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Fishing For Customers

Fishing For Customers is a marketing guide for small retail and service businesses. If you've ever been fishing, you already know half of what you need to successfully market your business.

Last Build Date: Thu, 20 Aug 2015 03:42:31 +0000


Ten “Dids” to Examine Your Failed Ads and Make Them Work Next Time

Thu, 24 Mar 2011 09:59:00 +0000

There are some pretty silly statements made about advertising. Many are quite obviously irrational.“I can’t advertise in July, the circus will be in town.”“Don’t talk to me about advertising. Your publication carries my competitors ads.”“I have all of the business I need.”Some, like “I tried advertising. It doesn’t work,” at first seem to be perfectly logical conclusions. The conviction of the people making this claim is unshakable – most likely because they’re describing exactly what happened to them.Of course, if they had said, “My kid tried riding a bike, but he fell over. Bicycles don’t work,” or “I tried golf once. I didn’t get a hole in one. Golf is a stupid waste of time,” everyone would recognize the absurdity of the statements.But every kid, (and every golfer) knows even common activities require some basic skills.At its basis, advertising is simple.Incredibly simple. Just deliver to the public your offer to sell something.The public’s reaction, though, is not as uncomplicated as “I’ll buy” or “I won’t buy.”Actual responses range from absolutely no interest on the unsuccessful end of the response continuum, to, on the successful end, people pounding on the door because the sign says the store opens at 8:30, and it’s now 8:32.Why do most ads produce results somewhere between these extremes?I’ve identified ten factors that could cause your advertising to produce disappointing results.Causes #1 and #2 involve your offer.Cause #1: Did anyone want the stuff you had to offer?Ideally, businesses would identify and research a market, then develop what the customer really wants. In the real world, manufacturers create, and retailers stock things, they believe people will want.Sometimes, they’re wrong.When those retailers say to the world, “Hey, come and buy our diamonelle encrusted left-handed can openers,” people don’t say, “I don’t want any, thank you.”They don’t say anything.They care so little about the offering, they don’t even notice the ad, and won’t remember ever seeing or hearing it.__________Cause #2: Did you offer what people needed when they were most likely to need it?Think seasonality. Swimsuits don’t sell well in November. Halloween candy won’t get much attention in April.Causes #3 – #6 involve the content of your message.Cause #3: Did your ad snag shoppers attention? Were you able to hold that attention long enough to deliver your offer?There are three broad categories of advertising communication – entertainment, information, and engagement.1. Entertaining ads can work, if there’s a direct connection between entertainment and the one thought you’re trying to plant in the minds of shoppers. In far too many ads the entertainment is not relevant to the advertising message.2. Most ads offer information. Unfortunately, its about the advertiser. Good ads are about the customer. Instead of “We have a huge selection of clean, late model cars to fit any budget,” try “Admit it, you’re going to like the way people look at you when you wear Ajax.”3. Engagement requires the shopper to pay close attention to, and consciously consider, the content of your advertising. Unless that shopper is ready to purchase, catching her with a marginally different offer won’t elevate your ad to consideration status.Say the same things your competitors do, and rest assured that most shoppers will ignore you.But say something salient, something highly meaningful, and watch the difference.__________Cause #4: Did you engage? Did you actually say anything worth remembering?Too many ads are tedious, dreary, boring, and monotonous. Are yours?Just because you have a lot to say doesn’t mean your audience will sit still and pay attention.Nobody gets emotionally involved in a laundry list of brand names, sale items, or the number of collective years of your staff’s experience..The most you can expect of any ad is to convey one single, compelling idea. Find that one idea, and express it.__________Cause #5: Did your ad pers[...]

A Marketing Lesson from American Idol

Thu, 10 Feb 2011 18:00:00 +0000

Roughly 20 minutes into the Nashville auditions for American Idol, the Lovely Mrs McKay turned to me and said, "These people MUST know how awful they are." "They don't have a clue," I sighed.Have you noticed how often incompetent people are supremely confident? Not just auditioning for American Idol, but throughout life? Professor Justin Kruger and graduate student David Dunning of Cornell University studied this effect in their 1999 paper, Unskilled and Unaware of It. Their conclusion: those who knew the least rated themselves most knowledgeable, and those who actually understood the topic were far less sure of themselves.This result has been confirmed in multiple follow-up studies involving several skills and fields of expertise. It is known as the Dunning-Kruger effect.Which begs the question: why does this happen?Answer: the basic skills and awareness needed for competency are exactly the same skills necessary to evaluate the competency.Their lack of knowledge (incompetence) prevents them from recognizing their lack of knowledge (incompetence). People don’t know what they don’t know. They don’t even know where to look or how to look at it. And it doesn’t dawn on them that skilled performers DO know this stuff, until they’re exposed, dramatically to their own ignorance. Until then, they delude their incompetent selves into illusions of confident competency.If you’ve ever wondered how:people who can't articulate the issues, still feel confident casting their vote (or making inflammatory statements);how people with no experience teaching, know exactly what's wrong with our education system; andhow those who have never studied investing, can blithely plow their life savings into the real estate marketIncompetence leads people to make poor choices. Incompetence prevents them from realizing they make poor choices. This is the Dunning-Kruger Effect (DK). On the other end of the DK continuum, competent people tend to rate themselves lower than they should. Their internal voices seem to say, "Hey, everyone knows this."The dumb get confident; the intelligent get doubtful. And to a greater or lesser degree we're all guilty.How Biased Feedback Makes it Even WorseImagine a typical Friday nite in any typical neighborhood watering hole. The regular crowd shuffles in. One of them, Miss Karaoke Singer, is recognized by the rest as being the "best" in the club. What kind of feedback does she get?Do any of the other contestants tell her that her breath control is bad, her vibrato unnatural, or mention the odd affectation she's developed? Hardly. They don't know anything about nuanced performance. Since the only feedback she gets is positive, she thinks she's good.Good? No, FANTASTIC! The Dunning-Kruger effect helps her to believe she's ready for American Idol!Then comes the audition.The judges tell her she's a poor singer. Her own incompetence prevents her from understanding what they're telling her. These judges must be stupid. After all, she just gave a great performance.She gets angry. Tells off the judges. Not because she's defending herself. Not because she's trying not to look bad in front of her supporters. But because she's completely incapable of understanding just how bad she is.Advertising That Doesn’t Work Probably Has More to Do With Dunning-Kruger Than AdvertisingMuch like our karaoke singer, every city has an advertiser who, rather than admit his advertising strategy and execution are flawed, convinces himself that advertising doesn’t work.Does anyone in Mr. Businessman's entourage tell him his ads have nothing substantive to say? That they don’t speak to the buyer in natural language, and instead just spew out ad clichés like "fast, friendly, service?" Does anyone tell him that putting his kid and his dog in the ad won’t convince anyone to buy things from him?Or more technically, does anyone tell our businessman that his ads don’t have enough frequency to make an impact? That he’s using the wrong medium? That his competition has effectively[...]

More SEO and PPC. We must save the General!

Sun, 16 Jan 2011 22:54:00 +0000

They called the procedure venesection – puncturing a vein to remove blood from the body. From the time of the ancient Greeks, physicians had prescribed bloodletting as treatment to “balance the body's four humors.” It was December 14, 1799. General Washington had come down with a sore throat. He called for his estate overseer, Mr. Albin Rawlins and asked for venesection as treatment for his distress. Washington accepted as fact the conventional wisdom that bloodletting was the cure for most physical ailments. After all, he'd seen it cure various maladies of his Negro slaves. Rawlins estimated that only a small amount of blood need be removed to cure Washington's sore throat, and took half a pint (8 ounces) of Washington's blood. When the General didn't show signs of improvement, doctors were summoned. Dr. James Craik was Washington's personal physician. Arriving to to attend the General, and noting the sore throat had not improved, he performed another venesection, this time, 20 ounces. When the General didn't show improvement, he performed a third venesection, removing another 20 ounces. Hours passed, and the sore throat persisted. Assuming that Washington's humors were much farther out of balance than he had imagined, Dr. Craik removed 40 more ounces of the General's blood in the forth venesection. Dr Elisha Dick, a prominent physician from Alexandria arrived, confirmed with Dr. Craik, and took the only reasonable action. He removed another 32 ounces of blood from the General's forearm. Roughly 90 minutes later, having been drained of 130 ounces (seven units) of whole blood, the Father of His Country lay dead. The Treatment Isn't Working. We Need More Treatment.They called the procedure Search Engine Optimization – using choices of specific words to help the pages being “optimized” to rank higher in organic search. From the time of Google's launch, Internet experts have prescribed SEO, and its step-sister, Pay-Per-Click advertising to “increase traffic to your website.” In January of 2010 Robert Smith developed a software product which standardized a procedure he called “Diversified Thinking.” Robert built a website to make the software accessible, and offered memberships to his site. Robert's brother-in-law was “getting into SEO.” Like many entry-level business people, Robert accepted the conventional knowledge that “more traffic” is the cure to nearly every marketing problem. After all, he'd seen before and after screenshots of successful SEO'd pages. Robert's brother-in-law charged only $800 (family discount) for the work necessary to SEO Robert's site. The brother-in-law optimized the pages on Robert's site to rank well for the key phrase “Diversified Thinking.” Other than the odd, unpredictable response from random visitors to his site, Robert's website wasn't selling memberships. The brother-in-law suggested Robert consult an expert in pay-per-click advertising. PPC Experts, Ltd. agreed to handle an Adwords campaign for Robert, charging him $2,000 for their service. Robert waited patiently for two weeks, then called PPC Experts and told them he still wasn't selling any memberships to his website. PPC Experts explained that they had purchased keyword phrases involving the phrase “Diversified Thinking.” They suggested that additional related phrases were likely to change public response. Unfortunately, Robert's retainer had been spent, and they needed another $2,000 to implement those changes. Robert sighed, and wrote the check. Another week went by. Robert called PPC Experts. They examined the analytics program, and told him the traffic to his website appeared to be increasing. Robert demanded to know when the increased traffic was going to turn into sales. PPC Experts concluded that Robert was poised on the cusp of success. They recommended that he invest another $4,000 in PPC advertising to push past the last market resistance and to protect the investments he'd already made. Robert t[...]

