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Common Marketing Mistakes

The price you pay...for not charging enough

It’s a fact: most small businesses charge too little for what they sell, and that’s because they’re concerned about losing market share to cheaper competitors.

But it's also a fact that relatively few customers make their “buying decision” based on price alone. Even better – it’s often far lower-down the decision-making process than you might think.

Sceptical? Think of the last time you went to the supermarket. How many products did you buy solely on their price? And how many did you buy because you’d seen an ad on TV, you liked the packaging, a friend had recommended it, you’d had a free tasting, there was a free gift, you prefer that brand and so on?

Setting prices is not just a question of matching or beating the competition. Rather than simply working out the basic cost and adding 50 per cent, work out where most of your sales originate and use that information to arrive at a fair price. For example, in many small businesses (especially service businesses) a lot of sales come from third party referrals, praising quality and the standard of service. In such a case, the business might use its good reputation to raise prices above those of its competitors.

Focus on setting the highest price that you can, and then spend all your marketing efforts on persuading your customers that you – or your product – is worth it; that there are other reasons that they should buy apart from the price. Don’t ignore the competition, but remember: it’s sometimes better to be better than to be cheaper.

Send out 1,000 leaflets and you’ll get 100 responses

Well…you can always hope.

Direct mail can be an extremely effective way of promoting your business. Forget people complaining about endless “junk” mail on the doormat: when it’s done properly, it works. We daresay it’s even worked on you before…

Low response rates are a fact of life - 1% to 2% can be considered a success and many businesses do a lot worse than this. Why? One reason is that they spend far more time on the content and design of the mailshot than on the distribution. The balance should be closer to 50:50. After all, if your mailshot doesn’t reach the right people at the right time, you may as well save the stamp and throw your expensive artwork straight in the bin – because that’s where it’ll end up.

How can you improve your distribution? For a start, consider ditching the franking machine when distributing your postcards or sales letters. A handwritten address to a named individual with a stamp is the most likely to be opened and read and if you're a business with a small number of high value clients then it shouldn't take long.

If you still can't imagine anyone taking the time and trouble to do this then hats off to Paul Smith, the fashion designer and retailer, who sends all his direct mail postcards in stamped, hand-addressed envelopes.

"There's no one here to take your call at present…"

As a prospective customer, don’t you just hate it when that happens? It's tantamount to saying “Hello, whatever we're doing at the moment is more important than dealing with you.” Customers much prefer to be answered by a human voice, even if it’s just to take a message. They’re more likely to wait for you to return their call if they think that someone, somewhere, is dealing with it.

These days, if you’re too busy to answer the phone - or if you’re out of the office a lot and it’s impractical and inconvenient to have your mobile phone going off every few minutes - there is a solution.

For about £50 a month you can hire a tele-answering company. Some of these offer an excellent personalised service, answering with your company name and responding as if they’re there in the office with you – “I can’t see her at her desk at the moment…” They will then forward the messages to you in the format of your choice – e-mail is popular.

The caller remains happily ignorant of the fact that the tele-answering company is in Newcastle, say, and you’re in Cornwall. Besides, studies reveal that people prefer northern and Scottish accents when dealing on the phone, so if you’re not blessed with such a voice, it’s an added bonus.

“For all I spend on advertising, I might as well throw the money down the drain...”

"Only half my advertising works, the problem is I don't know which half" - Henry Ford

There ought to be a rule that the word “advertising” has to be preceded by the word “effective”. If there were, then many businesses might spend as much time monitoring the success of their advertising as they do planning what and where to advertise.

So how do you measure the increase in sales attributable to a particular advertising campaign? And how big an increase in sales do you need in order to describe your ad campaign as “successful”?

A good way of measuring response is simply to ask your customers where they heard about you, especially those who phone or e-mail and who are clearly not passing trade. Ask politely and most won’t mind.

When you’ve got a reasonable number of responses, you can start assessing how many extra sales your ad is generating, and how much additional profit you’ve made. You can then examine whether or not the advertising has been cost-effective.

Obviously, you want to do more than just break even, otherwise what was the point of it all? A very rough guide suggests that the extra sales from each advert should be at least five times the cost of placing it.

Can't close, won't close...

OK – so your product is wonderful and your customers are hungry for it, but your sales are declining. Marketing, sales and promotional ideas are pouring out of you, but still they’re not buying. It may be time to review your closing techniques…

Closing is the last and most important part of selling - the time when you get the money, the cheque or the signature on the contract.

To some people, the act of closing comes naturally. To most, though, it’s a slightly awkward – even confrontational - situation. In the worst case, nerves take over and you talk around the subject without ever quite getting to the point (the point being “please sign here”). Often, customers will leave without the sale being closed and it can be tricky to identify exactly where a potentially promising transaction went wrong.

Closing is full of psychology and there are countless tips on how to improve your skills. Here’s one of our favourites:

Once the customer has agreed to buy something, complete the formalities quickly. People are very susceptible to second thoughts after making a commitment. (There’s even a name for this – “cognitive dissonance”- though we call it “customer changing mind”.) Try engaging them in discussion about something completely different, like the weather or sport, while you are processing their credit card payment. This makes it harder for them to change their mind. (There’s a name for this as well – “sneaky” – though we call it “good closing technique”.)

More pages

Page 1: The price you pay...for not charging enough
Page 2: "I daren't ask my customers what they think - they might tell me..."
Page 3: © Envestors 2008

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