Archives for February 2014

I was speaking at a seminar a while back. It went quite well. Got some good leads out of it. Which isn’t really the point about the story. But none the less I am new to the world of professional speaking and so getting leads was a real buzz.

What I find really interesting was the behaviour of one of the leads in particular. So we scheduled a follow up call.

During the call he outlined what his problems were. He explained what he felt he really needed. And I knew going in I wasn’t his first priority, I was more interested in establishing when would be the right time to start to talk about what he and I were going to do.

Specifically his newsletter.

So this guy says to me, “I like this newsletter idea, but I only need to do it two or three times a year.”

So I asked ‘why?’ and the reply was “Oh I need to stay in touch with my clients but I don’t need to send them something monthly. They aren’t interested in anything but printing and I don’t have that much to say about it.”

My response was you can. “One of our clients is in your industry, does it monthly, does the exact opposite of what you just said and makes a 5:1 ROI. A big part of their success is their frequency. And they have plenty to say about printing. They are also able to create opportunities for their products that weren’t there before.”

Awkward silence and then he went back to telling me about how to do my job. Newsletters sold by this printer none. Newsletters sold by newsletter marketing systems… I have no idea what our customer count will be by the time you read this – but it is steadily rising at a predictable rate and at the time of writing we appear to have cracked the conversion code – the rate we are adding new customers is rising.

But I find it interesting when people ask you for advice and then go and do their own thing. It happens all the time in my consulting work. Regrettable for both me and ultimately the client – who never gets the result they want.

Interestingly, the problem with the opportunities we find doing existing customer opportunity audits, we find large amounts of very green grass within reach. Sometimes even embarrassingly large amounts of money.

Often times it is the client’s disbelief at the opportunity that makes it really difficult.

At this point the potential client will start telling me how to do my job. Or about how to do a newsletter properly. I don’t think that is so smart. I don’t advise businesses about how to do their core skill. I don’t tell printers how to print, engineers how to design and build things. I do know business, sales and marketing though. And to be honest, most people don’t.  So I stop telling me how to do my job.

I Wish I Was A Punk Rocker With Flowers In My Hair I mean a Sequoia.

In what was somehow a great use of my holidays I had the TV on, and I wound up watching a countdown of the greatest 00’s one hit wonders. Down time is a blessed thing – it must have been meal time during the cricket or something.

I have to admit I was kind of chuffed when I discovered that Sandy Thom’s ‘I wish I was a Punk Rocker’ was the number one, one hit wonder of the 00’s and this was the first time I had EVER heard the song. (Worth noting that in my experience punks hate hippies and hippies try to love punks…)

Kind of an achievement, but considering I usually listen to community radio or business/ self improvement materials then not so hard. Considerably easier when most of the time when I go out, I see live bands or I am at some sort of ‘Indie’ establishment.

The ‘I wish I was’ part of the title sort of side tracked me to the question “if you could be a tree what sort of tree would you be.” ‘My brain isn’t right’ especially when I am on holidays.

Anyway, I would be a sequoia and more importantly Newsletter Marketing Systems would be one too. Sequoias are massive and permanent. They live for hundreds of years and spawn entire ecosystems by themselves.

Its everything you want in a business except for one thing – by being so massive, so permanent and by virtue of being a tree, it has zero mobility. Despite my size I prize agility over resistance. The ability to move to avoid being hit is far more valuable in my eyes than being able to absorb a blow.

Any sort of fight is costly in terms of time and resources. And the recovery time from the fight is long.

Speed is an underutilised asset. And you need skill to be able to use it effectively. Anybody can don body armour and wade into the killing zone hoping their armour is good enough. But it isn’t always enough. Anybody can hole up in a fort and try and wait out a war.

Look at all the companies who win legal battles just by having deeper pockets and draining the other side’s coffers dry.

