Marketing For Complete Beginners
This is a draft version of a book I've been writing. I've never had time to finish it, so I've decided to publish what I've written so far on this page.
If you find it useful, please share it!
About this book
In June 2012, I wrote a tiny Kindle book called Marketing In Less Than 1000 Words. It was a slow burn book, but gradually rose up the ranks until it hit #1 in the advertising category of the Free Kindle Store in America. In the UK iTunes store I had over 80 four star ratings for the ebook, and 140 4 star ratings in the US iTunes store (at the time of writing).
I realised that there is an enormous thirst not just for marketing books that tell you practically how to do things, but also books that teach you how to think like a marketer, an entrepreneur and a successful business owner. But moreover, many people don’t want books which are several hundred pages long. They just want to know what they need to know. Brevity beats comprehensiveness when you’re busy running a business.
So, if I only had 15 minutes of your time each day, I asked myself, what are the most important things I would I tell you about business, entrepreneurship and marketing?
Bite sized marketing
This series of articles is an attempt to approach everything I discussed in my first short ebook in more depth. Dip into it as you will and hopefully you'll find each short chapter helpful. You don’t have to read it in any particular order. And I’ve tried to name each mini-chapter in such a way as you know what you’re getting when you read it.
If this book is too long, read Marketing In Less Than 1000 Words first. It's completely free online from Amazon, iTunes, Barnes & Noble and Smashwords. If you like it and want to thank me, the biggest compliment you can give me is a review.
If you hated it or you don’t get along with this book, email me at email@example.com and let me know how I can improve it for you.
So let's get down to business, and see if we can use those words (and your time) really wisely.
I don't know who you are
I have no idea who you are. You might be a hairdresser in Barnsley, United Kingdom, or a tattooist in Las Vegas, or a small business started with micro-finance in New Delhi, India. Today's global publishing industry really means you could be almost anyone anywhere in the world. You might have start-up capital of $100,000 or more, or you could be starting your business in a third world country with a micro-financing scheme and less than $50.
What I do know about you is this.
You really want to make your own money without being employed by someone else.
It's not an easy path to follow. And sometimes it is as hard as it is rewarding. But with 5 years of being self-employed under my belt, I can tell you that it gives you an exhilarating freedom when you eventually succeed.
This is for total beginners
I assume you have no prior knowledge. But that doesn’t mean the book isn’t useful if you’re more experienced or you’ve been marketing and making money for some time.
While it might seem that I am trying to drive home some fairly obvious lessons, in my experience they are the lessons which are too easy to forget when we're in the thick of it - and we can really mess things up if we don’t follow them.
I'm writing this book in language that an entrepreneurial 15 year old could understand and profit from. If you like more complicated words or you want to read special marketing terms or jargon, you’ll want to try a more complicated book than this.
This book is a raft, nothing more
You use a raft to get to the other side of the river. Once you've got there you discard the raft, you don't carry it with you into the mountains. Likewise with this book. It's just a beginning. It doesn't tell you everything you need to know.
It is not complete. It is simply a useful beginning for anyone wanting a common sense grounding in business and marketing. Once you've used it to get to the other side of the river, discard it and go on to other materials which are more complex and in-depth.
The tools to work out your own answers
Given the almost endless different types of business opportunities available around the world, it would be stupid for me to try and tell you “how” to market a business by giving you an exact plan. Every business is different.
And until I sit down with you and go through your business plan, I don’t know what will work for you. What I do know is that I can teach you to think in the right way, so you can start figuring out what will work for you. There is no proven method that works for everybody.
So my goal here is to tell you about the thinking underlying how successful marketing works, why businesses grow and succeed and the characteristics of successful business practise.
Nothing replaces real experience
Words are great things. But they only convey so much. My objective is that this book will give you the basic tools to start building your own entrepreneurial instincts.
But it's no replacement for real experience in the real world. The only way to learn business is to get out there and actually do it. In fact, that is one of the most important things you can learn from this book - you simply have to get out there and do it.
The only way you can really learn to be a successful businesswoman or man is to start being one, however imperfect, and just iron out the kinks along the way.
PART 1: BUSINESS THINKING
Business is a way of mind. All change starts there. If I can teach you one thing, it’s about how to think about business in the right way. There are rules to the game. Here’s what I think they are. Other may disagree or have a different approach.
It's all about how you think
This is important, because if you don't think about business in the right way, nothing I can teach you will stick. Business is about how well you think and how well you act on your thinking.
Marketing, business & entrepreneurship, it’s all one thing
A business that cannot get customers is not a business. Marketing is about getting customers. So a business without marketing isn’t a business (even businesses that don’t ‘do marketing’ actually do marketing in one form or another, they just don’t know it!). If you make money, you’re an entrepreneur, and you’re also in business. If you’re an entrepreneur, you have to find customers, or you won’t make money.
In short, I'm saying that they're all the same thing, especially when a business is small. In fact, the chief concern of ANY fledgling business is where the customers are going to come from, who will buy the products and how it will make money.
Marketing, business and entrepreneurship are an inseparable holy trinity.
Business is a game
It seems that many people spend their lives playing very small games. By that, I mean they play games that don't really matter. They don’t confer much reward if you win, but equally they rarely result in genuine loss. Yet the same people will also be terrified by the idea of starting a business.
Are you afraid of business? If so, why? And how would you see it and approach it differently if you felt it were just a game? Let’s look at that a bit more closely.
Business is a game where you play a role. Your role is to be an entrepreneur. An entrepreneur takes things from one place where they are abundant and under-valued, to a place where they are scarcer and have greater value. This is the core of business.