Is There Money in Accomodating Early-Stage Shoppers?

Wed, 12 Jan 2011 01:22:00 +0000

You carry a cellular telephone. You're reasonably happy with the service, the rate, even with the quality of your phone calls. Still, the phone you purchased two years ago was already proven technology by those standards, and is now considered old. Plus, you're seeing the ads on TV for the newer touch screen phones, and you're getting curious.You're vaguely aware that your two year commitment to your current carrier is drawing to a close, and you keep seeing all those ads for the newer touch screens. You head out to the mall. It seems a good idea to quiz a couple of salespeople at the cell phone kiosks.You've just become an early-stage buyer.Salespeople have names for early-stage shoppers: "lookie loos," "tire kickers," "time wasters." Early-stage shoppers, very aware of their own ignorance, would feel much more comfortable at this point if salespeople were removed from their buying process. Early-stage shoppers say things like, "I'm just looking."Shoppers identify themselves by the questions they ask.Early-stage shoppers don't know what they don't know. They are are becoming aware of an itch, but don't know yet how (or where) to scratch. Early-stage shoppers tend to ask questions about the process.Current early-stage questions in the cellular industry are along the lines of "What's Wireless-N," "Are you telling me I can use my phone to connect my laptop?" and "What exactly is a 4G Network?"Whether conscious of it, or not, mid-stage shoppers have eliminated the offers which don't solve their problem, and are honing in on the solution which is exactly right for them. Mid-stage shoppers ask questions about specific equipment and its implementation.Middle-stage questions sound like, "How good is reception on this phone?" or "What's the battery life on the Model 22XJ?"Late-stage shoppers are ready to buy. If they're talking to you, there's an excellent probability that you'll get the sale. Late-stage shoppers ask questions about pricing and purchase terms.Late-stage questions might be "What's the total price including the upgraded memory chip and sales tax?" or "Can you give me a better price on the hardware if I accept a longer service commitment?" Salespeople pray for late-stage shoppers.To most salespeople, selling will always be a numbers game. "Pitch" the offer to a large number of people and a few will purchase. If those few spend enough money, salespeople are rewarded for all of the time they spent with those who didn't buy.If you show signs of buying, salespeople will pay close attention to you. Show the opposite signs and they will move on to better prospects. They call this process "qualifying the lead."But, suppose you're one of those ideal customers the cellular companies lust over. You buy expensive phones which lead to expensive add-on services, you buy the additional warranty, and you never invoke early termination. You're not a tire kicker or a time waster. You're a highly-qualified early-stage buyer who has very real questions about changes in technology and services since you last upgraded.Wouldn't you be more likely to trust someone who helps you understand the alternatives rather than pushing you to make an immediate purchase? Isn't this the basis of relational selling?Nurturing shoppers through the stages.Put yourself into the mindset of an early-stage shopper for anything. If you found a reliable source of information, wouldn't you automatically be more inclined to buy from that source when you've decided to purchase?So far, the best side-by-side comparison I've seen for cellular service and phones is offered by c/net. The sad part of this analysis is that c/net doesn't sell telephones or cellular service.  Any cell company could publish this information.  It is widely available.Of course, the danger of inviting side-by-side comparisons between your company and your competitors is the risk of not being competitive. Maybe that's why the cellular providers not only hide this information, they all[...]

How to Calculate Lifetime Customer Value

Mon, 25 Oct 2010 14:07:00 +0000

In “How to Make Money by Losing Money,” we introduced the concept of back end sales, and suggested it was worth giving away a $400 (retail) cellular telephone in order to get a $100 per month cellular telephone service contract. How did we know? We simply subtracted the cost of the premium (the front end transaction) from the sum of back end profits over the lifetime of the vendor/customer relationship. In Part 3 we'll learn how to use the Customer Lifetime Value to calculate useful things, like ad budgets. Our hypothetical telephone company is a small start up. It has 3,500 customers, each locked in to a twenty-four month service agreement. The company's net profit is $297,500 per month. Over the first year of the contract those 3,500 customers will produce $7,140,000 in profit - approximately $1,020 each. They will also produce $955 each in the second year. (There will frequently be a difference between year one and year two. More on that in a minute).This means that even if every single customer stops doing business with this company, the lifetime value (profit) of every new customer this phone company can acquire is still $2,040. Calculating LCV for your business. This LCV number is important. Without it we can only guess at how much we are able to spend to acquire a new customer. A. What is the profit on your average sale? $ _________B. How many times will the average customer repurchase from you? _________C. Multiply A by B to estimate your average customer's lifetime value. For your company that value is: $ _________ Lifetime Customer Value = Pt (profit per transaction) x R (number of customer reorders)Of course, this is overly simplistic. In the real world, Lifetime Customer Value is a moving target.Under most conditions, not all of those cellular telephone customers will complete all 24 months of the service agreement. If 14 percent cancel during the first 12 months, 3,200 customers will enter year two of their relationship with the cellular provider. At the conclusion of the second year we can estimate that, freed from their mandatory minimum service agreement, 70 percent will either upgrade to a new phone with the same company, or sign with a competitor. Either way, they'll be entering into a new 24-month agreement. But the remaining 30 percent will appreciate the month-to-month nature of their new relationship with their cellular provider. 1,050 will enter year three with the company. Also, the profit margin actually increases the longer a customer stays a customer, since older customers tend to consume fewer support services. So, applying a bit more accuracy to our figures, the actual customer lifetime is three years. She'll generate $2,205 in value to the company during that lifetime. Calculating Customer Reorders for your business. Your average sale figure is pretty straightforward. Simply divide total revenue by number of transactions. Estimating the number of times a customer will make another purchase is a bit more difficult. You could divide the number of total sales by the number of customers, but that leaves us with a bit of a problem. Can you spot it? Exactly. Newer customers will not have ordered as many times as a long-term customer would have. We'll get more accurate data if we remove data from all customers who have not finished their relationship with you. But that means you must already have a good estimate for the length of time a customer is likely to continue to purchase from you. And if we knew that, we wouldn't have to estimate. (Author makes “I'm going crazy” sound of index finger thrumming on lips). OK. Let's reconsider. If you've been in business for several years, you can create a fairly accurate estimate by removing from your list of customers any who haven't ordered anything from you in the last 12 months. Now, select every fifth (or seventh, or thirteenth) remaining customer until you've created a significant sample[...]

How to Make Money by Losing Money

Fri, 09 Jul 2010 15:54:00 +0000

Would you buy a dollar for 50 cents? OK, that one was easy. If you could hand me 50 cents, and get a dollar back every time, you'd push as many fifty cent pieces in my direction as I'd be willing to accept. What about for 99 cents? Would you be as excited about that exchange? Maybe. As long as there's a profit to be made you might be willing to make it slowly. How about $1.35? Could you imagine spending $1.35 to get back one dollar? Your first reaction is likely "no," but the correct answer isn't so obvious. How could anyone stay in business losing 35 cents on the dollar?Pretend with me that your music store consistently sells twelve guitars a week, at an average price of $850, and an average profit of $332 (39 percent). You're planning an Anniversary Week guitar sale, and have budgeted $10,000 for advertising. Knowing that you'll get to keep 39 cents of every dollar you take in, it would seem that to recover your $10,000 advertising investment you'll need to generate $25,641, or roughly 30 additional sales (for a total of 42) just to break even. But wait a minute. Selling 42 guitars this week doesn't have you showing a profit. You're merely recovering your costs. And what happens if you don't sell 42 guitars? Wouldn't you have been better off not advertising this sale at all? Maybe we need to re-think this Anniversary Week sale idea. Then again...We probably will sell a lot of accessories. We'll probably draw some new people into the store, and remind former customers that they used to enjoy shopping with us. OK. Even if we can't sell enough guitars to pay for the Anniversary sale advertising, we might sell enough other items to recover the ad budget. And then there are the rumors of the way the new competitor does business. You've heard he will happily lose money on the first sale if he gains a new customer in the process. What the... How can anyone stay in business with a silly business model like that? Well, your competitor has recognized that the customer who buys the guitar will also need a case, maybe a strap. Over the next weeks he'll see the value of a battery-powered tuning standard, or a capo. He'll need picks, and strings. Over his lifetime as a player, he'll need lots of strings. Then, too, over his lifetime as a player, he may purchase several other instruments, and all of the accessories. Maybe he'll even need lessons. If a business is willing to invest money in advertising to gain new customers, why not invest in the customer himself? When we consider the probability of all those additional purchases, and all of the profit derived from them, would you be willing to lose a few bucks on the "front end" of this relationship to "buy" the customer, and gain a profitable "back end?" Twenty years ago Jay Abraham brought up the concept of back end sales by telling the story of a coin dealer. The dealer offered a $23 starter coin set at cost, and gained 60,000 new customers.Within six months, 6,000 of those 60,000 new customers each bought another $1,000 worth of coins.Two months later 2,000 of the 6,000 customers each purchased roughly $4,000 in additional coins.Finally, 500 of the 2,000 bought another $10,000 each. By being willing to break even on the initial sale, the coin dealer was able to generate a list of qualified customers who were responsible for $19 million dollars in additional sales:And this part is critical: every one of the 60,000 names on the initial list turned out to be worth $317 in additional sales, even though nine out of ten of those new customers never spent another dime.This is a great illustration of Lifetime Customer Value (LCV).Make your profit on the back end.How many customers would you be willing to sell at no profit, if it meant each would directly or indirectly generate $317 in new sales in the next year?Would you maybe even be willing to lose money on the front end, if there was enough profit on successive back [...]

