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Marketing and the "R" Word
By Judy MurdochIt's got four letters, it starts with the letter "R", and it's the reason so many great products and services languish--never reaching their full revenue potential.
It's a little word that packs a wallop: risk.
There is risk in all areas of running a business: financing, technology, the people you hire, the vendors you choose to work with...you invest money, time and effort with the intention that the returns you get will more than justify the risk you took.
But from the conversations I have with business owners, the business activity associated most often with risk and negative outcomes is marketing.
Marketing is an inherently risky activity because whether or not your marketing program succeeds is based on what people (your customers) do. And after spending many years in consumer and market research, there's one thing I know for sure: Human behavior is tricky to predict. The other factor that makes marketing risky is that marketing activities are often expensive and time consuming. Ask anyone who has spent hours putting together a trade show demo, or has hired an advertising agency to develop a new campaign.
It's no wonder a lot of small business owners get knots in their stomach when they hear the word marketing.
But hang on there--put away the antacids and the aspirin. Because you can reduce marketing risk. Even better, you can risk less and get the same, possibly better results. You can spend less money, time and energy on your marketing and still get plenty of new customers, repeat business, sales revenues, etc.
WHAT IS RISK, REALLY?
Before getting into the "how" of reducing risk, it helps to better understand what risk really is.
Simple definition: Risk is the likelihood of a negative outcome.
This is helpful because it highlights the two main components of risk that you, as a small business owner, can manage:
1. You can take actions to reduce the likelihood of a negative outcome. In other words, you can make the odds more favorable.
2. You can reduce the magnitude of the negative outcome. In other words, don't bet what you can't afford to lose.
RISK REDUCTION STRATEGIES
So how do you move forward with marketing your products and services and manage the associated risk? Here are five practical strategies that will help you reduce and manage marketing risk:
Risk Reduction Strategy #1: Eliminate Unnecessary Risk
In every situation there are elements you can control and elements you can't control. Managing the elements you CAN control makes the odds more favorable.
For example, you're giving a sales presentation to an important group. The stakes are high: you've spent a lot of time preparing your presentation and cultivating relationships with key people. If you succeed, the prospective sales could enable you to triple your revenues. If you fail, you won't have another opportunity to work with this group for at least a year.
What are some things you can do to improve your chances of success?
If you ask most successful sales people they'll tell you they come prepared and they make sure they arrive early. This is as simple as you can get when it comes to improving your odds but it's amazing how many people walk into presentations late or try to finesse the conversation without taking the time to learn about their prospective customer.
Risk Reduction Strategy #2: Talk to Your Customers
You don't need to do an elaborate survey to get useful input from your customers. Oftentimes, calling your five best customers and asking 3-4 well-worded questions is enough. I do, however, recommend that you think through what you want to learn, what you will do with the information, the questions you will ask, and how you will collect the information. That way you aren't wasting your time or your client's time. I also recommend that you get opinions from enough people so that you've fairly represented the groups to whom your marketing is directed.
Risk Reduction Strategy #3: Beta test
Beta testing involves putting your marketing in front of a group that is representative of your ideal customers to get feedback before your marketing goes in front of the general public. You use the feedback and suggestions to refine and tweak your marketing so that you optimize your chances of success.
You beta test at the prototype stage: when you have something that is close enough to the proposed finished product so that the feedback gives you an idea of what to expect when you actually go public.
What should you test? Product ideas, product prototypes, promotion ideas, sales strategies, your website design and content, business cards, brochures, and so on. If you can't afford a public launch to fail, take a little more time and money and beta test first.
Risk Reduction Strategy #4: Take baby steps
This strategy addresses managing what you put into your marketing in order to keep potential losses manageable.
Most of you are probably familiar with the strategy of breaking large projects into small, manageable tasks. However, when you're doing something new that feels particularly risky, I suggest you take this a step further and break those tasks into the smallest possible discrete activities. I think of these small, discrete activities as "micro-steps" or "baby-steps."
Baby steps are tasks that are so small and non-threatening that your fear doesn't kick in and prevent you from doing them. The beauty of taking these tiny steps is that they enable you to make progress and to build momentum. As you make progress, your confidence grows and you'll begin taking on the larger tasks on your project plan.
Risk reduction strategy #5: Remember to fail forward
Sometimes it's more important to manage your perception of risk than to manage the real risk.
You can't grow and evolve without experimenting and learning from the outcomes. Your business won't grow and evolve either if your focus is on avoiding negative outcomes.
When you're trying out a new marketing activity, do what you reasonably can do to reduce downside risk and take action. If you succeed, fantastic. If you fail---the result isn't what you wanted--- it's an opportunity to better understand your customers, what you're marketing, and how you're delivering your marketing message. Sometimes a few changes in one or two marketing elements is all it takes to make the marketing vehicle more effective. But if it's too time consuming and expensive to make the changes that will make the marketing work, stop what your doing and try something new.
THE BIGGEST RISK OF ALL
The biggest risk of all when it comes to marketing is NOT DOING ANY MARKETING.
Sometimes I see business owners who become so discouraged with their marketing that they give up. They stop doing any marketing at all and pin their hopes on growing their business based solely on customer referrals.
While referral-based marketing is without a doubt the single best marketing vehicle for small businesses, it typically takes a long, long time to build enough word of mouth momentum to generate the customers needed to support a business. There are too many sad stories about businesses with solid products and services that had to close their doors because they just couldn't build their customer base quickly enough to generate the necessary referral volume.
BOTTOM LINE
Marketing is an inherently risky activity because human beings-- customers--are not perfectly predictable. This makes it challenging to change and improve the way you market your products and services because you know you need to get more customers and clients to grow your business but at the same time, there's possibility that the marketing won't work.
Rather than sticking to old tried and true marketing methods which are no longer producing the results you need, move forward with new approaches while doing what you can to reduce related risk. Remember that the most successful marketing comes, not from avoiding failure, but from taking intelligent, calculated risk.
About the Author:
Judy Murdoch helps small business owners create low-cost, effective marketing campaigns using word-of-mouth referrals, guerrilla marketing activities, and selected strategic alliances. To download a free copy of the workbook, "Where Does it Hurt? Marketing Solutions to the problems that Drive Your Customers Crazy!" go to http://www.judymurdoch.com/workbook.htm You can contact Judy at 303-475-2015 or judy@judymurdoch.com