Setting price on your products or services is one of the weightiest decisions you’ll make in your business. It will touch every part of your business from the financials to how you are perceived in the market place. Yet often scant attention is paid to the psychology and marketing potential of price. The price of your product is a critical positioning indicator. Do you think when they go to set price on a Rolls Royce or Ferrari, they just add up the bill of materials and then just add on an acceptable markup? Hardly. Price is central to the positioning of the product. If you position yourself as an educator and a trusted adviser price becomes much more flexible. More often than not, business owners set prices based on what their competitors charge. A common application of this is setting price slightly lower than the market leader in their industry. Another common way that price is set is to just take cost price and then add what feels like an acceptable markup. Both of these are acceptable starting points; however, if you aren’t thinking about the marketing or the psychological implications of price then you are likely leaving huge sums of money on the table.

How to Price Your Services/Products: Pricing Strategy

A Transaction is an exchange of value between two or more parties. If I have something you want and you have something I want, we’d both be better off if we agreed to trade. The Transaction is the defining moment of every business. Sales are the only point in the business cycle where resources flow into the business, which makes completing Transactions critically important. Businesses survive by bringing in more money than they spend, and there’s no way to do that without completing Transactions. You can only transact with things that are Economically Valuable. If you don’t have anything your prospective customers want, they won’t buy from you. This may seem obvious, but it’s amazing how many prospective business people enter the market without something the market wants. That’s why developing and testing a Minimum Economically Viable Offer (MEVO) is so important: it’s the best way to determine whether or not you’ve created something valuable enough to sell before you invest your life savings. Here's why a MEVO is crucial: 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reduced risk: By testing a simplified version, you minimize the financial risk associated with launching a full-fledged product or service. 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Early validation: MEVOs provide real-world customer feedback, helping you refine your offering and ensure it resonates with your target market. 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Faster iteration: With valuable insights in hand, you can adapt and improve your offering quickly, saving time and resources in the long run. When you’re starting a new business, the objective is to get to the point where you make your first profitable Transaction as quickly as you possibly can, because that’s the point where you transition from being a project to being a business.

Things to note before starting a business. EP 1

In a world where online competition is just a click away, what makes your small or medium-sized business stand out? It's not just about the product or service you offer – it's about delivering value at lightning speed. Think of it this way: your customers are busy. They're juggling deadlines, managing teams, and navigating the ever-changing digital landscape. The last thing they want is to deal with a clunky ordering process, unreliable deliveries, or frustrating customer support. That's where Value Velocity comes in. Value Velocity is the secret sauce of successful small and medium sized businesses in the online arena. It's the art of moving customers seamlessly from discovery to delight in the shortest amount of time. It's about: <ol><li>Streamlining your online experience: Make ordering a breeze, with intuitive interfaces and clear navigation. Let your customers find what they need quickly and easily, without getting lost in a labyrinth of clicks.</li><li>Fueling the fulfillment fire: Every order deserves to be treated like a VIP. Invest in efficient inventory management and reliable delivery partners to ensure your customers get their goods fast and intact. No more waiting weeks for that essential widget!</li><li>Becoming a customer service superhero: Responsive, helpful, and proactive support is your kryptonite against customer frustration. Be there for your clients when they need you, and go the extra mile to resolve issues swiftly and satisfactorily.</li><li>Surprising and delighting: Go beyond just meeting expectations. Offer unexpected extras, like personalized recommendations, loyalty programs, or even just a friendly thank-you note. These small gestures can leave a lasting impression and make your customers feel truly valued.</li></ol> Remember, Value Velocity isn't just about speed, it's about creating a frictionless experience that keeps your customers coming back for more. In the competitive online world, where time is money and convenience is king, being the fastest, most efficient, and most delightful option is the surefire way to make your SMB shine. Ready to put Value Velocity into action? Here are some tips: <ol><li>Audit your online presence: Identify any bottlenecks in your ordering process, website navigation, or customer support. Streamline where you can, and don't be afraid to ask your customers for feedback.</li><li>Invest in the right tools: There are plenty of software and services available to help you manage inventory, deliveries, and customer support more effectively. Do your research and find the ones that fit your needs and budget.</li><li>Empower your team: Train your employees to prioritize customer satisfaction and make quick decisions. A happy and empowered team translates to a happier customer experience.</li><li>Measure and adapt: Track your progress and see what's working and what's not. Analyze your customer feedback and use it to refine your Value Velocity strategy.</li></ol> By prioritizing Value Velocity, you're not just making your customers happy, you're building a loyal customer base, boosting your brand reputation, and driving sustainable growth for your SMB. So, what are you waiting for? Start sprinting towards your customers' hearts with the power of Value Velocity! Now it's your turn: Share your own Value Velocity tips and tricks in the comments below! Let's learn from each other and keep the conversation on building thriving online businesses going!

How To Attract and Keep Customers In a Digital World

Most businesses overlook a hidden treasure trove of potential revenue: their past customers. These individuals have already made the leap from prospect to buyer, demonstrating trust and brand awareness. While their purchase habits may have changed, the groundwork for a renewed relationship remains firmly in place. Reactivation campaigns offer a potent solution, reigniting dormant customer relationships and unlocking "fast cash" for your business. Why Reactivation? Reactivating past customers holds several key advantages: <ol><li class="ql-align-justify">Lower Cost: Compared to acquiring new customers, reactivating existing ones requires less effort and investment. They already understand your value proposition, fostering a foundation for quicker conversions.</li><li class="ql-align-justify">Higher Success Rates: Studies show a 60-70% chance of selling to existing customers, compared to a 5-20% likelihood for new ones. Reactivation leverages existing trust, maximizing your return on investment.</li><li class="ql-align-justify">Increased Customer Lifetime Value: Reactivated customers tend to spend more on subsequent purchases, contributing significantly to long-term revenue and profitability.</li></ol> Crafting a Compelling Reactivation Campaign <ol><li class="ql-align-justify">Identify Your Lapsed Customers: Analyze your customer database, segmenting individuals who haven't purchased or engaged for a specific timeframe. Filter out undesirable customers to ensure a targeted approach.</li><li class="ql-align-justify">Develop an Irresistible Offer: Design a compelling incentive to entice customers back. Consider gift cards, coupons, exclusive discounts, or limited-time offers.</li><li class="ql-align-justify">Targeted Communication: Reach out to your identified customers with personalized messages. Addressing them by name and recognizing their absence demonstrates genuine care and attention.</li><li class="ql-align-justify">Embrace Feedback: Actively seek customer feedback to understand their reasons for inactivity. Addressing any issues or concerns proactively fosters trust and encourages renewed engagement.</li><li class="ql-align-justify">Nurture the Rekindled Relationship: Once customers return, continue nurturing the relationship through personalized communication, exclusive offers, and exceptional customer service.</li></ol> Campaign Themes and Headlines: <ul><li class="ql-align-justify">"We Miss You!" - This emotional appeal taps into the desire for belonging and reconnection.</li><li class="ql-align-justify">"Have We Missed the Mark?" - Openness to feedback demonstrates a commitment to improvement and customer satisfaction.</li><li class="ql-align-justify">"Welcome Back!" - Simple yet effective, this headline conveys warmth and appreciation for their return.</li></ul> Reactivation: A Powerful Tool for Business Growth While a perfectly executed marketing plan aims to avoid customer churn, the reality is that even the best businesses can experience lulls in engagement. Reactivation campaigns offer a powerful tool to reignite dormant relationships, unlock new revenue streams, and ultimately contribute to increased customer lifetime value. By implementing these strategies, you can transform your past customers into a valuable source of sustained growth and profitability

