Business Gtowth

Mastering the Three Engines of Growth

When it comes to growing your business, there are three essential engines of growth:

1. Paid Engine of Growth: Most entrepreneurs consider this the only engine of growth. Often this takes the form of paid ads on websites or advertising on T.V. to attract lots of eyeballs to your product or service. The more targeted the service is to your market segment, the higher the cost of the ad. The paid engine of growth could also include paying others to get customers. Paying for outside sales functions or commissioned sales are examples of paying others to get customers. Other times, the paid engine of growth is paying higher rent for locations with larger and more targeted traffic.

2. Viral Engine of Growth: The viral engine of growth is based on increasing awareness of your product or service by using your existing customers. The viral engine includes engaging customers as affiliates to help sell to their friends and associates. Pampered Chef is an example of a company that encourages its customers to host a party to help sell their products to their friends in exchange for free or discounted products.

Another version of the viral engine comes in the form of apps that are pointless without others in your network adopting them. Venmo, Voxer, and Facebook are examples where the more friends you get to use the app, the better it is for you.

When it comes to viral engines of growth you need to make their adoption free of worry or friction. Demonstrating a product to make it clear how to use it properly or making an app free and easy to download aid in the adoption process. See my previous post ”The Secret to Viral Product and Services” for more information.

3. Sticky Engine of Growth: Since it is cheaper to keep a customer than it is to acquire a new one, this engine is focused on maintaining low customer attrition so you only need to acquire a few new customers to continue to grow. Once you have a customer, it is necessary to keep them by making your product or service sticky based on its high switching cost.

Remember the days when your cell phone provider owned your phone number? Changing carriers made switching costs painful since you would have to contact everyone in your contact list to provide them with your new number.

Another example is chip manufacturers. Chip manufacturers help their customers design their chip’s functionality into their customer’s product, making it very difficult to simply go with another supplier. Employing the sticky engine of growth often means you can ask for higher margins since switching costs are paid for by the customer.

Which engine of growth do you employ and are there opportunities to employ one of the others more effectively?

Note: this article originally appeared at www.SteveBizBlog.com.

Target Market

What Is Your Real Market Potential?

When counseling clients or judging startup completions, one of the biggest swag figures I see is related to the size of the market they expect to hit. These numbers are often extremely large which too often causes startups to overspend pre-launch based on the overly inflated prospect of future sales.

In an effort to determine your product or services real market potential, it is advisable to follow the three step process many venture capitalists use to determine a product or service’s real market potential.

tam_sam_som

1. The first step in determining your real market potential is to ascertain the size of the Total Addressable Market (TAM). For example, if you were the Dollar Shave Club, your TAM in the United States would be the total male population less males under 17 that do not yet shave.

2. However, your TAM is an unrealistic target since you would never capture the entire market with no competition. Therefore, you have to also determine the portion of TAM that is the Serviceable Available Market (SAM), in other words, the market portion that you can more realistically reach with your anticipated sales channels such as direct sales, affiliates, or dealer networks.

To understand SAM, let’s look at ROHO Inc., the developer of a medical device for patients seeking relief from pressure sores we talked about in a previous post called “Four Business Lessons from the Sturgis Motorcycle Rally.”

ROHO Inc. knew their product could be extended to other markets, such as relieving sores from motorcycle seats. However, its established sales channels for medical devices was not a good fit for extending its product line to these new markets. Rather than invest heavily in establishing a new sales channel to expand into a potentiality lucrative new market segment of motorcycles, ROHO Inc. decided to sell their technology to HESS LLC. HESS LLC already had a sales channel in place in the motorcycle industry with its Danny Gray Seat Design Division.

Therefore, your SAM is a more realistic target than your TAM. However, the SAM is still an unrealistic real target since you will never have a total monopoly on your SAM.

3. Finally, you have to estimate the percentage of the SAM that you can realistically reach and stimulate to buy from you. This is known as the Serviceable Obtainable Market (SOM) or your realistic target market. Your SOM is the the most realistic fraction of SAM you can hope to gain based on your customer acquisition strategy.

