L.T. has a graphic design business. She’s as busy as she wants to be, but feels she would like to move to a clientele who are willing to pay more for her services and who have a steady stream of projects for her to work on, but is unsure how to achieve this.
She proudly tells me she does no marketing. I hear this fairly often from professional services businesses. In many cases I believe this to be because people are scared to do what they don’t know or understand and for many professionals marketing is scary unknown territory. It need not be if you learn a few basic principles, but many people find it easier to believe they don’t market or to believe they have found the “secret sauce” that means they don’t need to market.
My first question in these circumstances is usually; “How much do you spend on marketing your business?”
She replied; “Oh I don’t spend any money on marketing. I told you I don’t market”
Naturally this leads to; “So how do you get your customers?”
I discover that like most people who believe they do no marketing, she relies predominantly on networking and referrals.
To me, marketing is everything a business does to acquire and keep customers. So in my book networking and referrals definitely fall into marketing.
I believe that these two tactics are often the default for people who have no marketing strategy or process. While these tactics can create quite a successful business, they eventually limit your growth because ultimately the amount of networking you can do is limited. When you are networking you can’t deliver, and when you are delivering, you don’t have time to network. If these are your only marketing tools, it will be extremely difficult to grow business beyond a few people.
The truth is that networking and referrals have lots of hidden costs that are actually marketing costs. For example, lunches, dinners, coffee, membership fees, meeting attendance, your time, travel etc. Don’t be fooled into thinking your time is free. It isn’t, and remember there is also an opportunity cost to doing these things.
By doing all these activities, costs mount up and you will be surprised to discover how much a new customer really costs you, even with these seemingly free activities. Calculate how much you spend on the above items each year. Once you know all of your “marketing” expenses for the year, divide that number by the number of new customers you get each year. I think you might be surprised at how high the number is.
That’s what you spend buying customers each year. The danger in not understanding this is twofold.
First, there may actually be cheaper more efficient ways of marketing your business, but without any understanding of the costs, how can you tell?
Second, if you think of your activities as free, you don’t look at them as an investment in creating and keeping customers and this alters your behaviour on marketing and client service. I believe you take it less seriously than you should.
The first step is to recognise that you have invested considerable sums of money over the years of building your business. I believe marketing is simply a way of buying customers. For some people this may sound distasteful, but you should try to get used to it.
If you get better at marketing than your competitors, then it becomes cheaper for you to acquire each customer than it does for your competitors and the more customers you get. What’s more you can become more selective in the type of customers you acquire.
Once you see marketing and client acquisition as an investment, it leads you to ask yourself:
- How do I protect that investment?
- How do I optimize that investment?
In order to protect that investment, you have to do everything to ensure that once acquired, a customer comes back regularly to buy more. This is true in businesses where clients only buy once or occasionally.
Even in businesses where marketing is restricted to networking and referrals, client acquisition is still the most expensive thing you do.
The best way to protect this investment is to fall in love with your customer rather than with your product or service. Falling in love with your customer will ensure you provide service that is without peer.
Being the same as everyone else in your industry is not protecting that investment. It makes you vulnerable to competition and over time erodes your investment.
Optimizing your investment in customers means finding ways to get each customer to buy as frequently as makes sense and every time they come back offering them additional products and services that they need; the goal always being to serve the customer more fully.
We’ll talk more about how to position yourself as your clients’ Most Trusted Advisor and how that sets you up to sell more to more customers more often in the next Street Smart Marketer.