Turning Past Customers into Gold: Reactivation Strategies for Increased Sales

<h2>In today's competitive market, simply attracting customers isn't enough. To truly thrive, businesses need to cultivate loyal customers who return again and again. And one of the most effective ways to achieve this is by boosting customer frequency.</h2>&nbsp;&nbsp;&nbsp;Increasing the frequency of customer purchases unlocks a treasure trove of benefits:&nbsp;&nbsp;<ul><li class="ql-align-justify">Higher revenue and profits: More purchases translate directly to increased income and profitability.</li><li class="ql-align-justify">Stronger customer relationships: Frequent interactions foster loyalty, trust, and deeper connections with your customers.</li><li class="ql-align-justify">Improved brand perception: A loyal customer base becomes your biggest advocate, singing your praises and attracting new business.</li></ul>&nbsp;But how do you actually get customers to buy more often? Here are three powerful strategies:&nbsp;&nbsp;&nbsp;1. The Power of Reminders:&nbsp;People are busy and forgetful. That's where timely reminders come in! Utilize email, SMS, or even postcards to gently nudge them back to your business. This approach is especially effective for products or services with a limited lifespan, like car servicing or ink cartridges.&nbsp;&nbsp;&nbsp;2. Nurturing Relationships:&nbsp;Building genuine connections with your customers is key to driving frequency. Regular communication, whether through newsletters, personalized emails, or exclusive offers, keeps you top-of-mind and reminds them of the value you provide.&nbsp;&nbsp;&nbsp;3. Give them a reason to return:&nbsp;Offer exclusive deals, loyalty programs, or limited-time promotions to incentivize repeat purchases. Consider subscription models for recurring needs, or surprise customers with special offers based on their previous purchases.&nbsp;&nbsp;&nbsp;Remember, increasing customer frequency isn't about being pushy, it's about providing value and creating a positive experience that keeps them coming back for more. By implementing these strategies, you can transform your customer base from one-time buyers into loyal fans who fuel your business growth for years to come.&nbsp;&nbsp;&nbsp;Ready to unlock the power of customer frequency? Start implementing these strategies today and watch your business thrive!People live busy lives. Send reminders by post, email or SMS to remind them to do business with you again!

Sell More, Sell Often: The Secret to Customer Frequency Growth

In the fast-paced world of business, one number has emerged as a game-changer, a compass that guides companies toward unprecedented growth and success. It's a number that simplifies complex customer satisfaction measurements, yields unambiguous results, and directly correlates with profits and expansion. We're talking about the Net Promoter Score (NPS). In this post, we'll explore the concept of NPS and how it can transform your company's trajectory by cultivating intensely loyal customers and fostering rapid growth. <h2>The Magic Question</h2>Many businesses invest significant time and resources in measuring customer satisfaction, but the results are often ambiguous, complex, and not necessarily tied to growth. The good news is that you don't need expensive surveys or complex statistical models. All you have to do is ask your customers one simple question: "How likely is it that you would recommend our company to a friend or colleague?" The more "promoters" your company has, the faster it can grow.But why is the willingness to promote your company such a strong indicator of loyalty and growth? It's because when customers recommend you, they're not just endorsing your product or service; they're putting their own reputations on the line. They'll take that risk only if they're intensely loyal. By asking this one question, you collect simple and timely data that directly correlates with growth, and you get responses that are easy to interpret and communicate. Your message to employees becomes clear-cut, actionable, and motivating, especially when tied to incentives. <h2>Calculating Your Net Promoter Score</h2>To calculate your Net Promoter Score, you need to ask a statistically valid sample of customers the magic question: "How likely is it that you would recommend our company to a friend or colleague?" Based on their responses on a 0 to 10 rating scale, group your customers into three categories: "promoters" (rating 9–10, extremely likely to recommend), "passively satisfied" (rating 7–8), and "detractors" (rating 0–6, extremely unlikely to recommend). Then subtract the percentage of detractors from the percentage of promoters. Companies that achieve world-class loyalty typically receive net promoter scores of 75% to more than 80%. <h2>Using Your Net Promoter Score</h2>Your NPS provides valuable insights into how to get more promoters and reduce detractors. You can compare your company's scores region to region, branch to branch, sales rep to sales rep, and customer segment to customer segment. This allows you to uncover root causes of differences and share best practices from your highest-scoring groups. Don't forget to survey your competitors' customers using the same method to see how your company stacks up against the very high bar of 75% to 80% NPS. <h2>Motivating Change</h2>To leverage the power of NPS, you must use your score to send a clear message to managers and employees about the importance of promoters and the dangers of detractors. Here are some guidelines:<ul><li>Ensure that everyone in the company knows which customers they're responsible for, and make sure all business functions, not just market research, own and accept the survey process and results.</li><li>Make your scores transparent throughout your organization. Share numbers showing the percentages (and names) of customers who are promoters, passively satisfied, and detractors. Then issue the managerial charge: "We need more promoters and fewer detractors in order to grow."</li><li>Create a sense of urgency by tying rewards to score improvement. This essentially gives customers veto power over raises and promotions. For example, Enterprise Rent-A-Car saw its survey scores rise and growth increase relative to its rivals by making field managers ineligible for promotion unless their branch or group of branches matched or exceeded the company's average net promoter scores.</li></ul> In conclusion, the Net Promoter Score simplifies the path to growth by focusing on one essential metric: customer loyalty. By asking the simple question, analyzing the responses, and using the data to motivate change and improvements, companies can cultivate intensely loyal customers and steer their businesses toward unprecedented growth. In a world where complexity often reigns supreme, sometimes the simplest questions yield the most powerful answers.

