Chris Bjorklund: What’s keeping you up at night? An underwhelming sales team? Bad apple employees? Bills due and no cash to pay them? Just where should you cut expenses? Marketing’s always the first choice but does that really make sense? Maybe not. We’re here to help. Hello. I’m your host, Chris Bjorklund. Stay with us for the next hour and we’ll help you increase sales, tackle human resource issues, and develop ways to keep the cash flowing. We’ll even throw in a little marketing advice free of charge. So stick around. The AllBusiness Thriving in Tough Times Summit starts right now.

Chris: Whether you’re running a global fastfood empire or a small Pilates studio, the key to increasing sales is to focus on how best to serve your long-time customers, the ones already in line to order a burger or already set up for a workout session. With their pocketbooks, they’ve shown they believe in your company time and time again. Hello and welcome to this AllBusiness webcast. I’m Chris Bjorklund, your host. Just exactly what do you know about your best customers and how do you connect with them? Today, we’ll explore this topic with a series of experts who will help you identify, cultivate, and retain your best customers and offer some real-life examples straight from the sale floor.

Chris: EHS Pilates is a small but growing San Francisco Pilates studio. What are they doing to generate more revenue and increase profits?

When I’m looking at profitability for the business, we use our software and we have four main categories that I would look at in terms of profitability for the business and the first being our group classes, the second being privates, and we also do education here, and then our retail business where we sell a lot of Pilates-related props that we’ll send home with clients. When adding new classes or taking classes away or looking at instructor, retaining the clientele, all of our reports allow us to adjust accordingly. So when a class isn’t doing well, we need to phase that out and think of something new. We don’t want to have the client just come in only for the trainer, we also want some loyalty to the business as well and retail is run as every other business would be run in terms of profitability and what products sell, what don’t, when we need to bring new things in, when we need to stop carrying things. We phase in and out and then bringing all of these together. We look at them collectively. We go through budget meetings. We look at the reports that we get from the software and then make changes accordingly.

Chris: The folks at EHS Pilates seem like they’re on the right track. For more on what businesses of all sizes can do to target their best customers, we turn to Charles Sterck, managing director of Sterck, Kulik O’Neill Accounting Group, which specializes in helping companies identify their best customers so they’ll come back for more. One of his key tools is what he calls the revenue maximizing formula.

Charles Sterck: Total revenue is comprised of the total number of customers you have multiplied by the average amount of money they spend when they visit you multiplied by the number of times that they do visit you. Total revenue. So now when I ask a business owner how should we increase total revenue, we no longer have only one solution which is to get to new customers. We can increase the average sale, that is the amount of money that your customer spends while visiting you or find a strategy that enables or causes your customer to come back and visits you one, two, three, four more times in a month, year, whatever your measurement period is, and by virtue of that formula, you increase total revenue.

Chris: Another technique for generating repeat business with your best customers is to stay on their radar screen. Let’s take a closer look now at how that’s done.

Running a heating and air-conditioning business may seem like a one-time hit-or-miss proposition. But that’s not the case for Kevin Cummerford of Service Champions in Pleasanton, California. AllBusiness reporter Paul Kilduff asked the owner what his selling strategy is. Just how does he manage to get homeowners who’s already done business with, to call him back for the small jobs and the big jobs too?

Paul Kilduff: Kevin Cummerford started Service Champions in 2003 from scratch. Today, the company has 84 employees, 2 offices, 64 trucks and expects 2008 revenue to be 17.5 million. How did he accomplish this growth so quickly? We went to their Pleasanton, California headquarters to find out.

