Words: ’bout 1500 AWESOME ones, yo. Take ya six minutes.
What They’re About: Why it’s important to have an ongoing marketing campaign in place, even when it doesn’t seem necessary.
Also, how to keep costs for this campaign really, REALLY low.

SMALL BIZ MARKETING DEATH MATCH: Word-of-Mouth vs. Paid Advertising

I recently had a conversation with a young lady who spends very few dollars, and even less time on her marketing strategy. She’s a licensed massage therapist.

Because the service that she does is top-notch, and because her customers are so “sold” on her as a person… they act as mini-evangelists, spreading the good word and bringing her a priceless, and seemingly cost-less supply of happy clients.

I told her it still would be a good idea to learn and use  the marketing techniques of Shoestring101.

She didn’t see why.

WHY Advertise When Word-of-Mouth is Working?

“Kurt, like you say to do, I’ve been tracking where customers come from. About 60% of my clients come from word of mouth advertising. Only 40% come from my print mailers. It’s VERY EXPENSIVE… and I’m only still doing that because I have a contract up to the end of the year.”

The direct mail advertising she was using the Val-Pak method, where a coupon for her services is included in a thick envelope with other coupons, and mailed to whole zip codes at a time. This is netting here about 1 new client a week, or 4 clients per month.

The other 6 customers were come by way of referral only; she’s pretty good at what she does. Plus, she makes it easy for current customers to refer her so it’s no accident that word-of-mouth is her biggest draw.

“When Val-Pak runs out, I’m going to just rely on referrals instead. Even with four less customers for every ten I’ll be doing the same or better with all the money I’ll save!” Her argument was that the lower amount of new business would be offset because she will be spending $1500 less per month on advertising.

While I agree that there are much, MUCH better ways to market than to just blanket an entire zip code with coupons… unless your particular business would appeal to a wide base like buyers of pizza or folks that need oil changes… My advice to our heroine was NOT to stop all paid methods of advertising.

Now, running a business coaching service with a name like Shoestring101 you would think that I’m all about eliminating… or at least LIMITING what people spend in every category… even the category of marketing. But that wasn’t my counsel.

Marketing ROI: New Blood Keeps it Going

“Samantha (not her real name)”, I said. “You just might just be missing the dollars by tripping over pennies.”

     “How’s that?”

“Think for a minute now about the math. Now, I know you’re looking at it in linear terms… that is, these four customers you pay $1500 for, and those six customers you pay nothing for… so it seems like a no-brainer to quit advertising. You go from $1500/10 customers or $150 per new customer to ZERO per new customer.”

      “Right. So… why not do that?”

“Well, does each customer represent more than the $150 it costs to get them?”

    “Well, yes, but that’s the point. A customer is profitable If I’m spending $0-to-$150 per customer, but not if I’m spending $375 per customer! I’m spending $1500 to get four and ZERO to get the other six. It cuts into my profits to have paid advertising at all.”

“Does it? Tell me, do you know exactly how you got those referrals? Walk me through one if you can.”

      “Let’s see… Amy came in from Lucy’s recommendation. Lucy and Amy work together at a hair salon.”

“Where did Lucy come from?”

      “Lucy banks at Wells Fargo, and her teller was Rosa.”

“And how did you get Rosa?”

      “Umm. The Val-Pak Mailer,” she admitted sheepishly. Apparently, it just dawned on Samantha that without the paid advertising… she would not have Rosa, Lucy, OR Amy. Without Rosa having opened a mailer, this particular chain of referrals would never have happened in the first place.

The Value of Having a Business Marketing Coach

“Samantha, by your own math you get six new clients free for every four clients you pay for. You pay for four and get ten. If you paid for eight, you’d get twenty, right?”

      “Umm.” she thought for a second. “Right!” Samantha brightened, then frowned.

“So why not pay for eight new clients per month? If it sets off a chain reaction where you get twenty?”

