Planning your Marketing

A poor retention rate means you have to spend heavily on promotion and sales, to replace the customers you have lost.

Replacing two �1,000 orders with a single order for �2,000 improves your profitability, as you halve the cost of selling and administration.

It is generally much easier, and therefore more profitable, to make an additional sale to an existing customer than to make a first sale to a new customer.

Identify your best customers (see 4.2) and target new customers with similar profiles.

Divide them into different categories (segments), to help you spot the best opportunities.

For example, a pet products company might use three levels of segmentation: pets generally, type of pet (eg dog), and breed (eg labrador). The corresponding products are feeding dishes (for all pets), dog leads, and a labrador video.

How do they choose between different suppliers?

The obvious channels might include direct sales, wholesalers, retail, agents and distributors and the Internet.

Consider alternative channels and influencers. For example, one accounting software company built its success on using the accountancy profession as a channel to reach smaller businesses.

Be realistic.

For example, the market for a high street shop is probably restricted to people who already visit the town centre.

Profile your competitors and their products. Ask their customers why they prefer the competitor�s products to yours.

For example, government expenditure, imports, new technology or quality standards.

Critical success factors might include product performance, range of products, speed of order fulfilment, customer service and low costs.

By listing the results in a table you can present a clear picture of your relative strengths and weaknesses.

Organisations (and individuals) that directly affect your business.

The broader business environment (eg new technology, tax, legislation).

Your top customers are those which account for the most sales and profit � or which will in the future.

Consider the opportunities to grow customer accounts by selling them additional products in your range.

Once you have accounted for their proper share of overhead costs, some activities may turn out to be loss-making.

Most marketing can be measured (see 8).

Aim to consolidate your position in your existing market segments before you try to enter a new one.

Almost all products (and services) have a product life cycle.

For example, a product can quickly go out of fashion (eg a garment), or be overtaken technologically (eg software). By contrast, Cadbury�s Dairy Milk has sold well since 1921 with little change.

Many products need to be constantly updated, to maintain their position in the market.

Re-packaging, re-sizing, and discovering new uses and new users is all part of this innovative process of renewal.

Extending the life cycle of an existing product is preferable to regularly developing and launching new ones, as the latter is risky and very expensive.

Personal recommendation is often a key source of new customers.

Consider ways to increase the number of introductions, starting with thanking each person who recommends your business.

Consider all the options. For example, direct mail, telemarketing, PR, advertising, and the Internet.

Include a review of terms and conditions (eg credit terms) for each customer.

This can have a major impact on customer retention and sales, at minimal cost.

This might require new production capacity, or new skills.

When considering any marketing strategy, start by testing to see what works on a small scale.

Most businesses need to do this at least once every 90 days to maintain �front of mind awareness�. This excludes the actual sales process (eg asking for orders, checking on delivery) and routine communication (eg newsletters, Christmas).

Keep asking your customers for feedback on your performance and on any new developments in the marketplace � including their own news.

Ask them for ideas to improve your products and your customer service.

With your best customers (and potential customers), you might want regular meetings, or at least regular phone contact, as well as doing mailshots.

Corporate entertainment can also help you to build stronger relationships.

Your less important customers might receive mailshots by post and fax.

For example, customers whose new budgets start in April may plan the budget the previous October, so you would need to approach them before then.

For example, what mailshots will you do to which market segments?

Who is responsible for implementation, including the fulfilment and measuring the results against your budget?

If the previous year included exceptional one-off sales, assume they will not be repeated this year.

For example, the number of sales leads may be crucial for one business, but the morale of staff may be crucial to another.

State the assumptions behind each forecast. For example, major orders, weather, exchange rates, fashion trends, or growth in your sales force.

If an assumption turns out to have been optimistic, you are immediately warned that the sales will be lower as a result.

Sales forecasts for new product launches and business start-ups are notoriously difficult � be extremely conservative until results prove you wrong.

Use codes to identify the sources. For example, �PR EX 7/5/02� for an article in The Express on 7 May 2002, and �MS 20/5/02� for a mailshot on 20 May.

Track both leads and orders.

Analyse the acquisition cost per new customer. Contrast the cost to the revenue you earn for the first sale, and the revenue you can expect to earn over the lifetime of the customer.

Contact customers who have stopped ordering and find out why.

Focus on chasing the most profitable business � typically large orders, or high margins, or repeat-order business.

For example, a heatwave during the week you advertised your paddling pools.

For example, a specialist prepared meats supplier can thrive alongside the major food companies (which service the mass market).

For example, if you want a retailer to stock your product, you may have to displace an existing product to win shelf space.

For example, a firm of accountants with good customer service should have excellent customer retention (even if its prices are high), due to the personal nature of the relationship.