In conclusion, it is not advisable to determine your TAM and then immediately assume you can capture a percentage, such as 1%, without doing further research to determine your SAM and ultimately your SOM.

Are you guilty of just guessing your market potential?

Business Planning

Business Planning Foundation – Begin With Strategy

Strategic Plan Sets the Foundation Annual Business Planning

Your company’s strategic plan creates a shared vision of what’s important to the organization and translates into a simple story about your organization’s future.

In a McKinsey Global Survey of more than 2,000 global executives, only one-third agreed that their corporate strategy approach represented “a distinct exercise that specifically addresses corporate-level strategy, portfolio composition issues.”

Increasing the time spent on strategy and involving more senior leaders in strategic dialogue makes it easier to stay ahead of emerging opportunities, respond quickly to unexpected threats and make timely decisions. An integrated PB&F framework links top-down, strategic targets to financial and operational bottom-up forecasts.

Key Questions To Answer When Preparing Your Strategic Plan
Mission –           

What is our purpose?

What do we do?

Vision –              

What is our picture of the future in three to five years?

Strategic Themes & Perspectives –        

What performance lenses should we use to evaluate results?

What are our focus areas?

What do we do better than anyone else?

What results do we need to achieve?

Objectives –     

What continuous improvement activities are needed to get results?

Strategy Map –

How do we create and improve value to customers and stakeholders?

Performance Measures and Targets –   

How will we know if we’re achieving the results we want?

Strategic Initiatives –    

What projects and programs will contribute to the desired results?

Note: this article was originally published at http://www.poewolfpartners.com. Follow Renita on Twitter: @RenitaWolf.

 

statistics

The Danger of False Marketing and Sales Statistics

Mark Twain made the following observation, which he attributed to Benjamin Disraeli, “There are three kinds of lies: lies, damned lies and statistics.” Let’s talk about the third type of lie, statistics, and how misleading statistics impact B2B marketing and sales.

According to truthpizza.org, “an obvious problem with statistics is that they can be simply be fabricated. Of course this could be true with any claim, but because statistics use specific numbers, they have a quality of authority about them, and we may be a little less suspicious than we would be for a more descriptive argument. Saying “83% of high school students admit cheating on tests” just sounds more authoritative than “most high school students admit they cheat on tests.”

Take for instance, the below chart which has been widely disseminated and quoted. It supposedly shows how a seemingly reputable organization called the National Sales Executive Association compiled data on how multiple contacts impacts sales close rates. The first time I saw this chart, I had a feeling that the stats are bogus – the data totally conflicts with our team’s experience with lead-to-revenue programs and metrics.

Misleading Statistics

Let’s dig into one of these statistics – 2% of sales are made on the first contact. Are you kidding me? There are many industries where making the sales on the first call is the norm so where does this 2% figure come from?

Of course it is important to follow-up on sales leads and be persistent, which is the point of this graphic. However, these statistics are made up and not based on any credible study. Adam Honing published a very good article about these false claims on Customer Think and an internet search will quickly show you that the purported organization called National Sales Executives doesn’t even exist. The problem is that people who are basing any of their marketing and sales initiatives on these lies pay a price when the reality turns out to be different than what the so-called stats indicated.

As another example, a business/life coach posted the following on her LinkedIn update: “Nine out of 10 people would rather die than change”. Really? Go ask the next 10 people you meet whether they would rather die than change. But I won’t be surprised to find other people quoting this fabricated statistic.

In regards to B2B sales, I’ve had two senior sales executives tell me that their teams close 50% or more of all qualified leads. Really?  Between my client-side and provider-side experience, I’ve probably run and measured several dozen lead-to-revenue programs and have never seen this level of proficiency. And in both of these instances the actual data showed that the close rate was below 20 percent.