When you play a game, you understand there are rules that you need to play by. You know what the purpose of the game is and you know what winning looks like. And though you might play the game seriously, you have an emotional detachment (unless you're really competitive) because you know at the end of the day it's not real.
So what if you thought about business like a board game? In that instance, the purpose of the game is to make money. There are rules you need to play by: you have to offer people something they want or they won’t buy from you; you have to find customers who will buy your products; you have to make people believe in the value of your product;you have to describe accurately what you are giving them and then give them what they expect; winning is making a profit; losing is when you lose money.
Game theory is interesting, because it takes us into a different mental space, one where we can put ourselves and our insecurities aside, and simply start learning to play the game well. Most likely you won’t be great at the game when you start. Few people in life start out as naturally gifted. But as time goes on, you can learn to play the game better.
But because I'm saying it's a game, that doesn't mean I think you should take it lightly. You can play games seriously and still know they are games. Business is just an elegant game played in the field of life.
Start where you are right now
If this book does one thing, I hope it gives you the courage and enthusiasm to get out there and try things without fear of failure, being both persistent and flexible, counting failures just as learning experiences (not experiences that define who you are) and counting small successes as stepping stones to even bigger achievements further down the road.
Wherever you are right now, that’s where you should start. Wherever you are right now, you’ve got all the assets (and perhaps plenty of obstacles too). You start playing the game with whatever you have right now, with your current level of experience. You don’t need an MBA. You don’t need to take business classes. Doubtless you’ve got lots to learn. And you’ll probably have to learn fast and dirty at times. But this is where you start.
Why? Well, some people never start a business because of what they don’t know. Some people use learning as a distraction to procrastinate and stop doing the scary thing of getting right down to it. Some people tell themselves “I will start a business when things are [insert reason for procrastination]”
Until you run out of excuses, you won’t take action. So go through your excuses. Argue with them. Shine a light on them. And work your way around them. Use a journal to do this. When you have no excuses left, you’re ready to start taking action.
I can tell you that entrepreneurs don’t know everything. I don’t know everything. I don’t even know the half of everything. But I know enough to be successful. And that’s all that matters. The rest of the learning I need to do, I will do as I go along. What entrepreneurs do know is that the most important thing is to start “learning on the job”. You learn best by doing it. Keeping it small and affordable, real entrepreneurs know there is no other place than now, and the path to riches could even start with selling something for a dollar/pound/euro, right here, right now.
Start comfortably small, with money you can afford to lose, and start within your current level of skills. Your actual business is the class, not this book. Start right where you are. Dumber people than you have made fortunes. Cleverer people than you have failed. If you sit somewhere between those polar opposites you have as good a chance as everyone else.
Before you walk, try crawling
You can choose any size of game you want to play.
But my advice is to start playing small business games first. See if you can sell a few old things that you no longer use or need. Keep the money. Then maybe see how you can use that to fund a slightly bigger business game. Wins might be modest, but losses are also affordable as you start learning the business of being in business.
With small games come small wins (not so good) but also small losses. Start at a size you can manage and also have a few false starts and failures, because every entrepreneur has them.
Better off doing a bit at a time and then working onwards and upwards to playing bigger games.
Do not measure your own sense of personal worth by the size of the game you play. Measure your sense of self worth by how well you play the game (in terms of profit), not by the size of the game.
Business is impersonal
Though the project of your business is extremely personal to you, Business (with a capital B) itself isn't personal.
Business doesn't care about your hopes and dreams. Business isn't going to help you. There's no lovely karma you can store up. Business doesn't really even care if you're a good or a bad person as long as you can play the game. Business simply watches to see if you succeed or not.
Anything bad which happens in business is not personal, it's just a lesson. People not buying your things or being interested in your products is not personal. It’s just a lesson. They just don't want to buy, or they don't want to buy just yet. Either way, when something doesn’t work, look for something to learn.
The important thing to remember is that its not about you, it’s not personal, it's just about business.
You are in business already
Unless you’re living off a trust fund, investments, state benefits or someone else. the chances are you have a job.
You choose to sell your time and skills to someone in return for money. That is a business.
Maybe you haven’t acquired or understood your best skills and you’re paid less than you ought to be. Maybe you’ve got great skills and haven’t learned to value yourself at your true market value.
Regardless of where you’re at, if you have a job, you’re in business.
Unless you are a slave or living in a repressive regime, you are totally free to change jobs, find better opportunities, take risks or start out earning money for yourself. You choose.
Some people prefer the security and reliability of having a job. And it certainly does confer security. It takes away the risk of having to think about how to create value, earn money and make a profit.
But I guess the reason you’ve picked this book up is that you want something different. For whatever reason you want to make your own money and craft your own path.
The point is that even if you’re in a job right now, you are still in business. You sold your skills, your personality and your time in an interview process and you consistently deliver whatever it is you deliver to your employer.
So you already have some experience in business.
What you don’t have experience of is the other stuff. Thinking for yourself. Finding your own opportunities. Making the numbers work. Selling enough of whatever you are selling in order to create a salary. Creating demand for your products. Taking calculated risks for calculated reward. Keeping the risks as small as they can be. Making decisions and taking the responsibility for it if it all f***s up. These are skills we need to learn if we ultimately want to become more independent and make our own money, free from the restrictions and negative aspects of having an employer.
Ditch the employee mindset
We need to stop thinking like employees and start thinking like business owners - having to scratch the dirt to find our food, outside of the gilded cage of letting someone else take responsibility for our livelihoods.