Zen and the Art of Persuasion. Part 3 of 3.

Mon, 14 Jun 2010 03:51:00 +0000

There’s a gas station at one of the Interstate 20 off ramps in Columbia, South Carolina that is rumored to have the lowest prices in town. If they don’t have the lowest prices, they certainly have convinced a large group of drivers that they do. Most hours of the day they have a constant line of cars at each of the eight pumps.A casual observer will notice a young man drifting from car to car, speaking with each driver in sequence. The young man you notice on Monday will not be there on Thursday. Another young man will have taken his place.And should the observer become an eavesdropper, he’ll hear the young man explain that he works for a glass company “up in Greenville,” has his materials with him, and can repair the dings and chips in the driver’s windshield for between forty and sixty-five dollars. He opines that the motorists insurance will cover it, reimbursing the driver so there will be no “out of pocket” expense.Apparently, enough people accept his offer that it’s profitable for the young man, or one very much like him. They keep coming back.Occasionally one of the motorists, wanting to “think it over,” will ask the young man du jour for a business card. He never seems to have one on him. Although he can name the company he works for, he can’t remember it’s phone number. No, he doesn’t carry a cell, so he can’t provide that number either.In any buyer / prospective seller relationship, there are two basic reasons that people choose not to buy, and the young man carrying the battery-powered drill and pocket epoxy illustrates them vividly.People don’t buy when they don’t feel the need for what you’re selling.They don’t buy when don’t trust you.People avoid risk on three levels.The biggest risk is that they’ll purchase the wrong solution – that they’ll have spent the money and still have the problem.But, there’s also the risk that the solution they purchase won’t last, and their problem will be back. (The variant on this is buying from a company who won’t warrant the purchase, or even be in business if the purchaser ever needs their support).And finally, if all of the solutions seem roughly equal, there’s the risk of over paying.Put yourself in the mindset of someone who’s just become aware of a problem, which could be anything from “ring around the collar” to “my back hurts every morning when I wake up.” Whatever the problem she’s identified, she’s now looking for a solution.Ring around the collar? One of the oldest formulas in advertising was perfected by major packaged goods companies like Lever Brothers and Proctor and Gamble. The familiar presentation is called slice-of-life, and is presented as if we, the viewers / listeners / readers are peeking in on a conversation between real people.First, our slice of life dialog establishes that “ring around the collar” is an easily noticed condition which will reduce social standing.The off-camera announcer states the problem: “You’ve got ring around the collar.”He now agitates the problem: “Those dirty rings. You’ve tried scrubbing. You’ve tried soaking. You’ve tried powders. And nothing works.”We’re treated to a close-up demonstration of Wisk liquid laundry detergent being poured on the offensive sweat stain. The camera cuts to a close up of the same collar without the stains.The off-camera announcer proudly announces the solution: “Wisk around the collar gets ring around the collar every time.”This is a good example of a single-step ad. Its also known as an order generation ad. Its purpose is to get the prospect to recognize her problem, accept the solution, and purchase it. Now.Does order generation advertising work? Most assuredly, it does. You’ve seen examples of it every day of your life.The catalog from Sears or Terry’s Village. Every Yellow Pages ad. The “cash for gold” ads on television.[...]

How to Steal Your Competitor's Customers. Part 2 of 3.

Mon, 07 Dec 2009 00:59:00 +0000

Is this a good ad?Does it make you want to buy a can of John's Tomato Juice?A good ad would.A good ad would catch the attention of someone who wanted tomato juice, and offer compelling reasons to choose John's brand. But this ad?People expect tomato juice to be pure and fresh. The “whole tomatoes” part isn't an expectation, but it's not surprising, either. Nope. Not a single reason to choose John's Tomato Juice.Without a demonstrable difference people tend to buy the more familiar over the less familiar. Even after they've seen advertising for the lesser known brand? Unfortunately, yes.John's ad may well encourage a shopper to pick up a can of tomato juice. Odds are, though, it will be a can of Del Monte's, or Hunt's, or Campbell's. Ouch.John's, like all of the rest of us, needs a compelling difference to become the brand of choice. If shoppers believe John's Tomato Juice is just like all of the other brands, the only reason a shopper would choose a lesser known brand like John's would be price.Awareness.But suppose I point out that tomato quality makes a difference in the taste of the juice. John's Tomato Juice uses only heirloom tomato varieties, chosen for exceptional flavor. John's tomatoes are individually selected and hand picked at the peak of ripeness. They are processed within hours to capture their freshness.I've just made you aware of a significant difference offered by John's Tomato Juice, and provided enough specific detail to make my claim of improved taste believable.Ideally awareness (and in this case curiosity) might prompt you to sample John's. If you like the taste, John's could become your preferred juice. And if large numbers of customers sample and prefer John's, that will lead to increased demand, increased market share, and through economies of scale, greater profits.Awareness → Preference → Market Share → ProfitabilityThis process always starts with awareness, which happens in one of two ways: though large amounts of advertising, or more spontaneously because the product (service) is noticeably different.Cognitive Overload.Thinking is hard. Remembering, not so much. And once a preference is established in the mind of a consumer, that decision won't be revisited.Unless, of course, that consumer is presented with a compelling new reason to reconsider.Have you ever talked to a homeowner who has decided she needs a new home? Listen carefully to her descriptions. She may only vaguely be able to describe what she wants in her new home, but she will explain the shortcomings of her current house in great detail. Her dissatisfaction will nearly always be a predictor of her purchase behavior. You could build an ad around her specific irritations. Other disgruntled homeowners would immediately identify and pay attention.Unfortunately, too many companies don't bother to research their customers. When it comes time to make something happen their inclination is to cut price. Long term this is seldom a valid strategy.Why? Because there can only be one lowest-price producer in each market, and chances are its not you. That lowest-price strategy is nearly impossible to sustain, and there's no particular advantage in becoming second-lowest.Distinguish.Advertising becomes more effective when there's a difference upon which to build the ads. But difference for its own sake is only weird, and weirdness doesn't sell. To persuade a customer to buy, the difference must be meaningful to her.As noted in How Do You Educate A Customer?, most businesses don't have enough time or money to convince non-users to enter the market.Most can, however, convert customers who've already been persuaded by the market leader to enter the category. Stealing someone else's customers is the most efficient use of your advertising dollars.Therefore, the only advertising strategy that makes sense for most busines[...]

How Do You Educate a Customer, Part 1?

Sun, 18 Oct 2009 19:53:00 +0000

“Everyone needs our product,” said Bob. “All we need to do is to tell them about it.”Bob's enthusiasm is contagious. He's convinced that America's tap water isn't safe to drink because of the presence of pollutants. The water filter he sells removes minerals, microorganisms, toxic metals, and organic chemicals.If sales is truly a transfer of confidence from the seller to the buyer, Bob is going to sell a lot of water filters. Assuming, of course, he can get his message to enough people.He thinks advertising problems in the water supply is an excellent way to attract potential customers to his business.He's wrong.Bob has two problems. Each will affect his marketing strategy. Can you identify them?First, he offers a solution to people who don't recognize that they have a problem. They will naturally be skeptical.Second, as small as his industry is, he has competitors. That means if he chooses to educate potential customers about the need for water filtration, they may well buy filters from some other company.Bob is not alone with this "Teach them why they need it" vs "Ask them to choose mine" dilemma.A manufacturer can't sell his brand of coffee to people who don't drink coffee. First, those people must choose coffee as their beverage. Only then can the manufacturer persuade them to choose his brand instead of another.The provider of high-speed Internet can't sell connections to households without computers. First, the family must choose to purchase a computer. Secondly they must elect to be connected to the Internet. Only then can the provider convince that family to select his service over that of a competitor. And Bob can't sell his brand of water filters to consumers who find the quality of their tap water to be quite acceptable.Why Shouldn't Bob's ads explain and educate?Because even the most effective marketing message can only advance the decision making process by a single step at a time, and there are too many steps between "Have you ever wondered what's in your drinking water?" and "Will you buy my filter today?"Convincing people they have a problem is tough enough. Persuasion becomes even more difficult when they know you benefit from the sale.“You have a problem that you're not aware of. Really, you do. And I'm here to help. Just buy my product...” Selling to an existing need may eliminate the credibility issue, but it doesn't eliminate those additional steps.Consider the local automobile dealer who no longer needs to convince people cars are superior to horses or bicycles. He still has three decisions standing between each prospect and each sale.First, the prospect must decide she needs a car.Then she needs to select a brand.Finally she has to choose a dealership.Advertising can advance the process by only a single decision at a time. Which of those choices should the dealer's advertising try to influence?Sometimes competitors join forces to inform.Cooperation can be a smart move when increasing the size of the market benefits all of those who serve that market, even those who compete directly with each other.The Cattlemen's Beef Board pools the individual members marketing dollars in the “Beef. It's what's for dinner” campaign.The Las Vegas Convention and Visitor's Authority promotes all hospitality providers in the city with their promise of “What happens in Vegas stays in Vegas.”The Florida Citrus Commission helps to create demand for all Florida growers with, “Florida orange juice. Healthy, pure and simple.”You may see this cooperation on a local level when the county veterinary association pools dollars to encourage pet vaccinations, or a group of chiropractors each contribute to an educational campaign explaining the benefits of chiropractic treatment.Short term, with enough concentrated advertising, programs such as this can create a bump in the sa[...]

