Blog | Business Techniques in Troubled Times by Thomas Gray | Thomas H. Gray - Consultant, CEO, Director - Part 2

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A Roadmap for Effective Marketing

by Tom Gray | on Feb 04, 2013 | Comments

Business Techniques in Troubled Times has been running a series of nine articles on Effective Marketing. This article sums them up. To see them all, go to Marketing | Thomas H. Gray – Consultant, CEO, Director. The key ideas are:

1. Effective marketing is one of the three crucial elements for survival of a small business. Marketing is more than communications. It includes choosing the right target market, selecting your differentiation and positioning, designing your product, pricing, distribution, sales and service tactics to support that positioning, and then communicating effectively to the right audience within a manageable budget.

2. Today marketing communications (“marcom”) starts with the Internet. You will use traditional and social media to draw prospects to your website.

3. Your Marketing Plan supports a reasonable sales forecast, a key input to your financial forecast.

4. Your customer data base is one of your most important assets – the tool for targeted communications to unlock your revenue potential.

The Roadmap

Start Here: Marketing Planning

Marketing Communications

Sales Forecast

Customer Database

The Market Itself:

Need met
Market Size
Trends
Target Market
Competitive Analysis
Differentiation

(Go to Strategy and Tactics)

Planning:- Audience- Marcom Goals- Tools

- Budget

(Go to Media)

- Units over time- Avg. Price- Revenue- Variable Cost

- Cash Cycle

(go to Customer Database)

-Contents- Reports- Design for Reports- Using Reports to generate revenue

Strategy & Tactics:

Positioning
Goals
Strategy
Tactics

-Product

-Pricing

-Distribution and sales

-Cust. Service

-Communications

(go to Marcom Planning)

Media:- Traditional Media- Website- Social Media

(go to Sales Forecast)

Summary of the Articles

Planning Your Marketing: The Market Itself – who are the customers for the need you are meeting? Are you on the right side of the trends affecting this target market? Is your solution different enough from their other alternatives? If not, you will not succeed!

Planning Your Marketing: Strategy and Tactics – how do you want your target market to think of your company? Can you sum it up in a memorable positioning slogan? Select your goals, and choose an overall strategy for making a dent in this market. Then define your 4 P’s and customer service plans to support that strategy and positioning and achieve the goals.

Anatomy of a Useful Sales Forecast – how many sales will you make over time? What will they be worth in revenue? How much will it cost to make and deliver those units? When will you have you spend for production vs. when will you get the cash from sales? Your sales forecast depends on the rest of your marketing planning, and it is critical to your other financial forecasts. Use reality testing to be sure it is reasonable.

Marketing Communications Plan: Audience, Goals, Tools, Budget – how will you get your message across amid all the clutter of communications that your audience faces every day? How will you inform and persuade prospects, and remind current customers to buy again? Will you use advertising, promotions, events, direct mail, and/or social media? How do you decide how much can you afford to spend? Be sure to consider costs for website and social media development, as well as costs to develop ads and buy media time.

Marketing Communications Plan: Media – what traditional media fits your audience and your product? What does it cost? You want to have a steady presence so you are considered when the prospect decides it is time to buy. Since media can only communicate limited information, you will want to attract prospects to your website where you can tell the whole story. How will you do that within budget?

Tips for Your Website – this is the front door to your business. Make sure you use a professional designer, but the content is your job. Take a disciplined approach to organizing your site, keeping the user in mind throughout. As a small business, one of your most important goals with your website is to communicate credibility. Do that with professional appearance, clear and valuable information, endorsements and success stories. Learn how to update the website with current information and do so frequently. A stale website makes relationships go stale as well, undermining its basic purpose.

Tips for Using Social Media to Market Your Business – social media is about gaining relationships by providing value. Maintaining relationships provides the presence you need to be considered when prospects decide it is time to buy, or buy again. Use multiple social media. Plan your posts with a calendar, and “repurpose” your content in various media. Make sure you are listening and build relationships with two-way communications: be active with likes, comments, and discussions.

Customer Data Base: The Key to Unlock Revenue – this is your tool to identify your best customers in order to find more like them, and to motivate repeat sales, the easiest and most profitable type of sales. Design your customer record to hold the information you anticipate needing for these two goals. Then design your operations to generate and enter that information in the normal course of business.

Using Customer Data Base Reports – before designing the master customer record, design the customer data base reports you’ll want to use. What will you use them for? What information will you need to make it easy to do that? Consider how the reports will be sorted, and then set up the data elements in the customer record so your reports will be able to find and use that data as envisioned. It’s much harder to add or revise data elements later than it is to build them correctly at the outset. If you do this right, your marketing communications can flow smoothly and efficiently, so you’ll actually be able to do what you planned to do!

Effective marketing is the key to your success, so take the time to make realistic plans and develop the tools you will need to carry them out. Your business depends on it!

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com

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Using Customer Data Base Reports

by Tom Gray | on Jan 30, 2013 | Comments

The previous article on the Customer Data Base recommended designing some reports before you design the data base, to help you single out the types of data you will want to store in the data base. This article provides guidance on how to do that.

What Reports Might be Useful?

What if you had all the information you needed to “wow” your customers with individualized communications addressed to their needs and showing how important their relationship is to your company? Sales would jump. Customers would stay, and come back to buy again. Your marketing would be efficient and well as effective.

Stay in this dream for the moment, and figure out what IS “all the information you need” about your customers. How would you organize it into reports or lists for specific purposes? The table below offers some ideas.

By the way, you’ll see the term “sticky” in the table. Sticky customers are loyal to your company, as shown by their purchase of multiple products or services from you. The more different things they buy from you, the harder it is for a competitor to take your place, because that switch becomes more disruptive as the customer becomes more dependent on his relationship with you. Sticky customers may also be your most profitable customers, because their new purchases require less marketing effort. They already know and value your business. They are repeat customers. So you want to create more of them!

