Marketing a Cost or an Investment

 We know that to grow our business we need to market effectively to generate new customers, however, as soon as business slows, one of the first things to go is the marketing budget! Why is that?

One of the main reasons for the marketing budget being cut as soon as money becomes a little tighter is because very few business owners actually understand whether their marketing is working for them or not. Unfortunately, some professionals, such as accountants and bank managers will often tell business owners that their marketing is an expense and when cash flow becomes tight, they recommend that expenses are cut.

What if we could really understand our marketing strategies and be able to measure them in such a way that we knew with certainty which strategies were generating excellent leads that are in turn generating profitable sales. When our marketing budget generates profitable sales regularly, then our marketing budget stops being an expense and becomes an investment.

So where do we start to convert our marketing budget from an expense into an investment?

The place to start is with an effective marketing plan that is built on sound market research and involves a clear understanding of who our ideal clients are for each market. Once we have this plan in place, we must also include a process for measuring each strategy that we use so that we are able to quickly measure if the strategy is working or not.

Measuring market strategies always seems to be a big challenge for the business owners I meet as they all seem to believe that measuring their marketing is very difficult, if not impossible. In all the years I have been teaching marketing principles, I have yet to find a strategy that cannot be measured. One of the keys to being able to effectively measure marketing strategies, is to make sure that all members of your team are involved with the marketing plan and that they fully understand why each of the processes are important. In the majority of businesses we come across, any marketing strategy seems to often be a spur of the moment decision by the boss and very few other members of the team seem to even be aware of the strategy, so any measurement process becomes hit and miss which feeds the belief that measuring marketing is very difficult. When the team are involved with the marketing plan and each of the strategies in the plan, it is considerably easier for them to understand why it is necessary for them to ask new prospects how they heard about the company and to record the results. One of the reasons why measuring new leads is very difficult for many businesses is the fact that very few even have an enquiry form for team members to complete, most of them just use a book or any scrap of paper lying around. When building a marketing plan for your business, it is vital that you have an enquiry form that has all your various marketing strategies on it to remind team members to ask the question and to record the answer.

Once we have the front end measuring process in place, we can then design how we trace enquiries through the business so that we allocate and measure sales against each of the strategies we employ. At first reading, this may seem very difficult to do in your business, but I have found that in the majority of cases a simple solution can be found by just making a few easy changes to the current process you are using.

Some of you reading this may be wondering if it is really worthwhile making all these changes to your current sales process just to measure the various marketing strategies you have in place. To answer this question, just stop and think about how much money you have invested in the many marketing strategies you have put in place over the years and then ask yourself how many of these strategies could you hand on heart say really generated profit for your business? So many business owners have invested thousands on a strategy without knowing if this strategy was generating any business for them or not. On the other hand, I worked with a business owner who cancelled an advert they had been running because they thought it had become old and stale. Within two months their sales had started dropping off at an alarming rate, so we put the advert back with a measuring process in place and sales started streaming in again, measurement showed that this advert costing just £200 per month was generating 19 sales per month with an average margin of £60 per order, a return of £1140 of profit against an investment of £200.

Once you are measuring your marketing strategies you are in a powerful position of being able to use your marketing investment wisely. At a glance you can tell which strategies are working and which need to be changed or withdrawn. At this point your marketing budget has moved from being a cost into being an investment as you can measure the returns. While you are running marketing strategies without knowing whether they are working or not, you are just throwing your hard earned profit at opportunities without measuring the return, the same profit that you have had to work really hard to earn.

But just think of this, if all your marketing strategies are working well and generating profitable sales, what is your marketing budget? Every time you invest £500 into your marketing it is making considerably more than this in gross profit off all of those sales you are generating. At this point, your marketing budget becomes self funding as whatever you invest generates considerable return for you.

Marketing your business successfully is one of the key points in any business to master if you are looking to take it to another level of success, but it is absolutely vital that you understand and measure your marketing activities so that they do not become a huge expense on your profit and loss account.

Segment Markets Progressively

 Mind you - getting to that endpoint is not always straightforward. It's made easier by the process of progressive segmentation. For although market segmentation is the breaking down of a large market into a number of smaller, more homogeneous ones, that is the reverse of the process that leads to the need for segmentation. In their formative period, all markets are small and homogeneous.

When Gottlieb Daimler produced the first automobile powered by an internal combustion engine or when Will Kellogg developed cornflakes and started his own company in 1906, the number of segments in the automobile market and the breakfast cereal market numbered just one. Now the combined number of individual market segments in these two markets would run into hundreds as companies try to match their products to more and more specific consumer needs.

So in recommending the process of progressive segmentation what one is doing is replicating the manner in which the market has grown over the years. The following segmentation of the 4X4 automobile market illustrates the process of progressive segmentation.

The 4X4 market over the last decade or so has been one of the few growth segments in an otherwise mature market for automobiles. The segment was originally formed by a single product - the Land Rover. Now we have the short wheel base light-weight Suzuki Sx4 at one end of the spectrum and the Ferrari FF at the other. The only thing these two cars have in common is that the drive is to all four wheels - and yet the development of both can be traced back to the Land Rover.

