Marketing starts from the inside and works itself out

A client recently declared that he had a marketing problem. Asking a few questions, what he meant to say is that he had an advertising problem. His sales were steady over two years, but his costs were rising. His margins were shrinking. He wanted me to come up with a fancy, quick fix equal to a shot of morphine that could make the pain go away.

Marketing is simple but unfortunately not easy. The heavy lifting to turn a company around is usually more complicated than getting more customers. More customers translates to less customers in the long run if the business under delivers on its promises. 

Marketing is just a promise.

The unfortunate thing about our client was that his margins were shrinking due to improper cost controls. His business was stagnate because of a lack of systems and controls on product and service standards. An inconsistent product made the company a liar in its past promises.

The client wanted us to show him how to increase his sales by 30%. Instead we told him he had to plug the holes in the bucket before he went after more customers. We guaranteed a fix but it wasn't what he wanted to hear. He got his morphine from someone else. 

And that's ok. For us to help a patient, we need the patient to recognize our expertise.

Marketing starts at the top of any organization. The leader's relationship with the whole team will allow for a collaborative, team-oriented approach or insular, everyone-for-himself mentality. The leader needs to build systems that the team can experience personal and financial growth. 

An environment where everyone feels they have an opportunity to voice their opinions makes it family like. Motivation, morale, happiness and profits exist here. 

You don't have to do this. The alternative is cranky, unmotivated, backstabbers in which absenteeism, and productivity is always an issue. 

We all want profits in our business. 

There's a simple solution. It doesn't start with more customers.

Leadership and vision finds, trains and motivates happy employees. Happy employees serve customers who eventually become loyal. Following Pareto's Law, 20% of customers generate 80% of the profits.

 

Increasing profits starts with the leadership and vision. It's not an outside problem. Lack of profits is usually an internal problem. Before you spend too much money on advertising, fix the internal stuff and revenues will start to shift. Once the problems are fixed, advertising can then be used. Otherwise, increased profits will take time because word of mouth is the slowest form of advertising.

So if you have money to spend on advertising, spend it first by fixing the inside of your business.  

Advertising only speeds up the inevitable. A sucky company goes out of business faster with an increase in advertising budget.

Value versus Price

What's it worth to you?
Isn't that the definition of value?

The question that gets asked is, "What's it going to cost"?
That's the wrong question.

So much emphasis is placed on price these days. I tell clients that price, on the most part, does not matter. When we think about pricing a product for sale, the only question that needs to be answered is what is it worth to someone else.

Most entrepreneurs try to compete in the marketplace with a reduced price. Being a low cost provider is a poor strategy for most businesses. Notable exception being Walmart.

You're probably not going to be a Walmart type business in your category any time soon. So don't be the cheapest in your category.

Here's why.

1. Price is the easiest thing to copy and improve on. Competitors pay attention to others pricing strategies to copy them or beat them if they perceive a loss in market share. This is called a race to the bottom in which there will only be one business standing when it's over. And the one standing will be the one who is the most financially secure at the start of the process.

2. If the product or brand does not have qualitative differentiation in the marketplace, the product is dangerously promoted as a commodity. In the commodity marketplace, the only thing that matters is price. Whoever is cheapest wins the customer's business. It is not a sound strategy to have customers who don't care about a company. Customers who switch to competitors the minute prices are lowered are not good, nor loyal customers.

3. When the commodity game is played, loyalty is non-existent. Margins are miniscule as the entrepreneur lowers prices to remain competitive. If margins are halved, entrepreneurs have to work twice as hard to get reasonable profits. Working much harder in a low price environment with less financial rewards seems ridiculous. For example, would you rather sell a cup of coffee for 50 cents or for $5.00? There will be less customers if coffee is sold for $5.00. But at an average cost of 10 cents, profit is $4.90 for every cup sold versus 40 cents in the former option.  At 50 cent coffee, 12 coffees have to be sold to every one at the $5.00 option. Don't question the expensive coffee as an entrepreneur. Ask what value has to be given to get the customer to believe that $5.00 coffee is worth the purchase.

My wife is a sales shopper. Her favourite stores have trained her to wait for the special. She no longer believes the list price is the worth the value of the item based on periodic sales promotions. There are many like her who wait for the product to be discounted before they buy.

Discounting is an excellent way to encourage people to buy. If you're trying to move old stock, perishables, or discontinued items, discounting can be a great way to get it sold. Discounting is also the lowest form of marketing. It works. Discounting strategies bring customers in to buy. But at what price? If used incorrectly, customers will quickly learn that the value is less than the list price and wait for the discount, thus slashing your expected annual returns for short term profits.

