Archives for June 2005
Client Education: The Missing Key to Growing Small Business Profits
Note: This was originally written for a computer reseller and consulting newsletter, so you’ll see reference to technology and VARs throughout. Don’t let it stop you from reading. The information inside is valid for any and every kind of small business — retail, b2b, even independent salespeople.
When John discovered one of his best clients bought an expensive backup solution from his toughest competitor instead of him, he couldn’t understand what had happened. For 5 years he sold and services the client’s computer systems, and a maintenance contract was still in place. John was sure the client had been happy all that time.
So what happened?
John’s asked what happened. Had service gone downhill? Had one of his technicians done something offensive? Why didn’t the client even call and ask about the service? John had to pick his jaw up off of the ground when the client told him the reason why:
“I didn’t know you could do it for me. I thought you just sold and repaired the computers, and [the competitor] told me I needed to do more to protect my business.”
This might seem funny to you. You might even believe that your clients fully understand all of the things your business can do for them. Over a decade of in-the-trenches technology marketing experience tells me otherwise.
Let’s talk about how you can put this knowledge to work in your business, ensure a situation like John’s never happens to you, and pick up some of the lost profits you are letting slip through your fingers.
The best free way to grow your small business
The difference between small and huge profits in the computer reseller business is often a matter of how well you educate your clients. There are three reasons for this:
Your clients do not know all of the solutions you provide. I’m endlessly amazed at the number of resellers who believe their clients will ask them about all of the solutions available or even know the right questions to ask. What happens in the real world is that, when a client buys a few computer systems from you, they put you in the “computer system place” category. Unless you take the time to educate about additional products and services, most clients will not go out of their way to ask.
Your clients have problems they do not know you can solve. Taking Clients have many problems you can solve. But with many of those problems, they have no idea that your business can help to solve them. It is up to you to identify the problems, let the client know you understand them, and tell them what to do about it.
*Your clients are paying you to be the expert. They do not know everything there is to know about computers, and they do not stay on top of every new development in the industry. You must anticipate their wants, needs, problems and goals. Then connect the dots between what they want and what you offer to fix it. Recently, a computer reseller client of mine added 27% to his net monthly profit simply by noticing a common problem his clients had and automatically offering it as an “add-on” for every job no matter what they were buying. A certain percentage say yes, and my client deposits bigger checks as a result.
Make the shift from peddler to trusted advisor
At its core, this article is about making the shift from being a simple “peddler” to becoming a trusted advisor to your clients. The only way to survive and grow in the face of cheapest-price competition and big-box retail competition is to make the shift from a simple peddler to a trusted advisor providing more than just inexpensive technology.
How do you make the shift?
First and foremost, do what I call “keeping your opportunity eyes open.” Simply, that means constantly identifying new ways you can help your clients get what they want. When you spot problems and goals they have that your solutions can help with, educate them about how to do so. Tell them what it is costing them to not address it, why you are the only logical choice to help them, why price shipping is foolish, and how they can fix it now.
The tools you can use to educate your clients include:
- E-mail newsletters
- Print newsletters
- Signs in a store
- Material included with every purchase
- Recorded messages
- Web sites
- And dozens more…
Here are three examples of educational marketing material has been used by my computer reseller clients:
An independent computer retailer created a series of one-page information sheets targeting his best buyers. A specific example: “7 Ways To Speed Up Your Gaming Without A New System” that talked about memory, video card, and other upgrades he sold.
A VAR targeting small businesses created a 5 page report all about “How To Get More Productivity Out Of Your Employees” that talked about LANs, Small Business Server, monitoring software, and more.
A computer repair shop sends out a monthly newsletter with a feature called “Best Questions This Month.” In it, the owner answers questions his customers asked individually during the month. Not coincidentally, the answers to many of those questions tie into solutions he provides. For example: He’s added a nice chunk of profit to his bottom line by addressing concerns about spyware and viruses, then pointing to his removal and safekeeping service.
A simple formula to educate your clients
Here is a simple formula you can educate your clients with. Follow the structure, and, with a little practice, you will be introducing new solutions in a way that primes the pump for a sale before the client even discovers what they are.