Report	Purpose
Customer List	Basic List; number, contact info, start date, annual revenue
Sticky Customer List	Most secure customers; find more like them; move others into this list with targeted promotions; show upgrades, events, loyalty club, annual revenue
Dormant Customer List	Revenue opportunities; stimulate buys with targeted promotions; survey for attitude changes
Email list	For email blasts to all customers
Customers by Revenue	Most valuable customers; enables segmentation and targeted promotions
New Customers (by year)	Target list to achieve sticky status; anniversary promotion
Birthday list (by month)	Spur sales with targeted promotion
Contracts Expiring Soon (choose date)	Revenue risk; renew them with targeted promotion
Key Upgrade List	Most valuable customers; upgrade = status; reveals sticky customers; enables segmentation
Interest List	May trigger ideas for targeted promotion to boost revenue
Employee Connection List	Communications to strengthen relationship; establish employee connections to create sticky relationships
Event Participation List	Promote your next event to them; candidates for sticky status
Critical Commentors List	Make sure they receive feedback; offer special promotion; monitor their attitude

Designing Reports

Simple reports have a clear purpose, only one primary data element used for sorting (also called sort field or sort criteria), and include additional data elements to enable the user to carry out the report’s purpose. Simple reports use only one line per customer, and that line fits on one page, either vertical (portrait layout) or horizontal (landscape layout).

Let’s say you want a key upgrade list. Your key upgrades are bronze, silver, and gold product packages or status. In thinking about the sorting, you realize that sorting on three different data elements to make a single list is beyond your capabilities – you need a single data element for sorting.

So you design the data base to have a “customer package” data element, with valid entries being 3 for gold, 2 for silver, 1 for bronze, and 0 for those who bought a standalone service rather than a package. This enables you to print a customer list organized in descending numeric order for this data element, showing your gold customers first, then silver, etc.

Next you decide what other data you want to see on the customer line in this report. Loyalty program membership will be one. Another will be annual purchase volume. Dates of most recent purchase and contract purchase/expiration will be useful. And of course customer number, and perhaps employee connection and/or email address.

Now you can send emails to encourage renewal or upgrades, and your message can be targeted to recognize the customer’s current status. Customers appreciate it when you understand the nature of the customer’s relationship with the business, so use this method to get the best success rate for your marketing effort.

Give it a try. Design some reports, and then make sure the data is stored in ways that enable the reports you designed. With experience you may decide to change some of the formats, especially the additional data elements to be printed on each line.

The important thing is to set up the right data elements at the outset in a way that can be sorted, because you don’t want to go back and update the entire data base to add a new data element for all your customers!

With the right customer information at your fingertips in well-designed reports, your marketing can be both efficient and effective!

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Customer Data Base: The Key to Unlocking Revenue

by Tom Gray | on Jan 23, 2013 | Comments

Your customer information is one of your most important business assets, along with your brand, your website, and your unique way of operating. Customer information is the basis of your relationships, which are themselves the basis of your sales.

Two axioms apply here. One is about your target market and finding new customers: “identify your best customers, and find more like them.”

The other is about sales: “repeat sales (to current customers) require the least effort and the least cost.” Why? Because you don’t have to inform these people that your company exists, or persuade them to believe in the company’s credibility and the product’s value.

New customers and low cost sales are the hallmarks of efficient marketing. Both require that you know the customers you have. Your customer data base captures your knowledge about customers, AND makes it readily-available when needed.

How to Use Your Customer Data Base

If you take a moment to think about how you might use information about customers, then you can design your data base to gather and sort the customer information you need for those purposes. Some common uses are:

1. Communicate with them, strengthening the relationship so they feel valued and buy more.

Your communications will include periodic messages that may vary according to the type of customer (customer relationship management or CRM), perhaps using Constant Contact or AWeber or some other email marketing system. You will also want to be able to send an email blast to all your customers, as well as send targeted messages about promotions designed for those who buy a certain product or volume. “We miss you” messages are designed to re-ignite dormant customers.

- To get customer email address, offer something of value in return, e.g., a discount or coupon, article or ebook.

2. Keep them longer

Those who have bought several products, or several times, are much more likely to continue to do so than those who have not. They become “sticky” customers, resistant to appeals by competitors. A customer data base can capture frequency of purchases, so you can make special efforts to reward those who buy often (e.g. loyalty program), and make special offers to motivate others to move into that category.

3. Find more like them

Profile the segment of your best customers by lifetime purchase volume/revenue, or even lifetime margin. One technique is to define a few categories of customer behavior or value, and place a “category” field in the customer record. Then create marketing programs directed to that profile, your best target market.

4. Forecast revenue from new customers, and focus your marketing accordingly

Your revenue or sales forecast can deal with current customers separately from new customers. You can segment current customers by purchase volume per year, using categories as mentioned above. Each segment will have a different average purchase volume, and possibly a different life cycle as well (weeks, months, or years that they do business with you). For example, for one credit card issuer, the customer life cycle was 8 years.

When forecasting how many new customers your marketing will generate, you can estimate how many will fall into each of these segments. Then you can forecast revenue from each type of new customer according to the average purchase volume of current customers in that segment. Design your marketing program to achieve these goals, and adjust it if results do not achieve this forecast.

What Information Goes Into Your Customer Data Base?

Once you create a customer record, you can keep it up-to-date manually, or have it updated automatically by integrating it with your Point-of-Sale (POS) or ordering system. Automated updates enable you to store purchase information easily. The table below matches data elements to update method.

