Creating an Effective Ad (Part 2)

This is a continuation of the Creating an Effective Ad post from Dec. 2; please read that one first, if you haven't already.

Advertising is effective if you follow a few basic rules. Part 1 focused on customer needs. Part 2 will suggest a few practical steps to assure you a successful ad campaign. These steps should be used no matter if your ad is; on a card, a letter, a coupon, or some other format.

Here are a few common sense advertising practices that will improve your advertising program:

Credibility

You want your customers’ loyalty; your customers want a fair deal. Your credibility is based upon how you relate with customers, this needs to come through in all your advertisements. Your attitude and sense of a fair deal must be evident in all your ads to build successful customer relationships.

Offer

To get a potential customer’s attention, you need to give them a reason to consider your product or service. The best, and easiest, way to get attention is to make a special offer. However, the offer must be clearly stated, simple to understand, and able to draw people into your business. Discounts or something free are typical examples.

Copy

Keep written copy in your ad brief, to the point, timely, and engaging. Make sure you carefully proof read every ad that goes out several times with your eyes wide open and your brain completely focused on the topic matter, offer, and any possible misunderstandings in the copy.

Target

Make sure you have selected the correct market population that is close to your place or places of business if you have fixed locations; if a service business, make sure you have targeted the correct homes or apartments in your service area.

Follow Through

If your ad has generated a potential customer, make sure you have given them the maximum attention required to make a sale, and always attempt to continue an on-going dialog, even if they did not use your service or product after their initial inquiry. They originally came to you for a reason; timing is every thing, the following months may allow for a better opportunity for you to assist them. Never quit following up on past customers or potential customers, I am amazed how many times a simple phone call a year or two after an initial contact has lead to a successful sale.

Cultivate People

Don’t try to close sales too quickly. By engaging a potential customer into a conversation, when practicable, will, in some cases, lead to larger sales or additional opportunities to provide other services or products.

Repetition

The key to any effective ad campaign is repetition. I cannot stress this enough. Write on your note pad, post it on your desk, paste it on your bathroom mirror, remember to say it at least every morning, noon and night . . . REPETITION, REPETITION, REPETITION. In other words, send the same message or offer or variations of an offer, and always keep your business name in front of your target population as frequently as financially possible.

O.K, that’s it for me. How effective your ads are depends on a number of things, but this brief list is a very good start. Now, you have my opinion. What are your thoughts on effective advertising? Many people are starting to comment on my weekly ramblings, I welcome your comments as well.

Considering Financial Risk & Judgment

Judgment is a mere lottery, sometimes you are right, and sometimes you are wrong. For most of us it is more likely that 2% of us are right 50% of the time; and, even if I am wrong, which is most likely, the odds are not very good even if 50% of the population are right most of the time. Benjamin Franklin, the author of Poor Richard’s Almanac, wrote, “At twenty years of age, the will reigns; at thirty, the wit; and, at forty, the judgment.” Luckily, research is identifying specific actions, to help those of us who are judgment challenged at any age, to make better decisions.

A new field has emerged over the past few decades that may hold the key to unlocking how we evaluate and determine the appropriate course of action in making a broad range of economic decisions. This new discipline is called behavioral economics, and studies the impact of our decisions on our lives.

Today, people, typically, consider our economy in one of two possible ways: some people are saying taxes are too high and regulations are stifling the economy; thus, businesses have no incentive to invest or create new jobs; while, others are saying: demand is too low, if wages were higher, consumers would buy more and businesses would then produce more and hire more employees. But, in a new book entitled Think, Fast and Slow by Daniel Kahneman, suggest a different factor is at play. He describes how our judgment and levels of risk taking affects our behavior. The book presents a number of interesting experiments, conducted by Dr. Kahneman and his colleagues, to understand how people make decisions. Kahneman’s findings indicate our minds operate in two distinct ways: one is fast and emotional, while the second is slower, study and more logical. The former is more uncertain in its decision making and obsessive. The latter is slow in making choices. Each day we use these two forms of thought, shifting from one to the other, without even thinking about it. Situations determine our choices, but, just as often, external factors can stimulate one method of thinking against the other.

One chapter, entitled “The Engine of Capitalism”, will probably be of interest to business owners because it focuses on “the blessing and curse” of optimism. Kahneman’s studies show that people, typically, exaggerate their ability to predict the future. This leads people to believe their goals are achievable when, in fact, they are not even closely obtainable; in the same way, personal confidence leads many of us to become entrepreneurs when statistically a little over a third of the small business startups survive the first five years in operation; while, almost two-thirds of those who start a small business believe they will succeed!

