Managing the Gap, Part Deux

From my "in" box:

Chuck;

I always look forward to your articles. I don't always agree, however. And today, I'd like to argue one point with you that you mention in your Managing the Gap article.

You stated that "Without advertising, you'll be primarily conducting business with people who just happen to pass by and see your sign."

That leaves out a couple of things.

1. Sales staff. I have seen a number of businesses that do very little advertising but have an aggressive sales staff bringing in good numbers. While you may say that a sales staff is a form of advertising, I would instead say they are a form of marketing.

2. Same with a company's PR. PR is not necessarily "advertising." It is however, marketing.

3. Networking. Again, not "advertising," but a form of marketing.

Just my two cents:)

Norm Minnick
Total Marketing, Inc.
www.totalmarketinginc.biz



Hi, Norm:

I should never make statements like the one you quoted without first qualifying them. You’re absolutely right. "Without advertising, you'll be primarily conducting business with people who just happen to pass by and see your sign" is at best incomplete (if you’re feeling generous). As it stands, it’s flat out wrong.

Aggressive selling and PR are obviously factors in growing new customers. Networking is slightly different, but again, I agree. It is a form of marketing.

To be sure that we don’t have different understandings of what these terms mean. Let me share mine.

• Marketing. – everything a company does to acquire new customers and maintain relationships with them. The goal is to match a company’s offerings of products or services to people who need, want, and can pay for them.
• Advertising – calling attention to a business, a product, or a service in some public medium in order to induce people to purchase. It’s generally accepted that advertisements are announcements paid for by the seller.
• Networking - making new contacts and spreading the word about yourself or your company. Usually this implies meeting one to one.
• Public Relations – the actions of a company to promote goodwill between itself and its buying public.

Now, lets address the points you made in your e-mail.


Point One: salespeople. I suspect you’re referring to outside sales. Sales clerks, who wait for customers to enter the business, are going to be dependent on either walk-in traffic, or on advertising, for the same reasons I put forth in Managing the Gap. There will also always be referral business, if those sales clerks provide a remarkably good customer experience.

An outside sales staff’s function is to seek out new customers. Outside salespeople will be much more important to your bottom line when your business depends on relatively few purchasers, who spend proportionally larger amounts in each transaction. Sales of services immediately come to mind. Think of a typical insurance broker’s office. The walk-in traffic will be miniscule compared to the number of sales it takes to keep that office open and thriving.

Outside sales wouldn’t work well for a grocery store, though. Businesses which rely on large numbers of customers, each of whom makes relatively small purchases, still won’t be able to trade their advertising for direct sales.

We can conclude that the value of outside sales is inversely proportional to the size of the typical purchase.


Point Two: public relations. Again, I agree. Public Relations is not advertising, but it is marketing. Public Relations is what you do with your reputation to attract new customers.

Some PR companies spend a lot of time and effort getting stories written about their clients in the major media. They justify the value of the story placement on the equivalent cost of purchasing advertising time or space. Frankly, I think stories that carry the credibility of the news medium are worth far more than their advertising equivalent.

Unfortunately, no one can predict when an editor will find such a press release useful and newsworthy. This makes Public Relations as a publicity mechanism highly limited.

A company’s ability to grow its customer base through its PR efforts faces the same limitations as a company trying to grow through outside sales – too few opportunities to convert mass impressions into multiples of new customers. If the business relies on a few customers to make large purchases, it may do quite well with Public Relations as its exclusive driving mechanism. Businesses which depend on large numbers of customers, though, will require large amounts of exposure.

Marketing professionals whom I respect disagree with me. Al and Laura Ries in The Fall of Advertising & The Rise of PR, for instance, make the bold claim that great brands are not built with advertising, but rather with PR. At a national level, they make a compelling case. I've seen very few local businesses, though, that could qualify as great brands.


Point Three: networking. By "networking," did you mean attending networking events? We both likely know people who use networking events quite effectively. Much like outside salespeople, they need to forge relationships with folks who make somewhat larger purchases, or who will make multiple purchases over a reasonable period of time.

For companies who deal with hundreds of customers in small dollar increments, networking is too inefficient to drive sales.

I truly suck at networking events. Perhaps if I were better at them, I’d be more enthusiastic. Though I don’t attend the events, I am constantly networking. Being open to people who cross my path, and staying in touch with them, has proven to be the best way to create my own luck

Norm, I appreciate you bringing up these points. Until I gave it more thought, I hadn't realized that "The value of outside sales is inversely proportional to the size of the typical purchase." I suspect I'll be quoting myself on that one.

Best regards,
Chuck

PS – we didn’t address Professional Reputation – the assessment by the community of the quality of your work, your knowledge of your trade, and your honesty and integrity. Maybe that would make a good discussion topic sometime soon.

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