Let’s get to it…
State and agitate the problem. Identify the problem your solution will solve. State the problem and amplify the pain it causes the client. This puts them in a state of mind where a solution being offered is welcome relief.
State the benefits of the solution. This is much different than stating the solution. You want to tell them what it can do for them and their problem before you tell them what it is. What will they get when they put the solution to work?
State the solution. Tell them all about the solution you offer that will solve their problem. If it is something they can easily get elsewhere at a cheaper price, you must package it in a way that makes it unique.
Tell them how to get the solution. You have the client excited about the solution, now tell them exactly how to get it. Make it simple and clear. The next step could be getting more information, having a consultation, seeing a demonstration, or making a purchase. Whatever it is: 1) tell them what to do, 2) tell them to do it now, and 3) tell them what they will lose if they don’t do it now.
A better educated client base translates into more profit per client, larger orders, and increased client loyalty. To grow your business in the face of increased competition it is a necessity. Focus on helping your clients get more of what they want, and your profits will follow.
Wayne Hurlburt has this week’s Carnival of the Capitalists. (Better brew a pot of coffee and pull out a notepad … it’s a long one with plenty of great entries.)
Recently, a friend and business associate paid $4,700 to an I.T. consultant and computer reseller. So what, you say? It’s interesting because it was the highest bid he received for the solution, and the next closest bid, from a professional and capable company, was $3,500, over $1,000 less!
Why did my friend, Tom, choose the higher priced consultant over the cheaper one?
You might think the higher price included a superior technical solution. It didn’t. The technical solutions were identical. You might think the lower priced companies had poor customer service, or didn’t show up for an appointment on time. Nope, that’s not the case either.
Three factors made the difference for Tom.
- First, Tom runs a high-end medical office. The vendor he chose had specialized knowledge about his business, and proved it by telling Tom about the impact new hardware would have on the industry-specific software his office ran. The competition made Tom feel like he was “just another business,” and that they didn’t understand what made his office unique.
- Second, the vendor didn’t try to hide his high price. He told Tom, up front, that his bid would be more expensive than the competition. But he didn’t stop there. He explained the reason why his solution was more expensive, and why it would actually cost Tom less money and frustration in the long run.
- Third, the day before Tom met with the vendor for the first time, he received a Federal Express package. Inside, he discovered a large binder filled with photographs of the vendor with his smiling clients, and letters about the great job done. On the cover of the binder was a large Post-It note with the handwritten words, “Tom, I’m looking forward to adding you to this album.” (BTW, this is one of my favorite marketing strategies for consultants and consulting firms — it makes an enormous impact and, in many cases, can “sell” your solution well before you arrive for the appointment.)
What is the lesson here?
The real reason people buy “cheap” advisors and consultants
When clients choose a “cheapest-price” option, there is a temptation to label them as “cheap.” Nine times out of ten, that conclusion is dead wrong.
Clients choose the cheapest price option because you haven’t given them a compelling reason why it makes sense to pay more. With no other difference to measure options by, all that’s left for the client to compare is price. When it comes to value, perception is reality. And when all solutions appear equal, why would they choose anything other than the cheapest option?
5 smart-marketing consultant questions
I want to leave you with five questions you can use to find compelling ways to make your business and solutions stand out to your customers:
- What specialized knowledge does your business have that can add value to what you sell?
- How can you present yourself as a specialist to your best and most profitable customers?
- What can you package with your solutions to make the perceived value to be higher? A day of training, a newsletter, a special advisory service?
- How can you guarantee your solution to prove you back up the higher value you present?
- How can you prove you are worth higher prices? And do you have thrilled customers to prove it for you?
Growing Your Small Business With The 80/20 Principle
by Michael Cage
Over 100 years ago, Italian economist Vilfredo Pareto observed that the majority of his country’s wealth was controlled by a minority of his country’s population. He found the same imbalance in other countries, and observed that the ratio stood at 80% of the wealth controlled by 20% of the population.
