Don’t Get Trapped In “Discount City”

Early in my consulting career, a very wise mentor cautioned me against getting frustrated about people who just refused to “get it.” His words of wisdom have stayed with me to this day: “You can’t care more about other people than they care about themselves.”

That mentor knew my weakness for wanting to help everybody – even those who wouldn’t put forth even the slightest effort to help themselves. Sometimes, I find myself slipping back into that frustrating mode, as in this recent situation…

A little while back, I requested some work be done by a local service provider. The entire project should probably have been completed in only a few days.

But when the work still wasn’t done a couple of weeks later, I called and was told by one of the co-owners: “Sorry, we’re completely jammed up with work and haven’t gotten to your project yet.”

“That’s a great problem to have!” I replied.

“Not really” was the sad response. “It’s all very low-profit work. We’re not making any money around here.”

I’ve tried for a while to help these owners get a clue about marketing their business –including proper pricing strategy – so it was hard for me to bite my tongue. It was all I could do to resist the urge to give them yet another unpaid (and sure to be unheeded) consultation on smart business strategy – but somehow I did, recalling the warning of my early mentor and therefore letting them continue to struggle through a completely unnecessary problem entirely of
their own creation.

Now, I’m not suggesting that the strategy of attracting new business with a low- or even no-profit entry point is not a good one. On the contrary, in many of my own and my clients’ businesses, we practice the art of “going negative” (losing money) on the initial transaction (commonly known as using a “loss leader”) in order to gain a new customer.

But in every one of those businesses, we have a clear, well-defined system for growing those low- or no-profit customers into profitable, long-term relationships. Absent such a system, the well-intentioned “loss leader” strategy is often just a form of charity for the frustrated and baffled business owner.

In properly-structured, systematically-run businesses, it isn’t possible to feel frustrated about a flood of low-or no-profit new customers. In fact, such a situation is a cause for outright celebration!

Could you imagine Peter Francis Geraci complaining that “too many people are requesting my free info tapes”? Or The Video Professor grumbling about having to mail “too many free DVD’s”? How about Costco being upset about giving out “too many free samples” inside their stores on a Saturday morning?

On the contrary, all of us who use this smart marketing strategy of “going negative” to acquire customers along with a system for turning them into long-term, higher-profit revenue sources are absolutely ecstatic whenever our marketing efforts work so well that we are able to buy many new customers this way.

The difference that separates us from those who get trapped in Discount City is that we don’t just keep losing money on these customers – we offer more and more value to them, which in turn gets them to happily pay us more and more money.

Speaking of the particular service provider in my example, I’ve been suggesting for years that they employ ways of adding a lot more value to the very basic services they provide. As you can imagine, those suggestions have continually fallen on deaf ears, while the “business is tough these days” grumblings of the owners get louder and louder.

In fact, I ran across them at a recent trade show. Not surprisingly, several of their direct competitors with nearby booths inked plenty of profitable orders right on the spot, but when I asked this particular business owner how his company did at the show, they gave me excuses like “well, we got some leads, but we have no idea whether any will ever turn into good customers” and “we have a long sales cycle, so we won’t know for a while.”

Their competitors employed all kinds of effective marketing strategies, including Irresistible Offers, compelling Bonuses, and many value-added services, while the complaining business owners simply stood in their booth all week with a boring, run-of-the-mill offer to perform only the most basic of services to potential customers.

(And don’t get me started about their website, which features the same boring-at-best, and self-defeating-at-worst initial offer, and no way to capture any leads from visitors who might someday turn into customers!)

A few years ago, when the economy was booming and people were much more freely spending money on virtually everything, companies could survive with such lazy, boring, “me too” types of businesses.

But in today’s shrunken market, and on into the emerging New Economy, with less customers and less overall spending in general, every business owner needs more than ever to use smart marketing strategies to attract more and better customers, and to build long-term, profitable relationships with them.

How about you? Are you using any effective strategies while your competitors are sitting idly by, complaining about “the tough economy” and thinking that you must just be lucky to be doing well while they suffer more than ever?