Kevin Cummerford: We really took the philosophy in watching Wells Fargo, two companies Wells Fargo and McDonald’s. They really have perfected what’s called this LCD marketing. It’s lowest common denominator marketing. It’s the 99-cent value meal. It’s the free checking account. All they’re looking to do is get the client in the door, give them great service when they arrive in the door like if you get on a free checking account, they give you great service, they bend over backwards and then all of a sudden you get on their credit card. You then are talking to them about a mortgage and before you know it, in a two to three to four-year period, you’ve got a lot of your accounts transferred over to Wells Fargo and it all started with a free checking account. Very similar process in our business. We can go and market, which we do at times, market for a $10,000 replacement system, buy a furnace, buy an air conditioner. However, what we find is more effective is if we just go in with a $78 tune-up. Give the client great service. Get them; sign them up after we’ve done this great demonstration for them. Get them on an on-going maintenance program and then when it comes time for them to replace their system, when it comes time for that $10,000 replacement sale, they only go with us. One of the things we preach to our team members all the time is we’ve got to not only be the sizzle, we’ve also got to have the steak. What I mean by that, if you’ve ever been to a great restaurant and the guy that the waiter brings the steak behind you and you hear it sizzling behind you and then that begins to get your appetite going, and he lays that steak in front of you and you take a bite of that steak and it doesn’t taste good, it doesn’t matter how good that sizzle sounded. We really train a lot on the sizzle. We’re really good at the sales and the marketing and the communication and the direct mail. We also have to be really good at the steak side so we’ve gone out and hired great people to not only be able to fix things and build things and install things. We also have really good people that can sell things and market things and service things. You’ve got to have both when you’re in a small business. Most small businesses fail because they’re really good at the steak. They’re a really good technician. They’re really good at fixing stuff. They fail on this end. They’re terrible at the marketing. They’re terrible at the service center. They’re terrible at the sizzling. That would be the number one difference between Service Champions and all of our other competitors.

Paul: To keep track of all their employees, trucks, and most importantly customers, Service Champions uses a customer relationship management system designed specifically for the heating and air-conditioning industry called SuccessWare. For more on this kind of programs and other tech-savvy ideas, we turn to Chris Zawacki as he talks to smallbiztechnology.com editor Ramon Ray. A founding partner of Greenhouse IT, Chris specializes in developing IT programs for small companies.

Ramon Ray: Technology could be confusing for many businesses. When you have a law problem, you hire a lawyer. When you have an accounting problem, you hire an accountant. But for some reason, technology is still confusing, kind of a black box to many people. We have with us today, Chris Zawacki of Greenhouse IT to help us understand how technology can be used in a small business.

Chris Zawacki: You need a way to communicate with your clients. You need a way to put your employees in a position to succeed as they interact with your clients and so contact relationship management database, a CRM package.

Ramon: And CRM, what’s CRM stand for?

Chris: Customer Relationship Management. So when you’re looking at dealing with your customers, you want to be able to seamlessly interact with them. You want to build processes in your business that allow your employees to fulfill whatever your customer is looking for and exceed expectations. Technology is a great way to do that. As you start, you can use the basic Microsoft Office Suite to accomplish this but I think as you grow, depending on what your business type is, there are general kind of mainstream CRM packages out there, the Axe, the Goldmine, depending again on what industry you’re in. You may want to look at an industry-specific package. These are things that allow your sales people to track their endeavors and efforts. It allows your customer service and fulfillment departments to interact with the clients and these processes that technology allows you to track ensure that you don’t miss out on opportunities, that you don’t miss delivering a product or a service to a client on time. Again, deliver so you exceed expectations and technology can help you do that.

Chris Bjorklund: Now that you know how to identify and cultivate your best customers, how do you retain them? Make them part of the family. Jim Stein is the CEO of American Ratings Corporation, a company that rates local companies on customer satisfaction for whom I have consulted. He says it’s all about super gluing customer loyalty, something that can be accomplished by every smart business owner.