It’s not a psychological change that happens overnight. It may take years even. But this is the psychological change that you must undergo in order to become successful in business. If you want to make money, you cannot and must not think like an employee.
I thought I was a hotshot in business because I worked for a couple of big companies. When I got out into the wide world of my own business I realised truly how little I knew. My advice is to not be afraid of how little you know. Don’t jump into the river before you can swim, but also know that you can learn to swim in the sea of business if you give yourself time, experience and exposure to it.
You are already in business. Whether you are in business for yourself or others is your own decision.
Prepare to fail before you succeed
Every marketer, every businessman, every entrepreneur has failed countless times. But it’s what they do with the failure that counts. They don’t see the failure as a black mark. They don’t see it as a comment on their own personality. They don’t think it means that they’re not cut out for business.
All they see is that they have not have enough practise at the game yet. They haven’t won this time. They took a swing at the ball and they missed. But there are plenty more balls out there to swing at. They see that this idea didn’t work, but the next one might. They see what they need to do differently next time. Failure teaches you more than anything else in life. You’ve got to be prepared to fail, and fail again, all the while aiming for success. Failures just count as zero. They don’t count as negatives.
Get up again. Dust yourself off. Learn something. Have another swing because maybe the next one will be a home run.
Sell to yourself first
The first person you have to convince you can do this is yourself. And it starts by knowing every little reason why you can't do this, why you won't do this, why it's not worth bothering with, or why you're going to postpone it. Let’s get all your weaknesses out on the table right now.
Write as many sentences as you can starting with “If I start in business, I’m afraid that...”
Part of this is about inertia. It's always so much easier for things and people to stay the way they are than it is to change.
Part of this is about fear. You're scared it might all go wrong. You're scared you might look stupid. You're scared you might mess it all up. One thing might lead to another and eventually, you’ll die. My news is you’ll die anyway.
Part of this is about self-belief. You want to believe you can do it, but maybe you haven’t yet collected (or remembered) enough positive experiences to convince you that you really can do it.
The reasons stopping you becoming an entrepreneur are tiny monsters hiding in the dark. They shout and roar and scream at you. But you can't see the monsters in the dark, so you don’t know they’re small, especially when they sound so big. We need to shine a light onto these monsters, and see them for what they are, not for how big they sound.
Write all the reasons why you can't do this now before you go any further. If it takes you 3 days, just do it. You may think you're too old, or too young. You may thing you're too smart or too stupid. Or too old or too young. In Max Eggert's words - you have to banish your wooden legs.
It's important to write down and acknowledge your fears - to think about the worst that could happen.
Ask yourself, what is the worst thing you can imagine happening from this. And if the worst happens, can you handle it? If not, how can you reduce the risk so the worst isn't really so bad.
Remember, business doesn't care about you. All it rewards are smart decisions and people with gumption*. Gumption is one of the biggest qualities you are going to have to develop in your business.
*Wikipedia defines gumption as common sense, shrewndess and a sense of initiative.
I prefer the word momentum rather than the word motivation. Motivation suggests you have to feel a certain way before you get going.
In truth, it's always more effective to act your way into a better way of feeling than feel yourself into a better way of acting.
Momentum means movement. We want to create a mental momentum first. Because your actions flow from how you think.
A ball doesn’t start rolling down the hill fast. It gains momentum through a small amount of force. Once it’s going, the same amount of pushing force makes it roll faster. Forget about where the ball will be or what it will be doing halfway down the hill. Just concentrate on the next little push. Then the one after that. Momentum is your friend but it starts off small. And at the beginning, the stones that are in your way are most often your own excuses and fears and hesitation.
Play the ‘what if’ game
We're so used to our minds looking out for danger, that we often underplay the positive possibilities that exist inside what we're doing. Here's how I created the initial momentum to write this book.
Q: What if I wrote a book that really helped people?
A: Then I'd feel great about myself because I'd know that I was making a difference.
Q: What if I made some money out of sharing my knowledge too?
A: Then I would be rewarded for adding some value to the world
Q: What if this book could help me fund writing another book?
A: Then I could spend more time writing, which I love doing more than almost anything else...
Do you see? It's not saying that failure can't happen or being unrealistic.
It's just about also acknowledging the positive and realistic possibilities that could also come out of the project.
We tend to focus on negative possibilities a little too much. And what we need is neither unbridled optimism nor disabling negativity. We simply need a practical, neutral head on our shoulders.
Our minds are biased towards thinking about negative results because they can create more pain. So we need to balance out the books by dwelling on potential positive outcomes too.
Negativity and catastrophic thinking are just as stupid as thinking about wild rollercoaster rock star success. If you do one, balance it with the other.
You can't eat an elephant in one sitting
If you ever tried to eat an elephant in one sitting, you’d find it so overwhelming you’d probably refuse and wouldn’t even start a single mouthful.
Business can look like that. We refuse to even do something or anything little at all because we think we have to tackle the whole thing.
A better way to approach it is one meal or a mouthful at time. You break it down into lots of little bits. Break tasks down as small as you need to get yourself consistently taking action to move you forward.
Start breaking down any project you have into all the different tasks you'll need work on in order to start producing your result. Break everything down into achievable, bit-sized pieces so that no task seems too massive to begin.
Momentum is action. And action is what we really learn from.
Be it a to do list, a few ideas doodled on a napkin, or making a phone call or buying and reading a book, little steps are the key to making big things happen.
Why do you want to be in business?
On the surface, you might be selling yourself the idea of being in business. But that's just the surface reason. That's not the real reason. What is your real reason? Is it freedom? Is it the opportunity to make more money? Is it for quality time with your family? Is it for independence?