The One Number You Need to Grow

Pricing is a labyrinth that every startup must navigate. It's not as simple as slapping a number on your product or service and hoping for the best. Every startup's revenue model is unique, making it challenging to compare pricing strategies across different companies. However, by examining various pricing approaches, we can uncover valuable lessons. At the heart of any pricing strategy lies the concept of elasticity, a fundamental principle first defined by economist Alfred Marshall back in 1890. Marshall's definition of price elasticity of demand states that the responsiveness of demand in a market is determined by how much the quantity demanded changes in response to a given price decrease or increase. While Marshall's theory laid the foundation, today's entrepreneurs have the immense advantage of the internet – a vast pricing laboratory at their disposal. You can experiment with discount codes, promotions, and different price points to gauge customer responses effectively. Let's say you've conducted a series of pricing experiments and found the sweet spot where you maximize revenue. It might seem like you've cracked the pricing code, but revenue isn't the only metric that matters. Here are some crucial considerations for your startup's pricing strategy: 1. The Pitfalls of Overpricing: Charging too much for your product or service can be a strategic misstep. Even if your offering is superior, as Apple's FireWire was in the realm of communication technology, excessive pricing can deter potential customers and stall market growth. 2. The Dangers of Experimentation: If you tinker with your pricing frequently and word gets out, it can backfire. Take Orbitz, for example, which faced backlash when it was revealed they recommended costlier options to Mac users. Customer trust can be fragile. 3. Suspicion of Underpricing: If your prices are too low, it might raise suspicions among potential buyers. They may wonder if your product is subpar or even question the legitimacy of your business. Pricing that's too low can devalue your offering. 4. The Impact on Virality: Overpricing can impede the viral growth of your startup. Achieving network effects that enhance your product's functionality may take longer if your prices are too high. Striking the right balance is key. 5. Product-specific Pricing: Different products or services have different price elasticity. While healthcare can be sold at various price points, some, like bottled water, benefit from higher prices, as they convey a sense of quality and luxury. 6. Keep Pricing Tiers Simple: According to Patrick Campbell, the co-founder and CEO of Price Intelligently, startups with straightforward pricing tiers and a clear path to differentiated pricing plans convert customers more successfully. Complexity can be a deterrent. 7. Expensing Simplified: Products that can be expensed easily, without requiring managerial approval, tend to convert at a higher rate. Simplify the purchase process for your customers. One common misconception about pricing is that it should directly reflect the cost of building or running a product or service. In reality, the price should be aligned with what your customers are willing to pay. In the ever-evolving landscape of startups, pricing remains both an art and a science. It requires constant evaluation and adaptation, but with the right strategies in place, you can navigate the pricing puzzle and steer your startup towards success. Remember, pricing isn't just about numbers; it's about understanding your customers and delivering value that resonates with them.

Unlocking the Price Puzzle: Strategies for Startup Success

IntroductionIn the fast-paced world of business, one of the biggest challenges entrepreneurs face is the procrastination of potential customers. It's all too common for people to put off their purchasing decisions unless they feel a compelling reason to act immediately. As a businessperson, the last thing you want is for "later" to turn into "never" when it comes to your customers. So, how can you motivate your audience to take action promptly? The answer lies in harnessing the psychological phenomenon of scarcity. The Scarcity EffectScarcity is a potent psychological trigger that compels individuals to make decisions swiftly. When something is scarce, the fear of missing out takes over, making waiting seem like a risky choice. This innate human tendency to value scarce items more highly can be a valuable tool in your business arsenal. By incorporating a scarcity element into your offers, you can prompt potential customers to act immediately, driven by the fear of losing out on something valuable. Case in Point: Tickle Me ElmoTo illustrate the power of scarcity, let's take a trip down memory lane to the holiday season of 1996. During that time, Tickle Me Elmo, a beloved character from Sesame Street, became the hottest toy on every child's wishlist. While Elmo was already a popular character, what fueled the buying frenzy was the limited availability of the toy. Parents went to great lengths, spending hundreds of dollars on eBay and mobbing retailers when new stock became available. This irrational behavior demonstrates the immense impact that scarcity can have on consumer decisions. Adding Scarcity to Your OfferNow that we understand the significance of scarcity, let's explore some practical ways to incorporate it into your business strategies:<ol><li>Limited Quantities: Inform prospects that you have a limited number of units available for sale. This scarcity factor can ignite a sense of urgency and exclusivity, prompting customers to act quickly.</li><li>Price Increases: Notify prospects that the price of your product or service will increase in the near future. This motivates individuals to make their purchases before the cost goes up.</li><li>Price Decreases: Inform prospects that a current discount or promotional price will soon come to an end. This encourages customers to take advantage of the reduced price while it lasts.</li><li>Deadlines: Set a clear deadline for your offer, emphasizing that it is only valid for a limited period. The fear of missing out on the deal will drive action.</li></ol> Navigating Artificial ScarcityWhile scarcity can be a powerful motivator, it's essential to use it judiciously. Artificial scarcity can backfire, eroding trust and credibility. For instance, placing limits on e-books, downloadable software, or electronic music files may seem manipulative since these digital products can be duplicated infinitely at minimal cost. In such cases, scarcity appears disingenuous and can deter potential customers.However, price increases with well-defined deadlines tend to be more effective. Raising prices after a certain number of orders or a specific time period is a reasonable and transparent policy that customers are more likely to accept. ConclusionIncorporating an element of scarcity into your business offers can be a game-changer. It taps into the fundamental human fear of missing out and encourages customers to take action immediately. By strategically implementing scarcity, you can drive sales, increase conversions, and ultimately ensure that your customers buy now instead of "later." So, take advantage of this powerful psychological principle and watch your business thrive in the face of procrastination.

The Power of Scarcity in Business

The job of the entrepreneur is to make sure the company doesn’t run out of cash.—BILL SAHLMAN, PROFESSOR AT HARVARD BUSINESS SCHOOL Here’s an old business adage you may have heard: “Cash is king.”It’s true. You can have millions of dollars in orders on the books, but without cash in the bank, it doesn’t matter. IOUs don’t pay the bills—if you can’t pay your employees or keep the lights on, you’re done. Purchasing Power is the sum total of all liquid assets a business has at its disposal. That includes your cash, credit, and any outside financing that’s available. More purchasing power is always better, as long as you use that power wisely. Purchasing Power is what you use to pay your Overhead and your suppliers. As long as you continue to pay them, you’re in business. As soon as you run out of Purchasing Power, you’re finished. Game over. Always keep track of how much Purchasing Power you have available. How much cash do you have in the bank? How much available credit do you have access to? The more Purchasing Power you have, the better off you are. Keeping track of your available Purchasing Power makes it much easier to run a business. Instead of constantly worrying about paying the bills, Purchasing Power gives you room to breathe, secure in the knowledge that you’re not going to suddenly run out of money. That frees up a great deal of mental and emotional energy you can put to better use—figuring out how to improve your business. Always pay close attention to how much Purchasing Power you have left —it’s the difference between a business that stays open and a business that fails.