Jim Stein: To super glue customer loyalty to your company, I recommend three action steps. Step number one, create a list with your team of three types of experiences your customers have that creates dissatisfied customers. This could be different things in service that happens. Different screw-ups that employees have with customer accounts, product malfunctions, et cetera. Then create a list of three things that your team does that surprise your customers in a good way and have…creates let’s say super satisfied customers. Step number two is to analyze this list and to price out the cost of what good surprises cost your company in terms of the benefit of new customers and customer retention and what bad surprises cost in terms of losing customers. Now you need to calculate, okay what is the value of a customer over the life of the company? And it’s somewhat of a complex formula but I’ll try and synthesize it here. First thing you do is you figure out what is the margin that you’re making on the average customer? Take your last month of sales and figure out how many customers you actually served and take your revenue and divide the revenue by the number of customers so that you get your average sale price. Then do a rough calculation in terms of percentage of what your incremental margin is. Now what you need to do is to figure out your attrition rate of customers over the course of a year and also calculate how many years you’re going to keep an average customer and you can do that, this is a little secret, by taking your attrition rate percentage that leave, taking 100 and divide the attrition rate into it. So for instance, if you lose 5% of your customers, okay 100 divided by 5 is 20. You have an average of 20 of your customers. Okay, so now you calculate the actual value of a customer over the life of the customer. It becomes a very big number which is all the more reason to make sure and to spend, to super glue the loyalty of these customers with you. Now because you’ve involved your entire team, it’s a great opportunity to get buy in from your team because they’re the ones that are going to do the small things to keep customers satisfied. The third step is to monitor and lead from the top and you personally must lead by example otherwise it will not work. And that means you create a little chart on the wall, you do training. You track it weekly and you see what good surprises your employees are doing and what of the bad surprises you’ve now wrung out of your system and make sure your employees are not doing. And if you do those three steps, you’re going to super glue the loyalty of your customers.

Chris: That does it for our look at selling in these tough times. In this next segment, we’ll dig into a real mine field and that’s your employees and how they’re performing.

Chris: Do you know which of your employees are contributing the most to your bottom line? Hello and welcome to the AllBusiness webcast. I’m your host, Chris Bjorklund. In this program, we focus on how you can cut your labor costs and improve employee productivity at the same time. The key is to evaluate your existing employees, terminate those who aren’t performing and then identify and hire the right people going forward. There’s no better time to reorganize your work force to identify those employees who aren’t performing and replace them with those who will. So let’s get started. First, what’s the best way to evaluate your current team? Rieva Lesonsky, CEO of SMB Connects and editor at large for AllBusiness says you begin by separating your employees into four groups.

Rieva Lesonsky: You should evaluate your A people, separate them out. These are your best employees. You don’t have to worry about them but you do have to reinforce to them, tell them they’re doing a good job, occasionally reward them, buy them lunch, give them twenty bucks, here’s something’s special, go out, thanks a lot. The B group, they could be A’s. There are some people in the B who may someday get to be an A. Chances are, they’re always going to be solid performers so if you’re doing okay, keep your B’s. You don’t have to necessarily give them extra but you do have to tell them that they’re doing a good job but also tell them where they can improve. That’s really important to B people because you have to keep them motivated. Employee reviews are good part of this. I actually don’t believe in doing them just once a year because I think people will fill their form; you fill out their form. I think you have to constantly kind of informally review people. The C people, here’s where you start getting into trouble. You really have to break your C’s into the ones who you think have potential to one day be a B or the ones who you think are just going to maintain that C performance and eventually, you’re going to have to get rid of them because they’re not really helping you do anything. If there are jobs that you have and very few entrepreneurs have these kind of jobs where it doesn’t really matter if things can just get done, you may be able to maintain life with a C person, so I think you look at your C’s, give the high performing C’s, help them along, give them a lot of feedback. Ask them, “What do you want to do? What are you comfortable with?” and constantly talk to them to help them be the B and then at some point, you might want to say to the other C’s, “You might be happier elsewhere.” And the D’s, if you’ve got a D person, you’ve got to have some plan in place to get rid of that D because that D person’s just going to weigh you down.

Chris: If you do have someone that you need to let go, it shouldn’t come out of the blue. There has to be a process. Tom Gegax of Tire Plus explains the steps you need to take to Hattie Bryant, host of the PBS show Small Business School.

This is an excerpt from Small Business School.

Tom Gegax: A lot of owners don’t know when to do what action and there’s a quiz in each of these for things that need to be done in an ATE to see how you do. The first thing in order to know what kind of action to do when, if somebody knows how to do something and wants to, what can you do? And this sends an ATE.

Hattie Bryant: They know how to do it and they want to do it.

Tom: So they would do what? You can do what? The man’s an ATE. What would it be?

Hattie: So the leader can delegate.

