Better marketing advice is the key to higher profits

Most businesses focus on selling – and for good reason. It’s the whole point of business.

It’s true that increased efforts at selling will lead to more sales and higher turnover, but a focus on selling more will only take you so far in the quest to increase profits. This is because increased sales usually come with the penalty of reduced margins – to get more volume, you are obliged to discount; with the result that the wheels turn faster, but for less effect.

This is where a good marketing consultant comes in. Better marketing helps you increase sales, and maintain and even increase margins. If you’re interested in my approach to increasing profitability through better marketing, please read on. If you just want to know what I offer, please skip to ‘Services’.

Why Marketing beats Selling every time:

The tools and techniques of selling are all about selling the customer what you want to sell.

Whereas the tools and techniques of marketing, are all about giving the customer what they want to buy.

A no-brainer! And yet board-rooms in every possible industry are populated by intelligent people endlessly scratching their heads trying to divine the ‘secrets’ of their more successful competitors.

It’s simple. They understand their customers better.

And once you understand your customers, marketing is all about identifying and communicating the value which interests your customer. Done properly, it has a far greater impact on sales and margins than selling ever can.

Three Steps to profitable marketing:

Step 1. Understand your customer (easier said than done)

Of all the thousands of books describing marketing tools and techniques, all boil down to one core issue; the importance of identifying and really understanding what the customer wants. There are dozens of ways to go about this; surveys on the phone or internet, face-to face interviews, focus groups, trial offers, the list goes on… But with all the methods available, it’s amazing how many companies, and large ones at that, operate on assumptions about their market, rather than knowledge.

Here’s a rule of thumb. Whenever a business lacks focus in researching and responding to its markets’ needs, its results are always average. Yet the fact remains that the majority of businesses spend comparatively little time and energy in systematically identifying and understanding what their customers really want. This explains why in every market there are the majority of firms that are market-followers. And then the few that are the market-leaders.

Take any industry sector and the rule holds true. Industries are invariably made up mostly by companies which make assumptions about their customers’ needs, and which dedicate their efforts to selling. And at the forefront of each and every industry, there are a handful of highly profitable businesses which best understand their market, that design their products or services to fit the customers’ needs, and that dedicate their efforts to marketing.

The point is worth repeating. All the most successful businesses focus on what the customer wants to buy; rather than what the business wants to sell.

It all starts by understanding the customer. Done properly it’s unglamorous and painstaking work. It’s so much easier to make assumptions. Albeit costly ones.

Step 2. Talk to the right potential customers

The next step is to focus on the right potential customers. The emphasis here is on the word ‘right’. Only certain potential customers in any market are profitable, and it’s essential that it’s these customers you reach. Research shows that on average 80% of a typical business’s profits comes from just 20% of its customers. So it’s worth understanding the profile of those 20%, because it’s more like these you want.

Step 3. Communicate the value you offer – not just what you want to sell

The final stage is communicating the value of your offering to the targeted consumers – in terms meaningful to these customers. Meaning that effective marketing communication focuses on what customers want to know, rather than what you want to say.

Focusing on what your customers want to know, creates willingness to pay a premium for the value you provide.

This three step approach of Understanding, Targeting, and Communicating encapsulates the entire marketing task. It seems easy. Which is why so many businesses underestimate the sheer effort – 90% perspiration, and 10% inspiration – it takes to getting it right. And getting it right, understanding the needs of your market, identifying and targeting more of your most profitable customers, and communicating your value in terms that your target market appreciates, is a job for a marketing specialist.

Unfortunately most smaller to medium sized businesses cannot afford a dedicated marketing department or Marketing Director – obliged instead to focus on sales. Hiring the right marketing consultant on a project basis, can be a cost effective way to extracting more profit from these sales.

A good marketing and branding consultant focuses on profit

Successful businesses talk about their ‘brand’ – and they invest a great deal of time and money into their brand. The brand is what the customer buys. And for the right brand, the customer willingly pays a premium.

So why do so many smaller to medium sized businesses miss a branding trick, and think about branding in terms of expensive advertising and marketing material, when in fact it’s about margin and profit?

It may be because so much of what is written about branding is theoretical and talks so little about profit. Which is a shame, because effective marketing and branding strategies can be used in any size business – for the only purpose that brands exist in the first place: to increase profit.

The 4 'P's of marketing and how they drive Profit

You’ll probably remember the focus on the 4 ‘P’s in the marketing books; ‘Product, Price, Promotion, Place’ – academic stuff that may seem irrelevant to the realities of day to day business. But even if you don’t remember the 4 ‘P’s, or haven’t made their acquaintance in the first place – allow me a little more of your time, and I’ll explain how I make use of the 4 Marketing ‘P’s to increase sales, at better margins.

