Marketing when the client is your competitor

Marketing Strategy Competition

Marketing Strategy Competition

Education is the first step if you’re competing against the Do-It-Yourselver

In August last year everything suddenly came together for me. In a period of 6 weeks I signed up 7 new clients. I was very excited. Finally, after all the years of pushing and pulling, trying every approach under the sun to market myself to my target clients, it suddenly all fell into place. I even found myself starting to get concerned how I might handle things if the deluge continued.

But I needn’t have worried. Since then it’s gone back to drought. I’ve had virtually no serious inquiries in the 7 months or so since then.

Back to the drawing board.

I’ve written before that business is really simple (on my blog, and in this article in Linkedin Pulse) and that for business to succeed we must only do two things:

  1. Do great work
  2. Make sure lots of people know about it

And the thing is, I do do great work (my clients tell me so frequently and I have lots of glowing testimonials here for example) and increasingly, lots of people do know about me. And yet, after 12 years I continue to have these lengthy drought periods.

Honestly, It’s doing my head in every now and then.

I’m reminded, that sometimes, things aren’t quite as simple as those two time honoured rules imply. If you have a blocked toilet, or you want to go to a restaurant, or buy a fridge, a car or a home, those two rules apply without exception. All that the marketing and sales strategies of the plumbing company have to achieve, is that the client is convinced that this plumbing company will fix the blocked toilet quicker, better, cleaner, friendlier or cheaper than any of the other plumbing companies out there.

But there’s a third secret

But things get a little trickier if you are an architect who designs and manages renovations for home owners, or an HR consultant who helps small business owners manage staffing and recruitment, or a PR agent who helps small business owners gain publicity, or an SEO consultant who helps small business get found on Google, or a wedding planner who helps people have a great wedding. If you are a professional like that you have a third thing you must do.

Not only do lots of people have to know about you, you also have to convince your prospects that hiring a professional is much better than, doing it themselves, DIY. Your services cost money over and above the actual thing they want doing. Recruitment services for example can easily cost an additional 10% on top of the wage of the new employee. The PR agent might cost you $3000 per month or more. The architect might charge upwards of $25,000 on top of the build-cost of the project.

Your client is your competitor

You’re not competing with other professionals, rather the first competitor you have to face is the actual client. The client needs to be convinced that they really shouldn’t go DIY. They shouldn’t try and manage their own renovations, run their Facebook advertising campaigns, organise their own wedding, or find and hire a new employee.

I strike a similar issue with some of my potential clients. Most small business owners think they ought to be able to do it themselves. To go looking for help from someone like me, can be a significant investment and can feel like admitting that they’re not upto the job of being a business owner.

Nothing is further from the truth of course, my most successful clients have always been the ones who have no hesitation in asking for help, but it’s often a hurdle I have to overcome with small business owners.

Timely reminder

The recent drought has reminded me, that the first marketing step for people like the architect, the PR agent, the wedding planner and myself, is to educate the clients.

The PR agent has to educate his clients that having a PR agent (not necessarily him personally) take charge of gaining publicity for the client is vastly more effective than DIY. The architect has to educate her clients that engaging an architect leads to much better renovations than DIY. The wedding planner has to educate her clients that the wedding is going to be so much more fun when a wedding planner is running the show than DIY. And I have to educate my clients about how a business coach can help transform your business, rather than DIY.

I’ve actually known about this issue for a long time, but forgot over the past few years. It’s time to focus on education again. In the next months I am going to create a bunch of case studies and stories in article and video form to help small business owners understand that engaging someone like me (not me specifically) can transform their business and their lives.

I suggest that you think about the question as well: Who is your greatest competitor? If it’s actually the clients themselves, you should change your marketing strategies to focus on education first… I promise you.

For more resources, and reading on strategies for growing your business follow this link to the first of The 7 Big Questions that all small business owners want answered

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Competition, Growth and the Red Queen

competition and growth

competition and growth

We must all become believers at the Church of Gross Profit

Tracey launched her business about 4 years ago, and in that time she’s built something quite special. Tracey’s business sells a unique home delivered fresh food solution online for busy professionals who want to have a healthy balanced diet that tastes great as well.