      “I see where you’re coming from. But… I can barely afford the $1500 per month for Val-Pak right now. I don’t want to hit another zip code and pay $3,000. I’m locked in for a whole year when I do that and while what you’re saying sounds good… getting twenty new customers a month… if it doesn’t work that increased advertising would put me out of business,” Samantha objected. “It’s just too risky.”

“Naw, I’m not suggesting you take on a great amount of risk. Just that you increase your marketing efforts to get eight new clients a month instead of four. Believe it or not, you already have all the ammunition you will probably need to get those other four at low or zero cost.”

The Shotgun/Laser Method… Find What Barrel to Fish In

Elsewhere on this blog, you’ll see the Shotgun/Laser technique. Here’s how it works:

1. use one broad method like print ads, area mailers, et cetera to flush out just a few custoemrs and analyze where they’re coming from.
2. Look for patterns. When you find a particular neighborhood, occupation, or other common factor among your paying customers, target more like them.
3. Usually you can target specific groups more efficiently AND more effectively. And inexpensively.

“So Rosa came from the bank, eh? Are any of your other clients tellers?”

     “Yes.”

“Any other salon workers?”

    “Y’know, I’ve got almost everyone at Innovations in Style.”  Samantha beamed proudly.  “Once one of the girls started coming, she bragged about it to everyone. I’ve had almost every one of them in my chair at one time or another.”

“Samantha, here’s a direct-mail idea for you. Instead of blanketing an entire zip code with your message… now that you know that bank tellers and stylists are likely to be frequent customers of yours, how about targeting them?”

I showed Samantha how to go to http://www.melissadata.com and get a list of every bank and hair salon within ten miles. Melissa Data tracked them all down in a .xls document we could download immediately. For under fifteen dollars the list would also include phone numbers of those businesses!

Like Shooting Fish in a Barrel

“Send ’em all a postcard, then follow up with a phone call. To the salon owners, pitch a ‘free massage day’ where you’ll come in and spoil each stylist during their break. They’re on their feet all day, probably that’s why you get so many of ’em. Leave every stylist with two coupons… one for them, one for a friend.

😎

“For the banks , they might have issues with security so you may not be able to go to them. Instead, invite the bank managers to have employees meet after-hours at your place for a talk about stress and how it can be beaten with good posture, relaxation, and an occasional massage.

“Have everyone buddy up and rub each others’ shoulders and necks. They can copy how you do it on the manager or one of the key employees. Make sure everyone experiences your touch for at least a few minutes during this session, cause that’s what you are selling. Then give ’em all two coupons as well.”

     “Cool!” Samantha was catching on to the Shotgun/Laser technique. Her paid advertising went out to everyone in a zip code, but some particular types of customers had identified themselves: bank tellers and cosmeticians.

A campaign narrowed down to target just those two occupations, close to her area… would be cheap and simple to put together.

An Ongoing Campaign Gives You More Credibility

I didn’t tell Samantha she should bag the whole Val-Pak idea; after all it had given her valuable intelligence about her market. I did suggest that once her contract was up that she might go with a less frequent mailing, or one to a smaller, tighter zip code that was nearby.

This was less to take someone that had never heard of her and convert them into new customers… and more to take those that were on the tipping point and push ’em over the edge because they had “social proof”… a prospect might have heard at the bank  and in the salon chair that this licensed massage therapist was THE BOMB.. but until they saw the coupon she didn’t think of her as a real person.

Last I checked, Samantha’s small business was booming… as it deserved to be… not just because of the great service she provides but also because of the smart marketing.

Which Brings Us to YOU, Dear Reader…

Have you identified a recurring pattern among your customers? If you haven’t yet, this  very important step may well be what puts you over… from unprofitable to profitable…

…or better yet, from profitable to VERY profitable.

If you HAVE identified a recurring pattern, write to me here in the comments! Let me know where a goodly portion of your current clients are coming from. I’d be happy to give you my $.02 on how you might Shotgun/Laser it, without the customary Shoestring101 fee of $101 per session.

Til then,

Keep Stepping!

Kurt