Good entrepreneurs are long term growth visionaries not short term profit oriented junkies.

XYZ cement company was trying to figure out how to charge more for their bags of cement, when all the competitors were selling it around $5.00 per bag. The product was a commodity. Everyone knew it. With no competitive advantage, the braintrust of XYZ increased the price of their cement to $1000 a bag. At that price no one would truly buy their cement if the value in customer's mindset didn't increase. So XYZ increased the value proposition by including architect consulting, access to an engineer usage of computer drawings to aid in the design of the structure. Every bag XYZ sold was equal to 200 bags from their competitors. They became the leader in their area. They were extremely profitable and demolished two competitors in the process.

Value is the only thing that matters when pricing your product. He who provides more value to a customer will be positioned to thrive.

Learning from cribbage

Grandma and dad used to have daily crib games. The games were epic with pulsating voices coming from the kitchen when someone had a great hand. "Hot digitity", "Oh boy", "Sonofabitch", "Yee-haw" were a few I remember. There were others I'm sure.

I learned the game of crib from them. I watched them, counted the cards, looked for the patterns, and learned what to throw away and what cards to keep.

Dad took me under his wing and taught me all of the rules of crib over a few weeks. He regularly beat me as he showed what I could've played versus what I had played. He got all the good cards. I knew he liked to cheat, so I was sure he was dealing the cards crooked. But he got the right cards when I dealt too.

He shared a secret about crib that I never witnessed in those games with Gramma. No one ever talked about this secret. I don't know if Gramma knew the secret skill my dad had. He showed me how to do it making me promise not to share it with anyone else.

Before Grandma died, I danced a few rounds of crib with her. She never beat me. She used to curse like a sailor when I vanquished her.

She could beat my dad, but she never triumphed over me.

Thinking back, it started when I was a youngin' of 6 years old. Gramma would flip the cards upside down and we would play Memory. Looking for matching cards, the winner would be declared with he who had matched more pairs.  My brain was young, uninhibited, free of pain, drugs, alcohol and stress. I never knew Gramma Grace to drink. But her downfall was a chain-smoking addiction to menthol cigarettes.

That was the only advantage I needed as a child.

As an adolescent, I didn't have that same competitive advantage as alcohol exposed me to a new world of enlightenment.

I was 14 when I started playing crib. To beat Gramma required a new competitive advantage. I had to cheat. Dad passed down his secret in my trust. And it worked. Gramma stopped playing crib as she got sicker and later bed ridden.

My dad's secret is not much of a secret anymore. A book and a movie came out 8 years ago exposing it.

Dad applied the Laws of Attraction to his cribbage game. He taught the rules of visualization to me.

Never once did I think this skill was transferrable to other areas of my life until I saw the "Secret" movie.

Gramma used to say I had a horseshoe up my ass. Luck had nothing to do with it. I wanted that card, visualized it, asked for it and was always giddy in thanks when it turned up.

We can cheat the game of life the same way dad and I cheated at crib. It's quite easy.

Questioning authority

I'm a product of the public school system. My kids are now being produced by the same system that created me and countless others like me.

On the way to school this morning, my daughter told me that she dared not question the rules at school. Some rules like respecting others, being polite and not yelling, running, swearing or disrupting others are regulations that show mutual respect for others. I accept these rules. And so should my children.

But there are other rules that have no bearing on respect. These rules are arbitrarily assigned by a person in authority because they can. The adult in me says these rules are ridiculous. Luckily I'm not a student at this school. As the parent, I must coach my children to think inquisitively.

My daughter is a unique little girl that questions all of my rules. What stops her from questioning her teachers? Does she accept all things said in the classroom? Is she thinking for herself or has she become a drone accepting all information as fact in school?

She worries about questioning the teacher about a banal rule for fear of making the teacher mad.

"Who are you more afraid of upsetting, me or your teacher?". She confirms that I am her biggest fear.
"Who has more power, me or your teacher?". She again answers that I have more perceived power.
"Why don't you question things you don't understand?". She answers that understanding the rules is not as important as obeying them in school

She's nine years old.

Everything she does not understand has to be questioned as long as she does it in a polite, courteous manner that does not disrespect the adult. Poor girl does't know that questions are the key to learning.

That's my fault. I take 100% responsibility for her un-inquisitive mind. Teachers beware. My child is being prepared for the world. She needs to question rules, why they exist, what would happen if they didn't exist, who made up the rule, how can the rule be changed and when will it all happen.

