The primary reason why most of the small businesses and start-ups fail to grow quickly is because they do not have an effective marketing plan to attract customers and grow their sales and profits.
In his new book Marketing Success Formula, Rajesh Srinivasan, a Marketing strategist has introduced a 4-step formula which can be applied in any market to grow a business successfully without wasting time and money on unproductive advertising.
Step: 1 Choose a Specific Target Market
The first step for successful marketing is to know ‘who your target market is’.
An ideal target market is a set of people who are going to get benefitted the most from you.
You can create an Ideal Customer Avatar based on these three segmentation strategies:
1. Psychographic (Based on their desire and pain points)
2. Behavioral (Based on their usage habits – commonly classified as 1) Heavy users 2) Occasional users and 3) Passive users
3. Demographic (Age, gender, income, profession, marital status)
Everything in the market is sold based only on two things: Extreme pain and desire.
So, give more importance to Psycho-graphic and Behavioral segmentation variables because it directly addresses the innate needs and preferences of a target market.
You also need to choose a specific target market;
– Instead of being a Dental Doctor, you can be a Cosmetic Dentist
– Spiritual tour operator rather than a generic Tour operator
– Social Media Marketing Consultant instead of Marketing Consultant
We pay more to the specialist than the generalist.
So choose a specific target market by identifying their pain point or desire. You can use this insights to craft a better Unique Selling Proposition which is step no.2
Step 2 : Create a Unique Selling Proposition
What is a Unique Selling Proposition?
The concept of USP was first developed by a television advertising pioneer, Rosser Reeves, in the 1940s. In his book, Reality in Advertising, Reeves has presented the three basic rules for an advertisement that summed up his ideas about the USP.
Rule 1. Each advertisement must make a proposition to the consumer—not just words, product puffery, or show-window advertising. Each advertisement must say to each reader: ‘Buy this product, for this specific benefit.’
Rule 2. The proposition must be unique and different from the competition.
Rule 3. The proposition must be strong enough to move the masses, i.e., attract new customers as well as convert potential customers.
Based on this understanding, he created ads for his clients with USP, and grew their sales multi-fold.
Some of his USP ads that produced stunning results were:
Anacin (1950s) – The USP was Kills Headaches Fast.
For M&M (a chocolate company), he rolled out a USP ..Melt(s) in your mouth, not in your hand’.
The USP should also answer this important question: Why should someone buy from you instead of your competitors and address the pain points of the customer.
A great USP will help you to overcome the price war, create better ads, break the media clutter and provide greater pull and high return on investment from your advertising efforts.
Step 3 Choose the Right Media Strategy
Marketers primarily advertise for two reasons. It is important to understand the distinction so that you can define your marketing objectives to achieve results.
1. Direct response advertising
2. Brand advertising
Direct response advertising (or direct marketing) is a kind of marketing that elicits a specific, measured response resulting from a consumer’s direct response to a marketer. Direct response marketing is designed in such a way to facilitate a call to action.
Brand advertising is all about creating the right perception about your product/service in the minds of the prospective audience. The idea is to create a brand identity or imagery which will aid a future transaction. It primarily focuses on creativity and imagination.
Which type of advertising should you use?
Coca-cola, Pepsi, Nike– these are some of the brands which heavily advertise in the mass media like TV and outdoor. If you observe, these are all commodities which people consume for day-to-day use. These products are also low involvement purchases, where the cost is low, and people don’t do much of the research to select the product. These products are for mass populations. So it should reach every one of them. Doing targeted advertising is difficult.
If you choose to carry out brand advertising, you should have deep pockets and be willing to spend considerably on advertising continuously.
Most of the Small and Medium businesses fail because they imitate the advertising style and pattern of big brand marketers.
So, direct response advertising is the best alternative for Small and Medium businesses because it measurable and can help you to generate revenues immediately.
If we link the advertising campaigns with the consumer behavior and insights, it will produce great results. Customers tend to take more time when buying a high-involvement product like real estate, cars, insurance etc., so in this case, the campaign approach should be more towards educating the customer and clarify all their doubts in the buying stage.
These three steps i.e choose a specific target market, craft a USP for the market and identify the right media strategy to deliver your marketing message will help you to attract the customers without wasting huge money on advertising.
Step 4 : Sell More to Your Existing Customers by Leveraging on Customer Lifetime Value
Smart marketers use a model called Customer Lifetime Value to understand how a long term customer relationship will impact the profitability.
Customer Lifetime Value is an estimated money value of a customer based on the time-frame he/she stays with a business.
Most business owners calculate the Return on Investment (ROI) based on a one-time customer acquisition cost and value of the transaction. Fred Reichheld, the customer loyalty expert also observes;
• Acquiring a new customer can cost 6 to 7 times more than retaining an existing customer.
• Businesses which increased its customer retention rates by as little as 5% increased their profits from 5% to a whopping 95%.
Advantages of focusing on your existing customers:
1. As they spend more money on your products they increase the sales and profits of your business.
2. Happy customers spread the word and refer people.
3. During tough market situations, your existing customer base helps you survive the downturn.
4. The cost to sell (advertising expenses) to them is low as they already know about you.
5. Trust factor will be high, and further sales will happen effortlessly.
6. You can create tailor-make your offers as their requirements and pain points are already known.
This step is critical because without leveraging on customer-lifetime value you can increase the revenues and profitability of the business.
These 4-step marketing formula will help the start-ups and other businesses to strategize their marketing and enhance their sales and profits.
This article was originally published in CoFounders Town – an online business media for entrepreneurs.
About the Author;
Rajesh Srinivasan is a passionate Marketing & Growth Strategist and Author of the book ‘Marketing Success Formula’. His mission is to help companies grow their business without wasting huge money on advertising and other unproductive marketing tactics. He is an alumnus of Indian Institute of Management, Lucknow and actively speaks at various business forums and events.