And why is that so important to you?
The reason I'm asking you? Becoming a business owner is a journey. Time and again you will have to remind yourself why this journey is important to you. Your reasons need to be big enough to sustain you when the going gets tougher. Because it will. There is always a point in every business you have to remind yourself why you're doing this…
Get your pen, and sort out your WHY now. The reasons you come up with could be talismans that give you power and amulets that protect your priceless ambition, enthusiasm and drive that you’ll need when things don't go so well.
You don’t need to think of “good” reasons either. It’s about living with emotionally compelling reasons. If you were bullied at school and you’ve never quite gotten over it - if that’s why and it powers you along - all to the good.
Having a good enough and big enough WHY helps prepare you with the emotional resilience you're going to need. It’s not all sitting in a bathtub full of dollar bills with a glass of champagne.
PART 3: LEARNING VALUE
It’s a hard balancing act. Many of us tend to undervalue ourselves in some areas of our lives and overvalue ourselves in other areas of our lives. Over-valuing yourself will naturally come into check with feedback from people, especially if you’re being a bit of a dick. However, being undervalued is rarely addressed.
Why? Because people can get more out of you for less if you undervalue yourself. Maybe your employer doesn’t pay you a competitive wage, or maybe as your own employer, you’re afraid to charge for the value of your time.
For many years I felt uncomfortable about money. I realise now that it was one of my biggest stopping blocks to really creating a business, and getting a better salary for myself in the jobs I work.
To do this, we have to stop thinking about money, and start thinking about value instead.
Money is evil
Nope. It's just like electricity. You can use it for good things or you can use it for bad things. It flows constantly around the world, and it accumulates in some places better than others.
What is money? It’s paper. It’s metal. It’s electronic digits on a screen. all of these are convenient ways of measuring money, but it’s not what money is. Money is value. We have simply invented money as a consensual hallucination. It means that we don’t have to go through complicated bartering systems where value is often uneven (I’ll give you this live chicken, but I only want one cabbage in return - what do we do with the rest of the value of the hen) and it’s harder to get what you want with what you’ve got to sell.
So we invent money. And it allows us to store the value we create in paper and metal. And that’s the best way to think about this. It’s just about value. If you add value to the world in business, you accumulate money as a representation of that value.
Ultimately, accumulating money through marketing and business are about adding value to the world. Adding value to the world is a good thing. In marketing, people cannot be forced to buy things. Everyone has to make their own decisions about what they want, what they can afford, and what they will buy.
Your measure of success in the game of adding value to the world is how much value you can create for people in ways that mean they are willing and happy to give you “value” in the form of money.
The game itself is not evil, but it is possible to play the game well and honourably, or unethically. There are more good people in business than bad people. And I hope you don't choose to be one of the unethical people. If you do, I hope you learn fast that your actions will eventually catch up with you, so you'd better be really good at running. And never stop.
Don't even begin to start in business until you're entirely happy and totally convinced that making money is a neutral thing. It’s how you do it that matters. It is your right as a human being to make money by adding value to the world and profit is your reward for adding value. It’s how we share value around. And it’s important that we are appreciated for the true value we offer.
The reason I am placing so much importance on this is that I find many people are torn two ways. They don't feel it's right to charge a surplus and then keep that for themselves.
I used to think like that and it made me a terrible businessman. Ironically, now I accept it's my right to make money, it’s okay to make money and that it's other people's right to buy or not buy into the value I offer as they see fit.
And I think I'm actually doing better things for the world, contributing more to the world and I'm happier. I believe the same can happen for you too.
PART 4: THE ABSOLUTE, DUMB, STUPID BASICS
Most people will think this chapter is stupid. Hell, I even think it’s stupid. But everywhere there are smart people doing dumb things in business because they have temporarily gone insane and forgotten the basics. Temporary insanity comes back to bite us in the ass. I say temporarily, because it happens to the best of us at some point or another.
Yes, this chapter is about stupid stuff. If you never want to read this chapter again, take everything on board and never forget it. If you’re too good for the basics, skip this section.
What is being in business?
Business is about finding out what people want and then giving it to them.
Business is about finding out about what people want, and then finding a way to supply it to them at a profit. The difference between those two figures is your payment for adding value to the world (minus tax).
Being in business is simply a decision you make to start trading in goods or services with the intention of making more money than you started out with. And as we’ve seen, even if you’re in work already, it’s easily argued that you’re in business because you’re selling your time and skills for money - even if it’s by being employed by someone else.
Most importantly, business is only business when you make more money than you started with. That's the purpose of the game and how you measure it.
A lot of people call themselves businessmen. It seems to harbour a romantic cachet, when most of the time it’s just ladies and gentlemen in suits doing boring office work. Men are especially bad at this. We like to feel we’re really important. So we puff ourselves up with a job title, we overinflate the importance of our job as central to the smooth running of the world, we worry that people rely on us and terrible things will happen if we’re not there ‘doing business’ or ‘working’. In truth, were I to die tomorrow, the world would keep spinning and will continue to do so a long time after I’ve gone.
The puritan work ethic has a lot to answer for. Work is only useful for what it produces. Hard work often produces more, but there is absolutely nothing spiritually or ethically superior about spending 12 hours a day at work. I advise people to drop the vanity and the self-importance of it all and focus on a single definition:
YOU ARE IN BUSINESS WHEN YOU START MAKING PROFIT.
There is no other definition in my book. That’s the only time when a business is actually a business. If one guy works 1 hour a day and makes profit, he’s in business. If another guy works 12 hours a day and doesn’t make a profit, he’s not in business. Business in profit.