We've been taught to accept the rules, don't question them and just keep moving on as if we do understand them.  It reminds me of the scene in "The Time Machine" by HG Wells. The Eloi in the book are future descendants of humans in the year 802701. They are fed and treated like livestock for the Morlocks to feed on. Morlocks live underground and rule the planet. The Eloi don't question anything. They just live in a paradise like place with food, drink and pleasure. Only to be eaten before they get too old and tough.

The fate of the Eloi is to be eaten. Is that what we want for our children?

Do you like to be told what to do?

I always wanted to be a grown up. Now that I'm here, there are days, I wish I could be a kid again. I think there are many who feel the same way.

There was one thing I hated about being a kid. I didn't like to be told what to do. I didn't like teachers, parents and any other kid trying to control me.

Most want to do a job well. We learn this in school as we look for the affirming A on our test.

Some people need more direction. Some people require less. In either case, the reason we work with other people is compound the effort so it all gets done faster.

I escaped my childhood the day I entered the workforce full-time. There were protocols, rules, and roles. But as long as one did the job with interest, ferociousness and consistence, no one was questioned. No one directed, managed, or told me what to do until payroll costs started going up. To do the job, I was working 10-15 hours overtime per week. We all were in my department of 30 employees. The work had to be fully completed by Saturday at noon and we didn't have enough people to do it all.

I left that job when people started telling me what to do. I wanted to be lead. Instead I was managed. Unfortunately, most people in management roles think leadership and management are the same thing.

They are not.

You manage things.
You lead people.

By trying to manage a person, you diminish the person to a thing.

One of the biggest issues today in business is motivation of the workforce. Did you ever try to motivate a pencil? The damn thing doesn't move until you pick it off the desk and do the work for it.

Employees have roles in the organization. With motivation, they go beyond their specific roles to help the organization. Without it, they work 9-5, expecting a paycheck every two weeks. They don't try to excel. They don't try new risky things in fear of being fired. They do the job they were asked to do.

We crave leadership.

Entrepreneurs don't like to be told what to do. If you have an employee problem, the problem is a deeper issue embedded in a leadership problem.

You are the problem if you're supposed to be the leader.

If you fix the leadership problem, you will fix the employee problem.

Lead people. They crave it. They will love and respect you for it.

Ideas are combustible but only under the right conditions

Mazda used to have a tagline in their advertising that demonstrated the fun of driving their cars. A kid would say "Zoom zoom", as if playing with his toy cars while he tore up the livingroom carpet.

Thinking about that iconic usage of rhythm reminds me of the number one problem with entrepreneurs.

Everyone has great ideas. Ideas can come from anywhere.

It's the execution that most people struggle with it.
Heavy lifting and working toward a goal forces the entrepreneur into submission. The ideas multiply and spread like a virus. Yet the budding entrepreneur remains stagnate in a pool of submission and stink.

The problem gets analysed and re-analysed. The solutions change. The work does not. And the work sits there waiting for the entrepreneur to grab the reins to ride the wild horse off into the sunset, where dreams exist and fairy tales come true.

But the entrepreneur becomes paralysed with intent. The term is analysis paralysis. The feeling is fear. Nothing is achieved without action.

An idea is like fire. Fire needs air to create the massive energy required to burn a stick of wood. Air equals action.

Dreams die every moment as another wannabe entrepreneur think up great ideas only to watch them suffocate without oxygen.

Question: What's the most important step toward action?
Answer: The first one.

Are you gonna let the smoke blow out your flame, or are you gonna fan the flame into the largest, brightest flame around? Once the flame takes off, you only have to direct the energy to where you want it to burn.

You can't light a good fire if you don't start with the right conditions.

It all starts and ends with the entrepreneur.
Ready to move yet?

Does purpose matter?

I often ask myself what is my purpose in life. As if there is some grand plan waiting for me to push the right button so I can achieve everything I was supposed to.

The grand plan thing must come from deeply entrenched beliefs about religion.

Is it possible that I have a purpose?

In a recent video, I saw the grandness of our universe and the size of our planet in comparison. Our planet is basically a spec of dust moving at 67,000 miles per second. Dr. Seuss may have described our Earth appropriately in "Horton hears a Who".

Yet our egos place us at the centre of it all. Humans fight over land, money and natural resources when none of it truly matters.

What matters is the current relationships we have with each other. People won't remember what we said. They will not remember what we did. But they will always remember how they felt in our presence.

Working hard to make a living, we forget that we are all on the same dust ball.

Maybe there is no such thing as purpose. Maybe we made it up to give our life meaning. Maybe there's no life after death.

All these answers are beyond my knowledge. But I know what I believe and that's what keeps me going.

Here's the only thing I know for sure:

We are living on a spec of dust spinning at 67,000 miles per second. We are insignificant outside our own selves.