Tom: Delegate, that’s right. That’s the first. The second is what if they know how to do it but they don’t want to?

Hattie: Motivate.

Tom: Okay, what if they want to do it but they don’t know how to do it?

Hattie: Educate.

Tom: Exactly.

Hattie: [Laughter]. Got that!

Tom: What if they don’t want to do it, don’t know how to do it, and you’ve tried to motivate and educate?

Hattie: Well then, we have to show them that they can have another opportunity someplace else.

Tom: Terminate.

Hattie: Terminate!

Tom: [Laughter]. Terminate or free up their future so they can do something unique in another environment.

Hattie: See, I said that. I said that.

Tom: You did. So most people, do you see? A lot of people don’t know which. Those are four key actions…

Hattie: Guidelines. Yeah or guidelines.

Tom: …of a small business owner. When do I delegate? When do I educate? When do I motivate? And when do I need to terminate? So those are key things and knowing the difference on when to do what is critical.

Chris: Another factor you should consider when determining which employees to keep is your ability to outsource their work. Many small businesses are effectively outsourcing their HR and accounting. For more on how to do this, we turn to small business expert Katie Ford. We asked Katie about when you should hire an agency to handle staffing needs.

Katie Ford: There are four situations in which it might make sense to use a professional recruiting or staffing company. The first scenario is if your hiring needs are cyclical. Perhaps you bring in a lot of temporary or seasonal workers on a regular basis. If that’s the case, you might want to delegate that function to a professional agency so you can focus on your business. The second situation is if you’re hiring needs are confidential. This would be if you’re replacing someone on staff and you really want to keep the hiring process under the radar. The third scenario is when you’re making a key hire and this position would demand some expertise that might be hard to find. Let the experts do that for you. The fourth scenario is if you’re an unknown company which is the case for a lot of small businesses. Sometimes when you’re a little-known company, it can be hard to generate a buzz and recruit talent. A professional staffing agency will have the connections to generate a steady flow of resumes.

Chris: If you’re like most companies, once you let go of your underperformers, chances are you’ll have the resources to hire a few key people. Be smart. Hire only those employees who will help you bring in additional revenue or better manage profit centers. These folks should quickly become your new A players. For an inside look at the hiring process, we got some advice from Michael Beardsley, managing director of Padilla Speer Beardsley, a New York public relations firm. According to Beardsley, the number one thing to consider with a new hire is whether they’ll fit in with your company’s culture.

Michael Beardsley: I think a sense of humor is a really important element when you’re hiring somebody. I generally try in an interview; I try to do some kind of test where I had to go, if someone says a joke. I will ask a dumb question or maybe it’s completely off the subject or I always try to have a social banter before we get into the serious questions because I think that’s really urgent and there’s a high stress that’s high energy and that requires an environment where it’s important for everybody to get along.

Chris: When making a new hire, it’s also important to consider character. To do this, Connie Hernandez of Reuse Concrete Ceiling in Overland Park, Kansas uses a rather unorthodox approach.

Connie Hernandez: I think from my point of view, the most valuable questions are where do you expect to be in the future? If you can see whether they have a vision for their personal life, if you get people who say, “I don’t know, I guess working.” They don’t have a very long-term view, they don’t have much investment in themselves so how can they possibly invest in the position that they work for? I read an interesting thing the other day. A guy said that when he hired people, he always took them out to eat because he could tell more about them by the way they treated the wait staff than any other thing that they did. If they were rude to the people that waited on them, they were going to be rude to the customers. And I thought, “Boy, that’s really…you know.” So I think observing the way that they behave to the other people in our office is a very valuable indicator of what kind of character that person has. And I think character is one of the most important things to hire for. You can teach them how to do the job but you can’t teach them character.

Chris: Let’s move on from HR now to a subject that’s extremely important to every business owner and that’s cash flow.