Is when you make more money than you lose. Business is a game. In this game, your indicator of success is profit. Profit is how you measure whether you are winning (or not). Don’t ever make the mistake of getting caught up with playing the game at the expense of the numbers. Numbers are the game. They are how you win.
Turnover tells you the total value of goods and services you have sold before you look at profit. All it does it tell you how big your business is.
Turnover doesn’t really matter except for vanity purposes and getting bank loans. There’s the well worn adage that turnover is vanity and profit is sanity. It’s well-worn and cliched because it’s true.
If you are not making profit, then you are making a loss. If you're making a loss, you're either running a poor business or you're running a charity.
If you want to run a charity, run a charity.
If you want to run a business, run a business.
Charity is for when you have more money than you need, giving you a surplus for charitable purposes. You fund charity with personal profit, not personal sacrifice.
If you lose money, you're losing the game.
Breaking even is when you have neither made profit nor a loss.
Essentially in business profit, loss and break even aren't especially meaningful in themselves. What's important is the direction you go in - and you want to constantly head in the direction of profit.
Keep close tabs on your business at all times to understand whether you're headed in the direction of profit or loss.
PART 5: UNDERSTANDING SUPPLY AND DEMAND
If you understand supply and demand, then you understand how markets work. Wherever there is a demand not yet being met, there is potentially a market to be created.
Many people make a mistake by working markets where supply is greater than demand. If you can understand the demand, and you can sort out the supply in a profitable way, you have a business on your hands.
It’s all about supply and demand
Supply and demand powers business and markets. There’s always a place in the world where something is scarce (i.e. there is a demand for it) and another where it’s abundant (i.e. there is a great supply of it) - be it knowledge based, service based or product based.
And “entrepreneur” from the original French, literally translated means “between taker”. An entrepreneur sorts out the balance between supply and demand. Her profit, or salary, is what’s left over for doing that well.
1734: Richard Cantillon: Entrepreneurs are non-fixed income earners who pay known costs of production but earn uncertain incomes
1803: Jean-Baptiste Say: An entrepreneur is an economic agent who unites all means of production- land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.
- Source: Wikipedia
Why is supply and demand so important?
Quite simply, supply and demand affect the value of things. If you have too much of something, it’s probably not worth that much to you. If you don’t have enough of something and want more of it, the chances are it’s worth quite a lot to you.
Supply and demand is the basis of value.
Where demand exceeds supply, value will naturally go up.
Where supply exceeds demand, value will naturally trend downwards.
Where demand equals supply, value will remain stable.
Think of it like a weather system - of areas of high pressure and low pressure. Weather systems are always dynamic and moving across the world. In exactly the same way, supply and demand is always moving and changing, trying to even itself out but never actually achieves it.
If you’re an entrpreneur, then this is really important. This is everything in fact. In order to create value from what you’re doing, you need to take something in abundance and therefore low value from an area of high supply and low demand, to a place where the demand is high and the supply is scarce. If you are an entrepreneur, your fundamental job is moving value around, taking it to the places where it’s most needed, and making money from doing that.
Today’s modern globalised marketplaces, connected by internet and vast trunk roads of information, have done much to even out the differences in supply and demand.
Wherever there is a demand for something that is not being met, supply will often increase to fill the gap and stabilise prices. A market with too much supply will bottom out prices with cut-throat competition and price wars.
Price elasticity of demand
I swore I wouldn't introduce any jargon, but I have to break my word here. Sorry.
Price elasticity of demand is an essential concept which everybody in business should know about.
Some things can increase or decrease radically in price but it won’t signficantly affect demand. These tend to be everyday goods for which there is no replacement as such: bread and water are relatively ‘inelastic’ products. If you’re thirsty, you don’t have any water and you’re on the motorway, the chances are you’ll be prepared to pay a high price for a bottle of water if you really need it.
Some products can increase or decrease in price slightly and it can have a strong effect on demand. For example, when subsidies on home solar panels were removed in the UK, demand for solar panels dropped by about 90% and decimated the industry. This is what is known as an ‘elastic’ product. They are things which we don’t necessarily need, but we want. It is sensitive to price changes. So if prices go up, far fewer people will be compelled to buy them.
It doesn’t always follow that a reduction in the price of an elastic product significantly increases demand within a market.
You can see in this that while a product in itself does not change, the price or value of it can change quite significantly depending on how and where it is sold, and whether it is an elastic or inelastic product,
The following situations may change the price a bottle of water can be sold for, even though it is an inelastic product. Whilst you can fill up an empty water bottle for practically nothing, the price can go quite high in some situations without affecting demand.
Selling cold bottled water on a hot day at a festival where there are lots of people but also lots of other places that sell the same product too.
Selling cold bottled water where there is a lot of footfall, but not many other places to buy the same product nearby.
Selling cold bottled water where people aren’t thirsty
Selling mineral water in the desert
Selling mineral water next to a free water cooler
If you understand this, you understand how value works. You understand why a bottle of water can have different value in different places. It’s exactly the same with any product. But some products are more elastic in their value than others.
You understand that where supply is greatest, prices are cheapest, and that where things a scarce and in demand, prices are high. You know that it’s just a bad an idea to sell where there’s lots of supply as it is to sell a product for which there is no demand.
Your job as an entrepreneur is to find the demand, and find the places where value for something is highest, and then hustle. Big time.
PART 6: NOW ON TO MARKETING
Now we’ve looked at supply and demand, we can get onto marketing. Without a demand to supply, there is no market opportunity and this is an all-too common mistake people make.
What is marketing?