Data Element/Update Method	Manual	Either	Automated
Customer number (unchanging)	X
Name and Contact info (include email, birthday)	X
Original Marketing Source (how you heard of us)	X
Date of first order	X
First purchase item	X
Subsequent purchases/revenue			X
Key Upgrades (to a higher level package; loyalty program)		X
Date of key upgrade		X
Cumulative revenue per year		X
Interest categories (check box; design boxes for products)	X
Employees connected to	X
Special events where customer participated		X
Date relationship or contract ended	X
Date of most recent purchase	X
Any critical comments from attitude survey?	X

Some tips from experience:

- Create your own unchanging customer numbers. Don’t use a phone number as customer number, because if the number changes it’s hard to link past behavior under one phone number to current behavior under another number.

- Key product upgrades may be your criteria to segment your customers. Be sure to make your loyalty program one of these “upgrade” boxes to be checked when they enroll.

- Interest categories, gathered at sign-up, may influence targeted marketing messages.

- Employee connections might link a customer to an instructor for a dance studio, or to a special customer service rep.

- Special events participants may be “sticky” customers; this may be a segmentation criteria.

- End of contract date can trigger “stay with us” offers, and reveals life cycle.

- Date of most recent purchase can trigger “come see us again” reminders or offers.

- Critical comments can guide improvement efforts, and influence targeted messages.

- Design everything so it can be sorted by a computer. Do not depend on verbatim or notes entries. Instead, anticipate types of entries and set up menu boxes to be checked.

How Do We Do This?

The software can be part of your POS or order system, or it can be a MS Access data base, or even Excel spreadsheets. If you use spreadsheets, learn how to use Excel’s “sort” function so you can create lists (reports) with the right contents for various purposes. You may even pre-program commonly-used sorts/reports, as you do with Quickbooks.

Setting up the process for who updates the database, when, and where is critical. An out-of-date data base equals revenue lost and a business flying blind. The owner should be familiar with using the database and extracting reports or sorts. Monthly, review key reports and make sure new customer data is current, when you review your monthly financial results.

The most efficient way to gather the data is to make it part of the order process. Don’t delay data entry for a separate update, because this assures that mistakes will be made! Entry will be deferred too long, data will be misplaced, and transcription errors will occur.

Treat your customer data base as one of your most valuable assets. Design it thoughtfully, according to how you will use the data. Design some reports in advance to help you decide what data you need for each report. Then design the data gathering process and train employees so the information is captured as part of the regular operation of the business. Then use the data to unlock revenues with repeat sales and targeted marketing to attract the most valuable new customers.

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Tips for Using Social Media to Market Your Business

by Tom Gray | on Jan 16, 2013 | Comments

Does the world need yet another article on using Social Media for business? Probably not, but you might find value in a bit of summarization and a few tips from experience.

Social Media is the exchange of user-generated content over the Internet. It is two-way, interactive. Examples include Blogs, Facebook, YouTube, Twitter and many others.

Businesses use Social Media as the receiver.

You can monitor what is being said about your industry, your competitors, and your products by signing up for services like Google Alerts and NetVibes.
You can respond to customer concerns on Facebook, and with Blog articles.
You can even make direct contact with Social Media users who are complaining about competitors, to offer a better solution. For example, see Tweet Me, Friend Me, Make Me Buy – Harvard Business Review

Businesses also use Social Media as the originator primarily to build and maintain relationships, which may blossom into sales. You create some valuable information, and invite people to view it and respond or use it. When they do, you have access to them for future direct or in-group messages. Hopefully, they become a “community” who share some interest, which you help satisfy and maintain by repeatedly offering more value.

What is “valuable information”? It might be techniques, such as Business Techniques in Troubled Times. See Business Techniques in Troubled Times. It could be recipes, or product evaluations. Entertainment – humor – is always welcome. It’s valuable if your target audience thinks it meets some need of theirs, so they decide whether to keep coming back for more. Then, when they are ready to buy what you offer, the relationship ensures that your business will be considered. You don’t “sell.” You maintain a presence by repeatedly offering value.

What Social Media Should You Use?

Many strategies are available. Here is one successful step-by-step approach.

1. Create a Blog linked to your website. Its graphics should be related to those on your website, and every article should end with a mini-bio including your website and email addresses. Post a thoughtful article at least once per week, using a calendar to schedule your topics in advance. You will want to invite people to subscribe to your blog (e-mail marketing), but see below for other ways to distribute your valuable content.

2. Create a Facebook Business Page. Again, there should be some graphic consistency with your website and blog, and links to your website should appear. Add content daily. Post your own blog article once a week, and post other information the other days of the week. Examples are: events you will be attending; issues you are resolving; links to other excellent blog or other media articles; tips for using your product. Facebook is the preferred social media app for many, so you need to be there.

3. Create a LinkedIn profile for business contacts. When you publish your blog, share it on LinkedIn. You can also post your daily Facebook Business Page updates on LinkedIn as status updates, comments, or new discussions.

4. Build Social Media relationships to expand your network. How? Use Facebook to “like” and comment on posts and other blog articles. Offer comments in LinkedIn discussions. Post your comments on those other blogs as well. Endorse the work of colleagues on LinkedIn. Cite and link to other blogs in your own blog articles.

5. “Repurpose” your content. Submit your blog to various blog directories for a wider audience. Do a YouTube video where you describe or demonstrate what you talked about in one of your blog articles. When you post comments on other blogs or Facebook posts or LinkedIn discussions, include a link to your own blog article.

6. If your business is retail, consider using Twitter to inform your community of specials or other items of interest.

7. Make sure your website and your blog and your Facebook business page all have links (via “widgets”) to the various Social Media where you have a presence. Your website designer can do this for you.

Once you get the pieces in place, the time commitment might be as much as three to four hours per week, if you spend two hours writing your blog article and one to two hours reviewing and commenting on other blogs and LinkedIn discussions.