And don’t even get me started on the companies that publish misleading data to sell their products – e.g. “According to an independent study, 92 percent of the people who take our weight-loss supplement lose 20 or more pounds their first month.” These fraudulent marketers know that gullible prospects hear what they want to hear and will discard common sense to buy the magic pill.

The following story, from a blog called Talk Money Café, shows how statistics can be manipulated: A mathematician and an accountant are in the same room for a job interview. The interviewer’s first question to the mathematician is:  “How much is $500 plus $500?” The mathematician replies:  “$1,000, of course.” The interviewer then turns to the accountant and asks the same question: “How much is $500 plus $500?” The accountant replies:  “Whatever you want it to be.” The interviewer then tells the accountant: “You’re hired!”

The moral of this story is to be skeptical of statistics – especially those that defy common sense and make your marketing goals harder to accomplish.

Note: this post first appeared at www.FusionMarketingPartners.com October 17, 2016.

Marketing

Quality Products Don’t Matter – Marketing Does

Most people believe that it is the product or service that makes a business successful. To those people, I say they are wrong. From my prospective, it is marketing that makes a company a success. Consider this example – did Starbucks invent coffee? No. Are they the only company that says they have the best coffee? Again, no. The reason why Starbucks is successful when many other coffee shops never expand beyond their neighborhood is MARKETING.

Building a quality product takes a distant back seat to building a quality marketing campaign. Of course, if you deliver an inferior product or service, it will catch up with you at some point when word gets out. However, if you make a superior product and no one has any idea it exists, you’re out of business.

Today, especially in the long tail economy, marketing an average product or service to the right person at the right time trumps a quality product or service marketed to the wrong market at the wrong time. Therefore, I contend that entrepreneurs need to focus on a strategy to attract the right customers at the right time over engineering a truly unique product of service. The field of dreams line “build it and they will come” only happens in the movies. Today, you need to build the path to the customer first and foremost.

Do you value a quality product or quality marketing strategy more?

Note: this post originally appeared at www.stevebizblog.com

 

Market Research

Market Research – 8 Strategies for Getting it Right, Quickly

I had a really good conversation with a business colleague who is launching his products into a new channel, with fresh messaging, pricing, etc. We talked about all the various ways of validating the concept before formally announcing it to the world. Like all entrepreneurs, he wanted to know that his chances for revenue and profit were high before making a larger commitment. Specifically, he wanted to know the following before launching into the new channel:

  • Potential size of the market
  • Best target segments
  • Details of the offering
  • Most appropriate keywords
  • Pricing options

My friend’s first instinct was to do traditional market research activities like focus groups and telephone/online surveys, supplemented by tools like SIC code analysis. However, my caution was that these types of tools — while instructive in the qualitative sense — are not that precise when it comes to answering the real question: Will people/companies spend money on a particular offer, and if so, how much? The key problem is that market research is based on the theoretical (e.g. would you buy this) and not the practical (sign the contract).

After being involved with hundreds of product launches in my career — some backed by heavy market research and others thrown into the market based on little more than gut instinct – I can find no correlation between the amount of time and money spent on pre-launch research and the degree of success enjoyed by the product.

According to Product.com, about 85 percent of new consumer product launches fail, and these are some of the most researched types of products on the planet. One other notable point from Product.com is that products often fail because managers become too ego-involved with pet products and overestimate their chance of success. Best to get the ego out of the process. However, there are exceptions to this rule, such as when analysis showed that the Sony Walkman was going to flop in the marketplace. However, Sony Chairman Akio Morita overruled his lieutenants and created a massive revenue stream. Steve Jobs was another founder who relied on his gut more than market research.

