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Live by the sales projection, die by the sales projection

Creators of the board game The Contender: The Game of Presidential Debate raised $140k on Kickstarter but ended up $40k in debt due to inaccurately predicting future sales.  This caused them to order more games than they could sell and ultimately caused them to go into the red for some time.

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So how do you predict sales?  Forecasting is as much art as it is science, finding a right method that is accurate will greatly enhance the efficiency and profitability of any business.  Over-ordering materials, under-allocating resources, etc. all undermine a company’s operations.

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The selection of a method depends on many factors—the context of the forecast, the relevance and availability of historical data, the degree of accuracy desirable, the time period to be forecast, the cost/ benefit (or value) of the forecast to the company, and the time available for making the analysis.

These factors must be weighed constantly, and on a variety of levels. In general, for example, the forecaster should choose a technique that makes the best use of available data. If the forecaster can readily apply one technique of acceptable accuracy, he or she should not try to “gold plate” by using a more advanced technique that offers potentially greater accuracy but that requires nonexistent information or information that is costly to obtain. This kind of trade-off is relatively easy to make, but others, as we shall see, require considerably more thought.

When a company wishes to forecast with reference to a particular product, it must consider the stage of the product’s life cycle for which it is making the forecast. The availability of data and the possibility of establishing relationships between the factors depend directly on the maturity of a product, and hence the life-cycle stage is a prime determinant of the forecasting method to be used.

Techniques vary in their costs, as well as in scope and accuracy. The manager must fix the level of inaccuracy he or she can tolerate—in other words, decide how his or her decision will vary, depending on the range of accuracy of the forecast. This allows the forecaster to trade off cost against the value of accuracy in choosing a technique.

All my business plans come with projected financial statements.  I use a combination of industry growth data, historical sales data (if my client has any), seasonal adjustments, advertising expenditures, and other factors pertinent to my specific clients.

Which method is right for you?  Send me an email and let’s figure out how to plan for your company’s future.

 

Great Small Business Saturday

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Small Business Saturday saw a record 112 million shoppers this year, setting a new record for the retail event.  This was a 13% increase over last year’s SBS.

Part of this increase is greater awareness with 72 percent of U.S. consumers now know about Small Business Saturday. That’s a slight uptick from the 70 percent in 2015.  Additionally, almost nine in 10 Americans view small businesses favorably, according to a poll conducted on behalf of the Public Affairs Council.

Another happy client!

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Shrink Wrap Pros is a commercial machinery wrap/sealing company based in Ventura, CA.  Their customers require cars, boats, helicopters, etc. sealed in a polymer wrap.

I helped Shrink Wrap Pros expand with their enterprise and CRM software needs, including making the transition from Excel to Access.  I also helped them improve their budgeting by refining their contribution margin calculations.

If you’re in Ventura and need any large item wrapped, give them a call!

How to sell something that is almost free

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An amazing article from the Guardian Liquid assets: how the business of bottled water went mad covers almost every aspect of marketing.

When selling something as ubiquitous as water, differentiation from your competitors is key.  How do you differentiate?  One way is through the right marketing mix.  The marketing mix is comprised of:  Product, Promotion, Price, and Placement.  Also known as the 4 P’s of Marketing.

Product:  Of course it’s not just water.  There is value added features, such as electrolytes, flavors, caffeine, anti-oxidising manganese, etc. that companies are emphasizing to differentiate their product from the competition.

There was Life, Volvic, Ugly, Sibberi (birch or maple), Plenish, What A Melon watermelon water, Vita Coco, Coco Pro, Coco Zumi, Chi 100% Pure Coconut Water, Rebel Kitchen Coconut Water and coconut water straight from the nut (“you have to make the hole yourself”, explained a shop assistant). Also: an electrolyte-enhanced water pledging to hydrate you with 40% less fluid than ordinary water (Overly Fitness), a birch water offering “a natural source of anti-oxidising manganese” (Tapped) and an alternative birch water promising to “eliminate cellulite” (Buddha). There was also a “water bar” – a tap in the corner of the shop – that, according to the large sign hanging from the ceiling, offered, for free, the “cleanest drinking water on the planet”, thanks to a four-stage process conducted by a “reverse osmosis deionising water filter”.

You can read more about the concept of “product” from a marketing standpoint in my post about the failed McPizza.

Price:  Another way to differentiate yourself from the crowd is by pricing your product/service at a rate that is considerably higher than your competition.  How about a $100,000 bottle of water?