What Content Should You Provide?

This process for developing relationships online only works if you have valuable content to share. How can you be sure of that?

For your Blog, make a list of 20 topics that your customers may find useful. If your blog is a once per week event, 52 topics would cover the whole year, and you will certainly find more interesting topics as the year goes on and as you keep listening to the buzz about your industry.

Your blog topic list could include how to use your product, issues related to the need your product satisfies, the history of solutions to this need, potential future developments, community issues, social media issues, other useful new products, or upcoming trade shows/exhibits. You want to write only a page or two, maybe 300 to 1000 words, so you don’t need to know or explain everything about the topic! For bigger subjects, plan a series of articles, like this one on effective marketing communications.

You can supplement this list of topics with issues you come across in other blogs, in newspapers and magazines, in LinkedIn discussions, at trade events, and in conversations with customers and friends. Get input about topics from Google Alerts about your industry, or from websites who claim to provide blog topics. See Find Great Blog Topics with these 50 Can’t-Fail Techniques | Copyblogger.

Think about the sequence of topics, and then make a calendar to guide your efforts.

For the content on your Facebook business page, a calendar is again part of the solution. You will want to post daily on this page, so plan to post the same kind of item every week on the same day. For example,

- Mondays you could post something about your calendar for the week showing what you are working on or where you will be this week, stated in a way that shows how this activity can yield benefits for customers eventually.

- Tuesdays you could post a comment on an article or blog you saw, and include the link.

- Wednesdays you could ask a question, perhaps using it as a LinkedIn discussion as well.

- Thursday might the day your weekly blog posts. It also shows up on this page automatically, because you used the right widget on your blog .

- Friday is a good time for a comment on something that happened this week.

- You can always supplement by posting another comment on an article or blog, or re-posting an old blog article of your own, or posting some temporary promotion offer, either yours or some other business’s.

By the way, you can pre-post content and schedule when it appears up to 6 months ahead. See How do I schedule a post to appear on my Page later? | Facebook Help Center | Facebook.

This article defined “value” as the attraction in social media, and “relationships” as the result. Monitor the buzz as a “receiver,” and follow a step-by-step Social Media “origination” strategy. Schedule content for both your blog and your Facebook business page. Build relationships with likes, comments, and discussions. You don’t have to do it all on day one – get started, and see where it leads!

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Tips for Your Website

by Tom Gray | on Jan 09, 2013 | Comments

Your website is your most important communications tool, so give it your best efforts! It’s your front door, that critical first impression. Like your mother told you, “You never get a second chance to make a first impression!”

There must be as many articles about creating a good website as there are small businesses in America. This article makes no attempt to recap them all; it simply offers some tips from the author’s experience, as part of a series on effective marketing communications techniques.

The most important tip is this: get a professional designer, but content is your job.

Professional Designer

Why use a professional designer? Here’s what he or she can do for you:

Advise on organization of your tabs and pages. Viewers appreciate clear and consistent organization and navigation between tabs and pages.
Provide the graphics that knit all your pages together. This gives your site a consistent “look and feel,” which pleases the reader and makes you look more business-like.
Solve all the technical issues, such as which host to use, which software to use (e.g. WordPress), navigation from one page to others, and proper use of mini-apps (“widgets”) for special features.
- Examples of widgets are print versions of pages, Facebook and other social media links, your blog, shopping cart, site popularity metrics, and contact by email.
Add the copyright statement
Advise you on how to be found in search engines like Google using keywords/metatags and Search Engine Optimization (SEO) techniques.

Find out if your designer would be creating your site by starting from scratch, or by using established software (also known as content management system, such as WordPress). Do NOT use someone who starts from scratch, because then you will be paying to re-invent the wheel, and you will be dependent on the developer for updates! Everything you will need is already developed and available. Plus, it is integrated, so you can add new features with only a couple tweaks instead of paying for new development.

I am quite happy with the services of Aimee Grover, aimee@plaidfish.com.

Content is YOUR Job

Do NOT leave the content of the site to your designer. Content is YOUR job! It’s your reputation and your message. It’s worth your time. But help is available. Your designer can providing a framework for the site as a whole and for each page, plus some guidelines on what makes great content. Once you’ve drafted it, you could hire a content editor too.

Start with making a list of your goals for the site. Usually these will include:

1. Communicate my differentiation and positioning – how I add value for customers, better than their

other choices.

2. Provide credibility assurance – why you can believe that my services will meet your needs best.

3. Offer value in the website itself, to attract more new and returning visitors.

On this last point, one of my trusted advisors puts it this way: “The goal of a website should be to create ‘Raving Fans’. Connect with them. Get them to subscribe. Add value. Build a relationship. One of the most important goals of any website right now is to create a mailing list – just because there are so many other ways companies are building relationships with social media that never existed 10 years ago.”

Second, keeping those goals in mind, list the topic of each page of your site. Examples include Home, About Us, Product/Service pages, Contact Us. There can be others as well, such as success stories, descriptions of capabilities, etc.

In your list, show which pages are the main ones, having a tab at the top, and which ones will fall within one of those main pages. Review other sites to get ideas for what to do and what to avoid, especially competitor sites. Your designer can help with this.

Third, for each page, make a little table that shows how it will deliver on your goals:

Positioning message
Credibility, such as a testimonial quote at the bottom of the page. To create a testimonial, write it yourself and then send it to the person you want to quote and ask for their approval.
Value for visitors, such as a link to a .pdf file or PowerPoint presentation or article
Internal links to other pages on your site, because clicks on these create a higher position in the search engine rankings
Picture or graphic for that page
Possibly an interactive element, such as a video, or a link to some survey of interests, or a game

Fourth, within this table, write the text that you want on that page. Your text will include “placeholders” in the right spot to show the designer where you want the internal links and the links to value-added information. Your designer can help with comments on your draft.