A positive attitude does have advantages: it breeds endurance in the face of obstacles, it tends to enhance the chances you will be an effective leader that enables you to motivate employees and close deals. Entrepreneurs energize people to provide money and resources to expand and development new businesses, and create enormous growth in our economy. Without a group of positive thinking, risk takers, our economy would have less growth, our society would have less innovation, and our citizens would certainly have a lower standard of living.

All this is good, in small doses, which is why a variety of small businesses are beneficial to our country, the failures are small enough to be absorb by the economy; whereas, misguided optimism by large business owners or government executives, who use our money to invest in high risk projects that fail, cause extraordinary losses and negatively impact our economy. The point is: we recover from many small failures that are spread over the country-side. Whereas, one very large, complicated project can have a huge financial impact on our economy when it fails.

So, go slow, realistically evaluate your options, tackle projects in manageable proportions, and don’t believe everything you read or hear about yourself; stay optimistic in relationship to your capabilities and the limitation of your resources.

Creating an Effective Ad

Part 1 of a 2 part article.

Every person in business wants to increase sales, enhance product or service awareness, and improve their image. The trick, however, is to make your product or service out shine the noise of countless other advertisers competing for ad space, airtime, or web site. The following might help you in promoting your business.

Take time to think about the benefits your product or service offers, Identify your customers’ needs, expectations, and how much they know about your product or service. Consider the effectiveness of past advertising efforts, for example, which ads brought you the most customers, what was it about previous ads that appealed to them, what modifications would you make to previous ads, and, the kicker, what wording, graphics, colors, and customer interpretations were most effective in promoting your business?

The point is: You cannot force a sale through advertising without first considering customer needs. Your existing customers come to you or use your services because you offer something they need. It is as simple as that!

Advertising does not make sales; Understanding customer needs does

Advertising is very good at giving your company name and brand recognition through associating your ability to meet customer needs. Your loyal customers may not be able to explain their positive feelings, but they know they like and use your products or services.

Meet your customer’s needs and you will, in most cases, make a sale; However, It is not enough to just meet a specific need of your customer.

To get a person to use your product or service, you need to demonstrate, some how, you can meet their needs. This can be with the right message, an appealing offer, or, in some cases, a simple color scheme. Whatever it is that moves your customers to select your business, you must be able to understand and appreciate the key customer needs you meet that cause your sales success.

Once your customers’ needs are understood, DON’T OVER DO IT.

Meeting customer needs is a very effective way to increase sales and grow your business because you have established credibility in your customers’ eyes. However, meeting customer needs is like predicting the weather . . . it is always changing.

So, stay flexible and know you customers’ needs. At the same time, make sure you communicate your understanding of those needs as often as you can in as many ways as you can afford. Advertising does work, just use it effectively.

Setting the Right Price to Attract and Hold Customers

Pricing is a challenge because it must represent your cost of production as well as meet your customer’s value for your product or service. Typically, a business will set a selling price on either a value based or a cost plus based system. Market conditions dictate, which approach, is used. For example, to use a value based approach you need to set the selling price at a level the consumer is welling to pay because the product or service meets their needs (it has value). A value based method is practical in highly competitive situations since the customer has alternative suppliers of comparable services or products, while the costs of providing such a service or product various. The cost based approach is generally used when your competitors are operating from the same costs of production and the pricing is highly competitive.

Find the Costs

Finding the costs to provide your product or service is a critical first step. The process includes identifying your production costs; this includes fixed and variable outlays involved to offer your product or service. Rent, salaries, property taxes, insurance and any other expenses that remain constant are considered fixed costs, while variable costs include those expenditures that fluctuate with the number of products produced or services offered, and, may include raw resources, hourly wages, sales commissions, and other related costs. Generally, you would add up all of these various expenses to determine your product or service cost per unit sold. Next, you will want to establish the markup value of your product or service. This will require research and discussions with a number of people in your industry, trade, and community; your objective is to determine a competitive percentage of markup. Of course, a number of factors will play into the percentage of markup that you establish, and, even then, you will vary your price on occasion to meet the marketing needs you encounter.

Remaining Competitive

The most critical questions to be answered in establishing a selling price are your competition and the price you pay to produce the product or service you offer to consumers. Your competitive edge is always driven by the purchase price you paid to offer a service or product. In today’s world, this can mean other local venders, but, just as likely, it can mean large multi-state or even international companies, such companies have the ability to buy larger quantities of products or offer a wider range of services, thus, the potential to offer a lower price. In this case, you may have to adopt a market strategy that involves business practices that attracts customers for other reasons than price alone. This means to remain competitive you may need to depend more on service, location, or other strategies.

