Top Ten Marketing Mistakes Made by Small Businesses

Top Ten Marketing Mistakes Made by Small Businesses

By Frank Marafiote, President
Emerge Communications

Even the most marketing-oriented firms make mistakes.

Most of us remember the turmoil at Coca Cola when it decided to abandon its successful cola formula and "the real thing" disappeared from store shelves in favor of a "new, improved" Coke. Consumers reacted to the news with such a display of anger and astonishment that Coca-Cola ultimately backed away from its plan and announced the return of its original formula under a new name: Classic Coke.

While the dollars involved might not be as great as in the Coke debacle, there's even more at stake when a small business makes a marketing blunder - the firm might not have the resources, as Coke did, to weather the storm and stage a comeback. Conversations with owners and managers suggest several recurring marketing mistakes made by small businesses.

Here are ten of the most common small business marketing mistakes and some tips on how to avoid them --

1. The business doesn't advertise/market at all. Yes, Virginia, there are business owners who sit at their desks fretting about a lack of customers, but who have never sent out a sales letter, attended a trade show, advertised their services, or called on prospects. This malady most often afflicts professionals accountants, attorneys, health care providers - who believe it is unseemly and unprofessional to market their services. In many cases, the professional simply needs to mentally shift his/her point of view so that the focus is on the needs of the prospect, not on his or her self-conscious discomfort about developing new business. This mental shift has two related, positive effects: the prospect is more likely to buy, and the service provider is more at ease about developing new clients.

2. Underestimates resources needed to market successfully. Marketing requires time, money, and talent. If most of your new business comes from referrals or networking, having lunch with a prospect just once a month is unlikely to generate the level the business you need. On the other hand, if reaching your market requires media advertising or direct marketing, don't assume that just one ad in the local paper or one sales letter will generate sufficient business either. Business owners are often suspicious that ad agencies want to place all those ads so that the agency can make money. While it's true that the more the business spends, the more the agency makes, there are empirical reasons for recommending high levels of advertising frequency.

One study, for example, published in the Journal of Advertising Research demonstrated that it took at least three advertising exposures within a single purchase cycle to generate just a 5% increase in the likelihood of brand switching among consumers. Marketing also requires some talent: yours or someone else's. If by nature you're a "do-it-yourselfer," honestly assess whether or not the flyer or brochure you want to produce on your personal computer will be at least as good as what is offered by the market leaders in your field. If not, spend your time doing what you're good at, and hire a professional to develop the brochure for you.

3. Unrealistic expectations about marketing. When your ad finally goes in the newspaper or the sales letters are dropped in the mailbox, it's human nature to expect the phone to start ringing off the hook. Small businesses owners are optimists by nature - it's impossible to withstand the ups and downs of managing a business without confidence and optimism about the future. Our more rational side understands, however, that a $50 print ad is not going to make us millionaires overnight, and that the 100 sales letters we mailed out yesterday is unlikely to generate 100 profitable new customers by the end of the week. Marketing is an on-going, synergistic effort; it's an investment in a variety of disciplined activities that build in value over time. Be cautious about thinking of marketing as an overnight "miracle cure" to slow sales.

4. Lack of in-depth customer knowledge. Recently, a client wanted to introduce a new financial service to businesses in the Concord, New Hampshire area. The idea was a good one, and he had the personnel and professional expertise to make his new service a success. What was missing, however, was a thorough understanding of the service features and benefits that prospects considered most important, how they made purchase decisions, and the type of service they were currently using, if any. He also needed to know how large his market was, what price he could charge and remain competitive, and the demographic characteristics of his market (# of employees, sales volume, type of business, etc.). In this case, we recommended a brief telephone survey of local businesses and some basic, inexpensive market research to fill the gaps in his new product plan. Too many businesses, however, operate under the Ready! Fire! Aim! school of marketing.

5. Confusion about marketing strategies and tactics. A general can have the best equipment, the latest weaponry, the best-trained soldiers and still lose the battle if his strategy is flawed. An understanding of the rules of competitive warfare can make the difference between a successful marketing effort, and one that wastes money, time, and human resources. For any type of business in a given market, only one business can be the market leader, several might be strong #2 or #3 contenders, and the rest in distant market share positions. The market strategies for each will be or should be different depending on market position and resources.

A small retail store on Main Street, for example, should compete for customers using a marketing strategy that is vastly different from a huge retail chain with a 50,000 square foot store at the nearby mall. The same is true of a new law firm or medical practice competing against larger, better-established firms. Closely related to this error is the tendency of many small business managers to focus on marketing tactics, rather than strategy. They worry endlessly about the size of their print ads, or whether or not their brochures should be four or two colors, before developing a sound marketing strategy.

