Your #1 Marketing Goal Isn't Leads

Jan 11, 2013

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Your #1 Marketing Goal

Your highest marketing goal is to produce leads, right? Maybe not. Really, leads are just a means to an end, to create a buying customer. But customers aren’t the end goal either. In fact, neither are transactions or even revenue. The purpose of marketing is to help you reach the purpose of your business. And for a “for profit” company, that means “profit”. My message is that a laser-focused marketing strategy starts and ends with its sites on profit and margin.

The First Step – Increase Your Margin

If I sell something for $1,000 that cost me $800 to provide, I made $200 in profit, which is a 20% profit margin. The key difference I want to highlight is that “profit” is the dollar figure, and “margin” is the percentage.

The first step I like to take with every new client is to increase margin. Why? Because I know that the end goal of any marketing campaign is profit, not just leads. And if I can help my client reach her profit goal without marketing, then I’ve provided her a service more valuable than the marketing. Second, I know that our margin will determine the ROI of each marketing campaign. Almost any reasonable marketing strategy will produce a good ROI if we first maximize profit margin.

How to Increase Your Margin – Raise Your Price

Margin has only two moving parts: expenses and price. And without knowing you, I know that you wrestle to keep your costs down. So rather than focus on costs, I invite you to consider raising your prices. Think back to my imaginary business with the $200 profit per sale. What if I raised my price by 10%? My customer would only have to increase his spend to $1,100, but I would earn $300 per sale. That’s a profit increase of 50%! That means even if I lost a third of my customers due to the price hike, I would still be making the same amount in total profit.

Beware of excuses. I’ve heard them all, “We can’t raise our price because of stiff competition”, “Our prices are controlled by a formal bidding process that always goes to the lowest bidder”, or “Regulators set our prices”. But even in extreme cases, the naysayers are almost always wrong. I’ve helped several companies raise their prices in competitive and regulated markets. And usually to the surprise of the owners, there’s rarely a significant loss of sales over, say, a 10% price increase.

Raising Prices Helps Your Marketing

Clearly, the more discretionary dollars, the more you can reinvest into marketing. But there are actually several more reasons to boost prices and revenue before a marketing blitz. Here are a few:

  • Higher priced goods and services are perceived as having more value. Better perception means it’s easier to sell.
  • With greater margin, you can afford to invest in better staff, technology, and other resources. A company with better resources is more likely to produce a better product or service, increasing value your customers are willing to pay for.
  • Choosing to compete at a higher price challenges you to provide more value than your competitors. You’ll be driven to identify and hone your uniqueness as a company. The more you sell on your uniqueness, the less direct competition you’ll face. And the less competition, the more your customers are willing to pay for an offering they can’t find anywhere else.
  • If you choose “lowest price” as your main uniqueness in your market, don’t be surprised when a newcomer undercuts you by 10%, stealing your competitive advantage.
  • When you raise prices, you will lose customers. That’s a good thing! Often there’s a fixed cost to working with customers of any size. The fewer your customers, the lower your fixed costs.
  • And speaking of customers, your high maintenance customers are often the one’s hypersensitive to price. Raising your price may chase these headaches away. And keep in mind, you may lose revenue, but you’ll likely increase the total profit.
  • When there’s more margin, there’s more you can afford to share with partners. Revenue sharing is one of the most powerful ways to create business allies.
  • The greater the margin, the more room there is for discounting. Done right, discounting can encourage good behavior from your customers, like buying in bulk or referring friends.
  • And last but not least, a savvy marketing director will appreciate a high margin. When margins are high, it’s much easier to produce a healthy ROI with virtually any marketing strategy.

Price is a decision. It’s something you control. Don’t let the market tell you what you’re worth. Decide what you want to be paid and then ask yourself, “What would I need to provide my customers to be worth that much?” Your market will tell you what it wants from you.

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