First published by EntrepreneurMag.co.za on June 10, 2013
I have a “full service” (no additional costs on quoted rates) refrigerated truck rental business based in Cape Town. At present I have a sub-contract with a national transport company that rents the two vehicles for 3 days per week, there is no room for expansion with this customer. My first objective is to have the current two vehicles rented 6 days per week. Second objective is to build up to a fleet of six vehicles within 1 year. How would you approach the marketing of this business in the most cost effective way?
This requires business-to-business (often abbreviated as ‘B2B’) marketing. So we aren’t talking about television or newspaper adverts here, which target large numbers of consumers. Rather we want to communicate to the (select) few people who are interested in the refrigerated trucking business.
Identify your market
Firstly you need to identify prospective markets for your current and future vehicles. I’m not an expert on trucking and logistics but it strikes me that there are a few obvious markets:
- Trucking companies that already have refrigerated vehicles who may wish to augment their current fleet
- Trucking companies who don’t have refrigerated vehicles who have possible business for refrigerated loads but don’t have their own vehicles or who don’t have sufficient business to justify owning a vehicle outright
- Trucking companies outside of Cape Town (i.e. geographic expansion)
- Short duration / last minute “stand-in” business
Determine exactly what you are offering customers
Next you need to determine why your prospective customers should do business with you rather than competitors, or acquire their own trucks. This is the most critical part of marketing and the most overlooked.
If you define a truly unique value proposition (USP) it’s much easier to interest the market.
Do you intend competing on:
- Lowest price (perhaps for long contract periods)?
- Best service?
- Short rental periods (i.e. augmenting customers’ current fleet for capacity overflow)?
- Unique size or other attribute of your vehicles?
Don’t underestimate the importance of having a clear USP. Without it, no matter how much marketing communication you do, you are unlikely to create market interest and build the business.
Identify prospective customers
Given that your (prospective) customers are also looking for their own customers, they shouldn’t be too difficult to find. The Internet is a wonderful marketing tool. Trade associations and associated suppliers such as clearing agents might also help identify prospects.
Even a prospect that turns you down can offer important information about other players in the market. The aim is to really understand who’s who, what type of business they concentrate on and how they compete. Without this information you are blundering around in the dark.
Selling is marketing too
Get out and sell. Nothing beats a face-to-face meeting (if possible) or as second best a telephone call. But be prepared; know exactly to whom you need to speak, what their title and responsibilities are and what business problem you are in a position to offer solutions to.
Selling is so effective that unfortunately everyone is doing it. You need to be able to offer possible business solutions early in the conversation to retain interest and build rapport.
There is in my view, little value in conventional advertising under these circumstances. You should however, spend significant effort creating a well thought-through web site (which these days effectively replaces the “sales brochure” of old).
You can create a remarkably professional website yourself for very little cost at WordPress . If budgets allow you could also consider a limited amount of Google search pay-per-click advertising to attract prospects to your site. As you only pay for those who click through to your site, this can be very cost effective.
Until you get paid, it’s not a sale
The most important business lesson in my career has been the importance of deciding with whom you are not going to do business. This is particularly pertinent in a business’ growth phase. Easily available business might be indicative of unattractive business.
Beware of unscrupulous (prospective) clients who change suppliers when unpaid suppliers finally refuse to continue the relationship. Remember that a ‘sale’ until paid for is better described as a ‘donation’.
First published by EntrepreneurMag.co.za
Growth. It’s the natural order of things. Those of us who own businesses are naturally ambitious for our “baby”. You may have participated in the business’ birth as a start up and gone through the awkward teenage years together. It is only natural for us to drive our businesses to grow.
How big to grow?
Once grown beyond the survival start up phase, it is time to decide: how big do you want your company to become? It seems self evident that most companies try to grow as big as possible. But larger doesn’t necessarily mean better or more profitable. It may be better to be a medium fish in a small (niche) pond than a large fish in the ocean. You may not know that the acknowledged market leader in Olympic class racing rowing boats is Empacher Bootswerft (boat works) a German family business founded in the 1950’s. They manufactured 10 of the 11 Olympic heavyweight-rowing gold-medal-winning boats at the recent London Olympics. In fact they produced 50 of the 84 boats in the finals – a 60% Olympic market share. Apart from also producing oars for racing rowing boats and catamaran’s for well, rowing coaches, they have focused single-mindedly on this particular boat niche. Given this focus and consequential success at Olympic level, you can imagine which boat Germiston High rowing club would really like to own. Success becomes self-fulfilling. Clearly it limits expansion, but market dominance can reduce risk, and not encroaching on say the luxury yacht market means that retaliation by significantly larger competitors is less likely. Customers like to know that their suppliers are world-leading experts rather than generalists. Sticking to ones knitting does make for exceptional jerseys. But the risk remains that said jerseys might go out of fashion. Empacher boat works has for instance lost its dominance in lightweight rowing class boats. South Africa’s stunning Olympic gold in the lightweight four was in a Filippi boat – an Italian competitor. Is this the end of over half a century of Olympic dominance? The point is that as your company grows, you need a specific intent with regards to: do you want to grow? / how much you want to grow, and if aggressive growth is appropriate how best to achieve this.