Remember to remain flexible

Remember, you can set different prices for different customers to take advantage of higher profit margins when possible and, alternatively, seek higher volumes when lower prices justify market penetration.
The point is remain flexible in your pricing policies by taking advantage of the uncertainties in the business cycles, stay alert to your consumers’ values of your business as well as your competitors. The guiding principle in setting prices is to focus on the amount of gross profit produced by the volume of sales in relation to operating costs. Thus, know your operating costs to measure your survivability in pricing your product or service, be aware of your customers’ needs, and be watchful of market trends to avoid any adverse changes that might affect your business.

How Adaptable is Your Business Model?

Good ideas help your business evolve.

In a market economy, variation and selection are always at work. New ideas are created by scientists and engineers, meticulous middle management in large corporations or daring entrepreneurs.
Failures are culled because bad ideas do not survive long in the market place: to succeed, you have to make a product that customers wish to buy, at a price that covers costs and beats obvious competitors. Many ideas fail these tests, and if management does not shut them down, a bankruptcy court will.

Trial and Error

Good ideas spread because competitors copy them, the staff leaves to set up their own businesses, or because the company with the good ideas grows. With these elements of variation and selection in place, the stage is set for an evolutionary process; or, to put it more crudely, solving problems through trail and error.
In a complex, changeable world, the process of trial and error is essential. That is true whether we harness it consciously or simply allow ourselves to be tossed around by the results.

Elements at Work

Most real-world problems are more complex than we think. They have:

1. The human dimension
2. The local dimension

Dealing with Complex Problems

First, seek new ideas and try new things. Second, when trying something new, do it on a scale where failure is survivable. Third, seek feedback and learn from your mistakes as you go along.

After an exhaustive study of businesses in the United States, 43 companies were selected as being excellent examples of successfully run enterprises. Out of this effort Tom Peters and Robert Waterman wrote "In Search of Excellence" to great acclaim in the early 1980’s.

Peters became one of the most highly recognized management consult gurus of the late twentieth century because of this work. However, after only two years, 14 of the 43 companies were in serious financial trouble. That’s a whopping 1/3 of the original 43 companies. To be fair the early 80’s were going through some very serious financial times.

Peters’ effort to identify the truly most outstanding companies in America fell short. Why?

The Ideal Hierarchy

Even an ideal hierarchy can backfire. The three elements of the idealized, decisive hierarchy: a “big-picture” view produced by the refined analysis of all available information; a united team all pulling in the same direction; and, a strict chain of command. Sometimes, even being able to check all three of these boxes can still product catastrophic results. The “ big-picture” information that could be summarized and analyzed centrally may not be the information that matters. A loyal, unified team can leave no space for alternatives perspectives. And, the strict chain of command can neatly suppress bad news from further down the organization before it reaches top management.

In an idealized hierarchy, a “team player” is an asset that does not disrupt an effective organizational objective, but they may not be as effective as allowing opposing views to introduce another perspective. Never confuse loyalty and expression of disagreement. Loyalty is valuable asset in an employee. As the owner, manager you need to judge the loyalty of your staff by very specific criteria. Expressions of disagreement are not necessarily one of them. Unanimous advice should be viewed with caution.

A strong team – a kind of family- can quickly fall into the habit of reinforcing each other’s prejudices out of simple team spirit and a desire to bolster the group. It is far better to more aggressive about demanding alternative opinions, exhaustively exploring risks, and breaking up your advisory groups to ensure that they don’t become too comfortable.

Don’t always rely on “big-picture” information all the time, focus instead on the specifics of the situation before you to solve a tactical or strategic problem.

It is not enough to tolerate dissent: sometimes you have to demand it.

It is simply impossible to know in advance what the correct strategy will be. That is why trial and error will always be a part of how any organization solves a complex, ever-shifting problem.

Eight Reasons for Customer Defection

Customers come and go for all sorts of reasons. It is unrealistic to expect customers to rely indefinitely upon one vendor or service company; we must accept that a portion of them will leave for a number of reasons. Market analysis of customer behavior has demonstrated eight specific factors that influence decision makers’ actions; six of these are controllable by you and your employees, and will be discussed further in the next post. For now, we will briefly explore each of the eight possible reasons customers switch from one business to another.