This self-proclaimed “champagne of waters” quickly won FoodBev Media’s Beverage Innovation award for the “World’s Best Still or Sparkling Water”. A case of 24 500ml bottles is $72, while a bottle from the “Luxury Collection, Diamond Edition” will cost you $100,000. It has a white gold cap set with more than 850 white and black diamonds and holds the profoundly questionable honour of being the world’s most expensive bottle of water. If you buy it, Riese will present the bottle to you in person at a private water tasting anywhere in the world.

Promotion:  Promotion goes beyond just advertising.  What do you communicate?  Once you’ve exhausted the typical “it’s delicious!” “it’s cool!” “it’s a great value!” You can go into educating the market about the process, the people, the ingredients, etc. that goes into your product/service.  It might be the same things as your competitors, but if you say you “add double the standard amount of X” while your competitors just say “they’re delicious!” then your market might assume your competitor does not add double the amount of X.

Fiji water, for example, contains 210mg TDS, including 18mg sodium, 13mg magnesium and 18mg calcium. (Fiji appears to have pulled off some fairly heavy-duty trademarking, including “Untouched by man™” and “Earth’s finest water™”.) Compare those numbers to San Pellegrino, which contains quadruple the TDS, at 925mg, including 33.6mg sodium, 53.8mg magnesium and 178mg calcium. Fiji, with far fewer solids, tastes smoother, while the San Pellegrino is bolder, saltier and naturally fizzy.

Melted iceberg essentially has no taste, having the lowest TDS (9mg) of any water on earth. It is like the ur-water, the water that pre-dates all other waters. “This is your starting point,” said Leonard, gravely. “Your baseline.”

Surprising right?  Now tell me you’re not at least a little curious as to how the various waters taste.  If the marketers did their jobs right, you might at least be open to trying the product once.

Your can read more about promotion in my posts about Coachella, and Quiksilver.

Placement:  Placement mainly deals with distribution.  Which is, where does your customer purchase your product/service.  You’re not going to sell a $10 bottle of water at a gas station.  You have to sell your product/service at where your market is.  They are upper-middle class, baby boomers living in Massachusetts?  Distributing through Whole Foods or Wegmans is a start, if you can meet their supply chain management requirements.

The dress code of the clientele in Planet Organic, Notting Hill is gym chic. On a hot day in mid-August, the men wore mid-thigh shorts, pectoral-enhancing vests, neon Nikes; the women were in black leggings and intricate ensembles of sports bras and cross-strapped Lycra. They had all either just worked out, were about to work out, or wanted to look as if working out was a constant possibility.

They examined the shelves. As well as the usual selection of kale crackers and paleo egg protein boosters, there were promises of wizardry, such as a packet of Alchemy Organic Super Blend Energy Elixir (£40 for 300g of powder). But never mind the food. Life, in 2016, is liquid. Opposite a display of untouched pastries and assorted bread products (who, in Planet Organic in Notting Hill, still eats bread?), were the waters.

The marketing of bottled water is pretty amazing amazing.  Some is ridiculous snake-oil shilling.  Some may have benefits, depending on the needs of the individual, that regular water cannot meet.  Nonetheless, it is a $5 billion dollar industry in the US that is projected to grow 5-6% over the next five years.

Great things can come from humble beginnings

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Internet marketing overview

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A lot of my clients want a marketing strategy that involves internet marketing. Usually just online advertising is fine, but to more fully utilize the tools available to a small business, an internet marketing component should be part of a marketing strategy.

Internet marketing sounds straight forward enough and to some degree it is.  However, it can get quite confusing when one goes beyond simple advertising on one website.  Mix in compensation methods, market segmentation, success metrics, etc.  then it gets fairly complex.  As such, I put together an overview of internet marketing.

This post is a 30,000 foot outline of internet marketing (online advertising).  As such, it is just an overview and not meant for detailed explanation.  Each concept can be more deeply studied.  Some of the terms are interrelated, meaning they are not mutually exclusive and can be blended with one another.  Please keep in mind, marketing =/= advertising, although the two terms are frequently interchanged advertising is a component of marketing.  Therefore, some of the concepts are more directed about marketing the company and/or product rather than just advertising.

