counting the number of phone calls you make, the number of newsletters or flyers you send out, and the number of ads you place, then counting the leads and sales from each activity.

“Accurate measurements are very important,” says Allan. “You want to know how many phone calls your marketing campaign generated for you, how many visits to your business or your web site, and how many you converted into a sale.”

The idea is to try a number of different strategies to see what offers the best return on your investment.

One great way to measure the effectiveness of a promotion is to include an offer, such as a discount, that requires clients to hand in a voucher or quote a special code if they want to receive it. That way, you’ll know exactly which activity generated which lead.

Here are some of the things you’ll want to measure:

• The number of leads from each campaign
  
• Your conversion rate – this will help you understand how to generate the highest quality leads
  
• The cost per lead (the cost of the campaign divided by the number of leads)
  
• The cost per sale (the cost of the campaign divided by the number of sales it eventually produces)
  
• The cost per dollar of sales (the cost of the campaign divided by the dollar value of sales) – this is the crucial figure for return on investment; it tells you which marketing activities produce high quality leads from customers with a propensity to buy from you.

 

Ten high-value, low-cost marketing ideas

So what strategies should you build into your plan? Here are 10 proven, low-cost ideas to consider. While not all of them will suit your business, there’s sure to be something on this list that could help you generate more sales in 2009.

1. Email newsletters. The business owners in our survey rated this as their most effective marketing tool. It’s generally easier and less expensive to win more sales from your existing clients than to go out and find new ones, and a newsletter is a great way to build a community of interest and make clients feel engaged. The key is to provide genuinely useful information, then build an offer around it.

2. Networking. The cheapest marketing method of all, networking is essential for service-based businesses, especially those who sell to other businesses. But effective networking is an art in itself. Start by writing and memorising an effective 20-second elevator pitch that explains what your business is, who it services and how it benefits your clients. Then use it at every opportunity. Your eventual aim is to secure a meeting where you can gather information about a potential client’s needs and explain how you can help.