Jim's Marketing Blog

Marketing ideas to help you grow your business

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Marketing 101: The race to the bottom

Race to the bottom

Without knowing it, many small business owners are engaged in a dangerous race to the bottom. In today’s post, I explain what’s meant by marketing professionals when we say race to the bottom, and why it’s almost always a terrible strategy for small businesses.

The Financial Times defines the race to the bottom as:

The situation in which companies and countries try to compete with each other by cutting wages and living standards for workers, and the production of goods is moved to the place where the wages are lowest and the workers have the fewest rights.

In small business marketing, we tend to use the term to refer to making sales or winning new clients, based on being the cheapest option. This is most common among commodity businesses. The ‘winner’ of the race to the bottom is the business that’s the cheapest at that time.

Some large companies use their financial muscle to work successfully with small profit margins. They have strategies in place, as the FT quote suggests, that allows them to compete on very low prices.

However, small business owners tend to just lower their fees (or prices), as a way to make more sales or attract more clients. They then find competitors do the same (see below) and the race to the bottom (the lowest price) begins. This small business scenario, is what today’s post is all about.

What does the winner get as their prize?

They get, wait for it, the privilege of building a client list of fee sensitive people, who will leave them the moment a cheaper provider comes along. It’s a high risk, low return strategy. It requires you to constantly look for ways to lower your overhead, cut corners and speed things up. All this, in an effort to attract the least loyal profile of clients in the world… those who switch from provider to provider, looking for the lowest fees or prices.

Why is such a high risk, low return strategy so popular with small business owners?

Simple: They see it as a fast way to attract more clients or make more sales. However, a look at the medium term picture shows how this can go horribly wrong.

Here’s what I have seen small businesses do over and over again:

  • They lower their fees (or prices) by 10% and see that they get a slightly better sales conversion rate.
  • So, they lower their fees by another 10% and see it improves sales even more.
  • Some of their competitors decide to do the same. Now, the race to the bottom is on!
  • That first business now needs to lower their fees by another 10%, because their competitors are charging the same kind of fees as them. Their fees are now rock bottom or very close to rock bottom.
  • After a while, they are working with clients or making sales, with very little profit.
  • If a better funded competitor then decides to undercut them, they have to try and survive on fewer and fewer clients, who are hardly profitable.
  • Alternatively, if their overheads increase and they have to start increasing their fees, all those fee sensitive clients they raced to win, start looking for the new, cheapest provider.

In the absence of an effective marketing strategy, it’s just too easy to lower your fees in order to get some fast money into your business. If this is something you are considering, please think about the medium term and longer term consequences.

PS: Here’s the best way I know, for you to grow a great business in a competitive industry, WITHOUT EVER lowering your fees.

15 Reasons to start blogging!

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So, why bother blogging?

Here are just 15 reasons, why I recommend you add a business blog to your marketing mix:

  1. Blogging is the most powerful marketing tool I have ever seen, used or studied. Period.
  2. Considering all the benefits of blogging, the financial cost is tiny. A self-hosted WordPress site can cost less per week, than a latte at your local coffee shop.
  3. If you turn up and blog regularly, you will also show prospective clients that you are reliable. If you show up regularly for years, it shows you’re durable too. Think about that… before these people even speak with you, they will already know you’re reliable and durable. That’s a huge commercial advantage.
  4. Blogging makes you a better communicator. It causes you to think, really think, about your message. Through repeat practice, you learn how to get your message across with greater clarity too.
  5. New prospective clients will be able to discover you and your work, as your blog posts are all findable, via social networks and search engines. Think about it… hundreds, maybe thousands of prospective clients can find your work each day, at the exact point where they are looking for answers.
  6. If you like the idea of helping others, blogging is ideal. It allows you to reach and help people worldwide.
  7. Blogging gives you a wonderful creative outlet.
  8. There is no ceiling on what you can achieve from your blog. Blogs have changed hands for millions of dollars.
  9. … and many bloggers have gained a high profile within their profession, thanks to the success of their blogs.
  10. As a direct result of blogging you can meet amazing people and make a lot of great friends.
  11. To blog regularly with fresh ideas, you need to feed your mind with rich, mental protein. An active blogger is an active learner too.
  12. If you work hard enough, for long enough, you can become one of the most influential voices in your profession.
  13. If you are passionate about what you do, and you should be, your blog gives you a platform to share your passion.
  14. With thousands of people sharing content, for every one person creating content, useful blog posts can spread like crazy via social networks. There are millions of people on Facebook, Twitter and Google+, etc., eagerly looking for useful, interesting content to share with their friends.
  15. Blogging is also a lot of fun!

What everyone needs to know about marketing automation

Everyone with a business, is in the people business.

It’s people who buy from you, recommend you and support you. It’s people who frustrate you, hinder you and waste your time.

At every point and on every level, it’s all about people.

Automate what needs to be automated

When it comes to business, we know that the smartest people automate all the stuff that should be automated, but they keep all the human elements of their business, human.

