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Customer Acquisition Cost

If someone were selling $100 bills for $50, would you need a budget to work out how many to get?

Marketing budgets CAN be this simple IF you can successfully test and measure results, and know that for a certain expenditure you will win a certain number of clients.  Naturally there is variability and changes over time, which menas you need to keep testing.

This is an article I contributed to Other Side Up on customer acquisition cost.

Customer Acquisition Cost OSU

The thing is, most businesses guess. Now, you HAVE to guess at some point in order to start (hopefully an educated guess). After that if you don’t measure and keep guessing, you might as well be gambling.

If you can’t stand the heat

If you’ve ever switched on the television mid-episode during Gordon Ramsay’s Kitchen Nightmares series you may have been taken aback by how terrible the @$#^%!-ing language was! It’s quite unusual for television – especially a commercial network and it really is remarkably terrible. In fact, a week after the first episode aired I read in the Sydney Morning Herald that it had been one of the most complained about programs on television – ever. It has even prompted a parliamentary inquiry into profanity on television.

So you wouldn’t watch Kitchen Nightmares for the culture and refinement and you certainly wouldn’t watch it for advice on staff management techniques … having never worked in the industry, I can only wonder if real kitchens are actually that horrible to work in. I find it difficult to believe that they could possibly be – who would want to work in a place where people use swearing at each other as a motivational tool? So why would you watch? Well, what I like about the show – and the reason I continue to watch it – is that it is essentially a makeover show. Simply put, Ramsay rides into town to fix an ailing restaurant. Sometimes these are in exquisitely beautiful locations, small towns in the English countryside that hark back to Elizabethan times – with owners and staff whose attitudes match the antiquity of their surroundings. Sometimes the buildings are ramshackle disasters, but the staff are keen to please, yet sadly clueless. Or in denial. Or both. There are surprisingly few alterations to the general scenario – there are only so many ways in which you can break a restaurant.

But while things may look completely and irretrievably disastrous, a handful of tools, some clever techniques and a whole heap of willingness to make it happen will get almost any business out of trouble. And Ramsay knows it.

It’s really very simple. If you saw Pulp Fiction, you’ll remember Mr Wolf (played by Harvey Keitel). Mr Wolf was ‘the fixer’ – he provided clarity while those around him just muddled along. His instructions to clean up a bloodied car were simple, succinct and effective – ‘You two, take those cleaning products and clean the inside of the car’. Brain surgery, it’s not. But it is relative genius. Ramsay’s style is ever reminiscent of Keitel’s character, whose standpoint is, ‘I’m not here to say please. I am here to tell you what to do and if self-preservation is an instinct you possess you’d better @%$#@&-ing do it and quick! I am here to help’.

Ramsay works in a similar way. He sends someone off to get towels and someone else to get cleaners … and in some cases, someone to get a stomach pump after he realises that he has eaten food that was prepared in the kitchen he’s in. He swears and shouts and it’s all done to get people to focus and change. He challenges them in the most confronting way, makes them realise that they need to change (even if only to stop the shouting).

Gordon Ramsay’s toolbox isn’t that big, yet he manages to do what he does (fix businesses) nine times out of ten.

But why? What are these powerful tools that Ramsay uses to fix the delinquents of the restaurant world? Here’s what I think …

Focus and simplicity – in one episode there was a place in New York that offered authentic Indian ‘cuisine’ and was also a steakhouse. Talk about an identity crisis. Trying to be all things to all people, they ended up confusing everyone and being nothing. There was another Indian restaurant that had a ‘build your own’ menu because they were worried that customers would be unhappy with set choices. Diners could mix whatever ingredients they wanted with whatever flavour they wanted and then decide how much heat it should have. So people could (in theory) order a mild chicken vindaloo. Ever seen that on an ‘authentic’ Indian menu? Me neither. This menu mayhem meant that the kitchen needed to be on permanent alert to prepare just about anything and the inefficiency and wastage was incredible. Gordon intervened, cleaned the place up and with the help of a world-class Indian chef introduced a simple menu with about a dozen truly authentic signature dishes. And guess what? The customers loved it.

Operations – Gordon went back to basics, instituting the basics of hygiene and sensible traffic flow through kitchen and dining room. The results were far greater food quality and increased customer service satisfaction. Everyone knew where they were meant to be and what they were meant to be doing.

Promotion
– with a big (and ugly) neon sign out front, the owners assumed that people would just find them. A major problem with many businesses is a lack of self-promotion. Word of mouth is great, but you have to promote yourself first, so people get to know you and can talk about you. Gordon had the staff out in the streets in traditional dress handing out free samples and great offers, inviting people to a grand re-opening. People came in droves. Oh, and knowing a stack of celebrities probably doesn’t’ hurt either.

Teamwork – too many chiefs and not enough Indians (excuse the pun!). With so many people in charge, there were very few people doing the actual work and everyone had someone else in charge to blame for anything that went wrong. Convenient for covering your butt with the boss, but not so great for keeping a business going.

Definition of leadership – you need to have clear direction from the top and know who’s in charge. In Gordo’s case, who shouts the loudest wins.