Speed on the other hand requires guile, planning and thought. Used wisely it can overcome the toughest foe. While it is nice to be the big massive sequoia, there are more opportunities to be had when you are nimble. And you can strike fast and get out while the getting is good.

Just don’t ever get hit. Then you’ll regret it. When you stay agile you tend to sacrifice armour.

In the business owners guide to getting more repeat business and referrals, Ben and I talk about churn:

The idea that so many of your customers are going to turn over in a given year.

And that if you want to keep your business at its existing size then you have to be adding customers in order to replace the ones that go.

Then if you want to grow you can add customers after you’ve replaced the ones you’ve lost.

Not too hard now is it?

We seem willing to take a lot of things for granted. One of them is customer defections.

We just accept them. We never try and get them back when we lose them. Or should I say go out and get them back?

We don’t try and keep our customers around for longer.  Which is the reverse side of churn.

The longer you can keep a customer the lower your churn rate. I was talking with a client recently, she has a capacity of about 200 customers in her business.

Her clients typically stay for about two years. They should be staying closer to 5 and if she gets them for five there is a good chance to turn them into lifers.

This means at the moment that she needs to be adding close to 100 customers per year in order to keep her business full.

Now if she was able to keep those customers for 5 years that would mean that she would only need to add 40 customers a year (200÷5) in order to maintain her business at capacity. That is much easier to do compared with adding 100 customers a year.

Want to know the easiest time to raise your prices?

It’s when supply exceeds demand. So if your business is full then it is really simple, you can raise your prices and there is none of this begging or making excuses stuff.

“Our suppliers put their prices up…”“Utilities and fuel have gone up…” “Blah blah blah”

Your customers don’t really care about that sort of stuff. That is pitiful excuse making. They buy because the value exceeds the price they pay. And when they know there is someone standing in line behind them with cash in hand ready to take their place, they are going to pay up and make sure they get their money’s worth – so you get a better client to boot.

Nothing is more powerful than having that line of customers begging to buy from you.

Sadly, most people try and turn the new customer wheel. The easiest way to go about creating the line of customers is making sure that once you’ve gotten a customer they don’t leave.

After doing an existing customer opportunity audit with a potential client I got a rather interesting reply.

Here is the general gist of it:

Client: This would require a substantial shift in our marketing budget which is skewed towards customer acquisition but is definitely a consideration. I will raise it in our next meeting.

I’ve taken some liberties with the reply to protect client details and maintain confidentiality, but what really struck me was this idea of a marketing budget. It’s one of the few places in the world where you can set yourself up and use a system to make money at will.

In business I hate spending money that doesn’t come back with little friends. If I spend a dollar it had better come back, and with more dollars in tow. Or if I am investing in customer acquisition then that dollar had better come back with a new customer and ideally some more dollars.

Here is my reply to the client:-

Your answer does open up some business-philosophy discussion. Firstly the concept of a marketing budget. It automatically implies marketing is an expense and a necessary evil. Kind of like an accountant or a lawyer.

Customer acquisition marketing is about buying an asset i.e. the customer that can be monetized. Kind of the way you buy a rental property. You fork out to buy the house so that you can rent it out for its life time.

Your customers work fairly similarly. You invest in marketing and you get a customer and then they buy repeatedly off of you for years. All well and good. So if you know your cost of customer acquisition (I.e. I spend $500 I get a customer who orders for the first time) then your cost of customer acquisition is $500. And for that $500 you get a steady stream of future orders worth say 5 years of monthly orders. Or over their life time 5 years X 12 months X order size.

We are talking about two different types of marketing.

A newsletter is a way to get customers to stay longer, buy more from you, buy other products from you. (I call this customer retention) So that customer that we just said you paid  $500 for goes from being with you for 5 years to say 7 years and for 5 years they  buy a product from you at a similar rate they buy the first.