6. The business misunderstands the arithmetic of marketing. Before beginning a new marketing campaign, most business managers want to know if their marketing efforts make sense financially. Because a firm's fixed costs or overhead will continue to exist whether or not the campaign is launched, the most realistic way to determine a campaign's ROI is to first calculate the direct, incremental cost of servicing a new customer and then subtract that cost from the price paid by the customer. The result is the contribution margin of that new customer. Let's say that the service or product costs $20 in direct costs and the price paid is $50. The contribution per customer is therefore $30. If your ad campaign costs $300, you know that you need 10 new customers to break even on the cost of marketing ($300/$30). The eleventh customer is generating $30 in profits to your business. Understanding the arithmetic of marketing can help a business owner weigh the risks and potential benefits of a marketing program.

7. Little or no marketing planning. A new accounting firm gets a phone call from a trade group sponsoring a regional trade show in Boston. The cost of a display booth at the show is $500. Should the firm sign up? The same day, a retail shop is approached by a sales rep marketing a direct mail coupon program serving local households. The cost to participate is $250. Should the store participate?

On a daily basis, small businesses are faced with what can be called micro-level marketing decisions. Too often, these decisions are made simply on the basis of whether or not money is available to pay for them, or whether a similar, competing business is also participating. In the case of the accounting firm, the trade show might indeed be a prestigious event and within the marketing budget. However, if the firm is specializing in consumer tax planning in the local market area, and the trade show attracts primarily medium-sized businesses from geographic areas outside the firm's market, the show is unlikely to be a sound marketing investment. Likewise, if the retail store specializes in selling rare art prints to an upscale market, a generic direct mail program is likely to be a waste of time and money.

Most business people understand the value of a written marketing plan for long-term decision-making; however, it can also be useful in making micro-level marketing decisions. Whether it's a simple outline written on the back of a napkin or an elaborate document complete with four-color charts and graphs, a marketing plan is a road map that tells the business where it is going and the best way to get there. Useful marketing plans for small businesses can be developed around the tried-and-true "MOST" formula: Mission, Objectives, Strategies, and Tactics.

8. Lack of written goals. Not surprisingly, a business that doesn't have a marketing plan typically doesn't have written goals in support of its objectives either. As one of our training associates is fond of saying, "Goals begin behaviors." Marketing goals can include weekly or monthly sales volume goals, leads developed, sales calls made, hours per week spent on networking activities, responses to advertising and direct marketing programs. Putting the numbers down on paper helps create a commitment towards achieving specific results, and makes managers and employees accountable for what they do, not what they say they will do.

9. Doesn't track results. Far too often, a business places an ad, sends out a sales letter, or attends a trade show, but doesn't have a formal method for tracking results. The manager thinks he/she knows how they did, but isn't really sure. Once goals are established, a tracking system needs to be established (a PC or ledger book works fine) so that the business can compare its goals to actual performance over some relevant period of time. The information gleaned from tracking marketing goals and performance can be used to predict future performance and costs, as well as serve as a baseline for setting new goals.

10. Absence of an integrated marketing effort. Although larger organizations can afford the luxury of a dedicated sales force, most small businesses have limited resources, both in terms of personnel and budgets. Yet it is not unusual for the owner or manager to shoulder the burden of marketing on their own. Part of this is due to the "Lone-Ranger" temperament typical of the entrepreneur, and part of it is simply a lack of confidence in the ability of employees to contribute to the marketing effort. As long as the goals are reasonable and employees are involved from the outset in the marketing planning process, nearly everyone in the business can play a role on the marketing team.

Shared activities might include generating referrals, preparing sales letters, qualifying leads over the phone, or a limited amount of personal sales calling. To the degree that the owner can provide a sense of shared mission and teamwork as well as some added incentives based on performance the business can increase its marketing effectiveness with little or no increase in expenses.

If there's a thread that ties together most of the items in the above list it is discipline: the discipline to do some homework about your market, to think strategically, to write out your marketing plan and business goals, and to track performance. The good news is that it takes more of a manager's will power and time to do it, than it does money. The bad news is that too few small business managers - already harried by the day-to-day challenges of running a business - have both the will power and the time. Hopefully, your business is managing the marketing process in such a way that your goal is not simply to avoid mistakes, but to find new marketing opportunities.

That's a topic for another top ten list.

Frank Marafiote, MBA, is the president of Emerge Communications, a marketing planning and public relations consulting firm located in Gilford, NH. He has more than 25 years experience providing marketing, advertising, and public relations services to small and home-based businesses, non-profit organizations, and large organizations in industries as diverse as health care and financial services. 

Frank is also an adjunct marketing instructor for Southern New Hampshire University, where he teaches graduate and undergraduate courses in marketing, advertising, and strategic planning.