Then send the designer all your material: site outline, page tables, graphics files, articles, etc.

After the designer incorporates your content into a design with navigation, it is YOUR job to proof all the writing, test all the links, and suggest any changes in the graphic design, tabs and page groupings, navigation, color, font etc. After those changes, you will need to proof and test again.

Allow about two to three months for the entire process. Assume a budget around $2000 to $4000 aside from video production, though actual cost will depend on hours spent by the design firm. You can minimize those hours by doing much of the work yourself (site organization, planning each page, providing ancillary content, making a list of keywords for search engines) and then using the designer to improve it, rather than initiate it.

Finally, you will want to be able to update your site yourself with new information, promotions, or at least to change the copyright year to show that your business is still active. Keeping the content fresh is a big factor with search engines and to keep visitors coming back. Think of your relationship with your visitors as an ongoing dialog. So have the designer write down instructions for adding files and editing content, and maybe even adding pages. Then test your use of them to be sure you understand.

Then monitor how well your front door is doing. Check the metrics to see how many visitors you are getting, and where they are coming from. Test where you appear when various search terms are entered in Google or other search engines. Modify as needed, and as your business or the competition changes!

Your website is the foundation of your communications. All your other communications efforts draw prospects and customers to the website. So make it a priority, and get the professional expertise to build a site that makes you proud!

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Marketing Communications Planning: Media

by Tom Gray | on Jan 02, 2013 | Comments

I have a budget, and I cannot do it all. What media do I spend my money on? Consider the strengths and weaknesses of each type of media, and match them to your product and your communications task or goal.

This article addresses your use of traditional media, usually with the goal of attracting people to learn more at your website. It assumes you have a good website, and you are updating it with special offers, pictures of events, videos showing customers enjoying product benefits, success stories and endorsements. The first thing you should spend your money on is a great website. Then you can spend money on attracting people to view it. Using social media will be addressed in a future article.

Media Strengths and Weaknesses

In this table on media strengths and weaknesses, L (low) is a weakness and H (high) is a strength.

Media/S&W	Local	Targeted*	Aud-Vis / Graphics	Cheap/Fast	Complex Msg#
Network TV	L	L	H/H	L	L
Cable TV	M	M	H/H	M	L
Radio	M	M	M/L	H	L
Metro Newsp	M	L	L/L	H	M
Local Newsp	H	L	L/L	H	M
Magazines	L	H	L/H	L	H
Yellow Pages	H	L	L/L	L	M
Coupons	H	L	L/H	H	M
Outdoor	H	L	L/L	M	L
Direct Mail	H	H	L/H	M	H

*By Income and/or Interest or hobby

# Complex messages require space to tell your story, and media that can be saved for later reference

Network television offers visual presentation, but it costs too much for small businesses, both for the media time and for the production cost of the ad. Cable TV is cheaper, more local, and offers the option of a streaming print for those who wish to avoid ad production costs. However, if you want to choose print, cheaper media are available. Some targeting by type of channel is also possible on CATV. Neither has the space or permanence for complex messages.

Radio is local and can be targeted by type of station, but not by income or interest. It is cheap and fast, but t lacks the space and permanence needed for complex messages. Alternative mobile entertainment seems to be making radio less useful to reach customers.

Newspaper ads can be targeted geographically if local newspapers are used. They offer the space for complex messages, but not the permanence for reference unless your customer clips the ad. They are cheap and fast, but look elsewhere if you need quality graphics.

Magazines can be highly targeted by interest and income. They offer high quality graphics, and space and permanence for complex messages. Magazine ads take longer to produce and cost more than newspapers and radio, and their publication schedule cannot handle fast-changing offers.

Yellow Pages are the pre-internet search option. They are quite expensive, and involve lead times of a year or more due to annual publication. Their graphics are poor compared to internet search.

Coupons can be printed in other media, or mailed as part of packages to selected geographic areas. They are now available on internet coupon sites as well. Cost is low for production, but can be high when the cost of the discount is considered. This media makes sense if your objective is to attract interest and “tryouts,” in the hopes of more profitable sales later.

Outdoor includes billboards and various types of signage. It is suitable for reminders for impulse purchases of well-known products for a mass market customer base. It does not fit complex messages or targeted markets. Cost and lead time for production and placement are moderate depending on the location.

Direct mail is very targeted and offers excellent graphics as well as permanence. Its success depends on accuracy of the data in the list used. The most targeted lists can be rented from magazines and associations for one-time use. Direct mail is costly, perhaps $2 per piece, and a 2% response rate is good, so the cost of a response is really $100. Once you have the list, lead time to implement is moderate. Due to the cost of direct mail, different campaigns are tested for success using different response numbers for tracking. This means that rolling out a full campaign takes several weeks.

Matching Media to Product and Communications Goal

If you have a mass market, you need mass media. However, most small businesses have more targeted markets, at least in terms of locality, especially if you spent a little time defining your target market as previously recommended!

For a goal of inform/persuade, this means that many small businesses will find the best fit with local newspapers, magazines for special interests, coupons, good signage if they have a retail location, and direct mail for high margin products if tests prove it can be effective.

For a goal of reminding customers to buy again, if you have the customer’s contact information then internet contact is best. Inexpensive direct mail (postcards) is also a possibility. If you lack that contact information, then local print, coupons, and good retail signage are the best places to spend money on traditional media.

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Marketing Communications Plan: Audience, Goals, Tools, Budget

by Tom Gray | on Dec 26, 2012 | Comments

“How do I get more customers?” is always one of the top questions for every small business. You have a great product, attractive pricing, and a folksy way of working that customers are sure to find appealing. But how will they learn all this? To paraphrase the old song, “to know me is to love me” – but how will they get to know you? Effective marketing communications (“marcom”) makes everything else in your business work. When “marcom” is missing, your business is facing failure.