Marketing is about everything involved in satsifying a known demand with supply in a way that adds value.
Marketing is about a huge amount more than just “selling” something, or trying to reach people with advertising and marketing material. And this is commonly misunderstood.
Marketing is about the whole set-up. If your pricing is too high, you won’t attract customers. If you present a premium product in a cheap way, people will think it;s too good to be true. If your market doesn’t understand the value of what you offer, they won’t buy. If you have a crappy product to offer your market, they won’t buy. If you have a great product but present it poorly, people won’t buy. If the market is saturated with lots of competitors, people are less likely to buy.
The outputs of marketing are customers which make you profit. If you have no customers you have no business. In fact, some might say that the first step in business isn’t sorting out the supply of products and services, it’s about finding the customers.
No customers. No business.
The 8Ps of marketing
Marketing is about how your business works (your business model), the value your product offers, how the numbers stack up, how you price your product, where you sell it, how you sell it, how you communicate the value of the product, identifying and speaking to likely customers, and how you communicate to people in a persuasive way to compel them to buy your product.
It's most easily summarised with the classic 7 Ps. I add another P to this list which is Perception.
Product (what you are selling)
Pricing (how it is priced in the market)
Promotion (how you tell potential customers about it)
Place (where you sell it)
If I see Business as a thing (much like a rock), then I see Marketing as a process (like throwing that rock somewhere to achieve a result, like breaking a window). Marketing fuels a business with customers by affecting a whole range of factors which affect how people perceive and understand the value of the product.
Put simply, you can change how much value your product creates by working with any of the factors above which form the basis of marketing. Let’s explore them in detail.
With the best will in the world, the greatest persistence, and an uncanny gift of being able to sell almost anything to anybody and backed up by fantastic marketing material - none of this will matter or make a difference if you have a product which people simply do not want.
So the first job is to make sure you have a product which people want or need. If you don’t know, find out.
The odd sale here and there is not proof that you have a good product. The fact that you like the product and would buy it yourself is not proof you have a good product. Straw polling family and friends (who mostly won’t want to hurt your feelings and will tell you what you want to hear rather than what you need to hear) is not proof you have a good product.
Ultimately, the only proof that you have a good product is that you can sell it and make profit. And by that, I mean that you have the necessary skills, knowledge and marketing budget to sell yourself.
It’s no good having a million dollar idea if you cannot afford to sell it. It’s no good selling a product that other people can sell but you can’t. It’s no good having an idea that is 10 years before its time because it won’t sell for another 10 years.
It all starts with a great product of one sort or another.
So from now on, the only proof of the product being a success is being able to sell it.
How do you identify want & need?
Market research is a pain in the ass. What people say they will do and what they will actually do are often very different things! Some of the largest companies on the planet have make gargantuan mistakes based on misleading market research.
Don’t trust your family one iota. If you’re starting small, it’s likely you’ll ask for feedback from family or friends. And because they love you and want to make you feel good many of them will probably say what you want to hear. Don’t trust what they say!
The people you should ask about your products are the people who will be buying your product who don’t care about your feelings. They are the people you will be selling to, and they are the people who have no other reason to buy your product than self-interest.
There’s a difference between what people want and need and what they are prepared to pay for. Here are several strategies to identify market opportunities, one or more of which you might try.
Find out what the pain points of real customers are. If you can solve those pain points, you may be able to add value.
Intensely research your competitors. Who else is selling it? Are there a lot of people selling it over-saturating a channel (i.e. internet)? At what price? What can you offer that they don’t?
Is there a place where the product isn’t yet being sold and represents a clear market opportunity?
Are you able to come up with a practical way of reducing your costs of business while charging the same price as your competitors charge?
Ask the customer “what would get you to switch from the product you’re using right now?”
Ultimately, is there a need that can be satisfied?
And if you can’t get the answer to these questions, your best option may simply be to try it out as a small, risk-free experiment to see what works and what doesn’t
Market research is finding out as much of the information you can about whether a product will sell before you invest a penny in it.
Who will buy it?
What is the range of market prices for the product? Where do you fit in?
Can you acquire or make the product in a more profitable way (the difference being your profit)
Who else is doing this business already and what can you learn from them?
Is there something which the market will value but hasn't been offered to them yet (i.e. better service, a different kind of product, better quality etc.)
Can you talk to buyers and find out what they are really looking for?
Is there a real opportunity to add value and make a profit?
What will the business costs look like?
How much margin can you make on your products?
Can you differentiate yourself from your customers in a meaningful way?
How much risk is involved?
Some things you will only learn with experience.
You will know whether you have a potential winning business idea when you know who will buy it, you understand the market pricing, you can supply the product at a decent profit, you differentiate yourself by adding value to your service in some way, you know what buyers’ pain points are, you know the business costs and you’ve done the numbers; you know how much you realistically need to sell in order to make a business work.
Research is important. It’s also not everything.
Start selling without a product
As unusual as this may sound, starting to market before buying (or making) the product is often the best way to test market response.
Why? Because you’re testing if there is a demand for what you’re offering.
Since the only good business is one you can find customers for, it makes a great deal of sense to start looking for the customers first. Your proof of whether there is a market for you to access is how much it costs you to acquire each customer.
In fact, knowing your cost (of marketing) per customer is a very valuable way to determine whether you have a viable business, since it’s the cost of marketing that is usually completely unknown until you start the business.
You may have a great product with superb margins but if the costs of marketing don’t make it profitable, then you’ll have to find another kind of product.
Improve on an existing product / business model
Of course, if you already have a product and it’s not selling, you’re going to have to troubleshoot. That means working out everything that might be going wrong with the product.