Even when you do a lot of research, you can still get it wrong: the market shifts, a competitor outflanks you, the economy crashes, etc. All this is not to say that you shouldn’t try to validate your idea before launch – of course you should. But please do this in a way that minimizes your costs (time and money) and maximizes your speed to market.  Here are a few ideas on how to accomplish this:

  1. Ask people who are already selling something similar. Your direct competitors will probably not talk to you, but those with complementary products or who are in non-competing geographies may give you great information.
  2. Query people at community share sites like Quora.com or Reddit.com. These are open business forums where people answer questions and provide input on subjects of interest.
  3. Crowdfund your idea. This is more of a long shot, but there have been notable success stories of companies launching (and pre-selling) products before they were ready for market.
  4. Take advance orders. What a great way to validate your product – offer it for a discount for pre-ordering. This is definitely a confidence builder for both product manager and CFO.
  5. Run test ads (e.g. pay-per-click). More companies than you realize actually run ads before the product is available. There are ways to do this without offending potential customers.
  6. Talk with people who bought a competitive product or service. While you may not have a short-term sales opportunity with these people, their opinions are valid since they actually made a transaction.
  7. Check out which books people are buying on Amazon that are related to your business area. This will give you a good idea of what the current hot buttons are and perhaps provide you with some messaging strategies.
  8. Do online keyword analysis to determine what terms people search on to find a similar product or service. Look at your competitors’ — as well as your own — notions of the motivating benefits and/or pain points.

By the way, LinkedIn can be an extremely useful tool in target segment sizing as well as product validation and message testing. There is much more to say about this, so I will save it for a future blog post.

Note: this article first appeared at Great B2B Marketing.

Business Adopter Chasm

The 5 Categories of Adopters

According to professor Everett Rodgers in his book Diffusion of Innovation, there are five categories of adopters:

1. Innovators (Technology Enthusiasts) – These individuals represent about 2.5% of users and are willing to take risks on a new offering. Generally, they have a high social status and are often considered mavens. They have a high degree of financial liquidity to absorb failures and a high risk tolerance that allows them to adopt new technologies that may ultimately fail. They are connected socially to engineers and technology and they often interact with other innovators.

2. Early Adopters (Visionaries) – These individuals represent about 13.5% of users and are opinion leadership. Early adopters have a high degree of social status that allows them to influence others. They are more likely to spread the word than innovators with their followers. They are a bit more discerning in their adoption choices than innovators as a way to help them maintain the central communication position they enjoy.


Innovators and early adopters are primarily focused on technology and performance. A sort of chasm exists between innovators/early adopters and other adopters since the focus of other adopters is on solutions and convenience rather than technology and performance


3. Early Majority – These individuals represent about 34% of users and adopt an innovation long after innovators and early adopters since their focus is about solutions and convenience instead of technology and performance. A major pivot is necessary to refocus the marketing message to cross from early adopters to the early majority. While the early majority has above average social status and contact with early adopters, they seldom are opinion leaders.

4. Late Majority – These individuals represent about 34% of users and adopt an innovation much later in its maturity cycle. Late majority individuals approach an innovation with a high degree of skepticism and adopt the innovation only after the majority of society has already accepted it. The late majority often has little financial liquidity and are not in a position to influence others.

5. Laggards – These individuals represent the final 16% of users, and they are dead last to adopt an innovation. Laggards typically have an aversion to change, tend to focus on “traditions,” and generally are only persuaded to adopt a technology by close friends and family.

To achieve success, a business must first run tests with innovators and early adopters to refine the product offering. Then they need to run additional tests with the early majority to find how best to enter the mainstream. Each of the five categories of users requires a different marketing approach to win them over.

Do you consider the unique attributes of the five categories of adopters as you market and grow your business?

Note: this post first appeared at http://www.stevebizblog.com.

