Article by Jose Gracia with www.givetogetmarketing.com
Here's a note I recently received from one of our subscribers.
In previous newsletters you wrote about money-losing activities versus money-making activities. Can you write more about these activities. Often you don't know what those money-losing activities are until you have made the mistakes!
Thanks for asking the question. I'm so glad that you understand how important it is to know the difference between activities that make you money and activities that lose you money.
Hopefully, today's article will help you to better distinguish between the two. Two crucial activities in your business. Here are two of the most crucial activities you should be working on each day in your business.
1. DECISIONS: Making decisions about what actions to perform (Research and actual decision making.)
2. ACTIONS: Performing the actions based on those decisions made in #1.
The ability to make profitable decisions is key to the success of your business, since all of your actions will be based on those decisions.
If you make unprofitable decisions, then obviously, all of the actions that you and your staff perform based on those decisions will be unprofitable.
How do you make profitable decisions
So how to you determine which decisions are profitable and which are unprofitable?
That's the crucial question in every business.
The answer is -- by testing!!!!!
Not by guessing, not by opinions, not by inspiration. Only by testing. And the only test results that are meaningful are numbers. 26 inquiries from the ad in the newspaper. 7 sales from your telephone follow-up. 11% increase in orders with the new offer, etc.
So testing is the foundation of all decision making. And numbers are the only meaningful results of those tests. Hold those thoughts.
How do you know what to test?
The bigger question now is, how do you know what to test?
In order to know the answer to that question you must know what you are trying to achieve in your business. Why do you open the doors to your business each day? What is your ultimate goal each week, or month? What are your interim goals necessary to achieve those ultimate goals?
Your Marketing Funnel System
What I am talking about here is your Marketing Funnel System.
Every business has one, although many business owners aren't aware of theirs.
These are the decisions and resulting activities that actually generate sales and profits for your business. If you don't work on them, you don't generate any sales. And if you don't improve them, you don't grow your sales.
Every business has marketing systems that attract interested prospects to their business and processes to convert those prospects into paying customers, and processes to generate additional, ongoing sales from those customers.
The key is in knowing exactly what the steps are in the marketing funnel for your particular business.
An Example Marketing Funnel System
Here's an example:
Let's say that the ABC Company attracts prospects by running a small, weekly newspaper ad. Each month that ad generates an average of 100 inquiries.
Those 100 inquiries are followed up by phone to generate appointments.
Of those prospects that agree to an appointment, a certain percentage purchase for the first time.
After that purchase, those customers are followed-up by mail and a percentage of them purchase additional products.
Here's the Marketing Funnel for that business:
Funnel 1: Increase Prospects Generated by Newspaper Ad
Funnel 2: Increase Appointments Made by Phone Follow-up
Funnel 3: Increase Sales Made with Presentation at Appointment
Funnel 4: Increase Sales from Mail Follow-ups to Customers
Funnel 1: We already know that Funnel 1 currently generates 100 prospects per month. That is their current benchmark. Their goal is to beat that benchmark.
If they can increase that to 110 prospects that would increase their sales by 10%. They'll do that by testing different size ads, different headlines, or different offers. Perhaps an offer of a free Idea-Kit, or a free brochure, etc. could do the trick. Only testing will tell.
Funnel 2: Let's say their current benchmark for Funnel 2 generates 50 appointments from those 100 prospects. That's a 50% conversion. Their goal would be to increase that percent by improving their phone follow-up script. Perhaps by offering their prospects some free gift, a related book, or CD for instance for attending their appointment they could increase their appointments to 60-70%. Only testing will tell.
Funnel 3: Perhaps they are currently converting 30% of their appointments into First-Time Customers. By improving the persuasive power of their presentation, or by making a better offer, a discount, or additional bonuses, etc. they could increase that to 40 or 50%.
Funnel 4: Maybe their mail follow-ups to those customers is currently generating an average of $126 per letter sent. By improving the letter or offer, etc. perhaps they could increase that amount to $150 per letter sent.
These are the money making activities in this business. Time spent on researching and improving the results of each of those funnels is very profitable activity.
Of course you will have to have an effective tracking system in place to provide accurate results for each of your marketing funnels. You 'must' know how many prospects, appointments, sales, etc. are generated by each funnel in order for you to improve on those number. Without a tracking system you will be bowling in the dark. You can't hit a target you can't see.
Any activity that isn't improving your Marketing Funnel results is probably a money-losing activity
How can you hope to grow your business if you don't work on improving the very systems that generate those sales for you? The answer is, you can't.
That's why practically any other activity that you work on in your business other than those that generate prospects and sales--increases the results of one or more of your marketing funnels--is in all likelihood a money-losing activity.
Before I began to help a fast-food client of mine, he had spent as much as 70 hours a week flipping burgers alongside his $6.00 an hour employees. It took a great deal of convincing to get him to see that flipping burgers was a 'very' unprofitable activity for him to be performing.
No one in his business was working on improving the results of his marketing funnels. I am happy to say that today that business owner 'rarely' ever spends time flipping burgers.
He spends most of his time working on improving his marketing funnel numbers. And of course, he does it by researching and testing. In that way he is always confident that his decisions and actions are profitable ones.
His business now runs like a well-oiled machine and his business grows bigger every year.
I hope this helps you to see your business from a more profitable perspective.