Increasing Your Profit
Coudray explains how to use your Website to stand out from the competition and convert sales prospects into profit centers.
Almost all of the business owners I know are on the perpetual search to increase profits. And why shouldn’t they? They’ve felt the pressure from declining profits for quite some time now. But when I ask how they plan on increasing their profits, the most common response is to cut expenses. I wince each time I hear this, because the answer isn’t really an answer at all.
Cost cutting is low-hanging fruit. Significant fat in the process is long gone. If some costs can still be reduced, the resulting gains are almost always short term, with the future consequences to be dealt with when they arise. Cost reduction comes with severe consequences to the foundation of the company. I’m thinking about labor cost reduction and elimination or deferral of maintenance to the equipment. Cost reduction to supplies and materials carries the risk of product inconsistency and unpredictable failure. The seeds you sow for future breakdown are usually far more costly than the gains.
The short-term view of how to increase profits is almost always tactical. It involves promotions, sales, and events. In short, the value delivered to your customer base is not really substantive and, most importantly, it usually can’t be repeated. It has to be replaced with some other gimmick pulled out of thin air. As an example, the retail market has the perpetual Going Out of Business or Everything Must Go sale.
Don’t get me wrong. There’s a place for this kind of activity, but it shouldn’t be the core of your plan to increase profits. Any profit gain from these kinds of sales is short lived, and you’ll work extremely hard to achieve it. You must sell and work harder to deliver the profit. Worse, you run the risk of cannibalizing your future revenue and profit stream with low-margin, artificially motivated tricks.
Fixing the funnel
The more prudent, but difficult, path is to think strategically. This involves looking deeper into your own organization and your customer base. Most of the owners I talk to say they have too many peaks and valleys or they can’t predict sales cycles or sales volume. Both of these realizations mean the sales funnel or pipeline is either broken or never existed in the first place.
The sales trend today has shifted to the Web. A recent survey sponsored by yp.com showed than 92% of consumers start their search for a local vendor on the Web, but 74% ended up purchasing locally and not with an online purchase. This is huge. It means that more than nine out of ten prospects start online. Yet, when I look at the typical business-to-business Website, nine out of ten fail—and fail miserably.
This is a bold statement, but let me explain. When someone hits your site, the main goal you have is to engage them to the point where you gain their contact information. Without it, they’re just a shopper browsing and you’re the floor salesman who asks, “Can I help you find something?” The answer is almost always, “No, just looking.” This is what needs to change. The sequence should be designed as follows:
1) Get targeted traffic to the Website.
2) Deliver engaging content that adds presale value (useful but incomplete information).
3) Conversion 1, where they give you their contact information, usually an e-mail address, and permission to market to them (opt-in).
4) Regular delivery of increasingly useful information over the next several days or weeks.
5) Conversion 2, which includes direct contact and an order.
The beauty of the Internet is we can track everything at every step of the process. We can split test offers and content on a continuous basis until everything is optimized.
The tracking aspect is all about engineering the sales-funnel process, and it is critical to your success. Traditional business owners have never really thought about this. They look at their Website as an electronic brochure and little more. Here’s something to consider.
Suppose you’re a medium-sized company with 1000 customers. Your annual sales are $2,000,000. This means the value of a customer is $2000 per year. Your traditional salesperson concentrates mostly on keeping their existing customers happy and tries to grow the business there. There’s no problem with that, but you need new customers.
When we look at the traditional sales cycle, for every ten new prospects, two are immediately rejected, two will immediately buy, and the other six will have to be cultivated. This is where the process typically breaks down—the cultivation site. We are all running so short, because we cut our labor costs back in 2008 and haven’t rehired, so our sales staff has resorted to one pitch after another. They’re hoping enough of their pitches will stick that they’ll get some new business.
The problem with this approach is your competitors are doing the same thing to the same prospects. The prospects recognize what is going on, and they have a field day with the sales guys, making them jump through endless hoops before they get the one paltry starter order that was deeply discounted in the first place so you could prove your abilities to the customer. It is a ruthless cycle—no fun for anyone.