Purchasing Power

In a world where our to-do lists seem to grow longer with each passing day, it's crucial to remember that not all tasks are created equal. Some hold the power to propel us toward our goals, while others merely clutter our schedules. This is where the concept of Most Important Tasks (MITs) comes into play, guiding us to prioritize wisely and achieve our true objectives. What Are MITs? Imagine your daily tasks as puzzle pieces. Among them, a select few stand out as the cornerstones that, once placed correctly, will make the whole picture fall into place. These are your MITs—critical tasks that promise to yield the most significant results. Recognizing them is the first step towards maximizing your productivity. "Of all the things on your to-do list, some are really important, and some really aren't," says Alvin Toffler, the renowned technology researcher and futurist. To make the most of your precious time and energy, focus on those tasks that will truly move the needle. Setting Your MITs Every morning, start by identifying your two or three MITs for the day. These are the tasks that, if accomplished, would make a world of difference. Keep this list separate from your general to-do list to avoid getting lost in the sea of smaller, less impactful tasks. To help you pinpoint your MITs, ask yourself a self-elicitation question: "What are the two or three most important things that I need to do today?" These should be tasks that, when completed, have the potential to create a significant impact on your goals. The Power of Focus With your MITs identified, make it your mission to tackle them as soon as possible. One powerful technique is to set an artificial deadline using Parkinson's Law. By challenging yourself to complete all your MITs by, say, 10:00 a.m., you'll be amazed at how efficiently you can accomplish your most crucial tasks. The magic of MITs lies in their ability to help you maintain a "Monoideal" state—a state of intense focus. When you're working on your MITs and someone attempts to interrupt you, it's easier to say no or defer the interruption by explaining, "I'm working under a deadline; I'll get back to you later." After all, everything that's not an MIT is, by definition, less important. A Day of Triumph By consistently prioritizing your MITs and completing them promptly, you free up the rest of your day to handle whatever else comes your way. This approach empowers you to take control of your schedule and make significant strides toward your goals, all while managing distractions and maintaining your focus. In a world where we're constantly bombarded with tasks and distractions, the concept of Most Important Tasks acts as a guiding light. It reminds us that, in the grand scheme of things, some tasks truly matter more than others. By embracing MITs, you unlock the potential to not just manage your day but conquer it. So, why wait? Identify your MITs, and let them be your compass on the journey to success.

Unlocking Success: The Power of Most Important Tasks (MITs)

In the ever-evolving world of business, success isn't just about having a great product or service; it's about having a well-oiled machine behind it. Unlocking Success Through Systems Creating systems within your business is like planting seeds of prosperity. However, not all systems are created equal. The most valuable ones are those that can be replicated. Think about it this way: if your business depends on a single genius or a superstar talent, it's challenging, if not impossible, to duplicate. This is precisely why Warren Buffet, the legendary investor, steers clear of high-risk tech startups or ventures reliant on a few superstars. Instead, he invests in "boring businesses" that deliver staple products, possess strong management, generate substantial cash flow—and thrive on systems. The Magic of Replicable Systems Replicable systems are your ticket to financial success. They open doors to various opportunities, including: <ol><li>Customer Attraction: Your consistency in delivering results will draw customers to your door.</li><li>Licensing: Others may want to license your system to replicate your success.</li><li>Franchising: Entrepreneurs may seek to buy into your franchise system.</li><li>Investment and Acquisition: Investors or competitors might want to purchase your business, enticed by its systematic brilliance.</li></ol> The Four Pillars of Business Systems No matter your industry, four types of systems are fundamental to achieving lasting success: <ol><li>Marketing System: This system ensures a consistent flow of leads into your business.</li><li>Sales System: It handles lead nurturing, follow-up, and conversion.</li><li>Fulfillment System: This is where you deliver your product or service in exchange for customers' hard-earned money.</li><li>Administration System: It encompasses tasks like accounting, reception, human resources, and support for other business functions.</li></ol> Irrespective of your business's nature, these four functions are crucial. The Pitfall of Neglected Marketing and Sales Systems Many small businesses fall into the trap of focusing too much on fulfillment and administration while neglecting marketing and sales systems. The urgency seems to lie elsewhere, and the business may struggle despite offering exceptional products or services. After all, customers can't appreciate your excellence until they've purchased from you. Without robust marketing and sales systems in place, they might never get that chance, perpetuating a detrimental cycle. The Power of Business Systems So, what exactly is a business system? At its core, a business system comprises documented procedures and processes that allow your business to thrive without your constant involvement. These often take the form of checklists but can also include video and audio training—a collective wisdom repository known as an operations manual. A shining example of business systems is none other than McDonald's—a global, multi-billion-dollar empire primarily operated by teenagers. Their operations manual leaves no stone unturned, from hiring practices to the exact amount of sauce on a Big Mac. McDonald's success lies in its impeccable business systems. Why Business Systems Are Overlooked Two major reasons lead many small business owners to overlook the potential of business systems: Perceived Boredom: Business systems are considered "back-office" functions, and their creation may seem mundane. However, the power they offer is far from boring. Lack of Urgency: In the hustle and bustle of starting or running a small business, fulfilling immediate needs often takes precedence. Business systems might be postponed, leading to unintended consequences. The Benefits of Implementing Systems Implementing systems in your business comes with a plethora of benefits: Asset Building: A well-structured system transforms your business into a valuable asset that can be sold for a substantial sum. Leverage and Scalability: Systems enable you to expand, whether through replication in different locations or by franchising and licensing. Consistency: Consistency is the key to delivering an exceptional customer experience—a hallmark of successful businesses. Lower Labor Costs: Efficient systems reduce the time and effort spent reinventing the wheel, ultimately lowering labor costs. In conclusion, remember this mantra: "Products Make You Money, Systems Make You A Fortune." Building and implementing replicable business systems may not always be glamorous, but the rewards are nothing short of spectacular. Your business will not only thrive but also be well-positioned for sustained growth, financial success, and the possibility of achieving your ultimate entrepreneurial dreams. So, get started on your path to fortune through the power of systems.