In this case my friend, you would increase your lifetime client value by 240%. (The amount of money a client spends over their lifetime…)

And we are helping you add this ‘bonus’ return from the customer for the measly investment of $74 per customer per year. ($514 over 7 years) you are currently happy to spend the $500 to get a customer how many more lots of $500 do you want to spend now that they are worth 240% more?

“Oh I have to stop I used up my budget…”

I understand that cashflow may be prohibitive in the short term. But if you don’t make the investment now it will be prohibitive in the long term too.

The thing about investing is if you cut your losers and keep your winners you’ll only be invested in proven money making opportunities that will pay off.

Marketing is not a cost it is an investment – when done intelligently and tracked for its performance relative to its costs. In my opinion anyone who does NOT TREAT MARKETING as an investment may as well be gambling. Take your “marketing budget” down to the casino drop your chips on 00 on the roulette table and *spin*.

This is why the concept of a marketing budget rankles me. If you have proven systems for getting a customer at an affordable rate and a way to make money out of your customers once you have them then you should be investing into them at a rate that you cashflow allows. That is the ‘science’ of making money with a business.

“Advertising (and marketing) in some hands has reached the status of a science.” Opening sentence of Scientific Advertising by Claude Hopkins (published in 1923). 90 years ago all of this was figured out – if you operate with a marketing budget catch up – you are way behind the game.

Recently I was reading a book on trading. It fascinates me… Mostly because I need something in my life that I can endlessly talk about that means nothing, Football statistics, tactics and strategy is my poison of choice, it works in social situations. If it wasn’t football it probably would have been the stock market.

(It’s no coincidence that I run my fantasy football teams as ‘Buffet/Graham style’ value investing exercises.)

I don’t know if you’ve ever watched finance and investing shows on TV but they are remarkably similar to sports opinion and analysis shows. A bunch of people sitting around a desk talking about things that is in reality largely irrelevant to the outcomes.

If these people held the secret to getting rich in the stock market you’d all be rich already – watch the investing show and follow the advice (It doesn’t work that by the way – they mostly recommend losers). If the sports guys know so damn much about football why wouldn’t they coach a team and win 10 consecutive premierships?

Anyway, tangents aside, while I was reading this book I realised that customer retention has a lot in common with investing. You are making an investment now in hope of a future return (the next sale, a referral, etc). So a lot of the same maths and psychology is involved. (Isn’t marketing, maths and psychology?)

Which means when you invest in a customer relationship you need to balance 3 things:

The amount you invest in order to get a future return. If you have a retail store selling cup cakes then your next purchase is probably only going to be a couple of dollars – which means the amount you can sensibly invest to get a future return is low. Would spending $25 on a newsletter for each customer make sense? I doubt it. Compare that with someone selling industrial components to a manufacturer. They can invest a lot more and still see a return.

The odds of the future return occurring. What are the odds of you closing another sale with them? The higher you stack those odds in your favour the faster you get richer. Say it is 50% at the moment and you only need it to get to 52% to cover the cost of a newsletter. Then it warrants taking the risk. If you need a newsletter to double your sales then I wouldn’t get too excited about those sorts of odds.

The size of the future return. Basically, the bigger the next purchase the less the odds can be and you will still win. Let’s say if you invest $20 in each customer and that every 25th customer buys a second time. Now let’s say that when they buy the second time you make $1000 profit.

That means that you have a licence to print money. For every $500 you spend on customer retention you make $1000 profit. Coincidentally, that is the formula that a lot of the most successful traders use. They aren’t ‘right’ very often but when they are it pays off in spades.

That is also the story behind why there are a lot of failures on the way to success. Few really big winners.

Since we all adhere to NMS production cycle…

I’ll confess I am a bit late getting this article into the newsletter on deadline.

I’ve added it as a last minute piece. We tell our clients to write a personal interest article and an industry specific article each month for their newsletter and we are no different. This newsletter follows all of the same advice we give our clients and we follow our own deadlines.