Price

This one seems fairly obvious, but for a variety reasons can be difficult to understand why a customer would choose someone over your product or service; especially, when, all things considered, you are both offering comparable items or services. Certainly, discounts, and such, will have an impact on customer behavior. Other factors play a role in pricing, too, for example, the economic level of the community, employment patterns, and mobility of customers. The last influence leads to our next reason for defection.

Inconvenience

Location of your business is critical in attracting and retaining customers. This holds true for you and your employees as well. If your client base is located at a great distance your travel time and expenses will adversely affect your ability to meet the customer’s needs. Equally, the distance customers must travel to acquire your products or services can negatively impact their decision to use your company.

Product Failures

Not too surprisingly, this is a major reason for customers to stop coming to your company completely. Quality control is critical in the opinion of most consumers. Your selection or use of products will have a direct impact on customer satisfaction.

Employee Responses to Service Failures

How your employees (and you for that matter) handle mistakes, shortcomings, or poor quality of a job performed will directly influence how your customers consider doing business with you in the future.

Ethical Problems

Fairness in your dealing with customers will always payoff in terms of customer satisfaction. Any sleight perceived by your customers can be cause for defection. In some cases, you or your employee may not even be aware of such negative perceptions because your business environment may not consider the implications of some of your company’s actions.

Involuntary Effects

Sometimes bad things happen for no good reason. Life is like that on occasion. Good luck and continue on as best you can.

Competition

Free enterprise has proven to be one of the greatest inventions of the modern world; however, it can cause us to stay up at night. If you have been in business for more than an hour, you know how your competition can influence negatively your customer base.

Service Failures

Delays in deliveries, misunderstandings, and a whole range of other mistakes fall into this category. Any one or another of these can jeopardize customer retention. In our next post, we'll explore various means by which you can overcome at least six of these reasons for defection, so hang in there! I am sure you already have experienced some the issues discussed above and probably have many suggestions of your own on how to overcome these problems. Please feel free to let us know in the comments how you would cope with these problems or any others that you have encountered.

Finding the Right Price to Attract & Hold Customers

Pricing is a challenge because it must represent your cost of production as well as meet your customer’s value for your product or service. Typically, a business will set a selling price on either a value based or a cost plus based system. Market conditions dictate, which approach, is used. For example, to use a value based approach you need to set the selling price at a level the consumer is welling to pay because the product or service meets their needs (it has value). A value based method is practical in highly competitive situations since the customer has alternative suppliers of comparable services or products, while the costs of providing such a service or product various. The cost based approach is generally used when your competitors are operating from the same costs of production and the pricing is highly competitive.

Calculate Your Costs

Finding the costs to provide your product or service is a critical first step. The process includes identifying your production costs; this includes fixed and variable outlays involved to offer your product or service. Rent, salaries, property taxes, insurance and any other expenses that remain constant are considered fixed costs, while variable costs include those expenditures that fluctuate with the number of products produced or services offered, and, may include raw resources, hourly wages, sales commissions, and other related costs. Generally, you would add up all of these various expenses to determine your product or service cost per unit sold. Next, you will want to establish the markup value of your product or service. This will require research and discussions with a number of people in your industry, trade, and community; your objective is to determine a competitive percentage of markup. Of course, a number of factors will play into the percentage of markup that you establish, and, even then, you will vary your price on occasion to meet the marketing needs you encounter.

A Competitive Edge

The most critical questions to be answered in establishing a selling price are your competition and the price you pay to produce the product or service you offer to consumers. Your competitive edge is always driven by the purchase price you paid to offer a service or product. In today’s world, this can mean other local venders, but, just as likely, it can mean large multi-state or even international companies, such companies have the ability to buy larger quantities of products or offer a wider range of services, thus, the potential to offer a lower price. In this case, you may have to adopt a market strategy that involves business practices that attracts customers for other reasons than price alone. This means to remain competitive you may need to depend more on service, location, or other strategies.
Remember, you can set different prices for different customers to take advantage of higher profit margins when possible and, alternatively, seek higher volumes when lower prices justify market penetration.

Remain Flexible

The point is remain flexible in your pricing policies by taking advantage of the uncertainties in the business cycles, stay alert to your consumers’ values of your business as well as your competitors. The guiding principle in setting prices is to focus on the amount of gross profit produced by the volume of sales in relation to operating costs. Thus, know your operating costs to measure your survivability in pricing your product or service, be aware of your customers’ needs, and be watchful of market trends to avoid any adverse changes that might affect your business.