Products Make You Money, Systems Make You A Fortune

Joe Girard is listed in the Guinness Book of World Records as “the world’s greatest salesman.” He’s sold more retails big ticket items, one at a time, than any other salesperson in recorded history. Was he selling some amazing new technology that everyone had to have? No. Was he selling to the mega rich? Wrong again. He sold ordinary cars to ordinary people. Between 1963 and 1978, he sold over 13,000 cars at a Chevrolet dealership. His stats are amazing:In total, he sold 13,001 cars. That’s an average of six cars per day.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On his best day, he sold 18 vehicles.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On his best month, he sold 174.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In his best year, he sold 1,425. Joe Girard sold more cars by himself than 95 percent of all the dealerships in North America. To make his feat even more incredible, he sold them at retail—one vehicle at a time. No bulk fleet deals. So what was the secret to Joe’s success? He lists several including working hard and being likeable. Without discounting these factors, I’m sure there were thousands of salesmen at that time who had those admirable qualities, but they didn’t sell a fraction of the volume that Joe did. One of the stand out things that Joe did was to constantly keep in touch with his customers.He sent a personalized greeting card every month to his entire list of customers. In January, it would be a Happy New Year card and inside it would say, “I like you.” He would then sign his name and stamp it with the details of the dealership where he worked. In February, his list might get a Valentine’s Day card. Again inside the message was the same, “I like you.”&nbsp;He would vary the size and color of the envelope and each was hand-addressed and stamped. This was critical to getting past the postal mail equivalent of spam filters, where people stand over the trash can and discard all the items that look like ads, scams, credit card offers and other types of junk mail. He wanted his customers to open his envelope, see his name and the positive message inside and feel good. He did this month after month, year after year in the knowledge that they would&nbsp;eventually need a new car. And when they did, who do you think would have been top of their minds? By the end of his career, he was sending out 13,000 cards per month and needed to hire an assistant to help him. By the time he was a decade into his career, almost two-thirds of his sales were to repeat customers.&nbsp;It got to the point where customers had to set appointments in advance to come in and buy from him. Contrast that with other car salespeople who just stood around waiting and hoping for walk-in traffic.

The Secret Behind World’s Greatest Salesman

IntroductionIn his insightful book, "The Book of Survival," Anthony Greenback highlights a fundamental truth about overcoming impossible situations: it's not about possessing extraordinary abilities but knowing what to do. Similarly, in the world of business, success is not solely about exceptional talents or industry trends. It's about understanding the critical distinction between being an expert in your trade and being an adept business owner. The Harsh Reality of Business SurvivalStatistics about business survival rates in the first five years paint a grim picture. Estimates vary, with some suggesting that as many as 90% of businesses fail, but it's rare to see this statistic quoted as anything less than 50%. This means that, at best, you have a 50/50 chance of keeping your business afloat after five years. However, the bleak outlook doesn't stop there. These statistics only account for businesses that completely shut down, disregarding those that stagnate at low levels or become a source of misery for their owners. The question that arises is why so many small businesses seem to plateau at mediocre levels. The Tale of Two PlumbersConsider two scenarios at opposite ends of the spectrum. On one side, there's Pete, the plumber, who tirelessly works long hours and weekends but struggles to make ends meet. On the other side, there's Joe, who runs a plumbing business with multiple employees and enjoys substantial profits. These examples illustrate the common phenomenon of small businesses barely generating enough profit for their owners to make a modest living. The Brutal Truth: Self-Created JobsMany business owners find themselves trapped in a self-created prison. Despite their best efforts to grow, they often end up frustrated, accepting that their business is little more than a low-paying job. In some cases, it becomes clear that these owners might be better off working for someone else in their industry, enjoying fewer hours, less stress, more benefits, and more vacation time. However, a fortunate few seem to have it all: reasonable hours, steady cash flow, and continuous growth. Blaming the IndustryWhen struggling, some business owners point fingers at their industry as the root of their problems. While some industries do decline over time (think bookstores or video rental stores), the blame game is often more about excuses than reality. Common industry complaints include fierce competition, low profit margins, online competition, and the ineffectiveness of advertising. Yet, other businesses in the same industry thrive. So, what sets them apart? The Entrepreneurial SeizureMany small business owners fall into the trap Michael Gerber describes in his book "The E-Myth." They start as technicians (plumbers, hairdressers, dentists) and believe their technical expertise qualifies them to run a business. This transition from working for someone else to becoming their own boss is a significant mistake. Being proficient in a trade doesn't automatically translate to success in running a business. The Key Distinction: Business Skills MatterThe essential lesson here is that proficiency in a specific skill doesn't equate to competence in the business aspect of your trade. This misunderstanding is a primary reason for the failure of many small businesses. A business owner may excel in their craft but struggle due to a lack of business acumen. ConclusionStarting and running your own business can be a path to financial freedom and personal fulfillment. However, it requires mastering the vital distinction between technical expertise and business acumen. To succeed, one must become proficient not only in their craft but also in the art of business. Only then can a business truly flourish and serve as a vehicle for achieving personal and financial goals. So, remember, in the business world, it's not just about what you do; it's about how you do it.

Knowing What To Do

If we attend continually and promptly to the little that we can do, we shall ere long be surprised to find how little remains that we cannot do.—SAMUEL BUTLER, NINETEENTH-CENTURY NOVELIST Often, what we want to achieve can’t be done in a single sitting. Projects are Goals that take more than one action to complete, and the larger the project is, the more difficult it is to anticipate all of the actions that must be done. Climbing Mount Everest is a project—one fraught with complexity and Uncertainty. How do you work on a project so large it threatens to overwhelm you? Simple: focus only on the action you need to take next to move toward your Goal. The Next Action is the next specific, concrete thing you can do right away to move a project forward. You don’t have to know everything that must be done to make progress on a project—all you need to know is the very next thing you can do to move the project forward. David Allen, the author of Getting Things Done, coined the term to describe one of the core steps of his “fundamental process”: 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write down a project or situation that is most on your mind at this moment. 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Now describe in a single written sentence your intended desired outcome for this problem or situation. What needs to happen to mark this “done”?3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Next, write down the very next physical action step required to move the situation forward.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Put those answers in a system you trust According to Allen, these questions help you clarify exactly what “done” and “doing” look like. If you define what “done” looks like, you can focus your attention and energy on “doing” the things that will get you to “done.” To keep yourself from feeling overwhelmed, track your projects and tasks separately. Focus on completing the Next Action, and you’ll inevitably complete the entire project.