The last 8 weeks of 2013 were a physical struggle for me. I’d call it burn out. It comes from trying to grow Newsletter Marketing, keep up with my consulting and copywriting work on as well as trying to stay sane and have a life outside of work…

Ideally, this article would be ready to go in at the start of January. But instead somewhere around November 3 I hit the wall and it became an exercise in priority management and my health to get through until Xmas. I made it.

We are all entrepreneurs, so we are all likely to burn the candle at both ends. But I am a case study in pushing too far at the moment.

While I gave you the nuts and bolts in January of how I spent my summer I didn’t give you the why. And that was it – I was so exhausted I couldn’t think straight or see straight some days. I watched TV, I slept and occasionally left the house to catch up with some friends – it didn’t help my back was out but it was more an excuse than really stopping me.

Just before my birthday I was starting to panic that the exhaustion I was never going to leave. Thankfully it has largely left by the end of College Bowl season. Which ends this afternoon.

Be sure to take the time to rest and recharge. It is okay to work intensely in bursts but be sure that it is balanced out. If you don’t take the time for the recovery, your health will leave. After this break I couldn’t imagine anything worse.

There is no point being rich if you have sacrificed your health or anything else to get there. Happiness seems to me to be a function of having a balanced life, not robbing one area to pay another.

Started Jan 7 11:07am Finished Jan 7 11:22am, which is why I don’t worry about being behind with writing (now way I could have done it that fast in December it might have taken hours). But note I was nearly a week behind getting this ready for Ben.  And to think it used to take hours to write a 300 word essay in high school.

We’ve all heard for a long time that the money is in the list.

If you haven’t then you probably are investing adequately in your marketing education.

Probably 80% of businesses are not even actively building theirs lists… Yes plural. A real business should have at least 3 lists and sub lists within each of those main lists as they get bigger.

16 of the remaining 20% are probably not investing adequately to see a return from their lists or they are too small or in such a state of neglect so are in effect worthless.

The rest are probably lists of significant value. Well invested in order to make a considerable return on the investment.

So here is my point on lists…

The value in a list grows as it gets bigger. So I can invest a couple of weeks to create a product and the marketing for it. Now let’s say it converts at 1 in 50. A 2% response rate.

When you have 100 people on the list you can send your marketing to that means that you’re going to get 2 sales, all things being equal.

Now that may be fine or it may not. That depends on you and your situation as well as the profits on the product.

Once your list is at 1,000, that same work yielding a 2% response rate yields 20 customers.

At 10,000 on your list the same work yields 200 customers.

The same work yields 100 times the response. If 1,10 or 10,000 people receive this email, it still takes just as long to write and to send it.

That is a big part of the leverage you can have from marketing. Rather than ‘selling,’ which I define as a 1:1 activity.

If you are actively growing your business then you can be actively growing your lists. And if you are acquiring customers then it is not too hard to be nurturing those accumulated lists in order to have a readymade asset that can make you large additional profits from in the future.

Be wise and invest as you grow your business. This is a ‘money on the table’ opportunity that a great many entrepreneurs neglect through their unwillingness to be disciplined about their business.

While a list is small, it ‘hardly seems worth it.’ When your list gets bigger it is major income source.

(Names changed to protect the innocent).

The middle of 2013 I was working with a new client to get help them generate more leads. We had a good size list of high value, prospective clients. If we got one sale it would pay for the direct mail campaign – which by the way is how you play business smart.

Since this client was familiar with direct marketing, as we do it in these parts – I am a Dan Kennedy Certified Copywriter, he is intimately familiar with Dan Kennedy and his marketing philosophy. This lead to me making several assumptions as you will see later.

So we put together a simple 3 step mailing to get my client some leads. We both understood that this was about testing the market. There are lots of things we can do in order to make it more successful in the future, if the test came back positive. We were looking to generate sales appointments.

Away we went, I wrote what I thought was a pretty good campaign – 3 letters to be sent 2 weeks apart.