But once you have tried everything you know, you either need to get someone with more expertise than you, or consider abandoning the product.
Failing quick and fast (with sufficient proof) is not only an effective way to eventually find the right product, it’s what I believe smart people do.
Here are some questions you might ask yourself to troubleshoot a product that is not selling:
Who is your buyer and why should they be interested in your product?
Are potential customers interested in your product. If not, why not? Try asking them to get insight, but also remember people don’t always know the true reason for why they are not buying something. You are going to have to read between the lines.
Are you selling the product in a place where the customer values it?
Is the price right for the product in the place it is being sold? Is it too cheap? Is it too expensive?
Does the product differentiate itself from other similar products in some way, shape or form?
Are you positioning the product in the right way? Positioning means aiming it at the right people, at the right place, the right time, the right price and the right selling or marketing strategy?
Does your communication strategy actually reach people who will genuinely be interested in buying your product? Or are you spending money on advertising to people who are unlikely to buy your product
Are you offering the right level of service appropriate to your product’s price?
Are your marketing materials of a similar level and quality to that of your product?
A product that is too cheap will be undervalued by people. A product that is too expensive won’t be bought or will create dissatisfied customers when they actually experience the product.
You can raise the price of a product somewhat if your marketing is really effective. Likewise, poor marketing will create poor demand.
How many do you have to sell?
Some products have a high profit margin and therefore you only need a few customers to make a workable business. Having said that, if the profit margin is large enough, the product is going to be more difficult to sell.
Other products have a small profit margin, so you’ll need to sell lots of them to make enough money.
Pile ‘em high, sell ‘em cheap
Price them high, sell few
Do the numbers on paper first
If you can't make the numbers work on paper, you're not going to make the business work in real life. Write everything down on paper first.
· Estimate the time it requires from you
· Work out what it costs to start up
· Work out what other people charge for the same products
· Work out the profit you'll make on each product
· Identify an ideal buyer
Place - Distribution Channels
Distribution channels are the medium through which you sell your products. They can be wide and varied and only some of them will be appropriate or effective for your business or product.
You can often add value to your product if you can sell it in a place where the market is not saturated.
Someone else’s shop
Not On The High Street
Communities, groups and associations
Direct mail order by post
Network / affiliate marketing
Other business contacts
Just because some of these options are easier than others does not mean they will be effective. Every single product and marketplace work differently. A distribution channel that works for one business will not work for another. The job here as an entrepreneur, is to make educated guesses and then spending the minimum amount of time and money to find out what really works.
People are the most important factor. People with money. People with a thirst for something you can satisfy. Marketing is about finding the right people, with the money and the desire to buy your product. Marketing can only amplify a desire for something. It can never create it.
You NEVER get the whole audience
Being on the Internet does NOT mean the whole world can see it and you’ve opened up your product to a global audience (you have to get found first, and it’s a competitive business achieving number 1 positions in the search engines, or achieving visibility in social media or other channels.
Advertising in a print publication does NOT mean you are reaching a readership of 50,000. What you are actually getting is the opportunity to speak to only the people who MIGHT realistically buy your product (often only a fraction of readership) IF they happen to see your advert.
Having 1000 likes on Facebook or followers on Twitter doesn’t mean that you are speaking to 1000 customers, or indeed that your marketing messages will reach them.
Only a fraction of people will ever see what you do. Which is a real challenge. So how do we solve that? How do we make sure that we’re reaching the right people? In short, how do we talk to people who are ready and willing to buy?
A GREAT PRODUCT
Your business is finding/creating something people want to buy
Find or build something people will want to buy. It's amazing what crazy things some people in the world want to buy and will pay good money for. And it's also crazy the marvellous things that people don't want to buy.
The world is absolutely packed full of places where you can add value and earn the difference.
The classic way of doing this is taking something from somewhere where it is cheap and in abundance to somewhere where it's scarce and valuable. Ice cubes in the Arctic have a low value. But the same ice cube has a greater value in a tropical country. Same thing, different places.
Think of the medieval trade routes for spices which came from the far east to the western world. They took abundant (but tasty) seeds, spices and herbs. Because they were abundant, they had little value. They transported them all the way around the world to a place where people didn't have them and wanted them. The result? Trade and money and riches. For tea (a dried leaf); for nutmeg and cinnamon; for frankincense and myhrr
In these days of a globally connected internet, it is certainly getting harder. You can Google for almost anything and find it available to buy. And it can be shipped around the world quite quickly too. This is why it's not always a good idea to create an online-only business - if you're selling something that other people have made and customers have abundant access to (i.e. search engines, Ebay etc.), the chances are it's being sold in hundreds, if not thousands of places already. You'll have a lot of competition and it will take a lot of hard work to get noticed. You’ll need a better offer, a bigger difference, better service lower prices and tighter profit margins. But there are still many new and valuable products which haven’t been offered yet, or haven’t been offered well enough that promise potential opportunities. But only if you create some meaningful difference that adds value.
The most important thing you can learn here is that what seems worthless in one place because it's abundant is actually really valuable somewhere else because it's scarce. And way the internet search engines work by making information and things abundantly accessible. That's not to say there aren't opportunities online. People are looking for things they want to buy every single day online. My point is, you've got to take something from where it's abundant and cheap and take it to some place where it's scarce and valuable. And an entrepreneur is constantly on the lookout for opportunities which do just this.
Unless you can identify a specific audience whose needs are not yet being met or served, the chances are that you're more likely to make money at the beginning by starting a business offline.