Eight segments of the 4x4 market have been identified. The progression from one segment to eight segments goes like this.

Step 1 - Take the whole market and divide it into two or three broad divisions - in this example body shape has been used but it could have been high and normal ground clearance.

Step 2 - Ask yourself - do all customers within each of these two segments have the same needs? If the answer is no, go to the next level of segmentation. So the 4X4 saloon segment is divided into two - those customers who want a car with superior on-road performance and those who want the safety and traction benefits of 4X4 in a saloon which also has some off-road ability.

This latter group wants 4X4 ability to assist them in getting to their destination - a ski resort, perhaps. But it's the destination not the journey that's the main focus. Cars built for the road performance market range from the Subaru WRX to a Lamborghini. For owners of these cars, it's the journey rather than the destination.

The Traditional 4X4 segment has spawned three sub-segments but only one of these has escaped further segmentation. Segment 3 is the modern equivalent of where it all started and had the 4x4 market not fragmented the way it has, the total market would have been limited to this sector, still dominated by the short wheel base Toyota Land Cruiser and the Land Rover Defender.

The on-road/off-road utility market has split into two. Segment 4 in genealogical terms is the offspring of Segment 3. Big and tough and loved by the army of grey nomads, these 4x4's can be seen towing a caravan or a camper trailer on the bitumen and then tackling the roughest tracks that the outback can offer.

Segment 5 is a fusion of the traditional 4x4 shape with the iconic Australian ute. Loved by tradesman for their carrying and towing capacity, they are GST free and relatively inexpensive and fitted with a dual cab, can takes friends and family to places where a ute would never venture. Very macho in character, with voice-overs in TV ads that are instantly associated with meat pies and VB, I have yet to see one driven by a woman.

But the marketers could see a further gap in the market for another type of 4x4 although I doubt even the most prescient of them could foresee the demand for what is now known as the SUV - Sports Utility Vehicle. It's not one segment though because buyers of SUV's have different needs that "their" SUV must meet.

Step 3 - The SUV market is split into three sub-segments. Let's look at the two smaller segments first. Segment 6 appears to be in decline. When it first split off from Segment 4, it was epitomised by the Toyota Rav 4 - a small, lightweight 4x4 that could be found at any surf beach with a couple of boards on the racks. However as is the norm for the automotive industry, the Rav 4 and its competitors grew in overall dimensions so it might now be considered as a sub-segment of Segment 8.

Segment 7 used to be the preserve of the Range Rover which, at the time of its introduction, provided users with a unique combination of luxury, off-road and on-road performance. You probably wouldn't see it towing a caravan but a horse float was a sure bet. The Range Rover started this segment but over the years it has been joined by rivals from Mercedes, BMW, Lexus, Audi and Porsche. Who would have thought that the humble Land Rover, launched in 1948, would be the progenitor of such stylish, sophisticated and high performance vehicles?

Step 4 - As Segment 4 grew, it became apparent that such vehicles were really too extreme for where they spent the great majority of their life on bitumen, in suburbia, delivering the kids to and from school. They were too big, too thirsty and too expensive. What many consumers needed was a less rugged, more stylish 4x4, bigger than those available in Segment 6 and far less expensive than those in Segment 7. And so the Sports Utility Vehicle (SUV) was born. Is the SUV market one segment? I'm sure it isn't. It's progressively fragmenting into a number of sub-segments as consumers become ever more specific in their needs.

The ability to segment your market is essential to strategic planning these days and the technique of progressive segmentation can help you do it. Starting with a single segment, the process works just as well for an accounting practice as it does for an orchardist. It enables you to:

• Redesign your total product offering - By asking yourself - how does this segment differ from another that I service - you can better tailor your product to customer needs. And by product I mean not just the core product or service but its positioning, its service elements, the degree of customisation, its pricing, its distribution, its performance warranties, the type and amount of after-sales service etc. The match between what a market segment wants and what you provide has to be a much closer match these days. Near enough is no longer good enough.


• Identify emerging new segments - Unless you segment your market, you may miss the birth of new segments. Markets are forever fragmenting - breaking up as customers seek different benefits or different combinations of benefits or different weighting of benefits. Take retirement planning. If I was a financial adviser, I would be keeping very close watch on how the needs of my client base were changing and how one big segment was breaking into several smaller ones. Sometimes "boutique" segments become mainstream ones. In other cases they remain small and are not of sufficient size to attract the industry's bigger players - but they may be big enough for you.


• Customise your marketing mix - It is becoming increasingly unlikely that one marketing mix will "fit" each market segment just as it is that you service only one segment. I have a theory that a business is like a table. It needs at least three legs to remain stable. Three legs equals three segments equals three different marketing mixes. On the other hand you might have a business resembling a centipede. It's grown so many legs that you cannot nurture them all. What started off as one market - to service the IT needs of home businesses - has fragmented into software, hardware, repairs, websites, assembly, trouble-shooting, tutoring and so the list goes on. Maybe there is a good reason why the largest four-legged animal is a million times bigger than the largest centipede?

