A problem within your business can be very much like diagnosing a cold. There are symptoms like a cough, sore throat, low grade fever, runny nose, and congestion. The difficulty lies in that those are symptoms of several illnesses like the flu or even early onset pneumonia. If misdiagnosed, you could treat for the wrong illness and could get worse instead of better.
The same is true in business. A problem can be seen as or manifest itself in one way, but could be a symptom of a completely different problem. Human nature tells us that we are usually going to have to change something or spend money to fix what is not working and are eager to get started.
As a small business owner, making sure that the money you spend or areas that you change within your business provide you the return for which you are looking. This is especially true when you are changing parts of your business or spending money in areas that are related to growth and increased sustainability. At the end of the day, we all want to make sure that we fix what is broken, but would it not be even better if we knew exactly how successful we were in our efforts.
In order to see and understand how important metrics are, let us use a specific business example. The sales people were always approaching the Sales Manager for a discount and were telling him the reason they couldn’t sell was because the competition had a better website and marketing materials and were trying to convince the owner and manager that if they lowered the product price and created a new website and brochure, sales would increase.
At the end of the day, you need to increase your customer growth, but the question is if you lower your price, and call a web design and marketing company to create a website and brochure, will this increase your sales? The short answer is probably not, because just based on what you are being told, it would be hard to know the underlying problem. If you decide to drop the price, you could be leaving money on the table and eroding your margins without uncovering whether that is the real issue. It could be as simple as the customer not understanding the value of your product versus the competition and your sales force selling just on price alone. It could possibly be an awareness factor that someone needing your product or service searched for the product or service in Google and could not find you. It could even be that the customer does not understand or has been positioned the value that you offer. It could be a combination of all, but you would want to make sure that if you were going to make a change or spend money that you were able to determine where the issue lies and the success rate.
Once you drop the price of a product, it would be very difficult to increase the price again. An example of one way to do this and track the success rate would be to run a time limited promotion. Run the promotion for a time period through your sales reps only and if price is the only issue, there should be an uptake in sales. You would want to track your run rate by sales rep before the promotion and the run rate during the promotion. You would also want to see if there was any overall increase in your sales by lowering the price or whether it eroded your margins or had a negligible increase on your bottom line. Before the promotion begins, you would want to set your required targets for success.
Next you could consider that the products that your prospects are buying from your competitors might have less functionality or the value you had over them is not being articulated by your sales reps or through your communication materials. The sales reps brought up that the competition had a better website and brochure. If we are all honest, no one has ever purchased something because a brochure or website was “more attractive” than the next. To be clear, they all need to be aesthetically pleasing, but the overall graphic design does not make or break the sale. What can is the content itself. As a second step, you could re-position your product or service on your web and in a key marketing piece, along with making sure your sales reps were focused on the value of your product and positioning correctly during the sale. Determine the costs that it will take to do this. Set a time frame to see how this would affect your business without changing any of your prices and measure your success.
The problem with your website may or may not have had anything to do with the look, or even the messaging; it could be that the website was not being found at all through Google or any of the major search engines. A large majority of your prospects today are researching companies that offer the products and services they need online before they ever talk to anyone. If you could not be found, then your company might not appear to be a valuable contender in your industry, therefore prospects might expect to pay less for your product. Even a small company can look big on the web. You would need to determine the cost of Search Engine Optimization for your site. Before you begin, you would want to determine where you are ranked and how many visitors you have today along with your current keywords. You would then want to have someone monitor your progress after SEO is implemented and track whether there was an uptake in sales from this change
Tracking can be simple to implement, but many times is overlooked due to the enthusiasm of trying something new to make a significant impact. It is important to break down change or new spending down into manageable trackable functions to ensure that you will know what you implemented did or did not give you the desired results.
Initially, most people would think that the price is the main issue in this scenario. In the actual situation, it turned out that this was not the case and if the price had just been lowered, the additional revenue generated would not have covered the decrease in margin. Though the website of the competitor was more aesthetic, the company was being found through SEO. The issue was in positioning and articulating the value of the product through both the brochure and the website, so the costs associated were low as they included only wording changes to the web and brochure along with training of the sales reps in articulating the true value and positioning the product correctly against the competition.
Breaking potential problems down into manageable and trackable pieces allowed the company to uncover the true underlying issues that were hindering the growth that the executives were expecting. By running the discount promotion for a short period of time – it became apparent that just decreasing the price was not appropriate. The traffic to the website was in line as well, so prospects were visiting, they were just not contacting. The real issue was that of communicating to the prospect an understanding of the value they were receiving for the price. Though competitors were lower in price, they did not offer the same functionality for the price. This was not articulated through web, marketing materials, or by the sales reps. Once this was articulated properly, sales began to increase and sales reps were not asking to discount the product as they were previously. The business owner was able to see that the few dollars he spent on wording changes increased his product growth by 20% without affecting margin.
RK Fischer & Associates
Our offices are located just outside Toronto within the GTA and are able to provide services across Canada . Our local service area for providing services at your location is Peterborough, Orillia, Clarington, Bowmanville, Oshawa, Whitby, Ajax, Pickering, Scarborough, Toronto, Markham, Aurora, Newmarket, Richmond Hill, Vaughan, King City, Brampton, Caledon, Bolton, Mississauga, Etobicoke, Oakville, Burlington, and Milton. We now are able to offer local services as well in Sarnia, London, and Chatham-Kent.
For services outside our local service area within Canada who require onsite services, please contact us to determine how we may best service your requirements.
SUBSCRIBE TO SMALL BUSINESS INSIGHTS