The Australian Bureau of Statistics recently released a report titled: Counts of Australian Business that looked at (among other things) the mortality rates of businesses between June 2003 to June 2006. For businesses earning between $50K and $200K, the business exit rate was 50 percent in three years.
Although business exit rates do not equate exactly with mortality rates – as some businesses are sold, others change names and in some cases the principal retires – the truth is that SMEs are perennially under pressure and many simply do not survive.
More than ever before, businesses need to avoid falling into commonly seen marketing pitfalls.
Here are five that can be easily avoided.
Pitfall #1: Assuming you know exactly what the customer’s needs are.
Perhaps the fast way to ensure any retailer fails is to assume you know what the customer wants.
Leading Australian market researcher, Frank Domantay (Managing Director of Research Insights) says: “Successful businesses routinely do customer research that allows them to understand what they are doing well and what they are not doing so well.”
This research can be in the form of a survey, one-on-one interview or focus group. The results can be fed directly into strategic planning for the retailer and are often the first indication of the need to change some aspect of the business or its product offerings.
For example, a recent survey done by a Melbourne-based medical clinic found patients were deeply unsatisfied with the approach of the front office staff.
As a result, the staff was retrained on both customer relations and social style training.
Pitfall #2: Trying to market yourself exactly the way your key competitors do.
To fully understand how important this point is, you need to understand that the customer’s need is really made up of two things. The met portion of the need – the elements that customers are already satisfied with – and the even more important unmet need, which is where you can work to stand out from the crowd. Now if, for example, your business follows your competitors blindly and mimics everything they do, you will basically be meeting the same met portion of the need and leaving the same unmet portion of the need unaddressed.
An example of a retailer that did not follow its larger rival’s example: Dial a Dino’s Pizza. It were the first to include free home delivery and, as a result, differentiated itself in a way that ultimately compelled the market-leading Pizza Hut to buy it out or risk losing market share.
Pitfall #3: Taking your customers for granted.
The ongoing support of key customers must also be acknowledged with incentive schemes designed to both reward and maintain customer loyalty, as well as drive demand for future purchases.
These schemes do not need to be complex. Trendy cafe Buddha’s Belly offers a simple scheme on its business card, offering a free coffee after five purchases. Simple, but effective.
Larger organisations like Subway have a similar card that offers a free drink after eight purchases of their subway sandwich. These are simple ideas that work.
It’s important to remember that for a lot of businesses, the 80/20 rule applies. That is that 20 percent of your customers generate 80 percent of your business. The bottom line is, know who the 20 percent are and reward them for their support.
Pitfall #4: Failing to strengthen areas you have identified in your business as weakness.
There is no doubt that a business is only as strong as its weakest link.
You may have a great product but if it is incorrectly priced, poorly promoted or not consistently available in the store due to unreliable suppliers, it will fail. These or any other ongoing weaknesses must be promptly addressed to ensure the business’s ongoing success.
Today’s consumers are more aware and less tolerant than they have ever been and any ongoing weakness in your business will translate into lost customer loyalty and sales.
Pitfall #5: Losing your overall perspective and work/life balance.
Of course it’s important to perform well and run a profitable business, however you must always be wary that the business has the potential to take over your life, causing imbalance. This is a complex issue, but there are some key strategies that can help.
1. Schedule time outs and honour them.
2. Take a time management course and learn to become more efficient with your time.
3. Learn the power of delegation.
It is well recognised that many businesses will fail in their first few years of operation.
Many of those who did go on to fail, failed to recognise these potential areas of risk.
By following these guidelines, you will lessen your chances of joining their ranks.
Daniele Lima is Managing Director of Road Scholars Sales and Marketing Consultancy and co-author of Marketing Works: Unlocking Big Company Strategies for Small Business.
Photo: Robbert van der Steeg (Flickr)