Is a Radio Remote Broadcast a Good Investment?

Sun, 04 Oct 2009 22:06:00 +0000

One of the advantages electronic news has over print is the capability to deliver information in real time “live from the scene.” As you might imagine it didn't take long for this proficiency to migrate from the news department to the sales department, giving birth to the radio “remote broadcast.”Remotes are traditionally expensive. But as advertising sales remain weak in this economy, advertisers are being offered discounted rates on almost all advertising, including remote broadcasts. And that prompts a critical question: is a radio remote a good investment of advertising dollars?Like everything else in business, the correct answer is “possibly.”The problem is there are at least four different people involved in the decisions effecting such a broadcast. Most of the time each has a different objective. Those four people are:the Manager/Owner of the business, the Radio Sales Person, the Radio Program Director, and the Disc Jockey. What do each of these people want?The Manager/Owner wants buyers.His objective is to sell merchandise in such quantity that he can pay for the advertising and still show additional profit for his efforts.He believes his store offers value. He believes when large numbers of people hear about his offers, they'll flock to the store to buy. This is usually expressed as “you get people in the door, and we'll sell 'em.” The Radio Sales Person translates this instruction.“Get them in the door” becomes, in her mind, “your job is to attract a crowd.”She will arrange all of the crowd drawing techniques at her disposal. These will include a clearly identified station vehicle in front of the store as an attention-getting device. It will be augmented with banners and sound system.She'll provide tee shirts emblazoned with the station logo and other station paraphernalia to give away to listeners who come to the event.She'll try to arrange to have clowns, balloons, and face-painting to attract kids, free food to attract their parents, and the ever-popular “register to win” entry box. (The prize will, of course, be provided by the customer).The Radio Program Director will coordinate.After determining there are no conflicts on the proposed broadcast date, the Program Director will assign a Disc Jockey as “talent.”The Program Director's job is to keep listenership high. She hates remotes, considering them to be interruptions to the programming (music), and potentially harmful to ratings. The Program Director will thus limit the number of reports from the scene, limit the length of each report, and do her best to disguise the reports by running instrumental music under the Disc Jockey's voice.The Disc Jockey will be expected to attract a crowd.Feeling pressure from the Manager/Owner and Radio Salesperson, the Disc Jockey will attempt to bribe listeners. He'll repeatedly emphasize “C'mon down. We're having a great time,” and will list all of the free items they could win just for showing up.A few listeners will be impressed by being close to a celebrity. He'll be tempted to talk to those people who come to him, rather than introducing himself to other potential customers. Part of this, believe it or not, is shyness.The results are entirely too predictable.In order they will be:Reacting to the offers made during the broadcast, people will come to the event for the free food, the clowns, the balloons. They will register for the prizes. They will then leave without buying anything.Frustrated by the lack of sales, the Manager/Owner will accuse the Radio Sales Person of bringing the wrong people to his event.The Sales Person will explain to the Manager/Owner the benefits of branding and name recognition. She'll explain the positive effects of today's high-profile advertising might not be immediate, but will definitely imp[...]

Does a Successful Zebra Need Its Stripes?

Wed, 02 Sep 2009 03:46:00 +0000

(image) Imagine you’re a lion. It’s dawn on the Serengeti, and you’re hungry.

Off in the distance is a herd of zebra. You’re down wind. You can smell the herd but they can’t smell you. You crouch closely to the earth, stealthily move closer, your padded feet not making a sound.

The zebra slowly mingle in the herd. Your only hope of catching one is to single it out from the rest, but which? The stripes of one blend seamlessly into the stripes of the next, creating a vermiculite tapestry of white and black. How do you focus on any individual when you can’t determine where one begins and the other ends?

Wait. What’s that? One zebra is grazing apart from the others. You can see every detail. It’s nostrils contract with each inhale and expand as each breath leaves its body. You watch its tail idly swatting at flies as it slowly steps forward to reach the next succulent blade of grass.

You are now focused on the one, rather than being confused by the many.

And the many? They have taken advantage of the safety of the herd. Herd animals like zebra, or sheep, or even people protect themselves by looking and acting like every other herd animal.

Taking risks is… risky.

Taking a risk gets you noticed. It exposes your vulnerabilities. And what’s the upside? Is there an upside?

No banker has ever been fired for refusing to make a loan. No investment broker was ever fired for buying IBM. Not taking risks is instinctive.

So we do the things we’ve seen other businesses do. We recite the same messages, replicate the same images, and deliver them through the same media. We stick with what works. We choose the tried and true and smugly congratulate ourselves on not taking any risks.

What passes for most business strategy is simply a “me too” game of “We do what they do, but you should buy from us instead.”

Unfortunately, “we do what they do” makes your business blend back into the herd. You’ve made the very things that make you the best solution to your customers problems impossible for the lions (uh… the customers) to single out.

Brace yourself.

“Me too” as a strategy fails because you’ve hidden your strengths.

Successful marketing of your business requires behavior that’s not only risky, it runs counter to instinct.

Successful marketing requires you to step apart from the herd, and draw attention to yourself.

Successful marketing requires you to shed your stripes.


Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about business differentiation may be directed to

There Is No Word-of-Mouth "Marketing."

Sun, 23 Aug 2009 17:08:00 +0000

Pay close attention to Stephanie's story:“Roger's feet get cold easily, so I bought him a pair of sheepskin slippers. He loved them, but it wasn't long before the wool lining started wearing off. So I called Lands' End to see if I could get them replaced under warranty. The lady I talked to was very nice, but she couldn't find any record of my purchase, and she couldn't figure out which slippers I was describing. But, she cheerfully told me that she'd be happy to exchange them, and gave me a return authorization. I was pretty excited when I told Roger that Lands' End had agreed to replace his slippers even though I couldn't find the sales receipt. He told me that was because I bought those slippers from LL Bean.”Stephanie tells her story well. People laugh at it. It's the kind of story that people tell each other daily. It's the kind of story likely to be repeated by people who don't know either Stephanie or Roger.There's a critical lesson, though, in Stephanie's story. Did you catch it? No problem. We'll come back to it in a minute.Stephanie's story is an example of Word-of-Mouth.It's not, however, an example of Word-of-Mouth “marketing.”And apologies to WOMMA aside, I'm not convinced that Word-of-Mouth marketing exists. Why? Because adding the word “marketing” assumes that it's something the business causes to happen. Word-of-Mouth may be influenced by business, but by it's very nature it can never be controlled.Go back to Stephanie's story for the critical distinction. Is she telling a story about customer service at Lands' End? No. She's telling a story about her own experience as a customer. People love to tell stories about themselves.Exactly how important is your product or your service in the telling of any customer's story? If the stuff you're selling fits into her narration, it might be included. But whether it is or not, Word-of-Mouth in any of its forms is always about the experience of the buyer. Only indirectly is the seller even involved.Which makes Word-of-Mouth "marketing" a misnomer.Word-of-Mouth is not marketing for several reasons.Marketing becomes cost effective when there are efficiencies of scale. Word-of-Mouth takes place on a one-to-one basis.In marketing, a company sends its message directly to prospects. Word-of-Mouth is farther removed from the company with each iteration of the story. People who know the story teller will be influenced. People who know those people may be slightly influenced. At three degrees removed there will be minimal effect, if any. (And yes, I'm fully expecting a few e-mails pointing out "Viral Marketing" as an example to the contrary. Can anyone even predict what goes viral? I thought not).Finally, people may get your message wrong, and you can't stop it from happening. In a few more tellings Stephanie's story could easily mutate into a tale about a lady who had a funny interaction with Sears.Word-of-Mouth is not marketing. It's not advertising.Word-of-Mouth existed long before advertising. When most people lived in smaller communities, walked to the market, talked to their neighbors, and gathered in churches or meeting halls, Word-of-Mouth was simply conversation.Advertising became important communication when our communities got too big for the people selling stuff to personally know their customers. Mass media carried the message from the manufacturers of goods to the new post-war middle class.But for the last century, probably due to over exposure, we've all become less susceptible to advertising's claims. Customers now are more likely to believe the opinions of total strangers than the advertising messages of local companies.Ouch.Word-of-Mouth is now more critical to business success than at any time since the dawn of mass medi[...]