Compare that to the online model of attracting prequalified, highly targeted prospects. A properly designed sales funnel with prequalified prospects will deliver first-stage conversions of 30-65% or more. The ongoing information-sharing process will deliver purchasing customers at the rate of 20-30%. To monetize this according to what we already know, let’s use a basis of 1000 visitors per month or roughly 30 per day to the Website.
Conversion opt-in at 30% is 300 per week, resulting in 60 new customers at 20% conversion. A customer is worth $2000 per year; to you, this represents $120,000 of new work per month. This is the low end, and these numbers are extremely conservative.
The key to these kinds of conversions is to develop a relationship with visitors and, in the process, establish yourself as an authority and expert. The initial contact and development should be almost 100% informational with no pitching in the content. You don’t want to come off as beating your chest with how great you are. The prospects see and hear that every single day from every single potential vendor.
When you look at your Website, analyze how many times you have the word I or we in the content. How many times do you talk about quality and value, and how good you are at delivering this to every customer? How much do you talk about your equipment and capabilities? Go to your competitors’ Websites and do the same. I think you’ll be shocked at how similar you are to each other. The consumer has heard it all before, and you have commoditized yourself without even knowing it.
Tell a good story
Your online presence should be first and foremost a collection point—a gathering point. You want to attract the ideal prospect and help them make the very best informed decision through automated delivery of content. That delivery could be an e-zine or newsletter, or it could be something more substantial. My favorites include detailed case studies, either real or hypothetical, and white papers or research reports. Your Website can capitalize on the use of infographics to illustrate significant trends in your segment of the industry. We’re bombarded with too many facts and too much information, so you have to make it memorable and easy to visualize.
Make your information into a story. This is why I like case studies so much. If you can carefully craft a memorable story around the case study, you’ll almost have them in your house. Why stories? The simple answer is we remember information more easily when it’s in the form of a story. It’s how we share information with those around us. The more interesting and engrossing the story, the better the chance someone will remember it—and you.
There’s another hugely important part of this. Every person coming to your site who engages you in a story becomes a potential ambassador for you. They may not have an immediate need right now, but they will most surely know someone who does. When they can tell your story to their friend, family, or colleague, each visitor to your site becomes your storyteller. They have much higher credibility with their friends, family, and associates than you do. If it comes from your mouth, it’s automatically discounted as sales propaganda. This is supported by a recent Nielsen survey that showed the consumer trusts advertisers only 13% of the time, but they trust their friends 94% of the time. We all know people buy from those they know, like, and trust.
Where does this all leave us? Take the time to understand your funnel or pipeline and forever have a flow of qualified prospects. You can do so many things to deliver prequalified prospects to your site. Optimized conversion of offline sales is the hot area in digital marketing right now, and it is just getting started.
Look closely at how you are going to get prequalified traffic. The simplest and fastest way (but definitely not the cheapest) is pay-per-click advertising. You can get prospects coming to your site in minutes using Google AdWords.
Once you determine the value of the traffic, you can begin the process of reducing the cost per lead. You can acquire these prequalified leads for as little as $0.05 each, if you know what you are doing. Compare this to AdWords at 10-100 times this price. This makes it affordable to have thousands or even tens of thousands of new leads hit the site each and every month, even for small operations.
With the understanding of how the pipeline works, all these potential customers can be cultivated on a continuous basis. You can ramp up or throttle back the flow of prospects depending on how busy you are at any given time. You simply back up the flow from the point where you have too many orders. If you know what the conversion rate and time cycle is, and the value of each conversion, you now have a sales engine in place that can be optimized and adjusted until the production cycle of peaks and valleys is a thing of the distant past.
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We remember information more easily when it’s in the form of a story. The more interesting and engrossing the story, the better the chance someone will remember it—and you.