Tomicide Solutions, April 2011

10 Common IT Client Acquisition Misconceptions

By Tom "Bald Dog" Varjan

Are you telling me the Russians are lacking creativity? No they don't.

Then just look at what happened in July 2010 on a beach on the Sea of Azov in the Cossack village of Golubitskaya in the Krasnodar region.

As an impromptu advertising campaign, the entrepreneurial owners of the local parasailing company attached a donkey to a parasail and started pulling it with a speedboat.

All they wanted to achieve was to attract more people to the beach, so more people indulge in some parasailing. Well, that would have made good money for those folks.

Of course, as the terrified donkey started circling over the heads of the flabbergasted sunbathing holidaymakers, it started its unique symphony of blood-curling screams.

But the holidaymakers, instead of calling the cops, grabbed their cameras and started filming the poor donkey's horrific ordeal.

Eventually the donkey landed in a rather atrocious way by being pulled at high speed in the water.

At the end of the event, the donkey was taken away for medical treatment, and the owners of the parasailing company were handcuffed and taken away by the cops.

As Larisa Tuchkova, a spokeswoman to the local police later commented...

"The donkey screamed and children cried, and no-one had the brains to call police."

It seems those parasailing guys had some misconceptions about acquiring clients just as so many IT business owners do.

And it seems most of them don't have the brains to recognise that what they're doing is not working. They're doing it because the competition is doing it.

And this is social proof at its best.

"If they are doing it, it must be all right. So we'll do it too."

And based on this social proof nonsense, some of the most idiotic books end up on the New York Times bestseller list. Their authors basically give away truckloads of copies, so the books become "successful".

The other day, I received a copy of a new book from one of the Internet Marketing gurus. He had a pre-release offer, so I had to pay only for shipping. So, I thought, let's see.

And then I saw it.

It's all fluff and bullshit, but it had become a New York Times bestseller even before its official release.

Maybe we should stay away from bestselling books.

The funny thing is that the more guru bestsellers are published and purchased, the more businesses go to the wall...

Anyway, back to parasailing...

And while the parasailing entrepreneurs thought that some outlandish image marketing would flood their business with clients, many IT business owners think that by replacing time-tested principles with silver bullets and magic potions, they can get ahead of their competitors. In the sort-term it may work, but in the long-run it's doomed.

Many IT companies treat planned and consistent client acquisition as a "when-I-get-around-one-day" issue. This behaviour is fuelled by the mistaken belief that if businesses build better mousetraps, then the buyers will beat paths to their doors and want to exchange their hard-earned money for whatever doohickies those companies are selling.

And when it doesn't happen, they blame the government, the tides of the seas and other fiendish circumstances.

Well, it won't happen. Every single sale is the result of consistent marketing. So, let's see here some common and costly business development blunders.

1. Advertising Is Just A Waste Of Time, And A Euphemism For Flushing Money Down In The Toilet

There is nothing wrong with advertising as a process. When it is done correctly, it works like magic. The problem is that most IT companies try to convert prospects into paying clients at the very first encounter. That is retarded. It is the same as trying to bed your date at the first meeting. Yes, it happens, but it also speaks pretty loudly about the virtues of both people.

Oh, and if your date agrees to go to bed at the first meeting, then you'd better run. This is the equivalent of prospects who invite you to meetings on the very first cold call. Those prospects always mean trouble down the road.

When is advertising a waste of time?

If the advertisers don't know what they're doing.

This is a problem because those who make the biggest advertising blunders scream the loudest that they are really good at advertising and that any idiot can do advertising anyway.

I've heard IT - usually very small - business owners yell at me...

"Son, I was already in business when you were a mere strategic plan in your father's trousers, so, there is nothing you could ever tell me about marketing that I don't know at least a million times better."

This is usually the business owner's last proclamation before declaring bankruptcy. Well, maybe some knowledge was missing.

However, when business owners have no earthly idea of how to write advertising copy, how to negotiate deals for ads and how to position ads in publications, then it is really a waste of money and to do any advertising. But just because you cannot sail a ship, I can't say that ships are a stupid idea for transportation.

