Riddell: Tomorrow’s success requires effectiveness today
March 8, 2016
If you are a seasonal business in Grand County, you are probably anticipating winter's last push, fondly known as Spring Break, with one of two mindsets. These two mindsets, one of positive eagerness or one of negative dread, probably mirror the business results for the winter season and these results generally fall into one of two broad categories. The first is you did a good job managing your business and you had a great season. The second category is maybe you didn't do such a great job managing your business, you had a disappointing season, and you are wondering what to do now.
It doesn't make much sense to offer advice to those in the former category. Clearly your recipe for success is working and your only real threat is complacency. For those in the latter category, however, this is a very dangerous time. The discipline to implement good management practices can now be completely overwhelmed by the very real short term consequences of diminished revenues and profits. With a little foresight, however, maybe we can come up with some workable approaches that can address the short term need with a longer term solution.
Every business textbook is quite clear on how to address short term revenue shortfalls. The simple antidote is to reduce short term expenses. Nothing complicated here, but the real skill in managing the business is knowing which short term expenses to reduce.
So many amateur business managers take the kneejerk position of immediately curtailing advertising expenses. Now think about this for a minute. Your problem all stems from diminished revenues, so one of your main tools for driving revenue–advertising, you decide to eliminate? How can this make sense? Seasoned professionals will tell you it doesn't! But what does make sense is a hard sober look at your advertising costs and effects followed by some judicious decisions.
Nothing complicated here, but the real skill in managing the business is knowing which short term expenses to reduce.
Here again, the key resides in the evaluation. Every business's advertising and marketing plan should have some objective basis for evaluation of effectiveness. For many this would be the cost per lead. This is simply the cost of the ad divided by the number of leads the ad generates. If you have this in place, you can now decide on exactly where to allocate your scarce cash going forward. Online presence generates a cost per click. Again, the go-in requirement is the ability to measure and monitor the information contacting process. If you don't have such a process in place, you can pretty much guarantee that your historical revenue picture will not change dramatically. So work with your advertising media to put a measurable program in place immediately. As an aside consideration, given that advertising media understands their real cost of your failure when your account goes to zero, try working out a variable program of costs based upon effectiveness. You might find them very receptive and willing to professionally help you in this area.
Another suggestion is to get a lot more focused on finding and building local loyalty. Here again, the first step might be in coming to grips with the definition of "local." So many businesses already do grant a small discount to "locals," but they define "locals" as only those with a driver's license showing a local address. Now when you consider the number of folks who have second homes up here, pay real estate taxes up here, but have driver licenses from somewhere else, then this represents a significant opportunity to develop customer loyalty that is not even being remotely tapped. Perhaps some coordination with the recreation department, which verifies local presence for local recreational discounts based on real estate taxes would be a good place to start. Surely some type of "local loyalty" card could be provided at a minimal cost. This could be a worthwhile service for both local businesses as well as local taxpayers. The good news is this approach could certainly carry over to the next season and creative offers could be designed to capitalize on this base, thus minimizing the anticipated off-season dip.
An additional area to obtain a better return on your advertising dollars might include some creative leveraging or co-messaging. For example, given the establishment and draw of the new Murdoch's, maybe customers who have just purchased some items from Murdoch's might be eligible for a discounted cup of coffee, or a special price on a burrito, or a "local's" discount on a piece of handcrafted furniture. This would be easy enough to implement. Get the promotional word out and simply require a current dated receipt from Murdoch's and everyone benefits.
Of course, these are simply ideas which may or may not fit into a specific business's plans. But if you've had a lousy year or even if you've had a good year, the time to lay the foundation for future success is right now and more effective advertising is the key.
Following a successful international business career, John Riddell turned his attention to small business/entrepreneurial pursuits that included corporate turn-arounds, start-ups, teaching, authoring business and sports columns and serving as VP for the Chattanooga Chamber of Commerce directing its Center for Entrepreneurial Growth.
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