Free Coffee and the Incremental Discount Coupon Tactic

Tue, 04 Aug 2009 02:41:00 +0000

As I headed out the door the Lovely Mrs. McKay handed me a coupon from the new C store in our neighborhood, saying “You've got to stop for gas anyway. Here's a coffee for the road.”The coupon offered a “free coffee beverage” from, oh, let's call 'em “Comfort Brothers Gas Station and Convenience Store.” I thanked her and slipped it in my pocket.Does a lower price boost sales?Will the availability of a discount, or a membership card, or a “get one free after purchasing ten” punched card appeal to everyone? Of course not. Some shoppers enjoy clipping, collecting, and organizing coupons to take advantage of reduced prices on household goods. Others see the time required by that process to be part of the price they pay for your service (or product), and will happily agree to full rate not to be bothered with it.If you offer a discount to shoppers who would have paid full price, you lower profitability. On the other hand, not discounting for the undecided leaves some inventory unsold. That reduces potential gross sales. How can you tell which is which?The answer is to let them select themselves.Make multiple offers at different price points to maximize sales. Those who wish to pay full price may do so, and those who won't will find a subsequent price/value ratio which works for them.Here's how to make it work:Let's imagine you have purchased a mailing list of high probability prospects for your new service. Send a letter, or post card, or other mailing piece to the entire list. Offer to sell them your service. Explain why you offer a good value. Some will purchase. Move their names from your “general” list to the “paid full price” list. Guard this new list. The names are golden.A couple of weeks after your first mailing, send a twenty percent off coupon to everyone who remains on your “general” list. Segregate the names of those who respond to your second mailing into a “twenty percent discount” list.In ten more days send the remaining names on your “general” list a thirty percent off coupon. See how this works?You're accomplishing two things through this process.First, you're maximizing sales at every price point. Second, you're segmenting your general list into groups of people who have now revealed the price at which they're likely to find your future offerings appealing.The percentage who bought from your very first mailing, divided by the total number of pieces mailed, is your base conversion rate. Over the next few months you might get as much as ten percent more than your base conversion rate, by offering these incremental increases in discounts. Expect the biggest response to be to your first coupon mailing. Each successive offer will produce a smaller number of buyers who will decide the price is finally right.Of course, the biggest factor which determines your base conversion rate is the offer itself.Specific dollars (cents) off tend to be more appealing than do percentages, although that can be affected by the market and the range of prices. Another proven appeal is to offer a reward such as free shipping or gift wrapping, or a free upgrade to anyone who spends a minimum amount.And you'll always want to print expiration dates as part of your call-to-action to force a decision. “This offer good this weekend only,” or “Offer limited to the first 100 customers or close of business Friday, whichever comes first.”But, I digress from my personal coupon story.After gassing up the car, I went inside to pay and to pick up a cup for the road.The coffee menu offered “a full-line of latte and mocha beverages served hot, iced and frozen, with gourmet flavored syrups and chocolates." Every conceivable latte, espresso, and cappuccino. F[...]

Grocery Shopping, Rising Tides, and Maintaining Market Share

Sun, 26 Jul 2009 15:25:00 +0000

Presented for your consideration two very similar conversations.The first never happened. (Well, technically, I did call a few friends and irritate them with the opening question).The second most assuredly did.Conversation #1:Q: I think I need to cook. What should groceries cost me?A: Huh?Q: What should I have to spend on groceries? I haven't been cooking. I need to.A: How in the world could you expect me to answer that? There are too many variables.Q: I asked Bob. He said, “$200.”A: Will you cook for yourself, or your family, or do you intend to have guests? How big is your family? How many guests? Will you cook one meal or several or all of them? What foods do your family like? How much variety is important to you? How do you feel about leftovers?Q: You're making this way too complicated. Just give me a number.No one would take the “what will groceries cost?” question seriously. As ridiculous as it seems, though, the quite similar “what will it cost to advertise?” question is common.The following exchange took place about a week ago between me and the absentee owner of a shop which sells handbags and accessories.Conversation #2:Q: I think I need to advertise. What should ads cost me?A: What?Q: What should I have to spend on advertising my store? I haven't run any ads in months. I need to.A: I have no idea. There are too many variables.Q: I asked Bingo Radio. They said “$1,000.”A: Why do you think you need to advertise?Q: Business is off a bit. I probably need to spend a few bucks to bring customers back to my store. I have an ad we used to run. I just want to know what it should cost.A: How will you know that your ads are working?Q: People will come in and sing my jingle to get a discount.A: Has that worked for you in the past? Because I've never seen an audience react positively to “mention you heard this ad.”Q: You're making this way too complicated. Just give me a number.There's an old saying that a rising tide lifts all boats. Even the leaky ones. Even those which aren't ship-shape. Even those which are too unsafe to be allowed out of port. The tide doesn't care.For the last couple of decades the financial tide has kept leaky, non-ship-shape, unsafe businesses afloat, too. Money has been cheap. Credit has been easy. And it seemed that anyone with an idea could find someone to finance it, purchase inventory, rent a location, and open for business. And as the financial tide kept rising, operators of these marginal businesses were able to sell enough to stay in business.And why not? Money and credit were not only easily obtained by business, but also by shoppers who bought stuff they didn't need with money they didn't have, just because they could.And now comes the reckoning.Three years ago when the economy was robust the companies which did the best job of marketing themselves doubled or tripled in size. Today, phenomenally successful marketers are working to repeat last year's sales. Most companies are shrinking. And too many small businesses don't even have a marketing program.For operators who understand the minds of customers, we now live in a time of great opportunity. The loss of sales volume across both retail and service industries has taken a corresponding toll on the media. Today's advertising prices are a bargain. For the first time in my experience, even the price of your Yellow Pages ad is now negotiable.But, a great price on an individual ad doesn't include meaningful content for it's message. Messages which pulled well two and three years ago aren't working any more. And a bargain price on an ad which says nothing salient is a shameful waste of money. Today's most important question isn't “Wh[...]

Hope is Not a Strategy for Greater Return on Advertising Investment.

Sun, 17 May 2009 22:43:00 +0000

A couple of decades ago I introduced a friend who sold pianos to the manager of a local radio station. The manager suggested that the piano salesman consider radio advertising sales. The salesman refused.“Sometimes advertising works,” he said, “and many more times it doesn't. The worst part is you can never predict which is going to happen. I couldn't in good conscience sell something that I don't believe will work.”Ouch. Is advertising more of a gamble than a science?If advertising is an investment, you should expect to see a predictable profit from that investment. Invest a dollar in advertising, get back four, or five, or six. At the very least, shouldn't you get back a dollar ten?But if you you don't know whether your ads are driving revenue, you can't very well call it investing. If you don't know whether you'll win, or lose, or break even, you are gambling.And if you put your money into ads that you “feel” are working, but but can't measure their effect, you're still gambling.Noted investor Peter Lynch once said, “An investment is simply a gamble in which you've managed to tilt the odds in your favor.”So, maybe effective advertising is that which has been tilted in your favor. Not so much an answer, as a process, which includes better targeting, more effective messaging, and improved media selection.The purpose of an ad budget?The reality is that most of us fear that we aren't turning our marketing dollars into profit. Not consistently. Not directly. Which is why we have advertising budgets. To limit risk.An ad budget serves the same purpose as going to the casino with a hundred dollars in your pocket and saying “When this hundred is gone I'm done playing. Maybe I'll get lucky. But I've got to set a limit on how much I can afford to lose.”Think about it. If you knew you were going to get back more than you spent, why would you ever stop spending?Perhaps you don't need a budget so much as a lever.The Greek mathematician, Archimedes, understood leverage. He's reported to have said, “Give me a long enough lever and a place to stand, and I will move the earth.”When applied to advertising, leverage means doing more with less. Getting more bang for your buck. Controlling large sums of revenue with relatively small sums invested in advertising. Stacking the odds in your favor.But, if you were capable of stacking those odds, wouldn't you also be running more advertising?A surprising number of companies try to avoid advertising, then force themselves run ads when sales are down or when they have excess inventory.Unfortunately, they're open for business all of those other days, too. And they need customers to come buy what they sell on every one of them.That constant need for additional sales makes advertising the most important thing any of us can do for our own business. What other activity can multiply raw dollars with this kind of leverage?First, measure.Do you know your rate of return?Note your sales levels. Run your campaign. Note any change in your sales levels.Divide increase by the amount spent. This is Return On Advertising Investment (ROAI). If you are bringing in more money than you are spending, your ROAI is positive. Congratulations.Of course if your advertising is not effective, the negative ROAI produces a constant drain on your resources. Is this why you don't advertise often? Do you justify the resulting poor return as “getting your name out there?”How effective is your lever?Is your advertising an investment or a gamble?The primary question you must ask is the rate of your ROAI. Until you know the answer, this is the only question that matters.How well does your current ma[...]