Valuable things that people buy into:
1. People want to be lazy, so they like convenience.
2. People like to save money, so they like to get the best price (but if you offer convenience you add value to your product and can often charge a higher price).
3. People like products or services which save them time.
4. People like products and services that help them avoid doing things they dislike doing themselves.
5. People like products and services that save them hard work (including the hard work of spending more energy to find or get something).
6. People like products and services that make them feel good. If you can make people feel good, it's very likely that people will pay for that good feeling you give them (whether as a therapist, whether providing a nice friendly customer experience, by making them feel they have got value from your trade etc. etc.
7. People like to feel special (which is really just another form of feeling good).
8. People like to avoid hassle (or inconvenience)
9. People like to get things quickly once they've decided they want them.
10. People like creativity - an old product reframed, or something which feels new and attractive
As you can see, I haven't mentioned any products here at all. But if you can offer any one of these valuable things to the right kind of person in the right place, the chances are you may have a potential business idea.
Value means different things to different people
What's valuable to you may not be valuable to me.
Some people aren't prepared to pay for convenience, whereas other people will pay almost anything for it. I'd pay a lot for a great book, or a good suit, but I run car that's worth less than £600. Our kitchen mixer, conversely is worth about £300 (and would probably take us up hills faster!)
Beware selling things that are valuable to you only. The ultimate goal is selling something that other people really want.
Some people will never buy your products
Stop wasting money on advertising to people who will never buy your products. In small business, you have to identify the ideal buyer (one who really exists!) and find the most cost effective way of reaching them and persuading them.
One marketing approach does not fit all
What works for one business will not work for another. I've seen that time and again.
So my aim here is to arm you with the knowledge to help you discover for yourself the best ways to market your business - whatever it is. You know your business better than me. You know your potential customers better than me. So I'm relying on you to take what you read here and intelligently apply it to your own situation. Use your noodle*.
HOW TO START MARKETING
Who's your buyer?
The buyer is everything. If you don't have a buyer, you don't have a business. Marketing is the job of finding profitable buyers.
Let’s assume you have your product. Who is likely to have the greatest need for your product? Who really wants it. Marketing starts with excluding everyone who DOESN’T want to buy your product. You cannot possible afford to market to everybody. Therefore you have to narrow down your targeting to the body of people who are most likely to buy and who are most likely to be interested in your product.
Theoretically, what you’re doing here is identifying the market for your product. If you’ve invented a special set of knitting needles for arthritis sufferers, then your target market is going to be knitters, most probably female and most probably over 50. That’s not to say there aren’t any male knitters or people under 50 with arthritis out there. But they are edge case scenarios.
Buy identifying the most likely buyers, you form a target market where your product is likely to sell much better precisely and simply because your product is targeted.
Once you have a target market, you have a better idea about how you’re going to speak to them to convince them to buy from you.
What will they value about your product?
In marketing, we talk about benefits and features to tell people about why they will value this product.
Benefits are what people will get out of a product from using it. In our mythical case of the knitting needles for arthritis sufferers, we might explain the benefits as follows:
Ease your arthritis pain by using ergonomic knitting needles
You’ll enjoy knitting more with less pain.
You’ll be able to knit for longer
Features are specific characteristics of a product which make it of value. These are the things which make it unique and justify the benefits.
Made from lightweight bamboo
Special ergonomic shape makes them easier to hold
Available in 10 different sizes
Express delivery available
Now, of course, benefits tend to merge. The features are the thing which explain the benefits. But the features don;t always make the benefits obviou, so we have to clearly explain the benefits so people understand the value.
Move your customers to a psychological point where they have no reasonable objections to doing business and spending money with you.
The first objection a customer will always have is “it's too expensive”. We must learn to read this message differently. Instead of hearing “it's too expensive, please lower the price” we should learn to hear “you haven't given me enough convincing information to make me want to buy it at that price - yet.”
In most marketing channels, you'll have to work out why the customer doesn't yet understand the value you offer, or even what you need to change in order to increased the perceived value of the product to your customer.
Most people hate the idea of “selling”. So don't. Stop being a salesman. You only become a 'salesman' when you don't thoroughly believe in the power your product has to improve someone's life. Everything else is just helping people. Either start believing in your product or stop selling it and find a product you really can believe in.
Differentiate your product
Ten watches stand side by side. They're all priced at £50. They all look exactly the same. How do you differentiate them from each other? Here are some possible ideas
· The first watch is being sold by a really nice lady. It's a pleasure doing business with her.
· The second watch seller will deliver it to your home for you
· The third watch seller tells you everything you need to know about the watch so you have a lot more information on which to base your decision
· The fourth watch seller will replace the battery for you for £1.50 if you ever need it
· The fifth seller guarantees that if you have any problems with it, you can bring it back and get a full refund.
· The sixth seller can get the same watch for you in red, if you'll come back next week
· The seventh seller notes how the watch really goes with your style, which makes you feel good and that it's worth buying
· The eighth seller will cut you a favourable deal if you buy two watches right now
· The ninth seller is leaving in 5 minutes, so you'd better hurry up
· The tenth seller only has one watch left, so you'd better hurry up
The point is that it's possible to make very similar products quite different by changing the way you offer them to the customer. In plain language, these translate as:
· Volume discounts
· Limited supply
See how we made those ten identical watches quite different? You can do the same with your products and services too.
But beware with some of these tactics, they have disadvantages too:
· Service takes time
· Convenience costs you time and money
Like what you've read? For further information please call 01392 427358.
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New Relationship Manager joins Reactor15 as previous work is nominated for National Social Media Award.
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