Who is the Audience?

Effective communications starts with understanding your audience. Who are they? What need are they trying to satisfy? Where do they look for solutions? What media do they pay attention to? What presentation style gets their attention? Your audience is your target market. You defined them earlier in your plan – see Target Market: “Who Are My Customers?” | Thomas H. Gray – Consultant, CEO, Director.

Goals and Tools

Your first communications goal will be to inform the target audience that you are in the business, and draw them to your website. Your tools here will be advertising, public relations/publicity, and events. These are considered “mass media,” because they are designed for mass consumption and are much cheaper per “impression” than using more targeted individualized approaches.

The website is your main tool for the second goal: to persuade them to choose you rather than a competitor or substitute solution. The website provides for more extended interaction than advertising. It enables you to present the benefits and the options using video, graphics, and even chat, as well as print. It also enables a direct link to purchasing.

Some forms of public relations/publicity, such as articles and speeches at events, also allow the more lengthy presentation that persuasion requires, but they are delivered to a less-differentiated audience than those who actually go to your website. Thus they are really mass media, more useful to spur the search for your website rather than directly persuade anyone to purchase.

You will also use the website to capture buyer contact information, which you will use later to achieve your third goal: to remind them to buy again. Reminder communications reach only the buyers as individuals, so mass communications are inappropriate. Direct or individualized media include email, various social media directed to or available to these fans, messages included with invoices, and the more expensive traditional approaches: direct mail, telemarketing, and personal selling. A regular program of communicating scheduled messages to customers is called CRM: customer relationship management.

As you can see, the process moves from a wider market in the informing stage to a very personal and targeted relationship in the reminding stage. Since all these stages are operating at the same time, you will be using different media for these different purposes in an integrated approach. Your messages will be slightly different as well.

This table links communications goals to the marcom mix tools and provides examples for each tool.

Goal	Marcom Tools	Example
Inform	Advertising Public Relations/publicity Event	Online: banner, pop-ups, YouTube, email; traditional* Press release; article Speech; sponsorship; sweepstakes
Persuade	Website Sales Promotion	Product/service pages for each target market segment; catalogue; videos; success stories, order/pay Time-sensitive special offer, communicated by any of the other media plus coupon mailers and coupon websites
Remind	Regular email Social Media Direct Mail/telemarketing	Planned messages matching customer purchase history Blog; Facebook Business Page; Tweets Renewal offer

*Traditional advertising involves at least seven media choices. The next article will address the best situations for each type: TV, radio, newspapers, magazines, directories (e.g. yellow pages), outdoor (e.g. billboards), and direct mail.

How Much to Spend?

Obviously, the opportunities to spend money on marketing can quickly exceed the company’s marketing budget. How do you decide how much to spend?

A new or growing business should choose its marketing budget by what it takes to get the job done (the “task” method), because failure to do the communications job means the business fails. Established firms can choose a percentage of revenue as their marketing budget, but new entrants cannot, because they do not yet have the revenue base. New entrants have little revenue to start with, so two methods that do NOT make sense for them are “percentage of revenue” and “match the competitors’ spending.”

New and growing firms must design the campaign first, frugally, and then price it out. If the cost seems unaffordable, they can then consider the cost and communications impact of removing or modifying the less critical elements. The remainder becomes the budget. Will it all be spent? That depends on the results of tests of the various initiatives. All marketers test before full scale implementation.

Remember your goals. You need to spend enough to get noticed by a large enough share of your target market, despite your competitors’ messages. Your name needs to be available or recalled when they are ready to buy, and you will never know when that is. So your marketing must provide some “presence” all the time, occasionally boosted by additional spending to communicate new offers or new promotions, or to make a special effort in key buying seasons.

Advertising only sporadically is a common error in small business communications. The brand has no constant presence, so it must reintroduce itself for every episode or campaign. The expense of previous campaigns is wasted rather than establishing a constant base of messaging. During the gaps, the brand is not heard or considered by customers choosing to buy at that time.

Planning market communications starts with understanding the target market, the audience. Next, you select the marcom tool(s) to fit each of your three goals, assess potential cost, modify the marcom tools mix, and select a budget.

Some say market communications can be summarized in six M’s. In this article we addressed Mission, Mix, and Money. The next articles consider Media, Messages, and Measurement.

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Thirty Mistakes to Avoid in Your Business Plan

by Tom Gray | on Dec 19, 2012 | Comments

If you want yourself and your business concept to be taken seriously, avoid these commonly-seen mistakes in your business plan.

Unrealistic Assumptions

1. Market share too high for a startup, e.g. 10%

2. Starting three lines of business at once, rather than succeeding at one before launching the next

3. “A low price is the only differentiation I need”

4. “I can personally produce professional-appearing website and marketing materials”

5. Sales Forecast grows at unrealistic pace, uses most of the time of the owner, assumes customers pay right away, and has no source/model from a currently operating business in a similar field

6. No salary for owner is shown in fixed overhead expenses

7. Marketing budget is too low

8. IT budget is too low

9. No “contingency” for unknowns is considered in the Cash Flow Forecast

10. Risks are not presented and discussed

11. “I can get a loan without collateral and without investing 20-30% of amount needed myself”

12. Timelines assume everything goes well and everyone cooperates according to your desires

Incomplete Analysis

13. “I have no competition”

14. Your plans for the 4 P’s do not support the Positioning you chose

15. Buying new equipment when used versions or leases are available.

16. Failure to plan to buy software for bookkeeping, customer data base, order processing, inventory, etc.

17. No recognition or description of key operations processes (hint: if you include flowcharts of these processes in the Appendix, you will really stand out as a disciplined planner)

18. Price is too low; contribution (gross) margin is too low; profit is less than 15% at maturity

19. Financials do not include loan repayment!

20. Risks are not described and assessed

21. No recognition of key skills that are missing or no plan to obtain them

22. Owner plans to spend almost all of his or her time in operating the production of goods/services, rather than managing the business

23. Unrealistic timeline to launch, especially if driven by acquiring a particular store location

Confusing Presentation

24. No page numbers; no outline or section numbers

25. No “deal” statement

26. Inconsistencies: text contradicts itself; tables or financials don’t add up

27. No milestones offered

28. Financials not summed up into a small table

29. Executive Summary is “creative writing” rather than a summary of the text that follows, or is longer than two pages

30. Pages and pages of beliefs, philosophies, and values rather than practical tactics for succeeding in business

What is the Reader Looking For?