Three Levels of Word-of-Mouth Which Determine Your Professional Reputation

Fri, 01 May 2009 02:17:00 +0000

According to an old saying there are only two things people want to know about you: what you stand for, and what you won't stand for. This is the basis of reputation.We intuitively understand that people's actions are nearly always in accordance with their values. Someone who embraces fairness and treats other people honorably is likely to treat us honorably. Someone known to be dishonest has a higher likelihood of cheating us, as well.And like our personal reputations, our companies have professional reputations, built on the experience customers have in dealing with our companies, along with their willingness to talk about those experiences.Call it Word-of-Mouth.Another name for professional reputation is word-of-mouth, which comes in three variants. From least to most influential, they are: 1. Awareness - Do I recognize any of these names in this directory?2. Reputation – Have I heard of anyone who has the ability to help me with my problem?3. Personal Experience - Do I have knowledge of, or experience with someone who can help me to solve this problem?Each successive level takes priority over the lower.Awareness.At the Awareness level, simply recognizing the company's name trumps never having heard of them. This is the weakest level of word-of-mouth. If you stay in business long enough, you'll achieve some level of awareness. You'll then have a slight advantage over some newer company that has yet to achieve any awareness at all. Why? With no other information to go on, shoppers will usually buy from the company they've heard of.Awareness is largely a function of repetition. A customer notes your name on the outfield sign at the ball park. Hears your jingle each morning on the radio. Sees your banner ad on the Internet. Catches your sponsorship of the six o'clock news. Recognizes your logo on the pee wee league uniforms. If you're part of the community, eventually people will bump into your name in the course of living their lives. The longer they're aware of you without hearing specific negatives about you, the more generally positive this awareness becomes.Small businesses like to advertise how long they've been in business, as if years of “experience” automatically translates to a benefit in the minds of shoppers. Unfortunately, shoppers have proven not to care. (Kind of ironic, isn't it? All those years of doing business in the community have lead to awareness of your company - but the benefit is to you, not to them). Reputation.The next step up, reputation, beats out basic awareness. “Here's what people say” is the next best thing to first-hand knowledge – provided of course people aren't saying uncomplimentary things.The size of the community is a factor, too. The fewer people in the population, the more likely a shopper is to run into someone with a story to tell about the business. Reputation is therefore a bigger factor in small communities than in large ones.According to Wikipedia, one study found that a good reputation added 7.6% to the price businesses received for their goods. Some companies are finding that improving their reputations can actually boost stock prices.Side note: the Internet has changed the nature of “community.” It simultaneously offers the potential of world wide reach while providing individual gossip to anyone who seeks it. And just as bricks and mortar stores have public relations companies to put a positive spin on community perception, their web-based brethren are now hiring reputation managers to keep track of on-line credibility.Personal Experience.And finally, those people who have had actual dealings with the companies in question will have[...]

Reticular Activation - How the Human Anatomy Prevents Ads from Reaching "Everyone."

Wed, 15 Apr 2009 01:26:00 +0000

One of the things guaranteed to make copywriters (and to a lesser extent media salespeople) groan is an advertiser who claims he needs to reach "everybody."No ad can possibly reach everybody. The human anatomy prevents it. If you have a minute, I shall happily explain why.The Shoppers MindsetAmazingly, most people are not poised in front of their television sets breathlessly waiting to hear of an opportunity to dump the cash from their purses into Mr. Advertiser's cash register.Nope. Most people are instead attempting to ignore thousands of radio ads, e-mails, product placements, signs, newspaper and television ads, billboards, matchbook covers, calendars, and the odd Rubic's Cube with some company's logo on it.Out of self defense human brains are physiologically prevented from paying attention to things that don't directly apply to them. And truthfully, most of what they see doesn't apply. What does apply to most people? Their kids, plans for the weekend, the empty box of corn flakes, remembering to program the TIVO, getting to the game on time, the in-laws coming to dinner, filing for an extension on the tax return, running late for work, or getting home before “Are You Smarter Than A Fifth Grader?”They're eager to find information which will solve their problems, and yet, they're not paying attention. They see and hear advertising with their eyes and ears, but they don't consciously notice those ads.That's because the human brain won't let them. Again, let me explain.Four Sets of Brain WavesThe synapses of the human brain fire at different rates during four different mental states. They are:1) Delta – 0.5Hz to 4 Hz – Deep Sleep.Delta waves trigger release of growth hormone, which helps the body to heal. This is one reason sleep is critical to the healing process.2) Theta – 4 Hz to 7 Hz – Drowsiness.Theta states most frequently occur fleetingly as people pass from higher consciousness to deep sleep, or return from it. Theta waves occur during meditation, and have been linked to visual and emotional creativity.3) Alpha – 8 Hz to 13 Hz – Relaxed.The alpha state is a highly creative condition of relaxed consciousness. People in alpha state tend to recognize non-obvious relationships. Interestingly, it's also the resonant frequency of the earth's electromagnetic field.4) Beta – 14 Hz to 30 Hz – Alert and focused.The beta state is associated with peak concentration, heightened alertness, improved hand/eye coordination, and better visual acuity. During beta state new ideas and solutions to problems literally flash through the mind.Degrees of ConsciousnessThe higher frequencies represent more brain activity, and require greater energy consumption. Like every other part of the body, brain activity kicks into higher performance only as necessary. The more familiar the activity a person is engaged in, the less conscious activity is necessary.Most of us have driven to work only to note upon arrival that we have no conscious memory of the trip. Individuals who drive a lot of highway miles frequently find themselves coming up with good ideas as they drive. Daydreaming while driving is an example of the brain in theta state. It's easily induced by the hypnotic sameness of road markings and sounds.As long as there are no surprises on the trip, driving to work can also easily produce an alpha state. The driver is relaxed, and the familiarity of the surroundings allow the driver to sing along with the radio, or listen to conversation without planning to respond.But imagine the car in front of our driver slamming on the brakes. Our driver immediately transitions into a [...]

Testing Advertising Response in the Store

Sat, 21 Feb 2009 22:33:00 +0000

Since 1892 when the English Court of Appeals ruled on Carlill v Carbolic Smoke Ball Company, companies are legally allowed to make claims they can't substantiate. The court ruled that reasonable people don't believe exaggerated promises by advertisers. The legal term for these claims is “puffery.”The public simply calls them lies.The practice of puffery is so common in advertising that according to the 2008 Edelman Trust Barometer Survey, only 20 percent of respondents trust corporate or product ads.Believe it or not, this information will effect the outcome of Ralph's new test of his advertising. At least, it would if Ralph had been paying attention.Let's talk about Ralph. He owns an appliance store. He purchases four cases of Del Vecchio cappuccino makers from China.Ralph places an ad in the newspaper explaining that after the Del Vecchio cappuccino maker brews up to four cups of espresso in it's glass carafe, its swivel jet frother will make steamy, frothy milk for cappuccino. The ad boasts that Del Vecchio cappuccino makers are available this weekend at Ralph's Appliances. Not at the $89.95 one would expect to pay for an appliance of this quality, but rather for only $34.95.But Ralph doesn't display those $34.95 cappuccino makers.When the ad hits the newsstands, the cappuccino makers are still in Ralph's back room.Ralph wants to know who's coming in to his store as a result of his ad. He has concluded that the only way anyone would know about the cappuccino makers would be from seeing his newspaper ad. Therefore, if Ralph forces customers to ask for the item, and tallies the sales, he believes he'll have a fair test of the effectiveness of that newspaper ad.He's wrong.He's not testing the advertising at all.What Ralph is measuring is a customer's willingness to ask for something she doesn't see on display. And he's limiting that test to those who've see the ad and come to the store looking for a specific product.Will shoppers ask for items they don't see on display? Some surely will. Most will look for a Del Vecchio cappuccino maker, and not finding it, will simply leave without making a purchase.They will also tell their friends not to believe any ads from Ralph's Appliances.Their friends won't be surprised. “After all,” the friends reason, “doesn't every business lie in its advertising?”So, if forcing shoppers to do things they don't want to do is a bad test, how does a manager/owner determine the effect of advertising on a specific sale?Indirectly, My Dear Watson.Check the day's total sales, and compare to yesterday, last week, and last year. Any significant change in trending can be assumed to be the result of some outside influence. Barring any other influences, we can assume the advertising was the primary factor.__________Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about testing your advertising may be directed to [...]

Conduct Only One Advertising Test at a Time.

