Marketing: A Case Study
Posted on February 8, 2008 - Filed Under Business |
Concept: Marketing is about enhancing the customer experience.
No, that is not a definition nor is it an attempt to explain what marketing exactly is. It is, however, an idea or a role that marketing plays in a business.
Kenric’s exploits with his on-line business has garnered a lot of my
attention. In his recent post, he talked about the decline in sales since the
beginning of the year. His solution to the problem was straight-up (as
in martini) marketing.
Case Study
Each day, Kenric spends a certain amount of money on Google Adwords.
Let’s assume it’s $20/day. And from that, let us also assume he gets 20 click-thrus (potential clients) which
in turn generates one customer (someone who purchased). The conversion ratio is 20:1.
His objective: decrease that ratio.
Simpletons such as myself would think "Well, if $20 nets me one
customer than it’s possible that $40 will get me two customers!" This is where the lack of understanding between marketing and sales/advertising is displayed.
Following that line of thought, the amount of money spent on Google Adwords has now doubled to $40 per day. But
there is no guarantee that $40 will net me two customers. It’s more
possible that the ratio will become 40:1 which is moving in the wrong
direction. Increasing the amount of advertising is not the same as increasing the marketing aspect.
Enhancing the Customer Experience
Kenric decides instead to offer free shipping. This is a cost to
him of $10 per unit (assuming UPS ground). He still spends $20/day in
Google Adwords. But his prospect to client ratio changes to 20:2 (or
10:1 for the anal engineer types).
Now one could argue "Yeah but offering free shipping is no guarantee of gaining another customer!"
You’re right. Kenric’s idea has two large benefits over doubling the advertising budget. First he gives the customer something immediately (free shipping). Second it doesn’t cost
him 1 dime until somebody buys a product. If he had doubled his advertising, he
would have spent an additional $20 and probably gained nothing.
This is why I’m not a marketing consultant.
Summary
The idea exercised here is about enhancing the customer experience. For this model, Kenric offered his customer a new deal: “I’ll pay for you to receive and enjoy this product”
For this case: this shoots down the idea that small business owner’s can’t afford to do marketing. In this case study: no money is spent until money is made. That’s the idea.
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My mentor and I spent some time this morning, talking about the business meeting.
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Cliff, thanks for the mention. On another note, free shipping was for the month of January only. It’s now back to regular shipping. Although free shipping worked, I feel that I had to switch back as I said I would. Else it wouldn’t be a limited time offer.
I see some stores that have items on sale perpetually. They really aren’t on sale then are they? I’m not sure which method works better though. My sale items are for limited times only.