Poor marketing decisions often costly to companies

When developing plans for the growth of any business, it is critical that the business owner not just detail planned marketing activities but also recognize potential mistakes that frequently occur.

In most cases, the mistake, if perpetuated, can increase operating expenses and even bring about the downfall of the business. It is just as crucial to be aware of potential mistakes - and avoid them - as it is to know the details of the marketing plans to be implemented.

Mistake 1: Not understanding that business success is driven by conversion and retention.

When the goal is to grow the business and to increase profits, it is important that two business elements provide the basis for this success - improving the conversion rate of leads to becoming customers, and improving the retention rate of customers to increase the number of transactions. As simple as it seems, this principle applies to any business, any size and in any business category whether it be retail, manufacturing or services.

There are many marketing tactics available to generate more leads, but unless you focus on and improve the conversion rate to create buying customers, the business will struggle to improve its profit performance.

Similarly, if the business does not improve its retention rate it will have to continuously invest to bring even more leads in to grow the business.

As a generalization, it has been proven that it costs approximately six times as much to generate a new customer purchase as it does to generate a repeat purchase from an existing customer.

Make sure that you offer the highest level of customer service and special incentives to existing customers to keep them coming back — they are your most profitable customers.

Mistake 2: Not identifying the unique selling proposition as a core driver to build a sustaining business model.

This may be the most common of all marketing mistakes. Because business owners are so passionate and have such a strong belief in their products or services, they do not realize the consuming public at large doesn't have the same understanding and enthusiasm for their products or services.

It is critical that each business identify what the consumers' needs are, to be clear that the company provides a solution for that need, and that the product or service is differentiated from the competition to create a proposition that encourages the potential consumer to at least contact the company to find out how it provides a solution to their needs.

This differentiation is called the unique selling proposition, and becomes the basis for effective communications to get potential customers to action.

Without an effective unique selling proposition, the company will have to resort to pricing - and therefore lower margins - as its marketing strategy to attract customers.

Mistake 3: Making decisions on the misunderstanding that customers know more than what you believe they know.

With business owners being so involved in their business, they will not only consciously but also sub-consciously know more about their business than any customer, and in most cases, they will also know more than their employees.

As a consequence, there is a tendency not to put in appropriate effort and time into helping the customer understand the benefits of the product or service being offered - and then wonder why sales are not up to expectations.

"The best mouse trap does not necessarily sell the most" has been proven in almost every business situation - it takes all the elements of a marketing plan from communications through customer service to effectively build a customer base.

Mistake 4: Changing marketing tactics when they are still working.

When you have marketing programs that are bringing in new customers and retaining existing customers, it is important to keep those programs going. Because the business owner is seeing his marketing programs all the time, there is often a feeling of boredom and the need to change.

It is important to maintain repetition of the same story as long as the margin return on the cost of the marketing program is above break-even — it doesn't matter how bored the owner is with the program.

Continually test and measure the results of marketing programs so that you know when it is appropriate to change to a new program.

Mistake 5: Reinventing the wheel when successful or failed strategies are already known.

It is important to be aware of what marketing programs have worked in the past and what are working now for other businesses in your category. Do homework and develop your own ideas that can ride off others' successes. This step is often overlooked by marketing and creative people who want the self-satisfaction of coming up with the next great idea.

A little humility in developing marketing programs can get a product to market faster and at a lower cost - and when this program works, use this as a basis to create a better and more compelling version of the launch program.

Mistake 6: Being taken in by creative cleverness or cuteness over fundamental communications.

Pretty pictures, humor, expensive productions and flamboyance may all win creative awards, but do absolutely nothing for generating sales for the business. Just getting attention is not sufficient to be successful.

One of the great writers on developing effective creative communications was John Caples. In his book, "Tested Advertising Methods," he said there is a three-step approach to creativity:

1. Capture the prospect's attention. Nothing happens unless something in your communication makes the prospect stop long enough to pay attention to what you have to say.

2. Maintain the prospect's interest. Keep the communication focused on the prospect, on the benefits they will get out of using your product or service.

3. Provide a reason for the prospect to take action now. Unless enough prospects are transformed into customers, the communication has failed, no matter how creative the communication is.

Mistake 7: Failing to build trust when it is known that everyone has been burned by some marketer in the past.

Because everyone has been burned by a marketing program at some stage, it is important to build in elements of a marketing program that will build confidence and trust with the consumers.

This should include an appropriate educational approach supported by facts the customer can positively assess. It can include guarantees, money-back offers, a phone number to call to get more information, and other tactics that will build trust with prospects in your particular industry.

These seven marketing mistakes should be taken into account in developing marketing programs as warnings to be considered as you develop your business — unfortunately these mistakes tend to be prevalent in most industry categories.

In building a business over time, avoidance of mistakes may even be more important than the planning of the actual marketing strategies to be implemented.

Iain Macfarlane is the president and founder of BizCOACHING & Associates in Madison, a franchise of Action International. He was named "Coach of the Year 2005."