Chris: Hello and welcome to Thriving in Tough Times, the third in a series of webcasts designed to keep you thriving in spite of the soft economy. Even in the best of times, cash flow can literally make or break a business. Consequently, in a tough economy, it’s one of the first things to suffer. To conquer the cash flow monster, you’ve got to stay on top of your customers and find ways to get the best terms from your suppliers. Some of the keys to mastering cash flow are checking your customer’s credit histories especially those who may have had trouble in the past, offering discounts to those who pay faster, and actually calling customers when they fall behind. It’s much tougher to avoid a phone call than a letter or an email and you’ll know sooner where things stand. To get things started, here are three quick tips on maintaining cash flow from Jim Logan, AllBusiness’ direct response adviser.

Jim Logan: Cash flow is the life blood of any business. So here are three quick tips to help you manage your accounts receivable and get as much money into your business as possible. The first tip is be sure that each invoice you send has a very clearly defined payment due date. If it doesn’t have a clear date, it may not be paid. The second tip is you want to be sure that you have a clear accounts receivable and collection process. What that means is you want to be sure that at 30, 60, 90, or 120 plus days, you’ve had steps built in on how to contact the customer and prompt them for payment. The third tip is really a general one but it’s so important. You need to track everything. If you’re not tracking your ageing, if you’re not tracking write-off, if you don’t have a policy in place, it’s impossible to tell how healthy your business really is.

Chris: Exactly what are your options for collecting debts? Attorney John Patrick Dolan describes a method gaining popularity in this excerpt from the PBS series Small Business School.

This is an excerpt from Small Business School.

John Paul Dolan: The federal government passed a law called the Fair Debt Collection Practices Act and what it basically says is you need to collect your debts in an appropriate fashion. So you don’t want to call people at 3 a.m. and you don’t want to send Vito the Leg Breaker to beat down their front door and you don’t want to call and abuse people at their work place and if you do, you could be in trouble. Let’s say you have somebody that owes you $500 and so you decide that you’re going to figure out a way to get them to pay because maybe as a small business person, this is the profit that you make in this transaction. You’re allowed to contact them and see if you could get them to pay under reasonable circumstances during regular business hours at work unless they say please don’t contact me at work anymore, at home, through correspondence, et cetera. The Federal Fair Debt Collection Practices Act however says if you abuse your ability to collect your debts, that is if you do things that are really rude, abusive, inappropriate, you can be liable up to a thousand dollars for any particular debt and recently a case came down that said this, “It’s not just a thousand dollars on your hypothetical $500 debt, but it’s a thousand dollars every time you do something rude and abusive like three phone calls at 3 a.m., four knocks on the door from bad guys, and three other abusive acts adds up to ten acts. You could be liable for $10,000 to this person.”

Okay, I don’t want to abuse them but how do I get my money?

John: Well, I would say the simple thing to do first of all is to correspond in the beginning. After you correspond, there are a number of reputable collection agencies where you could send out a bad debt and of course, when you engage in an agency like this, make sure that they’re familiar with the Fair Debt Collection Practices Act and you might even, by the way, put together in your contractual relationship with this debt collection agency, an agreement that if they act beyond the scope of your engaging them, that is if they do some things that are inappropriate, that you are going to be held harmless and that they will take full liability for this and then after this, you end up in litigation. We try and avoid litigation wherever possible but sometimes, it’s the only alternative. There’s a big trend in America and I think small business people can take advantage of this trend. It’s called alternative dispute resolution and how it works is you put together in your contract or agreement with yourself and your customer or client, a clause that says if we have a disagreement, if we have a dispute over payment, we both agree that we would use an alternative dispute resolution mechanism rather than going directly to court. It might be a neighborhood justice center. It could be an arbitrator agreed upon by both of us. The advantage to this is you can continue to do business especially with good customers while you have a dispute resolved outside of your regular business channels. In that way, you don’t ruin the relationship. When you’re talking about a small business, and you’re talking about debts, $500, $700, $1000, lawyer’s fees eat up so much that it almost becomes irrelevant to go to a lawyer and so for everybody’s protection, the trend is and I encourage small business people to include in their agreements, an alternative dispute resolution clause so they can go outside of the legal system but outside of their personal relationship to get a problem resolved. You don’t have to lose your business relationship in order to resolve a dispute that you have.

Chris: Here are some other thoughts on the importance of cash flow and how to manage it, from another AllBusiness adviser, Matt Stevens.