For example, thousands of people will receive this blog post today, via an automated email service. However, 100% of the people who hit the reply button on that email to contact me, will get a personal reply.

The danger of over automating your marketing

Sadly, an increasing number of business owners get this horribly wrong. They try and automate everything that can be automated. The challenge with this approach is that you can’t automate your way to success… despite what some marketing automation providers claim.

Successful marketing is about; people, relationships, trust, confidence and belief… none of which can be earned via software alone. Software should be used to enhance, not replace, the human element of your marketing.

In short: Use automation software for processes that benefit from it, but keep the human stuff, human.

How to break the cycle of working for clients who undervalue you

If part of your plan for next year is to work with better clients and higher fees, this information could be just what you need!

Money goes to money

Have you ever heard the saying, money goes to money? The idea behind that saying, is that people with lots of money find it easier to make even more money.

Interestingly, a significant chunk of the equation is not the actual money that wealthy people have behind them. I’m talking about how the mindset of wealthy business owners helps them acquire more and more wealth.

We see this mindset in play, when we look at how business owners think, regarding the clients they choose to work with and the fees they are prepared to work for.

Here’s what we see:

  • Those who feel poor, will take on almost any new client who comes their way.
  • Those who feel financially strong, will usually cherry pick who they work with. If they think someone is a bad fit or unprepared to pay what they are worth, they won’t work with them.

Under performing small businesses often struggle from year to year, because the business is run from a mindset of fear. As a result, they work for low fees and eagerly grab anything that comes their way. This then ensures they stay in that fear cycle, as they never earn enough to become more selective about who they work with or what they charge.

I have met with business owners, who have been stuck in that cycle for a decade or more. They work hard. They often offer just as good a service as those charging twice as much as them. Yet, their focus on fear causes them to undervalue their work and lower the bar on the clients they will accept.

How to escape the cycle

We have to start by understanding something fundamental. A wealthy business owner, would soon find themselves in trouble if they were to apply that fear based thinking to their business development. No business can thrive, working for peanuts and for clients who undervalue them and their time.

Here’s what your escape plan looks like, if you want to break free from this cycle:

  • Gather the courage to start being selective regarding who you are prepared to work with. This may feel risky, but the riskiest thing you can do is carry on working for clients who don’t value you or your time.
  • Offer the highest quality service you can. Look for ways to pump as much value into your work as possible. Craft an amazing client experience, so that hiring you becomes a pleasure for your clients… an experience they will cherish and want to tell their friends about.
  • Then, adjust your fees up to reflect all that great value you now deliver.

You need to do this before you become wealthy or you will find yourself stuck in the cycle.

Ironically, playing it safe, by working for low value clients for low fees is one of the riskiest things you can do. That’s worth remembering, the next time you accept a new client or quote a fee!

PS: Here’s some information about risk taking in business.

Do everything you can, with everything you have!

I was just thinking about a sign I used to have on the wall above my desk. I’d like to share the message with you.

It simply said: “If you get an idea that you believe has potential, do what’s required to make it work. You can’t afford untapped potential!

Getting an idea Vs Working an idea

Another way to think of a good idea, is to see it as an opportunity. In order to benefit from the opportunity, we need to work the idea. This means committing to do what is required in order for it to work.

Some of the best ideas never get the chance to fly, as they remain just an idea. They are either not acted on or they are acted on half-heartedly. They add to our banks of untapped potential.

You are an ideas person

You are a natural born problem solver. You generate ideas all the time. If you want to benefit from all that potential, all those opportunities, commit to working your best ideas… until they fly or flop.

Either way, you win:

  • If the idea flies, that’s great.
  • If the idea flops, take the learning from it and invest it in your next idea.

Just don’t allow your potential to be wasted. None of us can afford to leave untapped potential on the table!

How to get your passion and motivation back

I have a great question for you today: If your business was perfect in every way, what would it look like?

For example:

  • If you could hand pick your client list, who would you be working with?
  • If you could work from anywhere in the world, where would it be?
  • If you were earning enough from your business, to provide a lifestyle that would really excite you, how much would that be?
  • If you could partner in a business venture with anyone, who would it be?
  • If your typical working week was perfect, what would it look like?

The power of clarity

One of the key reasons people fail to achieve the business results they want, is that they have only a foggy idea of what (specifically) they want to achieve. They know they want to do better, but fail to really focus on exactly what that means for them, in real terms. By identifying and picturing in your mind, exactly what your ideal business and lifestyle would look like and how it would provide you with a vastly better quality of life, EVERYTHING changes!

Here’s why.

The word motivation comes from the fusion of two smaller words: Motive and action. The ability to take action increases massively, when the motive (reason) is clear and exciting enough to drive you forward.

Now, compare that kind of clarity to the vague way that many small business owners think about their business. They want a better month than last month. They want a better year than last year.  That kind of vague, foggy thinking is nothing like as motivating, inspirational or compelling as having an exciting, clearly visible picture of exactly what you want to achieve.

What next?

