Marketing tips, marketing help and advice

It’s a trap! The race to the bottom

November 14, 2018 by Jim Connolly

Photo: Shutterstock.

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.

Race to the bottom: What does it mean?

In 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 / lowest priced at that time.

Some large businesses use their financial muscle to work successfully with small profit margins. They have deals available to them, which smaller businesses can’t access. This allows larger businesses to compete in your marketplace, profitably, with extremely low prices (or fees).

However, small business owners tend to just lower their prices, as a way to make more sales or attract more clients. They then find competitors do the same, as you’ll see in a moment, and the race to the bottom begins.

This small business scenario, along with a better alternative, is what today’s post is all about.

The race to the bottom prize?

The winner gets, wait for it… the privilege of building a business on a foundation of customers or clients, 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 customers in the world: Those who switch from provider to provider, looking for the lowest prices.

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

Simple.

They see it as an easy way to attract more customers or make more sales. However, a look at the medium and longer-term picture shows how this can go horribly wrong.

Here’s what I’ve seen small business owners do over and over again.

Bob’s race to the bottom

Let’s take Bob the business owner as an example.

Bob decides to lower his prices by 10%. He soon notices a slightly better sales conversion rate.
So, he lowers prices by another 5%. And it improves sales even more.
Some of Bob’s competitors decide to do the same.
The race to the bottom is on!
Bob now needs to lower his prices by another (whatever)%, because his competitors are charging the same kind of prices as him. Bob’s prices are now rock bottom or very close to rock bottom.
Bob continues to make some sales, BUT with very little profit.
THEN… if a well-funded competitor decides to sell at a loss for 6 months (to gain market share), Bob has to try and survive on fewer and fewer sales, relying on income from hardly profitable customers.
Alternatively, if Bob’s overhead increases and he has to start increasing his prices, all those price sensitive customers he raced to win, will start looking for the new, cheapest provider.

It’s very easy to attract customers by reducing your prices. However, it’s unsustainable. So, if this is something you are considering, please think again my friend. Consider the medium and longer-term consequences of winning the race to the bottom.

Relax. Here’s a better approach. One that works extremely well. (You’re welcome).

The thing about kindness

November 13, 2018 by Jim Connolly

Photo: Shutterstock.

Your friends, colleagues, customers and contacts have something in common.

They’ll remember what you did when times were tough for them. They’ll recall how you treated them when they needed a break… when your support meant everything.

Yes, even those who fail to say thank you, will remember you. Not everyone finds it easy to show gratitude, especially when they’re embarrassed by their situation.

On a personal note, I still remember people who helped me when I was starting out in business. I remember those who believed in me, when no one else did. I remember those who introduced me to useful contacts. And I remember those who mentored me and guided me.

Of course, the opposite is also true

People soon forget yet another pat on the back, when they’re going through a boom period. And they’ll quickly forget yet another offer of help, when they clearly have absolutely no need for it.

As a business owner, you already know that your time is scarce. So, use it wisely. Where it can have the greatest impact.

Australian business owners topped my list

November 12, 2018 by Jim Connolly

Photo: Shutterstock.

As regular readers will know, I have long been an advocate for adopting a global approach to business. It’s not something that works for every industry, but where it’s possible, it’s exceptionally effective. That’s because it affords you greater protection against economic conditions, whilst also providing you with a wider spread of business.

I was mindful of this earlier today. I discovered what I’d already guessed: That the biggest market for my paid services in 2018 has been Australian business owners. If you’re interested, here’s the top 5.

Australia.
UK.
Canada.
Ireland
New Zealand.

The United States has topped my list, every year for almost 20 years. But things change in business. And the rate of change has never been greater. Which is why as business owners, we need to adopt an agile mindset. Because what looks certain today can change in a heartbeat.

Getting noticed

November 9, 2018 by Jim Connolly

Photo: Shutterstock.

Our clients or customers have something in common. Something that we need to be aware of, if we want to market our business successfully.

It’s simply this. They notice things. For example, they notice:

When we treat them like stars in order to get their custom, then treat them like numbers once we have it.
When we promise their project will be delivered on schedule, but we’re late.
When we’re more focused on what’s in it for us, than what’s best for them.

And it works both ways, because they also notice:

When we treat them like stars in order to get their custom, then treat them like superstars once we have their custom.
When we promise their project will be delivered on schedule, then deliver their project (and our promise) on schedule.
When we’re more focused on what’s best for them, than what’s in it for us.

Here’s the thing…

Not every client complains when they’re receiving a poor service. However, they’re highly likely to take their custom to a competitor.

Not every client says “thanks” when we’re delivering an outstanding service. However, they’re highly likely to remain our client and to recommend us to everyone.

The bottom line: People notice what you do. So do something worth noticing. And do it every day.

Stop using buzzwords in your marketing. Really. Stop it

November 8, 2018 by Jim Connolly

Photo: Shutterstock.

One thing in business is certain. There’s no shortage of buzzwords and phrases. Here are just a few that I’ve seen in use recently.

Intersection.
Deep-dive.
Disrupt.
Ruckus.
Knowledge transfer.
Ideate.
Pragmatic.
Wheelhouse. (As used in “that’s in my wheelhouse”)
Paradigm.
And all those compound words, ending with ‘hack’ or ‘hacking’

Those buzzwords and countless others, are used by people in an effort to appear informed or fashionable. Interestingly, buzzwords have the total opposite effect.

Here’s how they work against us (and our marketing).

Buzzwords make informed people cringe. Not only is this embarrassing, it’s a terrible idea if we want our peers to take us seriously or recommend us.
Buzzwords confuse the uninformed. And that’s the last thing we need, when we want people to understand our message.

In short, buzzwords not only add nothing positive to our marketing, they actively weaken it. And because they’re 100% unnecessary, we can remove them with no negative impact.

Remember: One of the keys to effective marketing is to always aim for clarity.

Why?

Because clarity sells.

Sorry to disturb you

November 7, 2018 by Jim Connolly

Photo: Shutterstock.

I received a marketing email this morning, which started with the following 4 words: “Sorry to disturb you”.

There’s a lot of subtext in those 4 words.

The sender knew what they were doing was wrong, which is why they opened with an apology.
Clearly, they also knew that their email was a disturbance. I’ve never heard of them.
Knowing this, they still decided to send it anyway.

Like everyone else who received that email, I stopped reading after the opening sentence. They may have had a great message, an outstanding offer or a wonderful opportunity to share. But their email let them down, so no one will know.

Oblivious to this, the sender will be wondering why they received no positive response. Especially if they genuinely have something valuable to share.

If we consider this to be merely an example of ineffective email marketing, we totally miss the point!

I believe it provides us with a powerful microcosm of ALL ineffective marketing.