In economist-speak, Pareto’s actual words were:
“In any series of elements to be controlled, a selected small fraction in terms of number of elements almost always accounts for a large fraction in terms of effect.”
Forty years later, management guru Joseph Juran took Pareto’s observations out of the realm of economics. Juran talked about the “vital few and trivial many.” In other words, for any goal 20% of your actions are vital and 80% are trivial, because the vital 20% will produce 80% of the results you want.
Today, we call this the 80/20 Principle.
By systematically applying the 80/20 Principle to your business, reducing the trivial many while putting more time and resources into the vital few, you can achieve any goal you have. Faster and with less waste.
Of course, the most common business application of the 80/20 rule has to do with your clients. You identify the 20% of your clients who produce 80% of your profits. Then, set out to get more clients like the 20% and let the least profitable clients go.
But the value of the 80/20 Principle goes far beyond this single application. To quote Richard Koch, best-selling author of “The 80/20 Principle”:
“The 80/20 Principle can and should be used by every intelligent person in their daily life, by every organization, and by every social grouping and form of society. It can help individuals and groups achieve much more, with much less effort. The 80/20 Principle can raise personal effectiveness and happiness. It can multiply the profitability of corporations and the effectiveness of any organization.”
Small business owners regularly waste time and resources on activities that do not produce great results. Without constant analysis of your actions and results, this will not change. The 80/20 Principle gives you an easy way to look at what you do and how to improve your results.
Let’s go over 5 “under-the-surface” ways to use the 80/20 Principle to grow your business and improve your peace of mind.
Crank your personal productivity to new heights. Apply the 80/20 rule to your own daily activities. You’ll find 20% of the things you do result in the most powerful business results. Take the other 80% and do one of the following 3 things: a) delegate it to an assistant, b) outsource it to a 3rd party, or c) stop doing it. When you focus your attention on the actions that contribute most to your business, growth will soar.
Focus your marketing on the right problems. Make a list of the most common problems or goals that cause a new client to seek you out. Find the 20% of problems or goals that produce 80% of your new clients. Then, write articles, create educational material and craft marketing campaigns to position your business as the “go-to firm” for those problems and goals.
Make better employee decisions. The usefulness of the 80/20 Principle does not stop with you. If you have salespeople, apply it to their activities. What produces the most sales? Engineer ways for them to spend more time on those activities and less on things that don’t put money in the bank.
Improve your advertising. Applying the 80/20 rule to your advertising will reveal a disproportionate amount of business coming from only a few sources. Do “more, bigger, and more frequent” advertising where it produces the best results. Improve or get rid of the poor performing advertising.
Grow your referrals and generate positive word-of-mouth. Dallas Cowboy’s ex-coach Jimmy Johnson once remarked that if a star player fell asleep in a meeting, they’d laugh about it. If a marginal player fell asleep in a meeting, he’d pack his bags the same day. To maximize referrals and word-of-mouth, you should not treat all your clients the same. 80% of your referrals will be delivered by 20% of your clients. Reward these referrers with special perks and benefits, and watch them turn from enthusiastic to evangelical about your business.
Plan your business growth. What will cause 80% of the problems for your clients in the next year? Find ways to solve those problems, communicate what you have done to your clients, and be there when they need you. Because most businesses are woefully reactive, not proactive, this will put you far ahead of the competition.
Reduce your headaches and make business fun again. The life of a small business owner is hectic, but it doesn’t need to be endlessly stressful. What are the 20% of problems or people who cause 80% of the stress in running your business? Once you know, reduce, eliminate or delegate the stressors; and get back to enjoying your life.
Like a good Mac geek, I can’t help but pass along a nice quote from Steve Jobs at Stanford University’s Commencement:
“Your time is limited, so don’t waste it living someone else’s life. Don’t let the noise of others’ opinions drown out your own inner voice…Remembering you are going to die is the best way to avoid the fear that you have something to lose.”
Tipped off via Signals vs. Noise.
Yesterday, I posted about two nasty experiences I had with employees and closing times (see A Simple Way to Happier Customers)…
…it’s time for the flip-side.