Matt Stevens: If you look at bankruptcy statistics and bankruptcy studies, you’ll find that decreasing cash flow is a leading indicator of bankruptcy so again, it’s something we can’t learn enough about. What are some of the reasons that somebody might be cash short at the end of a project? One of the ways in which you do that is you start off a job on a basis where you don’t bill enough at first and that’s obvious to most of us who have done that but collecting accounts receivables certainly is easy to do. We just got to be better at that but if you look at strictly cash flow kind of the basics here, you’ve got to be sensitive to the fact of how clients pay and you have to get rid of or fire clients that have poor cash flow, poor payment practices. There’s no reason for that unless they’re paying you a lot of money. In cash flow, what you’ll find is a leading indicator or a leading component of return on investment which is something I believe very strongly in. If you’re paid a little bit of money but you don’t have money invested in the job, you certainly have very high ROI. You do that math, it actually is infinity but let’s say that you have a modest amount of profit in a job and you’re paid every 5, 10, 15 days. That return of investment is very high.

Chris: Now let’s look at a specific industry, construction, which can teach us all a few lessons about cash flow. Here’s Matt again as he talks about the importance of meeting payroll and paying suppliers on a weekly basis, a common situation for many businesses.

Matt: In construction, many contractors, if not all contractors really finance a project in some way. They pay their payroll. The job gets billed. They send an application for payment in. It gets paid. They’re given some money back. Somewhere in there is their reimbursement of their expenses but the next week, they have to pay that payroll again, pay those material invoices and so, if you look at that financing or that working capital they’re investing in that project, that’s one of the two calculations you have to make to make return on investment make sense. If you’ve got lots of back log and if you’ve got lots of margin in a back log, you’re good. Well, the business is the second riskiest business in the United States so we have to look harder at this profitability issue, if you say we really want to make sure that we have a very high return on investment of the working capital we lend to projects, now there’s a mildly complex calculation that we go through and it really tells contractors how they’re doing financially on a project and overall in their business.

Chris: Should they be looking at the cash coming in and then the cash going out and when that cash is going out, the timing issues?

Matt: Absolutely. There’s no great change they’re going to make over the short term but over the long term, if they look at this cash in, cash out or what I like to call the cash-to-cash cycle, the industry averages about 47 days if you follow this kind of thing. Now that 47 days, it’s an analysis done by the banks and it’s very accurate. Somewhere less than 50 is a pretty normal cash-to-cash cycle. Well, if you’ve got people telling you that 70 to 80 is normal, I would argue with that. There’s things you need to be doing right now to bring it down at least to 47. The better contractors financially really try to figure out a way to get down to 45 and 40 and 30.

Chris: So that’s the gold standard, so to speak?

Matt: Yeah, the best side of the industry to be observed are the handymen, they walk in one day and they have their hand out when they walk out, they pay me for a day’s work and so their cash-to-cash cycle is zero or one day. And don’t forget when they buy material, that material might be…that invoice might be due in 30 days but they’re still paid today and it goes in 30 so that’s a ridiculous example but you can see the logic in it.

Chris: As credit tightens in an economic downturn, it may seem that borrowing to keep your business afloat isn’t an option. But with the right preparation, it could be. The end result would give you and your customers breathing room to catch up on bills. You can always go to your own bank for such a loan but what are the other alternatives? Katy Ford is a small business adviser.

Katy Ford: There are three places they can go. First, they can go to a small credit union. The reason I recommend this is because usually at a small credit union, you have high level decision makers who are more easily accessible and if you’re good at selling your ideas and you have a solid documented business plan, this might be your best bet. Secondly, you can scan local newspapers and magazines for the financial institutions who are actually advertising for new business. They’re looking for business and so you automatically have what they want. And of course, in this day and age, you can shop the internet. There are several sites out there in the business of matching borrowers with lenders and it’s all for free. Basically the lenders are being paid a fee for the referral. When you have multiple lenders vying for your business, they’re motivated to give you the most favorable terms and lowest interest rates to win you over. And obviously, that’s to your advantage.

