The Strategic Business Success Formula

A business can have an exciting vision and a clear mission, but until it has a customer it achieves nothing.  For a business to succeed, nothing is more critical than finding customers and satisfying them.  From this perspective, business performance can be broken down into a very simple equation.  The level of profits a business can achieve is a direct function of the number of customers it can attract, multiplied by the number of sales transactions with each customer, multiplied by the level of profit it can make on each sale, less the overhead expenses.

Total Profit = number of Customers x Sales to each customer x Profit per sale – Overhead Expense

It is useful to look at business through this strategic formula. Many business managers actually limit the effectiveness of their marketing and selling processes because they operate only through the accounting equation which says:

Profit = Revenue – Cost of Sales – Overhead Expenses.

The result of operating only by the accounting equation is that we only see the task of making sales as a single task instead of focusing on how to optimally perform each of the three specific marketing elements included in our strategic success formula. When you break down the marketing process into these three objectives, you can exponentially multiply your results.  Your profits move into supersonic range when you start to develop specific strategies to achieve three specific results:
1.    Create new customers, and
2.    Increase the frequency of repeat purchases from each customer, and
3.    Increase the average value (profitability) of each sale.

In reality, marketing can be described even more simplistically in that it is about two aspects of business strategy; (1) creating customers, and (2) ensuring the customers are satisfied with the outcomes of their transactions so that you keep them coming back to deal with you.

Create New Customers Effectively

For most businesses, marketing and advertising is ineffective because it has no specific purpose.  Some people justify this type of advertising as "getting their name out there."  For a small business wanting to create a flood of customers, this is like sprinkling a few drops of water on the desert sands.  Small businesses just don't have the money needed to make this style of marketing effective.  Huge corporates can pour truckloads of money into marketing this way and it will get some response.  However, for small businesses this is just a waste of money.

Small businesses need to use much smarter and less expensive marketing methods. To be successful, you need to efficiently discover the specific people you need to market to and then only communicate with them.  When you communicate specifically to your target customers, you will be much more effective in attracting them.

Build Relationships Proactively

Once you have gained a new customer, the most effective marketing begins.  This is when most business stop marketing, which means they always need to find new customers.  However, once you have customer's trust, you will be able to sell to them repeatedly with much less expense than it costs to get new customers.  Despite this, most small businesses leave this aspect of marketing to chance.  It is not enough to expect customers to remain loyal just because you create a good experience when they deal with you.  You must not only be good at managing effective transactions, you also need to be good at managing effective relationships.  The key to real success comes from managing the relationships you build with customers and this aspect of marketing must be done proactively.

Most business owners neglect this element of marketing because they don't get many complaints.  Because of this they think their customers are happy.  The trouble is, just creating acceptable transactions does nothing to build the relationship.  It's a bit like taking a girlfriend to the movies on the weekend, but then never calling her to talk during the week.  How many movies would you expect to see with that girl?  The same goes for customers.  Unless you woo them and nurture the relationship, don't expect them to keep coming to you to buy your products.

Be Strategic

Your marketing needs to be strategic.  Don't just do what everyone else is doing.  You will just get the same lousy results.  Be smart, be direct and be genuine.  Strategic marketing is the most influential aspect of achieving business success. Don't leave it to chance.  Learn how to do it effectively.  The book, Put Your Business on Autopilot has several key chapters that focus on these strategies.  Going to www.autopilotbusinessplan.com would be a good place to start your learning.