Product

Product, or service, is of course what you sell.

But is it the whole story? For instance, you may be a printing business that goes out of your way to provide exceptional service to your clients, or a manufacturer that goes the extra mile for quality, or indeed any type of business that takes the trouble to be that bit better. And yet, the extra value you provide often doesn’t seem to be recognised - or at least paid for.

The secret lies in how you design your offering in response to the market. For example, McDonald’s product is not really their food. And if blind tasting surveys are anything to go by, people don’t even particularly like their burgers. The McDonald’s product is a family outing where the kids get Ronald McDonald’s ‘free’ toys as a treat. McDonalds closely researches and designs their offering around the family entertainment value of their product – and parents, happily or otherwise, pay a handsome premium for it. Research has shown that ‘even carrots, milk and apple juice tasted better to the kids when wrapped in the familiar packaging of the ‘Golden Arches’ – Associated Press.2007. It’s the clever design of their family outing product that makes McDonalds’ food so mouth-watering; to investors that is.

And with some analysis, I can help do the same for your business – identify where the uncharged-for premium, i.e. the true value, lies in your product or service. And once we have identified where the true value lies, we consider how to better capture that value through pricing strategically.

Price

Only rarely do all four marketing ‘P’s fire in sync; and yet it’s a fundamental principle of marketing theory that they must. Unfortunately most marketing and branding consultants shy away from the spreadsheets and numbers involved with getting to grips with ‘Price’. In doing so, they cast aside the most powerful ‘P’ in the marketer’s armoury.

Why the most powerful? Because any improvement in price drops straight to the bottom line. Research shows that even a 1% improvement in price, can represent more than a 10% increase in operating profits (Michael V Marn and Robert L Roseillo, Harvard Business Review 1992). So it’s worth getting right.

How do you arrive at your pricing? Cost, plus a reasonable margin - or what the market can stand? If this is what you do – you’re leaving money on the table. There’s more to ‘Price’; and a little investigation can pay handsome dividends.

Promotion

For ‘Promotion’ read ‘advertising’ and all the other forms of promotional effort. Except that you don’t necessarily need to ‘advertise’ to promote your business - eBay does well for a business that doesn’t advertise. Indeed ‘Promotion’ has come to mean any method by which you connect with clients, or prospective clients. And a bit of flair and lateral thinking can go a long way. I mentioned earlier about first identifying the true value of your business. Once we’ve done this, ‘Promotion’ is all the ways we communicate this.

If you have the right relationships, promotion starts with your existing customers. For instance, Vida e Caffé have done a great job of getting themselves talked about in all the right ways – with their existing customers introducing friends as new customers.

Getting your business talked about in the right way is where the marketing effort comes together. And a study of your business, your market place, and what matters to your customers is where I start. From a close understanding of your business and your market, I help develop and promote an image of your business that people relate to; and talk about. In other words, transforming your business into a ‘brand’ that customers are prepared to pay a premium for.

Place

Last, but not least of the traditional marketing ‘P’s, is ‘Place’ – the ‘where and how’ of the way you distribute your product or service.

And even this ‘P’, which may seem the most difficult to change in a business, can yield surprising results with some investigation. Reviewing the way in which a product or service is distributed to the customer can be very rewarding. Amazon, and a whole host of other successful net retailers are always the examples that marketers point to when describing new distribution channels. This gives the false impression that new distribution channels must invariably be to do with the internet.

So it’s important to realise that an alternative method of distribution doesn’t, by any stretch of the imagination, have to be an internet concept! Opportunities abound for re-evaluating the product or service delivery for almost any business. For example, farmers in Queensland, Australia offer ‘work experience’ opportunities, and charge tourists for seasonal labour that they would normally pay for. In the UK, Vets2Home have taken a leaf out of the traditional family Doctor’s book, and offer home visits – a service so successful that it’s been featured on television.

Ways to leverage your distribution may be sitting unexploited at the heart of your business. You may be very pleasantly surprised at the opportunities we unearth for leveraging your distribution which may involve selling spare capacity, or selling some services at a premium; all of which drops straight to the bottom line.

My approach

Examining each component of the marketing ‘P’ mix, and fitting it all together is a specialist task; and unusually for a marketing consultant, I have experience in ‘Pricing’ consultancy – potentially the most rewarding marketing tool of all.

Meanwhile as far as the 4 ‘P’s are concerned, the text books have moved on. There are now 7 ‘P’s – inflation is not limited to the economy! The additional ‘P’s are ‘People’ – your people, in that everything your employees say or do is part of your marketing; ‘Process’ – the hundreds of systems that you use, from producing a quote to managing debtors; and ‘Physical evidence of the business’ – your offices, vehicles, uniforms, and every visible sign of your business.