This overview is pretty broad so skip to the end to find out what you as an entrepreneur/small business owner can do to utilize internet marketing for your company.  The first two sections are:  Delivery methods and Compensation methods

Delivery methods

  • Display advertising:  This is the most common and probably what everyone is most familiar with.  The process can be straight forward or quite complicated.
    • Example: Pretty much every website you’ve ever visited.
    • Related:  Web banner advertising, frame ad (i.e. traditional banner), pop-ups/pop-unders, floating ad, expanding ad, trick banners, news feed ads
      • Display advertising process overview:  This is where the real difference between traditional vs. online advertising is seen.  In traditional (and simple online) cases, the advertiser contracts with the website publisher and the ad is displayed. This is hardly done anymore beyond small relatively unknown websites.  In a more complex case, the advertiser hires a marketing firm that might handle everything including content creation and placement (this is not the case many small startups face. Scroll down to the end for actionable info).  The component that separates online advertising with traditional real-world advertising is the real-time bidding process at an ad exchange.  An ad exchange is a platform that facilitates the buying and selling of media advertising inventory from multiple ad networks. Prices for the inventory are determined through bidding. The approach is technology-driven as opposed to the historical approach of negotiating price on media inventory.
        • General diagram of the display advertising processad-exchangeSource:  Wikipedia – Ad exchange
        • Ad network:  An online ad network is  a company that connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand.  The fundamental difference between traditional media ad networks and online ad networks is that online ad networks use a central ad server to deliver advertisements to consumers, which enables targeting, tracking and reporting of impressions in ways not possible with analog media alternatives.
  • Interstitial:  Ads that appear before the main content of the site is loaded.  Kind of like a pop-up, but the ad appears in the same window instead of a new window.
    •  Example:  Bvlgari’s ad on Forbesinterstitial
    • Related:  Text ads
  • Search engine marketing:  You type in ‘auto mechanic’ and the first search result that comes up is a doctor’s office, usually near you.  This isn’t necessarily an “advertisement” (remember marketing =/= advertising) but it brings awareness of the business to the customer by displaying it in a list of other auto mechanics.  What rank it shows up on a search engine’s result is a mixture of keywords, backlinks, tags, page titles, daily bidding budget, etc.
    • Example:  Google Adwords, Bing/Yahoo Adsysg-adwords
    • Related:  Search ads, SEO, sponsored search
  • Social media marketing:  Advertising on…social media!  Each platform has their own pricing, terms and conditions.  However, their reach is expansive and consistent.  Facebook, for example charges as little as $5 per day and you can choose your target market, key words, photos, etc.  I wouldn’t recommend social media marketing for startup B2B companies, but a great resource for businesses in other sectors.
  • Email advertising:  Often synonymous with spam.  Success is mixed but a resource to consider.  Unsolicited emails are not encouraged unless you are very sure the target is receptive to your product/service.  However, if the recipient is a former customer, it is a great and direct method of communicating deals, specials, updates, etc.  You can easily create your own email list or hire email marketing companies such as Constant Contact to do this.
  • Online classified advertising:  Online classified are relatively inexpensive but less targeted.  An engaging headline, attractive photos (if attachments are allowed), and a persuasive yet succinct text body are essential for success with this advertising channel.  This is not a suitable advertising channel for high-end/luxury brands’ products/services.
    • Example:  Craigslist, eBay Classifieds
  • Affiliate marketing:  Sometimes called lead generation, affiliate marketing is when advertisers organize a 3rd party to generate potential customers for them.  Third-party affiliates receive payment based on sales generated through their promotions.  The affiliate earns a commission when the visitor completes a desired action such as a link click, email submission, filling out an online form, completing an online purchase, etc.
    • Example:  Product review blogs affiliate-marketing
    • Related:  Affiliate network, CPM, CPC, CPA
  • Content marketing:  An article, video, how-to-guides, quizzes, etc. (i.e. content) that is meant to market a product or business.  This can be a relatively expensive strategy suited for more established companies.  Companies can hire “brand journalists” to write articles about a wide range of subjects relevant to their company.  The articles I post on this website is a very simple version of content marketing.
    • Example:  GoPro’s page on YouTubegopro
    • Related:  Earned media, custom media, brand language, inbound marketing, interactive marketing, content strategy
  • Native advertising:  A type of “disguised” advertising that matches the form and function of the platform upon which it appears. In many cases, it is displayed as either an article or video, produced by an advertiser with the specific intent to promote a product. The word “native” refers to the similarity of the content with the other media that appears on the website.  The post the link takes you can be the company’s page or an article discussed in the Content Marketing section above.
    • Example:  “Articles” that show up in a feednative-ad-exampleearn-graphic
    • Related:  In-feed ads, search ads, recommendation widgets, promoted listings
  • Online marketing platform:  This is software designed to help manage all of your marketing in one platform.  Your marketing manager or hired marketing firm will most likely utilize software of this sort.  As a startup, depending on your marketing strategy, using an online marketing platform is probably not necessary.