Businesses fail because their differentiation is weak or absent, they fail to communicate it to the target audience (marketing), or they run out of cash before enough prospects hear the message. So your reader is looking for

Clear and strong differentiation in meeting a known market need
Effective marketing plan: message, money, media, timing
Reasonable sales, cost, margin, and cash flow estimates: not too optimistic
Plans to obtain adequate financing
Indications that the owner is a good investment: he or she understands how to organize and manage a business, deal with customers, carry out plans as scheduled, keep records, and pay back debts

So write a plan that’s as accurate and disciplined as you yourself must be to succeed as an entrepreneur! If you need help, contact SCORE – they’ve seen it all before. www.score.org

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Business Plan Financials – Section 6.0

by Tom Gray | on Dec 12, 2012 | Comments

Developing realistic and consistent financial forecasts is one of the main purposes of a business plan. Presenting those financials clearly and succinctly is almost as hard as developing them. This article provides some tips for both challenges.

Developing the Financials

Keep a list of the assumptions you make while forecasting financial results, and the source you used. Experienced business plan readers will focus on the accuracy of your assumptions before they even look at your forecasts. If the assumptions don’t seem reasonable, they will stop reading!

Identify all your startup requirements. Research to find likely costs for each.
Make a monthly sales forecast for the first three years. A future article provides detailed advice on this.
Do a Cash Flow Forecast for the first twelve months. This is your tool to figure out how much cash your business needs before it becomes self-supporting. Knowing that, you can determine if you need to borrow money, and if so, how much. See below for direction.
Fourth, decide whether you need investors or a loan. If you need money from others, describe the deal you want. For loans: amount, when received, interest rate, term of loan, monthly payment, date you start making payments. For investments, the deal issues are valuation of the business, who has control, and how investors can sell their stake.
Develop a three year Profit & Loss Statement (P&L or Income Statement). This is just an annual total of revenue, major cost categories, and profit. Copy the first year’s sales and expense data into the P&L from your Cash Flow Forecast. Then estimate two more years. Don’t forget to show loan repayments!
Have your accountant prepare a forecast Balance Sheet for the first three years, using the information from these other forecasts.

Sample forms (spreadsheets) for these forecasts are available many places. For example, at www.scorefoxvalley.org, see the Resources tab, and go to Business Planning.

Why Not Just Use Business Plan Software?

Of course, you could also enter all your estimates into packaged software such as Business Plan Pro. Then all your numbers would cross-foot, but you would not know how they were calculated, because you let the software do it! If you don’t know how they are calculated, you will have a hard time managing them. In a small business where “cash is king,” it’s better to know your numbers intimately if you want your business to succeed.

Monthly Cash Flow Forecast: The Mechanics

Top left: enter cash available before paying for startup costs. Below, enter itemized start-up costs. At bottom, find the cash remaining.

2^nd Column top: Cash available BOP (beginning of period) = cash remaining at bottom of prior column. Enter sales revenue, then variable expenses by type, and then fixed or overhead expenses by type. 2^nd Column bottom is Cash EOP (end of period) = Cash BOP plus new revenue and minus all those expenses.

This then becomes the 3^rd column’s Cash BOP, and so on, just like starting a new page in your checkbook register.

Using the Cash Flow Forecast

Find your “most negative” Cash EOP. It will be your largest negative number, usually the last month before you start to show regular monthly positive cash flow.

Then, increase it by at least 15% or so, as a “contingency” for unknown costs. This is your protection for not knowing the future perfectly!

The result is the amount of cash you need to start the business. Figure out where to get it. Bank loans are feasible only if you have collateral and you yourself can put up about 25% of the amount needed. Microloans are also a possibility. Now go back to item 4 above: define the deal you want if you need a loan. Note: 70% of startups use their own savings as the main source of their funding, according to the Ewing Marion Kauffman Foundation quoted in the Wall Street Journal November 12, 2012.

Presenting the Financials in Your Plan

Your forecasts will be on spreadsheets attached to the Business Plan. Use five sections to present that information in your plan:

6.1 Projected Results

Present a table with 3 years of data for unit sales, revenue, variable cost, gross margin, overhead, loan repayment (if any) and profit. Precede the table with some words explaining the conclusion you want the reader to draw from reading the table. You’ll copy this into the Executive Summary.

6.2 Milestones

List the expected dates for major events in business success, such as first sale, first cash flow positive month, first 100 customers, add some facility or staff, etc. Both you and lenders can use these as objectives to measure progress and success.

6.3 Financial Requirements: The Deal

State the loan or investment you need, the terms you have assumed, and when you expect to begin repayment. Then point to key financials in the 6.1 table to show that there will be ample funds available to repay the loan. Copy/paste this into the Executive Summary.

6.4 Key Assumptions

List five to ten assumptions crucial to the most important revenue and expense items. These assumptions must be reasonable for the rest of your plan to be credible.