Wed, 18 Feb 2009 12:11:00 +0000

The only Chevrolet dealer in Smallburg,Texas, augments his local newspaper ads with a schedule on a regional radio station licensed to the adjacent community, Midville. He's been selling an average of 18-20 cars per month. At the end of his first month with the new radio station he has sold a total of 27.In his next newsletter the station manger writes, “When you see Ned Vanderslice of Vanderslice Auto, ask him why he's grinning. He'll tell you sales are up 30 percent.” The newsletter hits the mail. Within hours the manager receives an angry phone call from Vanderslice. “How DARE you claim my success?”“Ned,” asks the manager, “other than advertising on my radio station, what other changes did you make last month in your advertising? Did you run any additional newspaper? Any additional television? Any additional direct mail?”“No,” says Ned, “but you had nothing to do with my sales increase. Nobody drove from Midville to buy cars from me.”Ned thinks advertising cause and effect is common sense.Is it? Yeah. Most of the time it is.In this case, I'd bet that Midville's regional radio station has listeners in Smallburg. How many? At least seven. At least seven that were ready to buy new cars. Since no other part of the advertising mix has changed, we can pretty well determine what drove the increase.The key is to test only one change at a time.Then watch the outcome. Sometimes it's not what anyone might expect, but it's usually still common sense.An apartment complex which does a very credible job of tracking the source of each lead has just added radio ads to their marketing mix. I advised them to watch for an increase in ALL of their lead sources.1.Realtors, hearing the ad, will naturally think of this complex more often. We can expect them to recommend it more than they might have without the reminder.2.People hearing the ad are likely to look up the phone number of the complex in the Yellow Pages. We can expect Yellow Pages referrals to increase.3.People keying the name of the complex into Google will, of course, drive up the on line referrals. But common sense will tell you there was only one change in themarketing mix.My favorite advertisers intuitively know this. They change headlines, and record the response. They change insertion days, and record the response. They add the weekend edition, and record the response.Roger de la Paz of Richie's Real American Diner in Victorville, California knows that this particular ad delivers a consistently predictable 118 percent increase in gross sales every day it runs.How? Because he's already tested everything from ad size, to offer, to headline, to graphics, to the day of the week to run this ad in the Victorville, Ca. Daily Press. Roger systematically changed only one element at a time, and kept careful records of each outcome. He compares the demand for specific food items before the ad runs, and again afterward. He is then able to calculate the increased demand for specific menu items against the cost of the ads.There are no quick answers. Each test helped Roger to make each successive ad more profitable. It took him three years to learn what he now knows about advertising his restaurant in the Daily Press.But by carefully tracking the specifics of size, placement, and frequency of his newspaper ads, Roger can now predict to within a few dollars the ROI for each newspaper ad he runs for Richie's Real American Diner.Persistence, it appears, is also a key element in testing your advertising.__________[...]

Are You Testing Advertising, or Simply Your Offer?

Sat, 14 Feb 2009 14:11:00 +0000

Somewhere in America a rookie cable TV sales representative is talking to the owner of a men's clothing store. The rookie could have been working in newspaper, or outdoor, or radio. The retailer could have sold sewing notions, or computers, or farm supplies. The the specifics could be variable. The outcome won't change much.The story begins.Our rookie is explaining to the owner why his ads are such a bargain. The owner says, “Young fella, you're making a pretty good case for some cheap ads. I'll tell you what. I've got three hundred dollars left in my budget. See that rack of suits back there? You sell those. We'll test just how effective those cheap ads of yours are. Do a good job for me on this sale, and I'll consider advertising with you again.”The rookie takes note of the rack of pea green suits, and thrilled to have cracked this account, says “Yes, Sir! We'll get right on it.” He calls his production department to schedule a video shoot at the store, and writes up the order.Unfortunately, it will be his only order. The pea green suits will not sell. A slightly more experienced media rep would from this point on avoid the client. The more experienced rep has already learned that these kinds of ads only work sometimes, and those times seem unpredictable.Our rookie, however, is a little less experienced and a lot more conscientious. He will stop at the store to check on the progress of the sale. The owner tells him nothing is happening. Nobody is buying the suits. In fact, nobody has even mentioned seeing the ads.Back at the station . . .The rookie tells his sales manager that he's worried about the new account. If they don't make something happen, the store owner isn't likely to advertise again. The sales manager tells the rookie to order a “blind bonus” - ads that the client will never be charged for. The client won't be charged because the announcements will be added to the schedule without hiss knowledge, in an effort to increase the impact of the advertising, and cover up any shortcomings in the original plan.Not surprisingly, the extra ads don't drive any additional traffic.When the sale is over, the ads have run, and its time to reconcile the books, our young media rep will apologize to the store owner. The rookie will collect the three hundred dollar payment. He will decide to never again try to sell this advertiser anything.Worse yet, this conscientious young media representative has now started doubting that advertising works. He's previously seen it work well. Sometimes. Now it seems that sometimes it doesn't work at all. And he can't see any way to predict which.Did advertising fail the test?Yes? No? Not sure?Consider that rack of pea green suits. The regular customers of the store did not purchase them. Why? Are they the wrong color? Wrong size? Wrong fabric? Wrong style? Wrong price? Some combination of wrongness? It is a safe conclusion that something is wrong. The store still has so many of them in stock that those suits have become the entire focus of an advertising schedule.Unable to sell these suits to his regular customers, the store owner now expects the rookie to magically create new customers. New customers who like unacceptable merchandise.I submit that this exercise is not a test of advertising at all, but rather a test of whether it's possible to sell goods no one wants. “Won't you please buy one of these previously-rejected suits, despite their wrongness?” No matter how many times people see this ad the outcome is the same.Oh[...]

How Can We Test Advertising?

Wed, 11 Feb 2009 04:56:00 +0000

Transcript of actual conversation:Potential Client: Tell me the truth. How important is advertising in this economy?Chuck: It's critical. When there is a lot of money in circulation it's not difficult for most businesses to attract their fair share of it. When the velocity of money slows, small businesses have to work harder than ever to keep enough customers coming through the door.PC: If I had the money, I'd advertise now.Chuck: Why?PC: It would help to differentiate me from my competitors.Chuck: Why do you want to do that?PC: Isn't being different what makes a company marketable? It's what would get me into people's minds. Prospects would be more likely to choose my company.Chuck: If I'm hearing you correctly, you're saying that you believe advertising will bring you new business.PC: Well, yes.Chuck: Then why aren't you advertising?PC: I can't afford it.Chuck: You can't afford new business?PC: Well . . . new business is important. I need to keep money coming in ahead of my bills. I know, I should be advertising.Chuck: Why are you hesitating?PC: I'm in an industry that doesn't traditionally advertise. I don't know if I should or not.Chuck: A minute ago you said if you had the money, you'd be advertising right now. Is the economy effecting your business?PC: Yes. We're hurting.Chuck: How long can you afford not to invite new customers to do business with you?PC: Honestly? I'm scared. I'm scared of what could happen, or more accurately what might not happen. I'm scared that the return on my investment won't be measurable.Chuck: I'm hearing you say that you don't have the knowledge to make sure your advertising investment will pay for itself. What knowledge do you need? What information are you lacking?PC: I lack knowledge of marketing. I don't know enough to understand which is a good idea and which is a bad one. What kind of return will my advertising investment bring? How can I predict it? If there were some resources that I could use to learn the basics of marketing . . . Of all the reasons to advertise . . . Increasing sales is by far the most important. It's been said that during good times businesses should advertise, and during bad times they must.During the rough times, though, the stakes are much higher.When customer counts drop, its common for businesses to find that operating costs exceed revenues. Most companies have some cash or credit which will allow temporary negative cash flow. The length of time they can sustain operations is their “staying power.”Every additional day of negative cash flow drains those reserves.Each day that cash flows out contributes to a chronic, protracted demise. Since none of us can accurately predict any economic downturn, we don't know how much staying power we'll need. Every dollar invested in advertising becomes one less dollar of staying power. That can put a company out of business quickly. The same conditions which create the need to invite more customers also create a danger in doing so.Sometimes we simply fear customers won't react to advertising because they have no money to spend. We fear the advertising lessons we learned during the good times are no longer valid. These fears become more justification to hunker down and wait for better economic times.Oh, sure. We believe in advertising. Just not now.The astute business owner/manager will note that his competitors have abandoned the advertising arena. Their absence leaves great share of mind available to the few with the courage to [...]

Guaranteed Advertising ROI in a Tough Economy

Fri, 02 Jan 2009 05:52:00 +0000

How in the world can they afford to keep advertising like they do?You've seen 'em. Those companies who offer to do battle with the IRS if you owe large income tax debt. The credit counseling companies. The medical discount programs. Those who will refinance your mortgage or your structured settlement?How can they afford the sheer number of ads they're running? Is business really that good?Perhaps. On the other hand, maybe they have a different deal. No, not a better price, but an arrangement under which they don't pay for advertising that doesn't deliver directly attributable sales. The arrangement known as “Per Inquiry,” or “PI.” You may also hear it described as “Cost Per Lead.” In the U.K. it's called “Cost Per Action.” On the World Wide Web it's known as “Pay Per Click.”How Does PI Work?The advertiser and the broadcaster agree to turn some of the broadcaster's unsold ad time into PI ads for the advertiser. The advertiser does not pay for the size of the ad, nor for the number of ads run, but only a pre-calculated percentage of the actual sales produced by that ad. No more. No less.The ads contain toll-free phone numbers unique to each broadcaster, which ring into a call center. Experienced telemarketers convert the calls to sales, and report the number of sales to the advertiser and the station.This can be a great deal for the advertiser. Why Doesn't Everyone Use PI?Television stations, radio stations, and newspapers are looking to sell their time or space for the highest price the market will bear. Most broadcasters won't accept PI at all, which eliminates the option for most advertisers.Those who do consider PI will grudgingly accept it as better than nothing, but only at the last possible minute, after they've offered fire sale prices to their regular advertisers, after they've offered remnant prices to the standby advertisers, if there's no other way for the broadcaster to turn the unsold time into cash. That last possible minute schedule will vary from week to week, which makes it hard to achieve enough repetition to help people to remember your product, and imagine themselves using it. Will even the least popular broadcast outlet run a PI ad with enough frequency to make the phone ring? A new direct response campaign will need two or three times the number of ad exposures required for a long term branding campaign.Another frequency problem becomes obvious when one realizes that PI requires quick response. If they can't see a payoff this week, broadcasters won't continue to run the ads next week. It All Comes Down to Reduction of Risk.If one is willing to overlook the cost of lost opportunity, performance based advertising is largely zero risk for the advertiser. For the broadcaster though, there's a serious probability that the ads will never produce any revenue.Why? Because the advertisers most likely to ask for a PI deal are under-capitalized businesses with ads that aren't working well. Instead of fixing the offer and increasing persuasive appeal of their ads, these advertisers look at PI as a great way to obtain cheaper exposure for their existing lame ads.And that puts all of the risk on the broadcasters. The offer is selected by the advertiser. The copy is written by the advertiser. The production is again handled by the advertiser. The broadcaster has to trust that the advertiser has done all of these things well. How much risk will broadcasters take? Frankly, it depends on the amount of unsold commercial time [...]