How to grow.
Professor Igor Ansoff left us a very succinct (and by now well known) road map for growth, known unsurprisingly as the ‘Ansoff Matrix’. Combinations of new or existing products and new and existing markets give four basic growth strategies:
Market penetration (more of the same – same products into the same market)
Unless you already enjoy a very high market share, the most obvious growth strategy is to simply take market share from your competitors. Your competitors of course will be less enthusiastic about this strategy and may well retaliate by attacking your core customers. This could well drive down market prices and consequently profitability, and as most companies are driven by profitability rather than turnover, consider this impact carefully before attacking a bigger aggressive competitor.
Product Development (New products into your existing market
A relatively low risk strategy, most organisations drive the development of new products as a matter of course. The primary attraction being that adding products to your existing portfolio increases sales with very little additional sales or administrative cost. It also helps lock in customers by adding to your basket of products – less opportunity for competitors to make inroads on your customer relationships because you don’t stock an item. In many industries the real competitive advantage is the relationship with the customer and cost effective distribution, rather than exclusive access to products. Use these strengths if you have them, to your advantage.
Market Development (New markets for your existing products)
Do you know all the current and possible usages for your product? Seems a simple question, but often products have unintended markets. Baking soda intended to make cakes and baked goods rise during baking is also used to reduce odours in fridges and to clean plastic piano keys, I understand. Could your products be repurposed into dramatically different markets? What about geographically new markets? Is there an export market for your products, or is there significant business in cities other than your current location?
Diversification (new products into new markets)
It is easy to believe that the strong brand you have developed can be leveraged into completely new products in new markets. This is a strategy utilised with significant success by Sir Richard Branson and his Virgin Group. With businesses ranging from travel (soon to include space travel), mobile phones, financial services and entertainment, the only common denominator is the brand and the founder’s personality. Of course many forget that there were numerous failures along the way including (bizarrely) Virgin Brides a wedding dress business launched in England 1996. Richard Branson predictably dressed up in a wedding dress for the occasion but it closed its doors about a year later. Cosmetics, lingerie and most famously Virgin Cola came and went. With reference to the latter Sir Richard admitted: ”That business taught me not to underestimate the power of the world’s leading soft drink makers. I’ll never again make the mistake of thinking that all large, dominant companies are sleepy”.
Even McDonalds. a recognised marketing heavyweight with a hugely powerful brand has suffered when it tried ill-advised diversification. Based on the thought that “Our restaurants serve 74 million customers in a country with a population of 7 million, if only one in 1,000 of those guests choose the Golden Arch Hotel, the project will be a success” McDonalds Switzerland went into the hotel business. However, apparently the 74 million customers couldn’t see the connection between the Mickey D brand and luxury 4 star hotels, with complaints that rooms were “too plastic”. This combined with unfortunate market timing resulted in the hotels being sold off after just a couple of years.
So, where the market sees a valid connection to the mother brand and believe the relationship can add real value, this can be a compelling growth strategy. Leveraging an existing brand for no additional cost to kick-start a new business is compelling. But it is high risk, with many failures even under the guidance of world-class marketers. So think long, hard and more importantly objectively, before attempting to deploy this game plan.
Blue Ocean Strategies
What about going one-step further than mere diversification? How about creating completely new demand consumers haven’t even realised they have yet, in completely new business categories? This is ‘Blue Ocean strategy’ devised by W. Chan Kim and Renée Mauborgne from the Blue Ocean Strategy Institute at INSEAD business school. The iPod is an often-used example – where the market wasn’t even aware of the possibility of managing their own personal music library through buying music tracks individually and digitally downloading them onto a personal listening device. Many recent social media and digital businesses fall into this category. Who could have predicted that half a billion people were itching to communicate in 140 characters or less, the foundation of Twitter? The payoff with such a growth strategy can be dramatic, primarily because by definition, there are no competitors to take a share of the market.
Growing a business is not unlike parenting. It is a roller coaster ride as you try and guide your progeny in the right direction, protect it from adversaries and help build a viable exciting future. Just like bring up children, it is also exciting, rewarding and well worth the investment.
This article was first published in Your Business magazine.