Chris: And that’s a wrap for today. Be sure to stay tuned for the next installment of Thriving in Tough Times where we’ll show you how to get the most out of your marketing dollars. I’m Chris Bjorklund for AllBusiness, thanks for joining us.

Chris: Here in the last part of our Special Summit on Thriving in Tough Times, we’re going to help you figure out how to squeeze the most out of your marketing dollars today. It may seem counter-intuitive but you should actually maintain or even increase your marketing efforts in challenging times. Study after study shows that companies that cut their marketing budgets as a way to ride out the economic storm fall way behind when things get better. Here’s why. Your ad dollars go further in a downturn because prices are more negotiable and as other companies cut back on their marketing, you don’t have as much competition for your customer’s attention. And the benefits aren’t just short term, the more people know about you, the more likely they’ll choose to do business with you. But you’ve got to have a plan. There are certain strategies to avoid and others to pursue that are unique to soft economies. For example, now is a good time to emphasize the safety of hearth and home in your advertising and a bad time to show images of extreme sports and adventure. Jim Logan, an AllBusiness advertising expert says it’s always critical to craft your message carefully especially now and be sure to tell people exactly what you want them to do.

Jim Logan: Without a doubt, the call to action is the most critical component of any marketing campaign. There is nothing that gets you less response than having a wonderful marketing piece that talks all about your company, how great you are, even goes into the benefits you offer your customer but then ends with nothing. One of the most important things you have to have is a call to action. After your customer receives your message, what is it you want him to do? Do you want him to vote, register, request information, give you a call, visit the lending page? Without giving them specific instructions, you’re just leaving to chance what that next action will be. Instead you want to direct it because by directing that action, it puts them into your sales cycle and gives you a better chance to make them a new customer.

Chris: Knowing your customer is more important than ever.

Jim: When it comes to advertising your business, you have a lot of options. Print advertising, radio, flyers, door hangers, web-based advertising, the list goes on and on. And there could be great temptation to jump on what appears to be a great deal to get the name of your business out there. But one of the most important things you need to think about first is who is your target audience? Who is your customer and where do they hang out in the world? And what you want to be sure to do is match the right advertising media to where your customer is most likely to receive that message. That’s how you get the most out of your advertising.

Chris: Now is also the time to tap into the power of the internet. It’s fast, it’s focused, and it provides measurable feedback. I asked David Meerman Scott, author of The New Rules of Marketing and PR to talk about web opportunities including how a company website can be transformed into a sales tool.

David Meerman Scott: I was actually the vice president of marketing for several medium-sized publicly traded technology companies and I did what everyone did. We bought expensive advertising and we begged the media and the analysts to write about us. But the web gives people an opportunity to ignore those old rules of begging your way in and buying your way in and allows us to publish our way in with great content in all of its forms, so a great website or podcast like we’re doing right now or videos on YouTube or all sorts of different opportunities for people to go directly to their market rather than buying their way in with advertising or begging their way in with the media.

Chris: From your book it seems as though you’re really encouraging business owners not only to experiment with some of the new tools but also to have some fun.

David: Yeah, absolutely! It’s an opportunity to try new things; it’s an opportunity to have a little fun, to be creative, to use humor. I mean, gosh, when was the last time we used humor in marketing and that seems to be one of the things that works really, really well with getting things to spread through what’s called viral marketing or the phenomenon of people spreading things from one person to another. Imagine in the old days when we had to do a brochure or a magazine advertisement or a Yellow Page advertisement and you had to get everything absolutely perfect. You couldn’t make a mistake in the spelling, God forbid your phone number was wrong but on the web, geez, I made a mistake. So what? I’d go in and fix it. So it’s a lot less stressful too.

Chris: Weren’t you talking about…was it a camera store or was it a hardware store where they were just walking around with the camera demoing how different gadgets work?

David: Yeah, lots of organizations have done that kind of thing. You can show people how your products and services work or how your organization solves problems rather than trying to explain things, the web allows you to show people with interactive tools, with video, with audio, and all sorts of other things, pictures and images and graphs and all sorts of cool stuff.

Chris: What about small business owners and getting them to think a little bit differently about their website and using it differently? What advice do you have for them there?