Gamblers, E-Mail, Religious Miracles, Word-of-Mouth, and Customer Delight

Fri, 28 Nov 2008 17:26:00 +0000

Word-of-mouth occurs when, through surprise, your customer has become emotional about you.It can happen when astonishment leaves her delighted. Alternately, it can happen when disillusion causes dismay. The first produces positive word-of-mouth. The second, negative.But either way, for word-of-mouth to sustain and grow, the high level of emotion your customer feels must be unexpected.You see, routine events never get discussed. In order for an event to be worthy of being talked about, it must be out of the ordinary. And that becomes the danger in each additional step you take to delight your customers. The experience eventually becomes routine.Offer a free desert in your restaurant to everyone who's ordered an entree, and people will talk.At least at first. But as people react to your new generosity, two outcomes become predictable:1) Your customers will grow accustomed to your new offer, and consider it just part of the meal they're choosing when they enter your establishment. Delight fades quickly when the surprise goes away.2) Your competitors will copy your idea. You'll lose the competitive edge. When everyone does it, the only possible outcome is thinner margins for the industry. Think “frequent flyer” miles as a classic example. What we need is a way to keep the surprise element high. For that, we turn to one of the fathers of behavioral psychology, Burrhus Frederic Skinner.B. F. Skinner created a branch of psychology known as operant conditioning. He demonstrated that when properly rewarded under specific conditions, living beings will change their voluntary behavior.At Harvard in the 1950s, Skinner created the “Skinner Box” to condition laboratory rats. The rats were taught to push a lever, and get a food pellet in return.Once they learned to feed themselves, Skinner split the rats into two groups. The first never got another pellet by pressing the lever. The second group got the reward sometimes, always following a pressing of the lever, but never at any predictable interval.The first group quickly stopped pushing the lever. The second group never did.We intuitively grasp the the actions of the first group. It's not so easy to understand the second, but its important that we do. Whether discussing lab rats or your customer base, the second group is where the money is.Do humans push levers?Absolutely. And the more random the reinforcement, the more unpredictable the payoff, the more frequently they will push.Watch someone feed quarters into a slot machine. Isn't the attraction of any form of gambling the incredible delight experienced by the gambler when surprised by a win?This tendency to keep pushing the lever also describes why the faithful keep praying for miracles. Every now and then, at random intervals, their prayers appears to be answered.And those folks who check e-mail multiple times a day, hoping that this time there will be something new? Yup. They're also still pushing the lever.Can you keep your customers pushing the lever?Yes, you can, provided that you keep the element of unpredictability intact.If you're the restaurant manager who occasionally comps desert to the birthday party, those customers will tell their friends about you.If you're the carpet cleaner who is hired to clean only one room, but who treats a spot in the hallway at no extra charge, customers will tell their co-workers about you.If you're the plumber who unplugs the sink, and then fixes the drip in the faucet for only the cost of the[...]

Violated Expectations. Marketing lessons from the Dallas Cowboys.

Thu, 06 Nov 2008 15:48:00 +0000

The Dallas Cowboys haven't had that bad of a season. Five wins, four losses. Slightly better than average. Unfortunately, the die hard fans are devastated. Care to speculate why?Probably because their expectations for the 2008 season included the Super Bowl.HBO's “Hard Knox” may have started some of the hype, featuring the team in four episodes. ESPN picked up on the extra attention given the Cowboys, and focused their considerable airtime (and commentary) on Dallas.Then, of course, there were all of the bloggers, themselves die hard fans, who enthusiastically trumpeted the inevitable triumph.Had the fans not been led to expect more, this season wouldn't be all that bad.Is there a marketing lesson in the 2008 Dallas Cowboys?Why, yes. Yes, there is.It has to do with your customers expectations, when compared to their experiences. Outside what they've learned from your ads, many potential customers have no idea of what to expect from your company.And then they have an actual experience with your company, and you live or die by whether your advertising is contradicted by your customer's reality.Advertise "fast friendly service," but deliver an experience in which your customer stands in line for a turn with a discourteous employee, and every dollar you've spent on advertising is wasted – at least with that particular customer.In much the same way that violated expectations have led Cowboys fans believe this season to be awful, your customer's violated expectations may convince her that you deliver bad service.Worse, that you deliver bad service, slowly.Violated expectations make people talk. Good and bad.I wrote about those effects in Love and Indifference, Part 1:"When you thrill shoppers with their purchases and the way they are treated, they are likely to become customer evangelists. They'll be out preaching the gospel of your company and winning converts to whatever the degree of their persuasiveness.But the extremely displeased group turn into vigilante customers. In their minds they've been wronged. You could just as well have "Wanted, Dead or Alive" posters up with your name on 'em, 'cause they're out to get'cha. Tell twenty more? Count on it."But what if your customer's experience is only slightly off?What if you don't deliver great service, but you don't do a bad job, either?If the customer expects “a gourmet meal exquisitely prepared using only select ingredients,” and gets a meal that's reasonably good, she may attribute superior qualities to the food.That's exactly what Antonio Rangel, associate professor of economics at the California Institute of Technology demonstrated in a recent wine tasting. Rangel altered the prices on the bottles, and found: "The volunteers consistently gave higher ratings to the more "expensive" wines. Brain scans also showed greater neural activity in the pleasure center when they were sampling those "pricey" wines, indicating that the increased pleasure they reported was a real effect in the brain."Without any major disconnects between expectation and experience, there's a good chance that people will accept what they've been led to expect. Which leads us to a simple formula for advertising success:1. Use your ads to create an expectation of the experience your customer will have when she does business with you.2. Then, ensure that her experience delivers on those expectations.3. And though we haven't yet discussed it, hold something back from y[...]

What's the Boss's Most Important Job?

Sat, 25 Oct 2008 17:06:00 +0000

The boss has a unique responsibility. And it's not the one most people think of when they describe the duties at the top.Robert Kiosaki, in his best selling business book Rich Dad, Poor Dad, explained that as an employee, you have a job. As a self-employed professional, you own the job. And the owner of a business hires people to perform the job.So, in terms of making business happen you are either someone else's employee, or you're responsible. There are no other options. And though there's an outside chance that in good times any business can just muddle through, over the next few years if you're not aggressively pursuing new business you're not likely to make it. Sorry.Some people are just cut out to be employees.Consider a carpet cleaning business. Not just any carpet cleaning business, this one was being contemplated by a young man who asked my help creating a marketing plan. He had worked for another, similar, business, enjoyed the work, and saw the profit potential.We spent two days together researching and building that plan. When it was finished, I offered my best advice: DO NOT OPEN THIS BUSINESS.The market was strong, there was room for another competitor, and the young man with the ambition and the new marketing plan actually enjoys cleaning carpets.Unfortunately, he hates selling.And, as we've already established, the owner's primary function is to bring in the work.Does that mean face-to-face selling? Possibly. But it definitely means that the owner can't simply place an ad in the Yellow Pages and wait for the phone to ring. Business owners who avoid selling end up with skinny children.At any given time, roughly 2 percent of any market is actively seeking what you sell. That 2 percent will come looking for you, or someone else who sells what you sell.The other 98 percent?You're missing them. Most of your competitors are missing them, too.Most of your competitors.Care to know who's attracting that other 98 percent? Those who actively sell the value of doing business with their companies.The competitors who have television ads that are being watched by potential customers are getting some of the 98 percent. Those competitors who's postcards and letters are making it to the homes, who's public speaking and referral programs are producing familiarity, and who's Yellow Pages ads are being read by the very people who need their goods or services are tapping into the other 98 percent.But, like the young man waiting for carpet cleaning customers to find him, those businesses which wait for customers/clients/patients to seek them out are hoping that their “share” of the 2 percent will pay the bills. It won't. After all, we're discussing 2 percent of a pie that may be shrinking for a while.What will grow your slice of that pie?There are two things you can implement immediately, and you should be doing them both.Find a reason to get back in touch with every customer and every former customer, then remind them of the reason they chose to do business with you. That reason shouldn't be price.If they were originally drawn to your business because of your selection, remind them that you can help them find exactly what they're looking for. If customers chose you for the speed of your service, point out all the other things they can be doing when they finish with you. If they chose you for your detailed knowledge, help them recall the value of getting exact[...]