The Marketing Viking

A few years ago, a business consultant called Eliyahu Goldratt wrote a “business novel” called “The Goal”. The book revolved around a number of useful business ideas, one of which - “the theory of constraints” - can help you better understand your business.

To explain how the theory works, I’m going to use the example of an assembly line:

Imagine a factory makes one product and thre are three steps of production (A, B and C) that turn the raw materials into the finished product.

These three steps have the following capacities:

A: 100 units per day

B: 60 units per day

C: 80 units per day

Now, it should be obvious that, as things stand, the most units the factory can make in a day is 60.

In fact, if the capacity was:

A: 1,000 units per day

B: 60 units per day

C: 800 units per day

It would still have a production limit of 60 units per day. That’s because B limits the overall output.

So, there’s no point in increasing the capacity of A or C unless you also manage to increase the capacity of B. That’s because B is the bottleneck (or, as Goldratt would call it, the “constraint”).

Taking this idea and applying it to business in general, there tends to be two steps in the “assembly line”.

There’s “production capacity” and there’s “market demand”.

i.e. “how many clients you can serve” and “how many clients do you have?” 

If you can serve 30 clients a month, but you’ve only got 20, then market demand is your “constraint”.

On the other hand, if you can serve 30 clients a month, and you have 40 people wanting to do business with you, production capacity is your “constraint”.

“Steve, enough of the theory, what can I do about it?”

If you have a marketing bottleneck, then the solution is to improve your sales and marketing.

There are many ways to do this. Here are just a few of the cheapest and most reliable:

- Do more of what’s profitable. 

- Improve the marketing you’re already doing - if you can get a higher response from the money you’re already spending, the extra clients are free.

- Work on your sales conversion process so you turn a higher percentage of enquiries into sales (if you’re selling online, “enquiries” would be web visitors)

- Find additional products and services you can offer to your existing clients

If you’ve got a production bottleneck, then that’s a different problem altogether.

One obvious solution is to increase capacity by bringing in extra staff or contracting the work out.

However, if you can’t find the right people to handle the work, or you don’t want to take on staff, there are a couple of things you can do to make more money from your current production capacity:

- Firstly, you can increase your prices. You’ll make more per hour and you’ll probably find you can increase your prices and still have more business than you can handle.

- Secondly, if you offer different services, you’ll find that some of them give you higher returns for your time. If you focus on those, you’ll get a higher return for your time without doing more work.

Best wishes

Steve Gibson

Today I’m not going to talk about marketing. Instead, I’m going to talk about business in general.

What I’m going to say might be old hat to you, but read on, because I know there are a lot of people in business who don’t understand what I’m about to say – and it’s costing them a lot of pain, frustration and money!

You probably already know that most businesses fail. An American statistic I read said that:

• 80% of businesses fail within the first 5 years
• 80% of the businesses that survive the initial 5 years, fail in the next 5 years

This means only 4% of businesses last until year 10.

This means, when you start a business, you’ve got the odds stacked against you!

However, I’ve got some good news - you can change the odds so they’re in your favour.

(more…)

When listening to a lot of people talk about doing business online, I realise that many of them are stuck in the “get rich quick” mentality.

They’ve bought into the myths about how you “just stick up a site, drive some free traffic to it and then sit back while the money rolls in.”

But the world is rarely like that … even online.

(more…)

When I’m talking about website marketing, I often talk about the importance of “visitor value”.

So, what is it?

Visitor value is the average income accrued by a business from bringing someone to their website.

It doesn’t just mean someone who makes a purchase during that visit, it can be the residual income you expect to generate from someone requesting information or signing up to a newsletter.

Anyway … earlier this week, I posted something on an internet discussion group where I said:

“… if you’ve got a low income per visitor, doesn’t that mean there’s something wrong with either your business model, the quality of your traffic or your website?

i.e. a business with a low income per visitor is a business in trouble.”

Some people seem to doubt this, so I thought I’d address the issue head on.

(more…)

Q: So, how easy is it to spot these weaknesses? You’re a marketer, what about the average business owner?

Steve: There’s no getting away from the fact that marketing is, for the most part, a skill. And, the more skill and experience you have, the easier it is.

You know, it’s easy for me to say “you’ve got to justify your price here” but, if you don’t know how to do that … and do it well, that feedback doesn’t really help you much.

Copywriting is a skill that most business owners do for themselves, and really they shouldn’t.

Q: Because it requires so much skill?

Steve: That’s one reason. And it’s a good enough reason.

But there’s a second advantage to having someone come in and look at your copy. (more…)

Q: So, how do you do that?

Steve: I talked before about the five steps of the sales/marketing process and how business owners get myopic and only focus on one application of one area. So, it follows that the right way to approach it is to look at all your options and start where it’s easiest.That might mean fixing obvious weaknesses in the lead generation stage. Or the follow up or conversion process has an obvious flaw that’s costing you sales.Or they could have a client base they never bother writing to. That can be an easy way to generate money quickly.

That’s usually the first step: find something that’s easy to improve.

A: And then what?

Steve: Maybe it’s easier if I explain that there are three basic steps: (more…)