Professional Affiliate Marketing

 If you're new to the professional affiliate marketing Internet business playground, then you're no doubt wondering what affiliate marketing is all about. In simplest terms, it is marketing and promoting some other company's products/services on the Internet. You, the pro affiliate marketer, promote through whatever means is available to you (your ezine, blog, email, online advertising, etc.), which then sends traffic and customers to another company's website, who then does all the work -- develop, sell and support the actual products and/or services; close the sale; process the orders, take payments and make delivery; etc. -- for the paying customer. You, as the marketer and source of that business, are then paid a commission for your work. That's it!

The whole business arrangement is essentially revenue sharing. The company that provides the product or service being sold is generally called the affiliate merchant, and he shares the revenue they generate with you, the affiliate marketer, for sending business their way. In most cases, the affiliate marketer drums up that business through various forms of legitimate advertising techniques on a wide variety of online avenues and platforms.

Note that generally, the affiliate merchant does not pay anything for the "marketing" and promotion until a sale has actually occurred. This way, the merchant can minimize both risk and expenditures. Theoretically, the affiliate can then be rewarded more handsomely for taking on that marketing risk and expenditure. However, since the affiliate marketer does not need to take on the risk, investment and expenditure of developing and supporting a product/service and administering a sale, the relationship is very much considered a win-win arrangement, with each party focusing on the part of the business they are good at and interested in.

Tracking, Calculating and Paying Affiliate Income

How the affiliate marketer essentially gets paid for his work depends entirely on the affiliate merchant. In practically all cases, the arrangement is wholly managed through an automated system, with the merchant using Internet server-based software that gives an affiliate marketer a unique link code or ID which the marketer must then use to identify all the traffic and customers he sends to the merchant. This is really the only way the merchant can properly identify, credit and compensate the right affiliate for any business generated.

In some cases, an affiliate merchant uses the resources of a much larger affiliate network service (such as Commission Junction, LinkShare, etc.) to administer its affiliate program. Some other merchants, on the other hand, choose to run their own in-house affiliate system, keeping their program independent from everybody else's. In practically all cases, however, the basics of how an affiliate program tracks and calculates affiliate commissions follow what is outlined above.

The merchant generally specifies the financial terms beforehand (pay periods, minimum payment thresholds, when money is paid and how, etc.), whether it uses the services of a 3rd party service or runs its own affiliate program in-house. How an affiliate is ultimately paid will depend on these predetermined specifics, and they can run the gamut from being paid online through services like Paypal, having funds wired directly to an affiliate's bank account, to having a physical check printed and mailed directly to the affiliate.

Although there is obviously a level of trust in the merchant involved in this arrangement, it works because not only is it to the affiliate merchant's benefit to maintain a good working relationship with its affiliates in order to grow its business and ensure its continued success, the community of professional affiliate marketers is fairly tight-knit with extensive communications channels that quickly reports any shadiness and negative business dealings. On top of that, affiliate programs that run on third party network services offer an extra layer of protection and trust to the affiliate, with the networks helping ensure that all transactions are properly tracked, calculated and compensated. This is one reason that many professional affiliate marketers often adopt a policy that they will only work with affiliate programs that are administered through these third party affiliate network services.

Affiliate Program Selection

You, as the professional affiliate marketer, are free to choose whatever affiliate program you wish to join and market. In other words, you essentially choose which products and/or services you'll be promoting (through your blog, web site, ezine, advertisements, etc.). It is not a light decision, since your income is very much affected by how well you match your total "offer" to your "audience" or "market." That, however, is essentially your job and is part of what you as the professional affiliate marketer is compensated richly for.

In many cases, what affiliate programs you do choose is usually determined by your preexisting markets and audiences, For example, if you already run a gardening blog, then obviously the programs you would seek out would be gardening related or ones that you've determined would be of interest to the audience demographic your gardening site attracts.

If you are approaching this affiliate marketing business as a pure marketer, however, where the decision on how to market a product or service would be highly dependent on what it is you actually select to promote, how you select an affiliate program can be based on many different factors.

Some professional affiliate marketers, for example, choose programs based on commission size (high payouts per sale) or market size. These are business decisions you have to make, again, part of what you're getting paid for. Here are some suggestions for beginners, however, that may help you get started.

Choose products/services you are personally interested in. If you are interested in gardening or golf, for example, then focus on products/services specifically for those markets. The plain simple truth of it is that it is much harder to promote a product or service that you really couldn't care less about.

Choose products/services that do not embarrass you and that you are comfortable having your friends and family associate with you. For example, even though it's quite lucrative, some professional affiliate marketers are unable to promote dating sites and services for reasons of embarrassment and discomfort.

Choose products/services you are already familiar with and fully understand. Even if you are not all that interested in automobiles or travel, for instance, you may already know more than enough about the products and services in those particular markets that you can actually sell in those market niches.

Select affiliate programs that provide you with the best sales support. This only comes up from prior research, of course, but it's something you must do anyway. The sales support referred to here are things like training, advertising material and resources, extensive product information, etc. Obviously, the more tools they give you to sell with, the better your chances.