The Top Seven Marketing Mistakes
THE SUCCESS MARGIN
Friday, August 22, 2003
In my view, nearly all government statistics about
reasons for business failures are nonsense.
Undercapitalization, inexperience, or poor management
are usually blamed for all business disasters.
Of course, there can be one or several more causes
that result in a business going "belly up."
However, from what I've seen, marketing mistakes are by
far the primary reason businesses do not survive. This
includes companies which consider themselves direct
marketers as well as those who do not.
Here are the seven most common marketing mistakes:
1. Management treats marketing as a business expense or
simply a department rather than a necessary business
Solution: Marketing should be treated as the driving
force of any company. It is the only function that
brings in cash. The other major functions in a company
are necessary. But they all spend cash. This includes
the primary business departments of finance, production
To market any product or service successfully, the
company must do two things:
A. Provide marketing with sufficient resources
B. Put marketing at the heart of its business strategy
The whole company should be focused on the needs and
wants of customers and be prepared to satisfy their
Marketing must be part of the philosophy of all
entrepreneurs and managers.
2. Management does not know specifically what it costs
to recruit a new customer. Plus, there are no accurate
statistics on the average customer lifetime value.
Without this knowledge, it is impossible to make sound
decisions. You cannot determine how much to invest in
marketing. If you spend more to gain a customer than
their lifetime value, ultimately you will go broke.
In the absence of this information, many businesses can
and often do fail. To make matters worse, few of the
casualties understand why they failed.
Solution: Before you invest large sums on marketing,
determine the average lifetime value of a customer.
An excellent book that I highly recommend on this topic
is The Loyalty Factor by Frederick Reicheld.
3. Management makes no attempt to build a customer
database. This is especially so with most retailers,
restauranteurs and department store owners. However,
I've seen this in many other businesses.
Solution: A company's database of customers is
potentially its biggest asset. It's much more valuable
than equipment, inventory, etc. This is not only true
of companies that utilize mail order or Internet marketing.
Every single company that wants to survive and prosper
needs to build a database.
4. The company does not communicate often enough with its
customers. The result is lower sales and profits than are
Solution: Contact your customers a minimum of once a month.
When I started my first business at age 21, I too made many
mistakes. The business somehow survived and became a chain
of retail confectionery stores called Peterson's House of
Fudge. At first I sent my customers an offer every six
months. So I tried sending a sales letter every three
months. My business doubled. I then began mailing every
other month. My business again increased proportionately.
I wound up with the ideal and most profitable interval--
once a month.
At first I thought contacting customers every 30 days
might be too often and that customers would get turned
But that didn't happen. I got great feedback as well as
higher sales. Providing your customers like, or even love,
your product or service, as they should, they want to hear
from you frequently.
This, of course, is in the context of your sending
excellent offers, excellent copy and excellent information.
Indeed, if you are not in frequent contact, your customers
will quickly begin to forget about you. Many will start
buying from your competitors.
I urge you to contact your customers at least every
30 days (occasionally with special offers a week apart
is perfectly fine too).
Your form of contact can be an e-mail, postcard, catalog,
telephone call or personal visit. I've found the most
effective method of regular contact is with a well-written
Rarely do I find a company of any kind which systematically
mines the real gold in any business--the customer database.
Make sure you do not make this mistake.
Making offers to your customer database is often referred
to as the "back end" in direct marketing jargon. But every
business should cash in on the huge potential of existing
customers by simply making frequent offers to them and
giving them more opportunities to do business with you.
5. Management has no method of accurately measuring the
results from its advertising investments. This is
especially so with so-called image advertising.
Solution: The way this is done is to seek a direct
response in each promotion. This can be a coupon,
telephone call or store visit. Code each promotion.
Then when an order is received or a customer visits
your establishment, you can appropriately trace it to the
The coding system can be numbers or letters. If you use
the telephone you can utilize separate telephone numbers
for each advertisement. Or you can simply ask the caller
which ad or letter they are responding to.
6. As many companies begin to enjoy some early success,
many develop a disease that I call "Big-Company-Itis."
They start having endless, non-productive meetings.
They become bureaucratic. They move as slow as molasses.
Instead of continuing to insist upon a high level of employee
performance and keeping a close watch and control over costs,
management takes its foot off the brake. Costs can spiral out
of control. Employee morale can suffer. Soon the company is
in deep trouble.
Solution: The secret is to think big but operate much like
a small business. Well-managed, large organizations that
are highly successful are run more like a small
entrepreneurial business. Managers have profit center
responsibility. Their job is to help increase revenue or
reduce costs, or both. They are held accountable. They
maintain the financial controls and quick response of a lean
and mean small business.
7. Management has no systemized upselling procedure in
place to upgrade both new and existing customers to a larger
sale. Result? Lower sales volume and lower profits than
otherwise could be obtained.
Surprisingly, companies I've observed that market direct to
consumers, such as mail-order businesses, tend to be
incredibly poor at telephone communications and upselling.
Well-managed and properly trained customer service people
can add 30%-60% in added sales volume without any
increase in marketing or administrative costs. Your only
cost is the cost of goods sold. Best of all, your customers
are the beneficiaries of more value and variety for their
money. Everyone wins.
But here is where it becomes really interesting. Your gross
sales will be much higher. But your net profit will
increase by a huge multiple. I've helped companies achieve
huge increases in their net profit just by learning effective
and professional telephone techniques. It's not unusual to
increase profits as much as 5 or even 10 times!
Effective telephone communications and upselling are the
main reasons for the huge success of my own companies.
My clients for whom I conduct training of their customer
service representatives have experienced similar results.
Solution: Develop a strategy which includes the following:
A. Create an incentive compensation plan for your
customer service representatives (CSR's) based on
added sales. Depending on your profit margins, this
can be for example 5% to 10% of additional sales.
B. Run a daily special offered as an "add on" that
provides great value for the customer. For example,
you can offer a new product at half price.
C. Prepare a verbatim script on how to present the
Tip: The selling price. Your special offer should not
exceed 30% of your average order. This makes the
decision to accept the special an easy one.
D. Provide your CSR's with some basic telephone
training. This should include the principles of active
listening, voice pitch, pacing, learning to present things
in a hearable way, and some gentle closing-the-sale
techniques. A big factor is learning the secrets of
boosting the sales without any pressure whatsoever.
Copyright 2003 Nicholas Direct, Inc.