Next Action

In 1955, Cyril Northcote Parkinson wrote a humorous essay in the Economist based on his experience in the British civil service. In that essay, Parkinson proposed what became his eponymous law: “Work expands so as to fill the time available for its completion.” If something must be done in a year, it’ll be done in a year. If something must be done next week, it’ll be done next week. If something must be done tomorrow, it’ll be done tomorrow. We plan based on how much time we have, and when the deadline approaches, we start to make Choices and Trade-offs to do what must be done to complete the task by the deadline. Parkinson’s Law should not be considered carte blanche to set unreasonable deadlines. All projects take time—you certainly can’t build a skyscraper in a day or a factory in a week. The more complex the project, the more time it typically takes—to a point. Parkinson’s Law is best used as a Counterfactual Simulation question. What would it look like if you finished the project on a very aggressive time scale? If you had to build a skyscraper in a day, how would you go about doing it? Answer the question the way you would a counterfactual, and you’ll discover techniques or approaches you can use to get the work done in less time. Ingvar Kamprad, the founder of IKEA, once said, “If you split your day into ten-minute increments, and you try to waste as few of those ten-minute increments as possible, you’ll be amazed at what you can get done.” For small tasks, use what is called Ingvar’s Rule—assume each task will take no more than ten minutes to complete, then begin. This includes meetings and phone calls: for some reason, the default time period for meetings is an hour —whether you need it or not. Often you can get just as much, if not more, done if you assume that the basic unit of time for a meeting is ten minutes.Ingvar’s Rule is a counterfactual—what would you do if you only had ten minutes to get something done? Act accordingly.

Parkinson’s Law

Sometimes when I consider what tremendous consequences come from little things, I am tempted to think: there are no little things.—BRUCE BARTON, ADVERTISING EXECUTIVE BEST KNOWN FOR CREATING THE BETTYCROCKER BRAND At this very moment, a Toyota engineer somewhere in the world is making a very small change to the Toyota Production System, one of the most efficient manufacturing Systems in the world. Alone, the change may not look like much—a small tweak, a slight restructure, a bit of material or effort saved. Taken together, however, the effects are huge—Toyota employees implement over 1 million improvements to the Toyota Production System every year. It’s little wonder that Toyota is now one of the world’s largest and most valuable automotive manufacturer. Small helpful or harmful behaviors and inputs tend to Accumulate over time, producing huge results. According to Lean Thinking by James P. Womack and Daniel T. Jones, Toyota’s approach is based on the Japanese concept of kaizen, which emphasizes the continual improvement of a system by eliminating muda (waste) via a lot of very small changes. Many small improvements, consistently implemented, inevitably produce huge results. Accumulation isn’t always positive. Think of what would happen to your body if you consumed nothing but fast food, candy bars, and soda for a decade. Eating a single candy bar isn’t a big deal, but eating hundreds of candy bars is. Fortunately, the opposite is true as well: small improvements in your diet, a little more exercise, and a little more sleep can have major effects on your health over time. Incremental Augmentation is an example of the power of Accumulation. If your offer improves with every Iteration Cycle, it won’t be long before your offer is many times more valuable to your customers than it was before. Small changes to your Value Delivery process can save you a ton of time and effort in the long run. The more small improvements you make over time, the better your results.

Accumulation

Fortunately, you don’t have to create the entire offer/product before you start selling. A Minimum Economically Viable Offer (MEVO) is an offer/product that promises and/or provides the smallest number of benefits necessary to produce an actual sale. A MEVO is essentially a Prototype that’s been developed to the point that someone will actually pull out their wallet and commit to making a purchase. It doesn’t have to be complicated. Fitbit’s MEVO was a Prototype, a description, and a few computer renderings. All you need to do is convey enough information to convince a real potential customer to buy. Creating a MEVO is useful because it’s impossible to predict 100 percent accurately what will work in advance. You don’t want to invest a ton of time and money in something that has no chance of working, and the faster you can figure out if your idea will work or not, the better off you’ll be. Since Feedback from prospective customers and paid-in-full orders are very different things, creating a MEVO allows you to start collecting data from real customers as quickly as possible, directly testing the idea’s Critically Important Assumptions (CIA) and reducing the risk of making a business-ending investment decision. This simple process can be done quickly and cheaply, and will reveal a great deal about the real-world accuracy of the business’s CIAs. Spending a few hundred dollars to pretest critical assumptions is a very good use of money, particularly if the findings prevent the investment of larger sums of money in a business idea that’s doomed to fail from the start. The purpose of starting with a MEVO is to minimize your risk. By keeping the investments small, incremental, and learning oriented, you’ll be able to quickly discover what works and what doesn’t. If the idea is promising, you’re in a great position to make it happen. If your assumptions don’t hold true, you’re able to cut your losses without losing your shirt or your dignity.

Minimum Economically Viable Offer (MEVO)

I have not failed. I’ve just found 10,000 ways that won’t work.—THOMAS A. EDISON, PROLIFIC INVENTOR Nobody—no matter how smart or talented they are—gets it right the first time. For proof, consider any artistic masterpiece. Beneath the finished surface of the Mona Lisa, you’ll find layer upon layer of draft sketches, false starts, and major alterations. The ceiling of the Sistine Chapel is covered with hundreds of millions of very small brushstrokes, each of which brought the resulting masterpiece one step closer to completion. It took Michelangelo millions of hammer strokes to turn a crude block of marble into the David. The Iteration Cycle is a process you can use to make anything better over time. There’s nothing wasteful about the inevitable changes and revisions that these artists made to their creations: every iteration brought the project one step closer to completion. Iteration has six major steps, which I call the WIGWAM method:1. Watch—What’s happening? What’s working and what’s not?2. Ideate—What could you improve? What are your options?3. Guess—Based on what you’ve learned so far, which of your ideasdo you think will make the biggest impact?4. Which?—Decide which change to make.5. Act—Actually make the change.6. Measure—What happened? Was the change positive or negative? Should you keep the change, or go back to how things were before this iteration?Iteration is a cycle—once you measure the results of the change and decide whether or not to keep it, you go back to the beginning to observe what’s happening, and the cycle repeats. For best results, clearly define what you’re trying to accomplish with each iteration. Are you trying to make the offering more attractive or appealing? Are you trying to add a new feature people will value? Are you trying to make the offering cost less without detracting from its value? The more clearly you can define what you’re after, the easier it’ll be to understand the Feedback you’re receiving and the more value you’ll extract from each Iteration Cycle.

