This is a guest post by Kate Manning
These days, it is impossible to turn on the TV, open a magazine or check your e-mail without getting bombarded with advertisements. In an age of increasingly short attention spans, many businesses may feel that creating massive advertising campaigns is the only way to get their message heard.
However, the fact of the matter is that splashy ads often just overload many consumers, causing them to do anything in their power to block them out. Yet many large advertising agencies continue to charge extravagant fees to develop ads and subsequently flood the market with them. Clearly it doesn’t take having an finance degree to see that while traditional methods advertising remain costly, they are becoming gradually less effective. Thus when it comes to advertising, more is not always better.
While blanketing the market in ads may seem like a good way to disseminate information to a lot of people, this approach usually ends up adversely affecting the profitability of the company. Many start-ups often make this mistake, thinking more advertising will create more sales, and ultimately result in the company becoming more profitable. However, this method is not as effective as many business owners believe: most advertising focuses on gaining a small part of consumer mind-share with an expensive advertising market strategy. For instance, an advertisement may take several hours or days to create, which can costs hundreds of dollars, only to be viewed in a matter of seconds and may reach only a limited segment of the population.
Luckily, small businesses can reduce advertising costs by using consumer centric marketing tactics. This type of advertising reaches customers one at a time at the point of sale and is promoted by word of mouth from satisfied customer to potential customer at nominal cost to the business owner. In fact, successful businesses have proven that four marketing tools (frequent shopper, customer loyalty, pre-sale, and referral marketing tactics) are extremely effective for building sales, decreasing advertising expenses and improving profitability.
Frequent shopper or frequent customer programs reward consumers who make purchases at the same store on a regular basis. This strategy increases customer retention, which in turn increases per-customer profitability. When utilizing this approach, businesses reward loyal customers with either a discount on future purchases or free merchandise based on past expenditures. These rewards are distributed regularly to encourage consumers to return to the store frequently. This method is most effective for service-oriented businesses such as car washers, barbers and yard mowers who have invested in tools and goods to provide a service. With more customers, the return on the company’s investment is greater, ensuring the success of the business.
Customer loyalty is a variant of the frequent shopper concept, which encourages shoppers to return to the same business. Business that use customer loyalty programs reward shoppers with an increasing amount of discounts as the number of their purchases increase, and then ultimately reward the buyer with a gift of a free item.
For example, one model businesses often use is to give buyers a five percent discount on purchases of two to five items, a 10 percent discount for purchasing six to nine items and then give the 10th item away for free. Not only does this approach please the consumer, but word of mouth passes the good news to future customers. This concept is most readily adaptable to video and game rental stores, restaurants and convenience stores.
Small businesses can also pass savings and benefits to customers by giving them a discount when they pay for goods or services in advance. Pre-sale items range from ten video rentals for the price of eight, four haircuts for the price of three and lifetime alignment service with purchase of tires.
Rewarding customers for paying for services in advance encourages buyers to continue to visit the store, which in turn benefits the business by developing a base of lifelong customers. This concept works well for auto parts dealers, mechanic services, video rentals, and hair stylists.
This program is geared to bring in new customers based on the referral of current customers. A personal referral is more effective than any high-priced, high-pressure advertising ever devised. The current customer is rewarded when a new customer informs the business that they received a referral from Mr./Ms. Current Customer. The business owner may even offer a free gift bearing the company logo to the current customer, while also supplying it to the new customer at nominal cost. The gift, which is often a coffee cup, magnetic calendar or chip clip bearing the business’s logo (location and contact information), will serve as a reminder and witness to others of the goodwill the business has built.
While advertising can be beneficial if it serves its purpose by reaching a large consumer base, businesses often spend more revenue on creating an ad campaign than the campaign actually generates, causing the company to get little return on their investment. However, if a business owner integrates customer-centric marketing strategies into their start-up business or struggling company, the bottom line will rapidly become more profitable. Thus, when it comes to developing a marketing plan, customer-centric marketing is clearly the right choice to make.