Discover the value of promoting your business and how to plan and budget effective campaigns.
Ralph Waldo Emerson, the poet and transcendentalist philosopher, said that if a man can build a better mousetrap, the world will make a beaten path to his door--well, perhaps if his door is on a major traffic route and he has a whopping big neon sign flashing over it. We all have heard business legends about companies that flourished for years, apparently without any promotional programs. The Hershey Company, the famous chocolate-candy manufacturer, spent not a dime on advertising for decades. I know a local woodcarver who has five years worth of orders on hand without an ad in the Yellow Pages, a Website, or a business card to his name. Some businesses appear to thrive without promotion, but most businesses need this tool to be successful.
Promotion is just marketing-speak for communicating with current and potential customers about your products and services and persuading them to buy from you. Here's what you need to know about planning your promotional activities and getting the most bang for your ever-scarce bucks.
Promotional methods are divided into four categories. These are personal selling, which includes salespeople in all their various forms, telemarketers, trade-show demonstrators, and traveling and retail salespeople; advertising, which involves non-personal promotion with an obvious sponsor; sales promotions, in which you might sponsor an event, conduct sales contests, or offer premiums, rebates, or free samples; and public relations, which is the process of creating positive attitudes about your business, products, and services.
Personal selling relies on direct, person-to-person communication. It is the most expensive method of selling, but is the most effective. Advertising comes immediately to mind when most people think about promotion. TV, radio, newspapers, magazines, billboards, the Internet, and of course my favorites, T-shirts and baseball caps, are all advertising media. Sales promotions work best when they are used in conjunction with advertising and personal selling, and public relations is unlike the other methods because it has no specific sales message.
Promotion: good or bad?
Are promotional activities necessary, or even a good idea? You may consider this a strange question to ask, but consider the following. Promotional activities are expensive, time-consuming, and not always viewed favorably by society at large. Before you start a promotional program, consider the negative attitudes that your customers may have about it. Advertising and other promotional methods often are considered fundamentally dishonest, because consumers think that advertising increases the price of goods and services. They also think that promotions overemphasize the importance of goods in our society and create an obsession with material possessions. In the world of marketing, perception is reality.
On the other hand, well-planned promotional efforts are the most effective and profitable method of communicating with customers. Promotion responds to consumer desires for more information about available goods and services. By providing access to ever-larger markets, promotions can dramatically increase sales, enabling more efficient production methods that actually drive prices down. Because advertising and other promotional methods usually take place in the public arena, any dishonesty is readily detected and can be promptly, publicly denounced, so it's inherently unlikely to occur. Finally, promotion is the most efficient and effective way to differentiate among the products and services offered by various businesses, thus enabling businesses and customers with mutual interests to find each other with minimal effort.
Even if you run the smallest screen-printing business, with only a box of business cards and a sign out front, you engage in promotional activities. Your promotions may already include distributing catalogs and price sheets, hiring sales staffs, advertising in the phone book, participating in trade shows, and distributing press releases to local newspapers. But to make your efforts most effective, you need to coordinate your promotional program and develop a promotional budget. These are the main points to keep in mind as you move forward:
Promotional goals In order to achieve your goals, you first have to have goals. Some objectives include launching products, maintaining and boosting sales, entering new markets, and cultivating customer loyalty.
Target audience Determine whether you're trying to communicate with current or potential customers, end users, distributors, businesses, or individuals. Promotion is communication, so the best way to make it effective is to have a crystal-clear understanding of your audience.
The product Identify the product or service you are promoting. Are you introducing products, supporting existing products, or describing new features and benefits to customers?
The budget For any given amount of money, certain types of promotional efforts are available, while other types are not to be considered. The budget gives you means of measuring your efforts in terms of spending and resulting sales. I'll discuss more about establishing budgets in a following section.