The Iteration Cycle

The Crusader Rule The zealous display the strength of their belief, while the judicious show the grounds of it.—WILLIAM SHENSTONE, EIGHTEENTH-CENTURY POET AND LANDSCAPE DESIGNER Being a Crusader doesn’t pay either. Every once in a while, you’ll find an idea so fascinating it becomes hard to think about it objectively. The stars align, heavenly trumpets blare, and suddenly you have the unmistakable impression that you’ve found your calling. In all the excitement, it’s easy to forget that there’s often a huge difference between an interesting idea and a solid business. In your optimism, forget ye not prudence: changing the world is difficult if you can’t pay the bills. Some ideas don’t have enough of a market behind them to support a business, and that’s perfectly okay. That doesn’t mean you should ignore them: side projects can help you expand your knowledge, improve your skills, and experiment with new methods and techniques. You may pursue side projects as long as you don’t count on them to reliably produce income. Once you have your financial bases covered, crusade all you want. Before attempting to launch a business, take the time to do a thorough evaluation using the Ten Ways to Evaluate a Market. If you’re finding it difficult to be objective, find a trusted colleague or adviser to help you, then test it as quickly and as inexpensively as you can before you fully commit. A few hours spent in evaluation can prevent months (or years) of frustration and misplaced effort.

The Crusader Rule

The Hidden Benefits of CompetitionThe competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.—HENRY FORD, FOUNDER OF THE FORD MOTOR COMPANY AND ASSEMBLY-LINE PIONEER One of the most common experiences of a first-time entrepreneur is discovering that your brilliant business idea isn’t as original as you’d thought: other businesses are already offering similar products or services. This would shake anyone’s confidence—after all, why bother when someone else is doing what you want to do? Cheer up: there are Hidden Benefits of Competition. When any two markets are equally attractive in other respects, you’re better off choosing to enter the one with competition. Here’s why: it means you know from the start there’s a market of paying customers for this idea, eliminating your biggest risk. The existence of a market means you’re already on the right side of the Iron Law of the Market, so you can spend more time developing your offer instead of proving a market exists. If there are several successful businesses serving a market, you don’t have to worry so much about investing in a dead end, since you already know that people are buying. The best way to observe what your potential competitors are doing is to become a customer. Buy as much as you can of what they offer. Observing your competition from the inside can teach you an enormous amount about the market: what value the competitor provides, how they attract attention, what they charge, how they close sales, how they make customers happy, how they deal with issues, and what needs they aren’t yet serving. As a paying customer, you get to observe what works and what doesn’t before you commit to a particular strategy. Learn everything you can from your competition, and then create something even more valuable.&nbsp;

The Hidden Benefits of Competition

The classic MBA product development model is shrouded in secrecy and mystique: <ol><li class="ql-align-justify">Develop the offering in private, make everyone involved sign non-disclosure agreements, </li><li class="ql-align-justify">Raise millions of dollars in venture capital, </li><li class="ql-align-justify">Spend years making it perfect, </li><li class="ql-align-justify">Then unveil your creation to the astonishment of the world and the thunderous sound of ringing cash registers.</li></ol> Unfortunately, this mentality ruins careers and empties bank accounts. On their own, ideas are largely worthless—discovering whether or not you can actually make them work in reality is the most important job of any entrepreneur. Don’t be shy about showing potential customers your work in progress. Unless you work in an industry with unusually aggressive, competent, and well-funded competitors, you really don’t have to worry about other people “stealing” your idea. Ideas are cheap—what counts is the ability to translate an idea into reality, which is much more difficult than recognizing a good idea.&nbsp; “Stealth mode” diminishes your early learning opportunities, putting you at a huge early disadvantage. It’s almost always better to focus on getting feedback from real customers as quickly as you possibly can. A Prototype is an early representation of what your offering will look like. It may be a physical model, a computer rendering, a diagram, a flowchart, or a one-page paper that describes the major benefits and features. It doesn’t have to be fancy: all your Prototype has to do is represent what you’re offering in a tangible way, so that your potential customers can understand what you’re doing well enough to give you good feedback. For best results, create your prototype in the same form as the finished product. If you’re creating a physical product, make a tangible model. If you’re making a Web site, create a working Web page with the basic components. If you’re creating a service, create a diagram or flowchart of everything that happens in the process, then act it out. The more realistic your Prototype is, the easier it’ll be for people to understand what you’re trying to do. The Prototype is your first attempt at creating something useful, but it won’t be your last. Your first will be embarrassingly poor and incomplete, and that’s okay. Prototypes are valuable because they allow you to get good feedback from real people before you invest a huge amount of time, money, and effort into the project. The purpose of a Prototype is not to make it perfect: it’s to quickly create a tangible focus for your efforts—something you and other people can see, evaluate, and improve. As you show your Prototype to potential customers, you’ll get a steady stream of ideas and Feedback (will be discussed later) that will help you make your offer even better.

Prototype

In the world of business, it's not just about working hard; it's about working on the right things. Caterina Fake, the visionary mind behind Flickr.com and Hunch.com, aptly captured this sentiment. If you're considering launching a new venture or expanding into a new market, taking a thoughtful approach is crucial. Before taking that leap of faith, let's delve into the Ten Ways to Evaluate a Market - a practical framework that can help you gauge the potential of any market opportunity.Imagine having a tool that provides a quick glimpse into the viability of your business idea - that's exactly what the Ten Ways to Evaluate a Market offers. By assigning a rating of 0 to 10 for each of the ten factors below, where 0 signifies extreme unattractiveness and 10 signifies utmost attractiveness, you can get a clear sense of your market's potential. When uncertain, it's wise to lean towards conservative estimates. 1. UrgencyConsider the urgency of your product or service in the market. Does it fulfill an immediate need? While renting an old movie might not generate high urgency, offering front-row seats to the opening night of a blockbuster movie creates a sense of urgency since it's a one-time opportunity.&nbsp;2. Market SizeEvaluate the number of potential customers who are actively seeking what you're offering. Compare the market for niche activities like underwater basket weaving courses with the vast market for life-saving cancer cures.&nbsp;3. Pricing PotentialDetermine the highest price a typical customer would be willing to pay for your solution. Contrast the price of a lollipop at $0.05 with the staggering cost of an aircraft carrier, which can sell for billions.&nbsp;4. Cost of Customer AcquisitionAssess how easy it is to attract new customers and the resources it would take, both in terms of money and effort. Consider the difference between high-traffic roadside restaurants that effortlessly draw in customers and government contractors who invest substantial amounts to secure major procurement deals.&nbsp;5. Cost of Value DeliveryCalculate the expenses associated with creating and delivering your product or service. While delivering digital files via the Internet is nearly cost-free, the creation and establishment of a physical product and factory can rack up millions in expenses.&nbsp;6. Uniqueness of OfferAnalyze how distinct your offering is in comparison to existing alternatives, and how susceptible it is to imitation. While there are numerous hair salons, only a few companies provide the remarkable experience of private space travel.&nbsp;7. Speed to MarketConsider how swiftly you can develop your product or service for sale. Compare the immediacy of offering to mow a neighbor's lawn to the extended timeframe needed for establishing a bank.&nbsp;8. Up-Front InvestmentEvaluate the initial financial investment required before your product or service is ready to be sold. Compare the minimal expenses needed to start a housekeeping business with the extensive capital required for gold mining ventures.&nbsp;9. Upsell PotentialThink about secondary offers that can complement your primary product, enhancing the value for customers. For instance, customers purchasing razors often require shaving cream and extra blades, while a Frisbee typically stands alone unless it's lost.&nbsp;10. Evergreen PotentialConsider the ongoing effort you'll need to invest once your initial offer is launched to ensure continued sales. Certain businesses, like business consulting, necessitate continuous work to generate revenue, while products like books can be produced once and sold repeatedly.&nbsp;Once you've thoroughly assessed each factor, calculate your score. If your total falls below 50, it might be wise to explore other ideas. Scores reaching 75 or higher indicate a highly promising venture - a green light to proceed at full throttle. Results ranging between 50 and 75 possess potential to sustain your business, but they may not be an instant hit without a significant investment of resources and energy.&nbsp;Remember, market evaluation is a crucial phase that can significantly impact the trajectory of your business journey. By utilizing this comprehensive approach, you'll be equipped to make informed decisions and navigate the path ahead with confidence.

