(That Can Kill Your Business Before It Has the Chance To Take Off)
One of the most common mistakes entrepreneurs make that hurt their chances of making it long term is not understanding the value of marketing. They look at marketing as an expense, not a revenue channel and when their funds are tight because the business is new and not making a lot yet, it may feel like they can't afford to spend money on marketing. So, they try to do it themselves, or they only focus on the free marketing channels, or they flat out refuse to market their businesses.
If you want your business to thrive, not just survive but thrive and be able to pay you a good salary, long-term, you need to build a customer base, and in most instances, marketing is how you'll do that. With marketing, you should track your expenses (what you spend), and what you earn from that spend, so you know what your return on investment is for each marketing piece you do.
I went to a new restaurant in my area recently. It's in a strip mall area but buried back away from the road, without a sign that's visible from the street. It's been there months, and I keep forgetting to check it out. We were in the parking lot looking for somewhere to have lunch and I remembered it was there, so we checked Google Maps, and they had some pretty good reviews, so we thought, why not try. It's always good to support small businesses, and we are always looking for new options in our area. Had we not been in the parking lot, looking for somewhere to go to lunch, we probably wouldn't have ever tried the restaurant. It had been open for months, and I hadn't been there, and it's on the corner with the grocery store, so it's not far from my house at all. I drive past it to go to lunch regularly. Anyway.
The restaurant itself was nice. It lacked that "something special" that would make it stand out and would make you want to tell everyone you know about the place. My experience there wasn't so impressive that I want to book my next client lunch there or take a colleague. It's nice, but it felt pricey for what you got. Lunch for two was $35, and you ordered at the counter, got your drinks, and someone brought your food to you. In our area, it's normally under $25 for lunch for two in a quick service place. So, the price was a bit higher than average, but if the food or service is fantastic, we don't mind paying more. However, the food wasn't that great.
This isn't a restaurant review, but this is important background for what lies ahead with their marketing plans. This is where so many entrepreneurs and small business owners make a critical mistake.
One thing I noticed when we walked in, at 12:30 on a weekday afternoon, was that the restaurant was almost empty. There was one other gal there having a coffee and working on her laptop. Most the restaurants in our area are packed at lunch. Most have lines out to the door. This one didn't. It had three customers total, and that's not a business that's thriving.
My lunch companion started talking to the owner about business and asked how long they'd been open; he told him they'd been open a little more than six months. Seeing as the restaurant was pretty empty at lunch, he asked the owner how things were going, and he replied, "not very good."
At least he was realistic up to this point. He knew the business wasn't doing well. But, here's where the mistake comes in….
Since my lunch companion knows I run a marketing company in the area and help small business owners learn how to market their business the right way through Etched Marketing Academy, he tried to ask a little about the marketing without being obvious. I sat back because I'm not going to pitch myself if I sense someone isn't open to help. And this owner is not open to help. He asked how they were marketing the restaurant and the owner told him, "I don't believe in marketing." He's focused on word of mouth (which technically is a marketing channel but we'll let that go). He then told us that his food was so good and he used all-natural, high-quality ingredients; people couldn't get something this good anywhere else that all he needed was more time for people to find his restaurant.
He is counting on other people to build his business for him. He's not taking ownership of his marketing plan. And because of this, I don't think the restaurant will succeed. I suspect he'll be one of the 50% of small businesses that fail within the first five years.
Yes, word of mouth advertising can be very powerful and this restaurant does have some positive reviews on websites like Yelp, Google Map, and Facebook, however, that's not enough to sustain a business. Studies show a happy customer will tell 2-3 people about their experience. The day I was in there for lunch, there was one other customer. If she was elated and told three people, that's still not enough people to build a business and be profitable.
Word of mouth advertising should be PART of your marketing plan, not your entire plan. I understand the appeal of a free channel. I do. As a business owner myself, I'd love to build my business for free, but there's a reason the saying is you have to spend money to make money. It's true. Sure, there are unicorns out there who spent $30 and earned $5,000, but that's not normal. And I think a lot of small business owners fall into this same type trap that this one did. He was so convinced that his food was amazing that he wasn't looking at the situation realistically. It was lunchtime, and there were three people in his restaurant. Something isn't working.
With a local business, like a restaurant, there are so many ways you can market yourself to the community. One of the easiest and lowest revenue impact options is to support your community. Offer free dessert or kids' meal cards to your local schools or library for reward incentives for students. If kids receive a reward the parents are going to use it because the kids will be excited. I worked at a restaurant that did this when I was in college, and the $5 free kids coupon led to an increased average ticket price for the family. When they'd come in with the free kid's meal, the parents would order an appetizer or drinks or dessert or something else because the kid's meals were free. In the end, most would spend more than the cost of the kid's meal. Offering a simple incentive like this was great - it gave the school or library something to use to reward kids, and it brought the local community into our restaurant.
The restaurant I visited last week could offer a program like this and benefit quickly. They had a beautiful dessert case. They could easily offer a free dessert card for kids to the local schools and library (3 blocks away). They could sponsor local events, hand out flyers in the neighborhood, buy advertising space in the local paper (this works well and is significantly cheaper than buying in larger papers), etc. There are so many ways this business could be marketed to help it thrive. Unfortunately, this business owner depends entirely on one channel - word of mouth.
Even his website isn't helping. I went to check his site to see if it's optimized and it's not. They're making several of the most common SEO mistakes (want to know what they all are? Read this post), the website has Title Tags that aren't optimized and the same Meta Description is on every page, there are multiple Header 1 tags. Unfortunately, they're not helping Google know what they offer.
Marketing should be viewed as a revenue opportunity, not an expense. Yes, there are costs associated with marketing, however, if you track your efforts (ex. Have unique codes on your coupons so you know where your customers are coming from) you'll know which channels work for your business. Diversify. You wouldn't put your entire retirement savings into one single investment, right? You shouldn't count on one marketing channel to build your whole business.
If you are going to focus on word of mouth marketing, then you have to offer something that's exceptional or different or can't be found anywhere else. In this particular scenario, nothing was so amazing that I felt like I had to go back or had to tell someone about this restaurant. Conversely, I remember an employee coming into my office 3+ years ago and telling me about this amazing restaurant he'd taken his girlfriend to over the weekend and that my husband and I HAD to try it because we would love the place. And he was right. We made reservations and went to dinner, and the food was exquisite, the ambiance was romantic, the experience was different because they only offered two menu options, they had wine flights that paired perfectly with the meal courses, the service was exceptional. Everything was outstanding. I have recommended that restaurant to people many times since we went there. I always warn them that it's pricey. Dinner for two was around $300, I believe, but it was worth every penny. That's a word of mouth type business. In fact, they were recently voted one of the top 100 restaurants in America due in large part to so many glowing reviews.
How do you look at your business realistically to avoid making a mistake like this business owner is making? Know your audience, know your competition and be very realistic about how you stack up. Market your business using both free and paid channels. And always focus on exceptional customer service because word of mouth marketing does work, but it shouldn't ever be your ONLY marketing channel.