Cost Reduction versus Income Growth: So many business people focus their whole life on cost reduction. Working long hours and cutting costs just to make ends meet. Now don’t get me wrong, keeping your costs down is still one of the most important areas of business.
If you really want to make money, you’ve got to generate more income. Making ten times, or even a hundred times more profit than you do right now is more about increasing your income than it is about decreasing your costs.
By the way, if you were to cut your costs by as much as you possibly can and still leave your company running, you’d probably only add about 10 or 20 percent to your bottom line. Yet through building your income, the bottom line jump is limitless.
Distribution and Marketing: You’ve got to put 50 percent of your time, effort and investment into getting your products and services to the marketplace and the other half getting the marketplace to come to your products and services.
The challenge is that most business owners put about 90 percent of their time into distribution and only about 10 percent into marketing. You’ve got to market if you’re ever going to make real money.
Marketing: Expense or Investment? Most accountants will show you that sales, marketing and advertising falls into the expense side of your business, and I know when you’re signing the checks it can certainly feel that way. Yet, when it’s done properly, marketing is your best investment.
Think about it. If you were to run a $1,000 advertisement that returned you $2,000 in profit in a matter of weeks, then you’re doubling your money. And what’s more you can run that ad as many times as you like, because it never costs you anything. Marketing is only an expense when done incorrectly.
Test and Measure: The only way to become a marketing genius is to test and measure. Ask every prospect you ever deal with, this one simple question; “By the way, how did you find out about us?”
And, simply keep a tally.
This way you’ll very quickly find out what marketing works, what pays for itself and what is just an expense? Then, for exponential growth, re-focus every dollar you spent on what didn’t work, on those that do, and every dollar you spend on marketing will make you more money.
By the way, measuring turnover, costs and profit is a waste of time.
Acquisition Cost: You can have an unlimited marketing budget, and buy – that’s right, buy – as many customers as you want.
In business most people think that you just invest in the stock that you sell – but the exact is true of customers.
In fact, from a marketing point of view, the only thing you’ve got to buy is new customers. The question is, how much are you paying for them?
If you’ve put $1,000 into advertising and had 100 phone calls, then you’re paying $10 for a lead. Then if you only sell to one in five of those leads, you’re paying $50 (5x$10) for a sale.
Once you know how much it costs to buy a customer, and as long as you make more per customer than the acquisition cost, you’re ready to start reaping the profits.
Buying a Customer: When you switch from selling to new customers to a focus of buying new customers then you’ll start to see a whole new unlimited world of sales and marketing results.
Try to see the entire function of your business as nothing more than a customer buying exercise. Then the only real question you’ve got to ask is, can I buy customers for less than they’ll spend with me over the lifetime of buying?
Wallet Share Vs Market Share: Chasing market share in today’s business world is a guaranteed formula for chasing your tail. Market share or a focus on new customers comes with the assumption that you’re in the business of buying products or services and selling them to customers.
If, however, you swap to the idea of buying customers, you’re no longer chasing market share, you’re chasing wallet share. Then the issue becomes, how much, how many and for how long can you sell to each customer you buy?
In this world of business, where customer loyalty is everything, if you’ve already spent the money to buy a customer then it makes total sense to make sure you get a full return on your investment.
Chasing wallet share is as simple as remembering you’ve got a loyal customer base, so what else can you sell to them?
Lifetime Value: Think about this for a moment, how much are you going to spend in your lifetime on something as simple as toilet paper? Thousands of dollars?
So let me ask you this, how much will the average customer in your business spend with you over their lifetime?
You must establish this long-term view of their value before you can appreciate how important it is to develop a relationship with customers and ensure everything is done to keep them for as long as possible.
A Promotion versus a Business: Many business people own a promotion and go through life thinking it’s a business.
Let me explain… In a promotion, you have to go out and find yourself another customer. That’s an ongoing marketing promotion, NOT a business.
On the other hand, a business is where you buy a customer and then sell something, or many things, to them over and over and over again.
In Summary: From now on you should think of marketing strictly as an investment, customers as something you “buy,” and start spending at least 50 percent of your time in this area of your business.
These simple instructions have completely transformed thousands of businesses that have been stuck on the treadmill of traditional thinking. It’s time to get off the treadmill and start getting somewhere.
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Where’s My Cash Gone?