But if one or more of the ‘P’s is out of line with the others, for example, if your product or service delivery is at odds with the claims made in your marketing, or your pricing at odds with the brand’s image, the effect on your business is like an engine misfiring on one or more cylinders.

My approach is to systematically work through your business and get all the ‘P’s firing in sync. The benefit is higher net profit.

My background

My business experience has a number of dimensions and is extensive: My career spans more than 30 years working in Finance, Advertising and Marketing, the building blocks of business.

I started out by dealing financial futures and international commodity trading; then I created photographic images for major advertising agencies and their blue chip clients for a decade; and more recently consulted to large corporations in Branding, Marketing and Pricing. And this blend of experience has led to a 360° approach to Business and Marketing.

As a result of this analytical and creative background, I have developed an approach to marketing which integrates the fundamental principles of understanding the market through customer and financial analysis, and developing the business through relationships, networks and all aspects of creative brand building.

I have a Masters Degree in Business Administration, and before offering advice, I make it my business to understand every relevant aspect of your business.

I don’t overcomplicate. Simpler is almost always better.

Developing and promoting your ‘Unique Selling Proposition’

The most tried and tested principle in marketing is that of finding a ‘Unique Selling Proposition’ (USP) for a business. The USP of a business is the area where the business excels. For example, some businesses can’t be beaten on price, and this is their USP; others on quality; others on turnaround times. These USP’s define the business, and become the key features which the business constantly promotes and becomes known for. The concept is as relevant now as when Rosser Reeves in America first coined the term in the 1940’s. The methodology has been successfully exploited by successful companies ever since.

But over time it has become increasingly difficult to stand out. This makes the development and promotion of your USP more important than ever. And doing this happens to be my USP. How so?

As a result of my analytical and creative background, I’ve developed a finance-based approach to building business, along with a creative mind-set. Meaning that as I consider every aspect of your business, and not just the traditional marketing areas, I am able to spot underused competitive advantages which help define your USP; whether your advantage lies in pricing, distribution, promotion, or the product itself. And when I help redefine your USP, I develop powerful and relevant creative ways to promote it.

Once your USP is re-defined, I develop a practical and budgeted plan to promote it. Working with internal or external creative resources, I originate, develop and manage the marketing communications through to the final outcome; whether an event, advertising campaign, brochure…

Clients

As an advertising photographer I worked for blue chip clients via major advertising agencies; TBWA Hunt Lascaris, DDB, Herdbuoys McCann Erickson, and Ogilvy & Mather. Clients included; Sprite, L’Oreal and Old Mutual.

As a corporate marketing, branding and pricing consultant, I have worked for clients who are also market leaders in their fields: The Stock Exchange, NedBank, Italtile, Karen Beef, Denny Mushrooms, and Young and Rubicam Advertising.

And as a private business and marketing consultant, I apply the same skills and experience working for smaller to medium sized businesses; from corporate Risk Financiers, to TV Producers, printers, advertising and design agencies, manufacturing and construction companies, and equipment suppliers to the mining industry. The clients are diverse, but the skill sets I apply are always the same – current best practice business and marketing tools, which apply equally to all businesses.

Services

Services include:

• Consumer and Market Research

• Business and Marketing Strategies

• Client Relationship and Network development

• All aspects of Brand Building from naming a product (I named the STRATE system for the JSE www.strate.co.za ) to putting a product in lights through award-winning advertising photographs (I photographed an advertising campaign for Safyr Bleu eye drops which won a Gold medal in the New York Advertising Festivals 1995)

• Copywriting for adverts, brochures and websites

To give an idea of how this works in practice, recent jobs for the same client have involved me taking responsibility for (i.e. doing!); market research, developing a new strategy for growth, advertising photography, directing web and brochure design, copywriting, identifying and developing key external business relationships, and building comprehensive Excel models for funding purposes (well-constructed Excel models are very effective marketing tools for high-level presentations).

So when it comes to getting down and dirty, and ‘doing’ the job, I undertake a range of tasks that would normally require a consulting team drawn from different disciplines. The benefits to the client are: cost-saving; continuity; and time (dispensing with the continuous process of briefing other individuals on a project).

But it’s the ability to work on both the creative side, and the analytical side, of the business that allows me to do what I do best. Namely, to develop and implement powerful business and market strategies that draw on the strengths from all sides of your business, and to create a fit between what the market wants, and what your business offers.

Contact me

I’m based in Cape Town but am available to assist companies throughout South Africa.

If you want to increase sales, and improve margins, contact me for an initial discussion. I’ll give a straightforward appraisal of what I can and can’t do for your business - and hopefully show what a little fresh insight in your marketing can achieve.

Mike Hughes
079 493 0146