Tracey’s business model is in fact so successful that it attracted not only growth but competition. Entrants copy what she’s been doing so well for the past 4 years. Some of those competitors are trying to compete on price, some are offering delivery to different areas of Sydney and others are offering different payment models.

Tracey is annoyed, she’s worried and she’s determined. Annoyed that others are stealing her ideas, worried that they’ll kidnap her customers and determined to fight the bastards. Good for her, and I’m going to fight right alongside with her and teach those upstarts a lesson they’ll never forget.

Good news and Bad news

As always, there’s good news and bad news: The bad news is that it seems that some of these bastards have actually gained a foothold in Tracey’s market, but the good news is twofold:

  • The bastards are demonstrating that there is room in the market. It’s clear that there are a lot more people who want what Tracey has to offer than she might have thought.
  • The bastards are testing some new ideas that Tracey herself has been considering for a while, but now those ideas are being tested free of charge or risk to Tracey’s business.

Tracey’s knee-jerk temptation is to attack. And the obvious attacking strategy is to meet the competitors head on and offer the same things they do. One of those things revolves around delivery options. Tracey’s products are delivered for a flat fee, by courier, on the day of ordering to a limited number of areas of Sydney. It has always been a core principle of Tracey’s, to keep the whole thing super simple. A flat delivery fee fits that principle. The flat rate means the delivery has to be restricted to certain areas of Sydney, or Tracey can’t maintain her minimum margins.

Same day delivery everywhere

But one of the new upstarts is offering same day delivery everywhere in Sydney and Tracey feels she needs to match the competition — that flexibility.

But I’ve advised her against doing so, for one reason and one reason only:

Buying growth always leads to disaster.

Sure, it would be nice to move into the untapped regions of Sydney, but Tracey would only be able to do so by paying a lot more for her deliveries. She’s costed the various options and her delivery costs to those new areas will increase by about $2 per item. $2 Doesn’t seem like much when the average price per meal delivered is roughly $30. But, the fact is that her current Gross Profit Margin (profit per meal) would reduce by 33%. At the moment, she makes about $6 gross profit per meal. With an increase in courier cost of $2 per meal, she would suddenly only make $4 per meal delivered. Doing that spells disaster, as sure as God made little apples.

Not long ago we updated our breakeven calculations for the business and we worked out that at a certain level of sales, the Gross Margin on each item sold had to be at least $5 to be able to break even. At a Gross Margin of $4 per item, Tracey would need to sell 25% more meals just to break even.

The Red Queen never stops running

It’s what someone recently referred to as The Red Queen Problem.

The Red Queen being one of the Queens in Alice in Wonderland who says:

“My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”

In effect what Tracey would be doing by delivering to new areas at the cost of her minimum Gross Margin is running harder, but standing still. No doubt Tracey would be selling more meals if she offered same day delivery to other areas, but in all likelihood, she’d make less money than she is now, she might even lose money. The profitable areas of her business would be subsidising the unprofitable areas and if there was ever an unsustainable way to grow a business, that’s it.

Growth is irrelevant. I’m not sure who ever made growth such a focus in business, but he (and it’s guaranteed to be a he, btw) should have been strangled at birth. The blind focus on growth that we are told to chase in business is crazy. Successful business owners, business owners that build Great Small Business that are Fun and that stand the test of time are devoted believers at the Church of Gross Margin.

I have no doubt that Tracey’s business will be a Great Small business that stands the test of time. Building Tracey’s business model is much more complicated than it looks and consistently making money in this business is a tough  challenge. I’m sure that some of those new bastards are not making money at the moment and that they’ll fall over soon enough. One or two of them might get established and survive, but it’s clear the market is big enough and they’re going to be driving Tracey to innovate and come up with new solutions and new approaches to doing things and that’s healthy.

But buying customers at the expense of Gross Margin, that’s a disaster… I promise you.

For more resources, and reading on strategies for growing your business follow this link to the first of The 7 Big Questions that all small business owners want answered

FREE eBook: The 10 Truths for Making Your Business Grow

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