David: Well, I’ve got some general advice which is basic to all sites particularly for small business owners. One of the most important things is to focus on your buyers. Focus on those people that you’re trying to reach, the people that you would like to make use of your products and services and the best way to do that is by using what I call a focus on buyer personas. Now what is a buyer persona? It’s basically the way that you organize and slice and dice your marketplace into particular buying groups. Now what most websites are is most websites are organized around the company or the business and it says we have this product and we have that product. But that’s not the way buyers buy because if they’ve never heard of your company, they don’t have any idea what your product lines are. What buyers are looking for are answers to their problems so the best way to solve those problems using a website is to create content that’s especially for each buyer persona. Let me give you an example of that. Imagine you’re running a small hotel or a bed and breakfast in a city and your small hotel, small independent hotel, you’ve got a website and most hotel websites, and you can go to any hotel website out there and they’re almost all the same, they’re focused on the property itself. They talk about the fluffy pillows and the tasty shrimp and the fact that they’ve got a pretty garden out back. But imagine how different that hotel website would be if it was focused on the individual buyer persona of people who are looking to buy services from that hotel. You’ve got the independent business traveler who makes her own decision about where they want to stay in a particular city then you’ve got a corporate travel department who has a company headquarters near that hotel and they want to buy say two or three hundred room nights per year because they have guests coming all the time into that city. They want to get the best rate possible. That person in the corporate travel department making the decision on 200 room nights a year has a very different set of needs than an individual business traveler who’s making her own decision for a couple of nights in a particular city. Imagine still a young couple planning their wedding reception. What a different set of needs that buyer persona has or somebody who’s organizing a conference in a city that needs to get a couple of meeting rooms to hold their conference. Those are very, very different buyer personas with very, very different needs and if that hotel had organized their site around those buyer personas, they would be much more successful than just talking about their fluffy pillows and tasty shrimp.

Chris: Marketing experts like Rieva Lesonsky, CEO of SMB Connects and editor at large for AllBusiness warns that marketing gimmicks are out and that reliability, durability, safety, and performance are in. She recommends spending about 80% of your marketing dollars on your current customer base and 20% on potential new customers.

Rieva Lesonsky: I think it’s very important to spend more time on your existing customer base. One, you already have them. You’ve spent the money to acquire them. The most expensive part of getting customers is finding them, who are they, and it’s the acquisition cost. Once you have them, you’re not really spending money on them other than to take care of their business which they’re paying you for. So it’s much better for your bottom line to have existing customers who keep coming back year after year. So you have to maintain them. You have to take care of them. If you ignore them, they’re going to go elsewhere. After a while, you’re going to figure out which customers are high maintenance and need a little bit more of your attention and which ones seem to be low maintenance and even the low maintenance ones need some kind of attention from you. Check in occasionally, are you doing okay? Every time they order from you, give them two, three weeks and then call up and say, “Are you happy? Was there anything I can do for you?” And then from that, then if they’re happy with you, they’ll go recommend new customers to you so that part of acquisition will cost you less. Then take about 20% of your time and go mine the field, go find new people to bring in. There are times when you’re as good as you are to your existing customer base, for reasons outside of your control, they’re going to go out of business, they’re going to consolidate, they’re going to retire so you do need to constantly have people on the bench coming in and once you bring them in, they’re going to actually love it because now all of a sudden, think of the attention they’re going to be getting. So you bring them in, make them happy, keep them loyal, and spend a lot of your time as we call it the care and feeding of your loyal customer base.

Chris: Whatever your marketing budget is, you need to manage it carefully. Jim Markel is the owner of Red Oxx, a manufacturer and seller of high-end travel gear.

Jim Markel: I would say that the biggest marketing mistake that most small businesses make is they’ll work on their corporate identity and not have the budget to implement afterwards. So you can spend a lot of money getting a logo workup done, photography, copy writing and then have nothing…basically build their car and not have enough money to put gas in the engine which would be ad placement and a PR campaign and so by the time they get their identity package done and their brand analysis done, they’re out of money. And so then the car can’t go anywhere and they’ve got this beautiful car sitting in the garage that they can’t take anywhere.