Passion – passion is the driving force that gets people out of bed every day. If you’re not passionate about what you do, you’ll never be happy no matter how good you are at it or how well it pays. Without passion, you are merely existing, not living.

So his formula is simple, but not always easy. Knowing what to do and actually doing it are two vastly different things. Some of the restaurants Ramsay fixes revert back to their old ways, some find the pressure too much and close their doors for good (and often for the good of the community palate as well). But invariably, those who make the decision to stick with the plan are successful.

Interestingly, as you watch the show it’s easy to sit there and think, ‘I could have told them that’. And probably you could. Because it’s the outsider’s perspective that matters. It’s why coaches can have some quick wins with new clients. And if you look at what gets in the way of success, it’s always the same things – holding onto the past, not considering the clients’ perspective, ignoring profitability, clinging to complexity, fostering confusion and having poor operations.

If your business could do with a boost, why not give yourself a Ramsay makeover? Take a look at your menu (your business offering), your kitchen (operations), your tables and windows (marketing) and see if people are licking their plates clean in satisfaction or walking out in disgust and going to McDonalds.

Did Gordon Ramsay set out to create a business makeover show? Hell yes! Restaurants are serious business and a lot of hard work. It’s no wonder they fail just like other businesses, and more often than not for the same reasons. Whether you sell food, spanners, books or bikes, the principles of business are the same. The reason Gordon is so good at what he does is because he is absolutely, utterly and totally passionate about it. Are you as passionate about your business?

So if you haven’t wandered into a Kitchen Nightmares episode yet, give it a shot. Watch it (making sure the kids are in bed and asleep so that they don’t pick up any critiquing tips from the master of the ‘f’ bomb) and see how his principles could apply in your business. Even if you already watch it, take another look.

Then take a tip from the man himself and do something. It’s easy to get overwhelmed at the enormity of the prospect of fixing your entire business … and it’s easier to just do nothing while you quietly slip into oblivion. But what would happen if you looked at just 20 per cent of your business? Take a look at what isn’t doing so well and start by changing that. Your business doesn’t have to be failing for this to be and important exercise that will boost your revenue. I’ve never, ever, ever come across a business owner who would complain about their business doing better.

And you don’t have to be as ‘in your face’ as Gordon – you can do it without swearing, shouting, ranting, raving or bullying. But you do need to be brutally honest. The weird thing is that despite the heated moments, abrupt attitude and often offensive techniques that Ramsay employs, everyone thanks him profusely at the end of the show. Because although he is rude and bullying, his heart really is in the right place and his passion shines through. He really wants to help people become successful – and in the interests of self-preservation, you’d better get on board!

Creative Guarantees

Here is a great site that I came across with a really creative guarantee.
This is funny… I love wording of this guarantee : “If it’s obviously been worn about, or washed, or has a chilli stain on it, we’re keeping your money”

http://200nipples.com/fabulously-interesting-policies.php

Even the FAQ section is fun to read.

The company name is great too – batches of 100 shirts – hence the “200nipples” name… yeah, took me a while… a lightbulb went off one day when I was telling someone about the site . Mid sentence… “and I don’t know why it is called 200 nipples… ah, now I get it”

The other day I spoke to a client who told me that all marketing activities had been put on hold because of decreased sales, and an enforced ‘tightening of belts’. Their market was buying less of their product (packaging) because consumers were buying less of the stuff their packaging packaged.

Seems reasonable, on the surface.

But then I thought about it a bit more … what is the assumption here? The logic is simple enough:

1. We are selling less
2. We are making less profit
3. Therefore marketing departments are ‘given’ less to spend on marketing (which, ironically, is what will be the most effective way to increase sales)

Inherent in this is the belief that a marketing budget is a resultant cost (a figure derived from profit that could then be used as something to spend) rather than a necessary business expense that must be met regardless of performance.

So why doesn’t marketing automatically deserve money?

Marketing should be an investment in promoting your key benefits and message to you market – it is a driver for increasing sales. So, excluding the idea that you run marketing exercises merely to boost the charity fund of the advertising agents, radio stations, printers, and promotional products companies of the world …  a properly run, strategic marketing campaign should give back more than you put into it.

Of course, you can’t always measure every campaign … but assuming that you have some kind of feel for ‘payoff’, you should have a fair notion of whether what you’re doing right now is working for you or not.

And if you don’t know what’s working or not, then how do you know how important what you’re doing right now is to your current position? Simply put, if you ditch your marketing in a time of decreased business activity, is it going to lead to no business activity? If your marketing is entirely responsible for the business you’re doing right now, what will happen if you get rid of it?

If your current marketing activity offers a payoff, then a shrinking market is more reason to keep actively marketing. You may need to tweak your mix, create more measurable marketing activities or even create marketing activities that offer extreme short-term benefits, but if something is working in essence, then why on Earth would you stop it altogether?

So instead of automatically cutting your marketing activities during times of decreased business, take the time to think outside the box and consider different marketing options instead. Remember that marketing does not have to be expensive to work!

Keeping your marketing alive might just be the best business decision you make all year, and anything that keeps you going while the competition slowly disappears is worth the effort, isn’t it?

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