The client approves the letters. While we were scoping the project I found the sub section of the list that is most likely to respond to the offer. Mailing test list drops from 1000 to 200. Client thinks I am a genius. I suppose I am when I work list magic like this.

My client sends his secretary off to print the letters and get them in the post.

Mailing step 1 goes out. No response.

4 weeks go by, my client gets step 2 out 2 weeks late (later admits it is half of mailing step 2). Still no response.

I’m explaining the reality of the maths at this point, ‘when you do a 3 step direct mail campaign, you do all of it – then analyse the results.’ ‘Response is better to the second and third step.’ ‘not a big difference between 0 and 1 response – numbers wise is there’

At this point 2 things happen. The regulations change for the industry that we’ve targeted and they aren’t going to be worth chasing as clients anymore (valuable lesson about market selection).

Secondly, he gets a cease and desist letter from the industry’s regulator. I had engineered in a second way for this campaign to be a success – he might be able to get the regulator to refer him clients as a preferred vendor. But none the less we are dead in the water with this campaign.

Another 2 weeks go by. At this point I got a sheepish note from my client – Turns out he’s had 5 email responses – that he has only seen and that the phone number he put in the letter hasn’t been answered – the people he emailed back all said it was engaged and they had each tried it at least 3 times.

1.6% response would have been an outrageous success for this client. Good copy was nearly sabotaged by not testing the phone number and the email address. I screwed this up by not checking the response mechanism – I am to blame here too.

Be sure that you test your response mechanisms before you go out and spend money on media. It can save you a lot of stress.

With Ben and Hollie expecting a baby come April, I was leafing through our article ideas materials looking for an idea for this article. One of them is ‘would you recommend your kids get a job in this industry.’

Now, I am a long way off having kids (probably unqualified in the eyes of some to offer this opinion), but that won’t stop me offering my opinion on whether or not I would get my kids to get a job in this industry of newsletters (whatever that is).

I’ve just finished reading ‘The World Until Yesterday: What can we learn from Traditional Societies’  by Jarred Diamond – so that coupled with some interesting patterns started to stew.

In the West we often see a pattern where great wealth is built in the first generation, grown in the second and squandered by the third. The third generation never has experienced ‘lack’ so will lose the money that has been built up because they feel entitled to it and don’t appreciate what went into getting it in the first place. A fool and their money are soon parted.

The second generation appreciates how hard the first generation worked or have been involved in acquiring it themselves and usually have the experience to grow the first generation’s wealth.

So, would I recommend my kids get a job in this industry?

There aren’t that many jobs in the information marketing industry at large, the majority of these businesses operate lean with few employees in ‘kitchen table’ type operations. That is the first problem. The second is, it is relatively easy to start these businesses and with the right skill set run your own business – why go and work for someone else?

In many western dynastic families, children are given a job in the family business, leaving them forever dependent on their parents in some ways. In hunter-gatherer societies, children able to walk are basically treated as adults, many are expected to contribute to food production once they reach puberty.

It’s common to see children playing with knives, near fires and doing all sorts of dangerous things. Why? Because the child is considered autonomous. You cut yourself playing with the sharp knife, it’s your fault; you put your hand in the fire and burn because it was hot, your fault. Imagine that attitude at a child care centre.

Yes we would consider it child abuse but it seems to result in very little teenage rebellion in traditional societies and generally they grow up to be very happy adults that socialise well. Compared with the ‘adults’ our society turns many would consider it an improvement.

Personally I value freedom – I see no freedom in jobs. The only true freedom in the west is the ability to create your wealth from nothing. That is what I would want for my kids.

It’s a good industry to get work in if you want a job but a far better way to be able to create your own wealth and if your parents are in the industry it could make it easier to acquire the skills you need for your own business – for that reason I wouldn’t mind it if my kids worked in our industry, but I would prefer it if they became producers – capable of creating their own wealth and run their own businesses.