Sales and Marketing Fix

12 Quick Sales and Marketing Fixes

I write a lot about curing the chronic conditions of sales and marketing, but today will address the acute condition — when you need leads and revenue quickly. Here are 12 tactics to get you started:

  1. Stop doing what doesn’t work. Forgive me if this sounds blindingly obvious, but the fact is, inertia is a powerful force. We sometimes get caught up in our routines – even when they don’t produce such great results.
  2. Rebrand or reposition. I am not talking about a total rebrand or reposition here (which addresses the chronic condition), but rather modifying the messaging to match the needs of a particular target segment.
  3. Remarket to past prospects. There may be gold in your opt-in contact list, but you need to get out your shovel and mine that gold.
  4. Borrow an idea from your competitor(s). You may have competitors with large budgets and lots of marketing people whose entire goal in life is to take business away from you. Why not pay them back by borrowing one or more of their best tactics and modifying to your unique needs?
  5. Make a new offer. If your old standard offers are not working, try something entirely different. Do a drawing. Conduct a survey. Buy prospects pizza if they attend your lunch event or a coffee gift card if they talk to you in the morning. Test new offers until you find one or more that work.
  6. Send out a press release (or two). Although they are more of an awareness tool than a lead gen tool, press releases are a fast and inexpensive way to get the word out. And no, “My product is the greatest thing since sliced bread,” is not a proper subject for your release.
  7. Do 20% more. There are two major ways to improve marketing and sales productivity – do what you do better or do more of it. Sometimes the quickest fix is to focus on quantity.
  8. Measure and refine. If you aren’t measuring actual vs. anticipated results, you are likely not going to get better performance. I will be covering this topic in my upcoming webinar, How to Eliminate the “Promise vs. Reality Gap” of Marketing Automation.
  9. Incentivize your sales force. Smart sales managers know about the power of selective incentives to drive short-term gains in revenue. As one of my favorite CSOs often reminds me, sales reps are coin-operated — they go where the money is!
  10. Get rejected. Sales is both a quality and quantity game. If you are not being rejected often enough, you are probably not talking to enough potential prospects. When your revenue numbers are anemic, make sure your reps increase their activity at every stage of the sales cycle (e.g. do 20% more as mentioned above).
  11. Ask your prospects questions and then act on what they tell you. Here are four of the best questions:
    • What are you doing that is working?
    • What are you doing that isn’t working?
    • What is the one improvement that would add most to your success?
    • What does your ideal situation look like?
  12. Hire professionals. This may be a bit self-serving since my company does outsourced B2B marketing, but the fact is, those of us who have practiced these tactics hundreds, even thousands, of times usually have a good track record when it comes to getting results.
Clone Business

Are You a Clone Business?

Every day, entrepreneurs invest huge amounts of time and money to build what they think is a better mousetrap. However, all too often entrepreneurs struggle to articulate how their value proposition is fundamentally different. While many businesses make minor tweaks, they are fundamentally what I call clone businesses.

While there is room in the market for these businesses, clone businesses are just another participant in a red ocean where margins are frequently squeezed to the breaking point for all but the best managed businesses. Clone businesses with little differentiation from their competitors (such as janitorial companies, drywall contractors, etc.) essentially hang their success on the belief that other business owners are incompetent. They are banking on everyone around them being “worse than them” rather than being “better” in some new way. When you are a clone business, you are a commodity, and when you are a commodity, the only real point of differentiation is your price. Price is a poor value proposition as there is always someone out there willing to undercut your price and drive themselves out of business faster than you.

Even a business that entirely transforms an industry and is truly disruptive often is not radically different. For instance, look at the business and economic model of a mini mill that uses recycled steel vs. iron ore. Another example is a cell phone company that uses wireless transmission vs. a landline phone company. In both of these examples, there is only a few degrees of difference from their mainstream competitors.

Other examples include Uber and Airbnb. Uber built a disruptive taxi business with the simple idea that the driver didn’t have to be a taxi driver. Airbnb built a powerful accommodation business on the premise that the room you stayed in didn’t have to be a hotel room. They took what had gone unquestioned and questioned it.

Sakichi ToyodaToyota Motor Corporation’s Sakichi Toyoda developed a technique he called “The 5 Why’s” during the evolution of the automakers manufacturing methodologies. Successful entrepreneurs dare to apply the 5 Why’s to various aspects of their business model to uncover the substantive few degrees of difference that will take them from the red ocean to their blue ocean.