Take a look at those questions from earlier in this post. Jot them down and then write the answers to each one, in as much detail as you can. Make that “perfect future” the inspiration that drives you forward to the results your hard work deserves!

PS: By the way, if you need a little help getting started, check this out!

Photo: La Prima Donna

5 Simple ways to make your day amazing!

have a great day

Here’s an idea: Why not make today a day to remember?

Consider doing one (or more) of the following and just watch the kind of impact you create:

  1. Send a handwritten note of thanks, to a person who has helped you or inspired you in some way. The power of something as personal as a handwritten message is enormous.
  2. Send someone flowers… just because. This doesn’t have to be expensive. You can pick some wild flowers, wrap them yourself, add a card and deliver them in person.
  3. Write a blog post or article, which shares something that has been massively useful to you. If it was a website, include a link. That way, your readers will benefit AND whoever or whatever you’re recommending will get some great recognition. I did this with PicMonkey.
  4. Go to your primary social network and recommend a person or business, which you really appreciate.
  5. Contribute either some time or money to a charity that does great work. Short of time and money? Then do as I have just mentioned and share their great work with your social network or on your blog… or both!

One of the wonderful things about contributing in the ways just mentioned, is that it’s cyclical. It makes the people you are showing your appreciation to feel great — and it makes you feel great too. This makes you want to do it again… thus the cycle repeats.

Try it!

A heartbreaking email that every small business owner should read

I want to share something important with you today. It’s a heartbreaking email I received last year, from a reader.

He was a small business owner, who had to cease trading after 5 years in business, because of 2 critical errors he had made. As well as showing you the errors, I’m going to show you how to make sure this never happens to you.

The following excerpts are quoted, with the author’s consent, though they have asked me not to use their name. Here’s a section of the email, quoted unedited:

“Me and my wife quit our regular jobs in 2007 to start a business. We were excited and worked like crazy to make it a success. By mid 2011 we knew we were in trouble as our life savings were almost gone and the business was still making too little money to cover our overheads. We’d been dipping into our savings from the get go to make up the short fall from the business. By February this year we knew we had to quit the business and get jobs. Last week the business was closed for the last time”

He went on…

“Looking back I see we made two major errors that I’d like to share with your readers to stop them doing the same. First up, I was trying so hard to keep our costs down that I didn’t invest in the help we needed. I wanted our savings to last as long as they could so we hardly spent anything and ended up starving the business of the professional help that would have saved us. Second up, we were waiting for some big sudden sign to show we were screwing up but it didn’t happen like that at all. We didn’t go broke over night. It was a slow process which looking back had been happening for years. That’s what stopped us taking urgent action years ago.”

Failure doesn’t happen overnight

One of the reasons so many intelligent, hard working business owners fail, is that failure doesn’t happen overnight. It’s extremely subtle. It creeps up on you. It’s seldom the result of one cataclysmic decision, but usually the result of small errors, repeated often.

Here are just a few examples:

  • When you push your marketing at people, it hurts your business a little.
  • When you think you’re saving money by doing it yourself, rather than hiring an accountant, a marketing professional, a web designer etc, it hurts your business a little.
  • When you copy the social networking approach of your peers, making yourself almost invisible, it hurts your business a little.
  • When you can name the judges on the top reality TV shows, but you don’t know who the key people in your marketplace are, it hurts your business a little.
  • When you allow an amateur looking website / blog to make you look bad, it hurts your business a little.

Success doesn’t happen overnight

Like failure, success doesn’t happen overnight either. People want overnight success, which is why there are so many bullshit books, webinars and seminars that promise it. In reality, we know that business success takes time. It’s subtle. It’s seldom the result of one smart decision, but usually lots of smart decisions repeated often, over time.

Here are just a few examples:

  • When you learn how to attract the attention of your marketplace, so you never have to push your marketing at people, your business gets a little stronger.
  • When you decide to get the expert help you need, rather than try and succeed in the worst economy in living memory without it, your business gets a little stronger.
  • When you stop using social networking sites like a sheep and start building a highly visible presence, your business gets a little stronger.
  • When you take time to learn about the people who make up your marketplace, so you can help them overcome problems and embrace opportunities, your business gets a little stronger.
  • When you invest in a professional looking website or blog, which reinforces the promises you make in your marketing, your business gets a little stronger.

The link between failure and short term thinking

If you want a business to succeed in the medium and long term, you need to avoid making decisions based on the short term.

Short term thinking means you see money going out of the business as a bad thing, so you avoid it. People thinking short term are fearful of making an investment, even an essential investment as mentioned in the email earlier, because they see little difference between a business cost and a business investment. In reality, the 2 couldn’t be more different.

Keeping costs down is a great idea, but starving a business of essential investment, is like starving a plant of sunshine!

Short term thinking also leads us to look for short term answers. That’s why every scammy, bullshit filled webinar, ebook, software product and seminar – promises fast results or secret formulas to get rich quick. We have to be smarter than that.

In short: Business success requires a long term perspective. If you are not seeing the results you need, now is the time to take action.

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