6.5 Risks and Mitigation

List two to four things that could go wrong and have serious impact on your forecasts. Identify the profit impact for each one (you can re-run your spreadsheets with the bad event replacing your original estimates). Then state your plan to prevent the risk, and to minimize its financial impact if it does occur. This shows you are realistic, not just blindly hopeful!

Now re-read and edit the plan to make sure all the parts, numbers, and assumptions are consistent.

Then, create 1.0 Executive Summary by copy/paste of summary paragraphs from the important sections. Add a few transition words to link them all into a nice 2 page narrative, and you’re done!

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The Sales Forecast – It’s Time to Commit!

by Tom Gray | on Dec 05, 2012 | Comments

Your sales forecast is fundamental to a realistic business plan. It determines profitability. The simplest sales forecast is “units sold per time period,” usually per month. If you have more than one product type, you will want to forecast sales of each type separately.

How Do You Estimate Unit Sales For The Future?

Most companies forecast sales by considering several methods, blending the results into something they trust. Here are several common methods:

1. Trended: assumes past sales trends will continue

2. Bottom-Up: Ask your sale force and distributors

3. Top-Down: Make your own forecast per salesperson or distributor

4. Market Share: Estimate your share of the market for the year, and then spread those sales across the months considering industry seasonality and your own growth trend.

5. Pace of Growth: Estimate your capacity at business maturity, and gradually grow sales to that point.

6. Customer-Driven: Estimate sales per customer per month. Then estimate a reasonable number of new customers per week or month based on the marketing programs you expect to use. Add them to a spreadsheet row for your new customer additions for each month, and continue to show them in your customer base for as many months as you estimated they would continue to use your services. Remove them when that expires. Customers x unit sales per customer = sales.

Reality Test

Forecasts always need some kind of external benchmark to provide a reality test. For example, you could use the sales funnel (see Sales Funnel | Thomas H. Gray) to test the practicality of a bottom up forecast.

Consider the sales cycle as well. The sales cycle estimates the time between the first customer contact and closing the sale. It may be a few minutes, or six months. If a salesperson is going to make 4 sales in January, and it is now November, how many accounts should he already be in contact with, based on the normal percentage of contacts converting to sales? Is he on schedule, or will he miss the target?

But There’s More!

Once you have a forecast of units sold, the hardest work is done, but you have delivered only a fraction of the information needed! With a little more effort, using either company data or assumptions already in your business plan thinking, you can provide a forecast that is really useful for projecting expenses, profits, and cash flow. You need to forecast each of these in your business plan anyway.

For the most useful sales forecast, the other estimates needed are:

Average price per product per month (avg. price times units = revenue). This estimate uses the list price minus expected discounts.

Sales commission is part of your variable costs. Estimate it as a percentage of revenue.

Variable costs per product (variable cost per unit times units = variable expenses). Subtract these from revenue to find gross or contribution margin. Use that to calculate breakeven point, and to verify that prices are high enough.

The cash cycle tells you when cash started to be spent before the sale, such as for raw materials and labor, and after the sale for commissions and shipping. It also tells you when cash arrives as payments after the sale.

For example, you may order raw materials 2 months before a sale, receive them in two weeks, and pay for them 30 days after that. Thus cash is going out two weeks before the sale. Cash is received at the time of sale in some businesses, or 30 to 60 days later for those companies who use invoicing.

Paying for cash expenses before receiving cash payments requires “working capital,” a cash cushion. When it disappears, the business either fails or goes deeper into debt. So the cash flow forecast is probably the most important forecast a small business can make. A short cash cycle means less working capital is needed and success is more likely.

This table shows how each forecasted item is used by the business or in the business plan:

Forecasted Item	Used to determine			Financial Statements
Unit sales by product	Revenue	Operational capacity needed	Variable costs
Avg. price per product per month	Revenue
Revenue				P&L	Cash Flow
Sales Commission	Sales compensation planning	Expenses or net revenue		P&L	Cash Flow
Variable Costs	Expenses	Gross or Contribution Margin à Pricing & Breakeven point	Cash needs	P&L	Cash Flow
Cash Cycle	Incoming cash	Cash available	Financing needs		Cash Flow

How Do You Capture All This Thinking Into Documents?

First, write down your assumptions as you make the unit sales forecast, and as you make the other estimates (average price, sales commission, variable costs, cash cycle). A list of key assumptions goes in the Financial section of your Business Plan, and this is a good time to start it.

Second, enter your unchanging sales commission percentage and variable costs per product into Excel cells, and reference these cells in the formulas used to calculate revenue, sales commissions, and variable costs.

Third, set up a new set of rows for cash flow calculations. Assume all sales occur mid-month. Label a row for revenue, a row for sales commission, and a row for each of the variable costs. For each cell in these rows, create a formula to find the cash effect occurring that month due to unit sales in any month. For example, using the previous example in the cash cycle definition:

- June variable costs = July unit sales for the product x variable cost for that product (supplies paid for 2 weeks before sale)

- September revenue = July unit sales for the product x July price for that product (invoice paid 60 days after sale).

Why Not Just Use Business Plan Software?

Of course, you could also enter your estimates into packaged software such as Business Plan Pro. Then all your numbers would cross-foot, but you would not know how they were calculated because you let the software do it! If you don’t know how they are calculated, you will have a hard time managing them. In a small business where “cash is king,” it’s better to know your numbers intimately if you want your business to succeed.

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Business Techniques in Troubled Times

Using Customer Data Base Reports

Customer Data Base: The Key to Unlocking Revenue

Tips for Your Website

Marketing Communications Planning: Media

Marketing Communications Plan: Audience, Goals, Tools, Budget

Thirty Mistakes to Avoid in Your Business Plan

Business Plan Financials – Section 6.0

The Sales Forecast – It’s Time to Commit!

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