The Ultimate Guide to Assessing Market Potential for Your Business Idea

Caption: "Discover how the Iron Law of the Market can be your North Star to unparalleled business success. 🚀 Embrace its wisdom and thrive in a world driven by market demand. 💡 #MarketTriumph #BusinessSuccess #IronLawOfTheMarket" Post Highlight: In the ever-evolving landscape of entrepreneurship, one fundamental principle stands tall as a beacon of wisdom: the Iron Law of the Market. It serves as a powerful compass, guiding business ventures to navigate through turbulent waters and emerge victorious. Today, we delve into its depths, unlocking the key to unrivaled prosperity. 🗝️🏆 🚀 Market Matters Most: No matter how extraordinary your team or revolutionary your product, the market holds the ultimate power over your business's fate. It's a humbling reminder that even the brightest minds must cater to a market's needs to flourish. As visionary entrepreneur Marc Andreessen wisely said, "Markets that don't exist don't care how smart you are." 🎯 Finding Your Niche: Like a seasoned explorer, market research charts the course for your business journey. Just as "look before you leap" guarantees safer passage, John Mullins' acclaimed book, "The New Business Road Test," offers invaluable insights to pinpoint promising markets from the outset. By understanding your audience's desires, you increase your venture's odds of triumph. 💡 The Viable Business: Imagine hosting a grand party, brimming with excitement, only to find an empty room when the moment arrives. In business, this can be an all-too-familiar scenario. Dean Kamen's Segway PT, a marvel of engineering, faltered not due to product design but from a lack of eager consumers. The painful truth: revenue thrives on the passion people have for what you offer. Your success is intrinsically tied to your ability to meet their desires. 📈 Embracing the Iron Law: Armed with this profound knowledge, entrepreneurs can forge a new path to prosperity. Embrace the essence of the Iron Law: to succeed, you must create something people genuinely want. Every business thrives when it addresses the needs and aspirations of a substantial audience. 💪🏼 Building a Business Legacy: As we embark on our entrepreneurial journey, let us engrave the Iron Law into our core philosophy. By placing the market at the heart of our endeavors, we cultivate a legacy of innovation and relevance. Together, let's build businesses that not only endure but leave an indelible mark on the world. In this rapidly changing world, the Iron Law of the Market stands resolute—a guiding principle that illuminates our path towards enduring success. 🌟 So, as we set sail into uncharted waters, let us remember that the market is the compass, and our customers are the true North. 💫 #BusinessTriumph #EntrepreneurialJourney #IronLawWisdom #MarketMastery

Unleashing the Power of the Iron Law of the Market: A Blueprint for Business Triumph

Kevin Hillstrom of Mine That Data, says it’s essential for online retailers to know what kind of relationship they have with their buyers, because this drives everything from marketing strategy to shopping cart size.To understand this, he calculates the annual repurchase rate: What Percentage of People Who Bought Something from You Last Month Will Do So This Month? Acquisition Mode&nbsp;If less than 40% of last month’s or last year’s buyers will buy this month/year, then the focus of the business is on new customer acquisition. Loyalty programs aren’t good long-term investments for this kind of business.Kevin says that 70% of e-commerce businesses fall into this category when they’re mature. Vendors of scuba or rock-climbing equipment might be a great example of this: many of their customers buy gear once, and don’t get so hooked on the hobby that they need to upgrade. That’s not a bad thing—it just dictates marketing strategy. An online vendor of eyewear might put more of its marketing efforts into convincing past buyers to refer others, and less into convincing those buyers to purchase multiple pairs of glasses, for example. Hybrid Mode&nbsp;If 40–60% of last month’s or last year’s buyers will buy this month/year, then the company will grow with a mix of new customers and returning customers. It needs to focus on acquisition as well as on increasing purchase frequency—the average customer will buy 2 to 2.5 times a month/year. Zappos is a hybrid model e-commerce company.&nbsp;Loyalty Mode&nbsp;If 60% or more of last month’s or last year’s buyers will buy something this month/year, the company needs to focus on loyalty, encouraging loyal clients to buy more frequently. Loyalty programs work well only if the retailer has this kind of engagement, and only 10% of e-commerce businesses end up in this mode when mature. Amazon is a good example of a company in this mode.Additionally, even before a year has elapsed, an e-commerce company can look at 90-day repurchase rates and get a sense of which model it’s in.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A 90-day repurchase rate of 1% to 15% means you’re in acquisition mode.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A 90-day repurchase rate of 15% to 30% means you’re in hybrid mode.·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A 90-day repurchase rate of over 30% means you’re in loyalty mode. CONCLUSION“It doesn’t matter whatsoever what mode a business is in. But it means everything for the CEO to know what mode he or she is in,” Kevin says. “I see too many leaders trying to increase loyalty. If you’re in acquisition mode, you probably can’t—and shouldn’t try to—increase loyalty. The average customer only needs a couple of pairs of jeans a month/year, for instance. You can’t force the customer to buy more! Knowing your customer and mode is important.”Kevin says he frequently sees business leaders with seasonal e-commerce properties trying to convince customers to buy gifts off-season. “It doesn’t work,” he says. “They’re in acquisition mode. They’re better off creating awareness during the year so that they get new customers in November and December.”&nbsp;REFERENCEThe Lean Series: Lean Analytics —Use Data to Build a Better startup Faster by Alistair Crolll &amp; Benjamin Yoskovitz

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