Three weeks ago I pulled an all-nighter. Around 5am, craving caffeine, I decided it was time for a Starbucks break. I hopped in the car and drove down the street, pulled up outside Starbucks, and noticed the sign was still dark and the lights were off inside. I thought they opened at 5am, but it was Sunday and the store was still closed. I stopped the car, went up to the door to look at the hours so I’d know when to come back, turned around to walk back to the car.
I figured the coffee would have to wait…
…until the lock threw and the door flew open and one of my regular baristas noticed me, asked me how I was doing and whether I wanted something to drink. Now, get this (and pay attention Borders, Hollywood Video and other retail folks) … the store didn’t open for another hour! … but he let me in, make me an espresso drink, and didn’t charge me a penny. (He got a very big tip.)
Starbucks “gets” it.
Managers at Starbucks put tremendous attention into hiring good “people people.” People who enjoy interacting with and pleasing others. Their hiring and training process is designed … systematically … to produce events like the one I described. It isn’t an accident. It isn’t left to chance. And it’s part of why they win.
How does your hiring and training measure up?
A few nights back I drove (way too fast, ahem) towards Hollywood Video to pick up a few DVDs. The time was 11:57 when I pulled up to the curb and hopped out of my car. As I approached the door, the clerk on the other side noticed me, raced towards the door and quickly slammed the lock shut while doing his best not to make eye contact.
It got me thinking about another experience at Borders.
I’m a night person. I love books. I love going to Borders at 10PM, and staying until the 11PM closing bell. But it’s not unheard of for me to get in the door at 10:50 with a big list of books to grab and buy. Usually, I’m greeted with cold stares from the folks whose wages I pay. Just once, I’d love to hear across the loudspeaker:
“It’s 11PM and we’re closed, but if you love books as much as we do, you might need just a couple more minutes to decide on your purchases. Go ahead. The doors are locked but we’ll keep the registers open for just another 5 minutes. Make your selections and come on up.”
The truth is they are already keeping the registers open at both Hollywood AND Borders the extra five minutes, because there are customers who stay until the last minute and need the time to checkout. Local retailers: Why not teach your people to turn it into … yet another reason … to love your store; instead of making your customers feel like they are ruining your employees’ nights?
Little things count!
Fun post at Fractals of Change on the top 10 ways to tell if you are an entrepreneur. My personal favorites:
10. You can’t bring yourself to call anyone “boss”.
8. Instead of saying “there oughtta be a law”, you say “there could be a business…”
2. You have to take two zeros OFF the numbers in your business plan or no one will believe it.
1. You didn’t read this list because you already know what you are (and you don’t have time to read lists).
Read the rest at: Are You an Entrepreneur?.
Every interaction you or your staff has with clients is an opportunity to spot a breakthrough marketing opportunity.
During a recent coaching conversation, Mike L., an IT consultant and computer reseller in Idaho mentioned in passing that many of his business clients had been asking him about digital photography. Not for business use, but for personal use. Mike let it go in one ear and out the other because he was not interested in getting into consumer markets. I suggested it was a massive opportunity for him to increase his business clientele with no manual labor and without him getting into the consumer business.
How? I told him to make a deal with a local camera shop to hold a 90 minute demonstration of the latest digital cameras and how to use them. Mike could then offer the seminar to his clients as a bonus for new service or as a client appreciation event. The camera shop wins because they get high-quality prospects in the door who are likely to become customers. Mike wins because he gives something to his clients they want, continues to strengthen relationships, and taps into a latent want without manual labor. Now, here’s a question for you…
Are you sorting everything you hear from your prospects and clients for hidden business/marketing/advertising/partnership opportunities to…
- make new sales?
- craft new marketing pieces?
- create value added partnerships and joint ventures?
- strengthen your client relationships
…all with little-to-no additional work?
If not, start now.
Opportunities to improve your business, marketing, and profits are all around you. Only if you are looking for the right things and asking the right questions about your observations will you be able to capitalize on them. Sometimes the most significant business and marketing breakthroughs are simple, cheap, and right in front of your nose!