The competition However you promote your products and services, a major goal of your promotional program must be to differentiate yourself from your competitors. I know of at least two businesses whose radio advertising tells potential customers to find their phone numbers in the White Pages. Why direct potential customers away from the Yellow Pages, you ask? Because that's where their competitors' ads are to be found. On the other hand, using the same promotional method as your competitors can sometimes be of benefit. They most likely have learned through trial and error what works and what doesn't.
The media Media can mean anything from a nation-wide TV campaign to business cards tacked up to public bulletin boards. Each medium offers a unique combination of costs and benefits. Don't give up just because you think you can't afford a major media buy. In my area, if you can't afford to advertise in local newspapers, there are at least three shopping guides, published more or less monthly and distributed for free at local businesses. Less effective than the traditional daily paper, perhaps, but much less expensive. I have advertised on radio and not paid a dime to the station--I traded imprinted sportswear for the air time.
Before you select the medium you intend to use for your communication effort, take some time to learn about its strengths and weaknesses. And don't believe everything the media salespeople tell you. They work on commission, and the long-term welfare of their customers is not necessarily their highest priority. Also a word about the Internet: In popular legend, it's free and has a worldwide reach. Well, as anyone who has published a truly effective Website can tell you, it's not free, and the worldwide reach may not necessarily be a good thing. How much time do you want to spend dealing with inquiries from Dubai and Manila?
Place of purchase Products may be sold retail, in catalogs, or through distributors. You can sell anywhere from flea markets to high-end resort boutiques. Your promotional activities should aim at the critical point where the actual sale takes place. Except for direct sales by salespeople, most promotional efforts can facilitate and encourage sales, but they don't actually make sales.
There are just two overall promotional strategies: push and pull. If you can communicate with the end users of your product, you may want to try to market directly to them to create demand. This is called the pull strategy. The theory is that by stimulating retail demand, your products will be pulled through your distribution channels.
If you can't communicate with the end users, or consider it too expensive or difficult to attempt, you are limited to the push strategy. The push strategy works by marketing to the middlemen, the distributors of your products, and encouraging them to push the product through the distribution chain to the end user. A combination of both often is best.
I know business people who've been marketing products for 20 years or more and have never considered whether to use push or pull methods in their promotional planning. But if you want your program to work, it's something you must consider.
How much will this cost?
For any promotional plan, along with schedule, product, and target audience, one of the key issues that must be determined is the budgeting method you use to fund the program. You have several approaches to choose from:
Percent of sales Some businesses routinely set aside a specific percent of gross sales for their promotional budgets. For an ad-specialty business, I would not be surprised to learn that the promotional budget is more than 50% of the gross revenue. But for a manufacturing-oriented business with a limited and static customer base, the percent of sales could be much smaller.
All available funds If you're starting a new business, or are running a floundering business in danger of going under, then you need to spend every dime you can beg or borrow on promotional activities. This method also is appropriate when you have an exclusive on a hot new product and you have to penetrate and capture as many markets as possible, as fast as possible, before the competition wakes up.
Incremental "We spent $57,000 on promotional activities, including the trade show last year. We expect costs and sales to be up this year so why don't we budget $60,000 for promotional activities?" This incremental approach to increasing promotional activities is not very demanding or creative. This type of promotion budgeting won't get you in trouble, at least not very fast, but it won't lead to any marketing breakthroughs either.
Follow the competition As I mentioned earlier, if you don't know what to do, often your competitors will show you the way--whether they want to or not. The bad news is that you can never beat the competition by following them.
Task or objective oriented In my humble opinion, this is the budgeting method that is both hardest and most likely to succeed. You'll need to determine your sales goals for the coming year (and I'm not just talking about gross sales), products you intend to debut, markets you want to penetrate, how you'll defend your business from competition, what services or benefits you can offer to customers, and how you can take advantage of changes in your marketing world. Once you figure it all out, you can determine what promotional activities you should implement for the coming year. With that information at hand, you should be able to figure out what your plans will cost and then devise a budget based on that information.
Profit from promotion
Any interaction you have with current and perspective customers is an opportunity to create a sale. Structure your promotional program carefully, and you'll see those interactions increase and your business grow.
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