Daniel Burris, the author of “Techno Trends,” says, “The future is already invented.” What he meant by this statement is that most successful businesses simply take a practice from one industry and apply it to their own.

A good example of this principle is Airbnb. Airbnb took the existing hotel and B&B reservation system and applied it to the private home rental market. Most of the core business is the same but just has a slight tweak.

What questions can you ask that will convert your clone business to the next Uber?

You Differential Castain

The “YOU Differential”

There are so many things  that could be considered a competitive edge, but unfortunately, they can also be duplicated.

We’ve seen this with technology, chains of stores that once dominated the market, and even companies that claimed to have the lowest price . . .

Until someone else came along and found a way to do it quicker, better and cheaper.

Here’s A Crazy Thought . . .

Are you offering YOU as a selling point?

I’m talking about your “know how” experience, creativity, awesomeness etc.

When you really think about it, unless your competitor has wicked cloning skills, nobody else can offer YOU?

4 Simple Ways To Do It

  1. You have to have the balls to say it. Most don’t!
  2. You have to say it in a way that resonates with your prospect! Don’t ever underestimate the “packaging” of your words and phrases.
  3. You need to get them to visualize it.

Why? Because you’re dealing with something that’s intangible and intangible things are easier to comprehend when you make them TANGIBLE.

One thing you could do, is include your bio (include your photo too) in with your proposals or price quote.

What else could you do to make YOU more tangible?

NAPA Auto Parts Rocks This!

Have you ever seen the NAPA Auto Parts commercial, where some dude is making a purchase, and the guy behind the counter says, “And with your order you also get this” and he places a can on the counter. The can says “NAPA Know How”.

He goes on to explain that the “Napa Know How”  is all the experience,  advice and tips that’s included with the purchase.

In that crazy moment, they gave us a visual of something that is otherwise intangible.

They also get a gold star for having the balls to say that to a customer;

Most sales reps feel that the statement is unnecessary, and that it is always implied, but that’s a huge mistake in my book!

Last, but not least, you really have to prove it, otherwise you really aren’t doing much, to move someone off the fence of indifference.

In fact, without the “evidence” it just sounds like you’re saying a bunch of cute sh*t you read on someone’s sales blog.

Let’s go back to that idea of including your bio.

One of the things I do with my bio, is I include several testimonials from my clients as a form of “evidence”. It sort of answers the question “Who says so besides you Castain?”

What can YOU do to prove your “know how” and sheer awesomeness?

I mean, if YOU are included with the purchase, how can you get your prospect to see the value in the “YOU Differential”?

Was This A Valuable Tip?

Then you should absolutely, positively, join us for our next webinar on August 17th

It’s called “How To Dominate In A Competitive Environment” and we’re going to be taking a much deeper dive into the tip I shared today.

Here’s What You’ll Gain By Joining Us . . .

15 Ways To IMMEDIATELY Set Yourself Apart and Position Yourself To Be The Front Runner!

What To Say/Do When Your Prospect Wants To Take 3 Bids.

5 Ways To Keep Your Prospect Engaged and Focused On YOU; Even Between Meetings and Phone Calls!

How To Maneuver Your Competitors Into A Defensive Position, Without Badmouthing or Getting Dicky!

How To Competitor-Proof Your Book Of Business

You will also learn how to create propinquity (go ahead and look up that word, I had to) so you can ACCELERATE the “courtship”!

Click HERE (or the banner below) to learn more, and to reserve your seat for this important online training session.

Author Bio: Paul Castain is founder of Castain Training Systems. Prior to this, Paul was the Vice President Of Business Development for Consolidated Graphics as well as the Director Of Corporate Solutions Sales for Dale Carnegie & Associates. Over the last 30 years, he has trained and mentored over 10,000 sales professionals, written sales training content for several Fortune 500 companies and is the author of Paul Castain’s Social Networking Playbook,  Castain’s Sales Playbook and The Sales Playbook Podcast on iTunes.