By Keir McConomy
When you start a new business there are lots of people telling you to try this and that way of marketing, as though it’s the law. They tell you that you have to advertise or go to trade shows to get yourself known. But with figures showing that more than half of all new ventures in Britain close within three years of opening, if there is no return on these marketing investments within a fairly short time frame, then the chances are that you will run out of cash before you reach your first anniversary.
It all boils down to ROI…return on investment. Most people would agree with the idea that ROI is difficult to measure for many marketing activities. If that’s the case, then don’t do them! New businesses cannot afford to gamble their precious start up capital on things that ‘may’ work, and even established businesses need to see a return on their marketing expenditure if they are to achieve their targets and stay ahead of the competition.
As with everything, there is a smart and a not-so-smart way to get the most out of your marketing, so here are my top seven steps to achieving marketing ROI.
1. Is there a bottom line benefit?
Don’t be fooled by people who tell you that you need to advertise for awareness. This is a luxury of the global brand. As an SME or new business, you need to advertise to generate new business leads from your key markets. Brand advertising can come with time, but initially focus on getting the messaging and targeting of your adverts right. The key here is to monitor everything you do carefully — you need to build up an understanding of what works for your business and the style, techniques and messages that really have an impact on your bottom line. While it may be a nice idea to sponsor your son’s football team, will it bring in new business or just a load of muddy shirts every Sunday? Before investing in anything consider carefully what you want to get out of it and what, realistically, it offers.
2. Go for scalability.
Look at the marketing activity and ask yourself: if this works can I invest more and continue to get the same level of return, or will I be a victim of diminishing returns? Marketing is key to any growing business, but you need to justify your marketing spend and ensure that you are getting a good return on your investments. Equally, if you are onto a winner the law of product lifecycles means that you only have a limited window before the competition catches up or technology supersedes your service.
The secret is to keep your eye on the ball. Don’t sit back and think something’s worked so it will continue to work. Good marketing means continually monitoring and evaluating what you are doing, looking at how the return on your investment develops and keeping abreast of what else is happening in the market. Your marketing activity needs to grow and develop with you, supporting you at every stage of your launch and development.
3. Go online before you go offline.
It is amazing how many SMEs still do not take advantage of the Pay-Per-Click advertising on Google and Overture (Yahoo etc). This is a highly effective and manageable form of advertising, which offers excellent ROI so long as you are careful about the search terms you choose. The more specific you are, the cheaper the cost per click and the better the conversion rate.
For example, ‘accountant’ might cost £2 per click, but ‘accountant in Tamworth’ might only cost 10p per click and would be much more suited to your needs if you only operate in the Tamworth area! My own company does a step on from Pay-Per-Click which is Pay-Per-Lead, where rather than pay for each click to their site customers only pay for each genuine business lead they receive. If no leads are received there is nothing to pay — thus giving customers demonstrable ROI.
Online marketing spend increased by 70% to £1.4 billion between 2004 and 2005, so if you are still not taking advantage of online lead generation, you risk being left behind while your competitors race ahead of you. And with an estimated 4.3 million business enterprises in the UK at the start of 2005, an increase of 59,000 (1.4 per cent) on the start of 2004, competition is fierce.
4. Avoid long-term commitments.
Sounds a bit like a horoscope recommendation but that doesn’t make it any less valid. Don’t get into unnecessary long-term deals; as most of us know it’s easy to get suckered into a run of adverts or a fixed term PR contract that you just cannot get out of. The strategy might be failing, but you’re contractually bound. It seems to make sense, but if you lose your biggest client and all of a sudden cash flow is tight, then you could really use that cash to pay the staff or the rent. I remember a client once booking adverts on 100 London Taxi cabs. In a whole year he never saw his own ad once, despite working in London. No payback. No way out of the deal. A total waste of money.
Whatever the salesmen may say, long term commitments are best avoided, particularly when cash flow is tight.
5. Work to a plan and a budget.
The best way to avoid unplanned marketing activities with no certainty of ROI is to have a costed plan. If there was never any intention of advertising in Scunthorpe Business Weekly then you will have no problem telling the rep that it just is not part of the plan. Likewise, if people try and persuade you that if you don’t go to SME Expo 2007 people will think you have gone bust, then let them think that. It’s not part of the plan! Businesses that develop and use a marketing plan go on to outperform those that don’t by an average of 30%, underlining the importance of setting out what you plan to do, when and how much you will spend on it.
Set yourself clear, realistic and measurable targets and stick to your budget for each and every marketing activity. Poorly thought out objectives and knee-jerk reactions will only cause you problems. Just because a competitor starts advertising somewhere doesn’t mean you have to. The plan should give a clear indication of where your business will be in 12 months time and how you will get there — take advice and plan carefully and you should achieve it without exposing your business to soaring costs.
6. Don’t go bloodhounding.
You know the situation. You get a call and you are so glad someone wants to talk to you that you set off like a bloodhound without qualifying the prospect. The trouble is that many SMEs rely on cold call telemarketing where we convince ourselves the contact wants to buy our products or services. In truth the contact has probably little, if any, knowledge of the company, and has only agreed to a meeting with a small level of interest. Few people consider they may be dragging you from Scotland to Essex for a half hour general chat and a cup of tea if you’re lucky.
Far better is to get prospects to call you because they know what you have to offer and have a genuine interest in your services. If you need to make a personal visit you will at least know there is a likelihood of some business coming your way. The way to do this is to tailor your online and offline marketing to those markets that really matter, while using new business generation techniques that go beyond the traditional cold calling from bought in lists.
7. Network like your life depended on it.
It only costs a little to stay in touch said the tired old BT. And it’s true. Some of the best ROI marketing you can do is to start networking with old clients, former colleagues, schoolmates, prospects, suppliers…anyone else who knows you! If you don’t use your contacts to get word out about your business, then who will? It’s also worth remembering to ask them for referrals. They may not be looking for a direct mail agency but they may know someone who is, and by spreading the word you’re far more likely to pick up new business. Better still, get your entire workforce to build their own networks and get them to ask their contacts for referrals. Pay them for each referral if you need to. It’s amazing how much quick business you can bring in without so much as placing an ad in the Yellow Pages.
The key thing in running a SME marketing programme is to be ruthlessly honest with yourself. Ask yourself where your new business comes from, and then go back and do some more of what really gave you a measurable ROI. Don’t try and convince yourself it was the charity golf day that did it when you know very well it was the phone call to your old client or the £12 you spent on the pay per lead site, or even the 20p you spent on pay per click for the search term “Taxidermists in Towcester”.
Effective ROI in marketing for the SME is rarely glamorous but I thought you said you were in business to make money, not win beauty pageants.
Keir McConomy has 5 years in web marketing and is managing director of TheSeed.com, an automated web-based service providing genuine, pre-qualified new business leads.