 

Compensation methods

Due to the accurate data on views, various types of multimedia, and other metrics that digital advertising allows for over traditional channels, several compensation methods have come into favor in the industry.  Furthermore, because advertisers can track action online (unlike if a radio advertisement has been heard or a TV commercial seen) compensation methods is largely separated into impression and action.

  • Cost per mille (CPM):  With this impression method, advertisers pay for every thousand displays (a.k.a impressions) to potential customers.
  • Cost per click (CPC):  Advertisers pay each time a user clicks on the ad/link with this action method.  CPC is recommended as a compensation method if you want the customer to visit your site.  If your goal is just to build awareness of your company then CPM is recommended.  CPC is growing in popularity though, with two-thirds of all online advertising compensation methods being CPC.  One concern with CPC is accidental clicks.  Thus, click rates using CPC has to be lowered to account for accidental clicks.
  • Cost per engagement (CPE):  This action method aims to track not just an impression but if the viewer interacted with the ad.
  • Cost per view (CPV):  This is mainly for video advertisements and is appropriately the primary benchmark used in YouTube ad campaigns.
  • Fixed cost:  This is the most straightforward and arguably the most cost (in)effective compensation method.  This is mainly time duration dependent and as such the cost is measured in cost per day (CPD).
  • There are other, less common methods as well as hybrid methods but as a startup it is unlikely you will see them.

Wow this is great and all, so how do you as a small business owner use this to advertise online?

It’s pretty straight forward:  Search engine marketing (Google Adwords and Bing Ads) and Social media (typically Facebook).  If you do that you’ll probably be ok and have most of your bases covered.  The trick is getting your demographics, budget, and keywords on point.  Internet marketing is an art that almost anyone can do but takes a skilled professional to do well.

All my business plans come with a basic marketing plan which can be expanded into a full fledged marketing plan that breaks down a company’s full marketing mix including branding, timing, advertising channels, pricing, and more.

What is your 5 year plan?

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How a little movie called Cowboys and Aliens got made

 

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Step 1:  Change the goal post of the definition of “hype”

Step 2:  Create hype

Let’s say you have a product that you want to build hype around.  How do you go about it?  If you’re Scott Rosenberg and Ervin Rustemagic (of Men In Black fame, which started as a comic book) then you go about it an atypical way.  Rosenberg and Rustemagic purchased the rights to a western comic book called Tex.  Tex was a good comic but at the time, Westerns weren’t a popular movie genre.

So they spruced up the comic to a Sci-Fi Western!

Then it languished in development purgatory.  For years.  So Rosenberg came up with the novel of idea of making the script into a “graphic novel”.  If he couldn’t get the script onto the big screen, he’d get in paperback!  This is because lots of popular comics and graphic novels are turned into movies (i.e. Spiderman, Captain America, etc.)

This is where step 1 comes into play.  Rosenberg had to make the script the #1 graphic novel in the country.  Rosenberg intentionally choose graphic novel instead of comic as the format because to be the #1 comic in the country, he’d have to sell almost half a million copies.  For graphic novels, it’s a more manageable low tens of thousands.

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So Rosenberg got a bunch of the 144 page graphic novel printed up.  Normally graphic novels are priced $10-$15, but because he need to move a lot of copies he priced them at $4.99.

In addition to selling through normal comic distribution (which Rosenberg negotiated a few rules to make happen), he contacted a number of prominent comic book stores throughout the US and had them “purchase” the graphic novels for essentially nothing.  The comic book stores had to “purchase” them or else it wouldn’t be counted as a sale.  Rosenberg then gave the stores a check to purchase tens of thousands of dollars of the graphic novel.  Overnight, thousand and thousands of copies of the graphic novel were “sold”.  The comic book stores would sell them for 50 cents or just give them away from free.  Unsold ones were tossed into the dumpster.

This is where step 2 occurs.  Rosenberg wrote a press release claiming the high number of sales and that it outsold Frank Miller (of Sin City fame).  Also, Entertainment Weekly reported the sales chart of one store (which received the deeply discounted copies) which happened to list Cowboys and Aliens as the best selling graphic novel of the month.

A few years later, Cowboys and Aliens hit theaters.

Of course, he didn’t actually sell the copies that were actually given away.  This is arguably fraud.  However, it does show their creativity in convincing the studio heads / decision-makers in getting a stalled project moving.

When faced with a hurdle, a lot of creativity (as long as it is not fraudulent) can take you a long way.  Another great marketing story is in my article about Shep Gordon.

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