2. Everybody Knows Us, So Let's Save Our Client Acquisition Budget

Is it fair to say that everyone knows Nike, Coke or IBM? They are some of the best-known brands. Yet, they invest serious amounts of money in marketing and advertising. Why? To keep themselves in the forefront of their markets.

Now, how known is your business in comparison to IBM or Coke? What would happen if IBM relaxed on the marketing activities? If Microsoft relaxed, then the open-source community would take over. If Nike relaxed, Adidas would take over. If IBM relaxed, then Apple would take over.

How many competitors do you have that would like to see you dead and buried? Harsh question, but think about it? Do you really think you are the one and only choice for your clients and customers? If they can solve their problems without your help right now - and they can (stop arguing!) - then what is your chance of being selected from the endless ocean of competitors? I could say, not a sausage, but maybe a tiny bit more. But not much.

And being merely known means nothing. I know Coke, McDonald's, Folgers or Marlboro.

But I'm a lifetime non-smoker who hates even the smell of coffee or coloured and carbonated sugared water and who rather dies than eats any kind of McDonald's McCrap.

So, regardless of how well I know those brands, I will never become their consumers.

You have to do a bit more than being known. And this is where education-based direct response marketing comes in.

Yes, it's true that only about 3% of your prospects are ready to buy, but it's also true that the sweetest deals come from those prospects who are not yet ready to buy. It means that for the other 97% you can establish your company as the respected industrial authority using education-based direct response marketing.

It's not free, not even ridiculously cheap, but it depends on what you're looking for: Low cost or high return. It's ideal for high return.

3. Our Sales People Do Their Own Prospecting

This is a rather popular but brain-dead approach.

Mr. Richard (Dick) Head, the president of Dumbass Inc. decides to "save" his marketing budget by condemning his sales people to pound pavement and dial for dollars in order to make their monthly quotas (another idiotic concept). So, the salespeople spend some 70% of their time on prospecting and only 30% on selling. And a big chunk of that 30% is spent on paperwork, unnecessary meetings and other busywork minutia.

I find it interesting that so many ads for salespeople specify...

"You must not take no for an answer. You must be able to handle rejection and verbal abuse from prospects, and keep on keeping on until they buy."

In my view, this is the perfect description of a serial rapist. Mind, you while the outcomes are slightly different, the process of traditional sales and date rape are suspiciously similar.

Step 1: Set up a meeting with the selected victim by playing down on your real intentions.

Step 2: Meet the selected victim and bring out your big guns to get what you want.

Now, by spending the 70% of their time on real selling, that is, interacting with prospects who are pre-interested, pre-motivated, pre-qualified and pre-disposed to do business with you if your company can fulfil their buying criteria, supported by an effective marketing system, salespeople could easily make more than enough money to cover the company's lead generation, but Mr. Head is such a narrow-minded and short-term focused charismatic cantankerous curmudgeon, that he focuses on how much he can "save" regardless of what opportunities he loses.

So, he keeps losing.

And what is the result? Within a year, 42% of the sales force disappears, taking some clients with then and spreading the negative word about Mr. Head and his retarded drudgery joint.

Salespeople can sell and love selling, but hate prospecting. You must provide them good leads if you want to benefit from their full performance. They can only perform in the right environment, but in an environment where they have to hunt for each and every lead, they won't be able to operate at their best. And sooner or later they just leave, forcing you to start hunting for some new salespeople. And that's a pretty costly way of running a business.

4. Direct Mail Is Just Junk Mail

It depends on the sender. If you send junk, it is regarded as junk mail. If you send something relevant and valuable, then it is not junk. Granted, not everyone will respond to it, but it is still not junk. Hey, just because you turn down the waitress' offer for one more cup of coffee, it doesn't mean she is offering rubbish. Well, only slowly-killing poison, but it is socially acceptable. You have just made a conscious decision that you don't want more coffee.

It is up to you if you send trash or treasure. Again, just because many IT companies don't know how to conduct effective direct mail campaigns, and are too stingy to hire someone who can, the method itself is still valid and wildly successful.

The fact is that good mail gets opened, read and in many cases responded to. Secretly, sneak your and some of your close friends' names and addresses into the database, and upon arrival, see how you and your friends respond to the mail piece. You may be shocked when you see what your company sends out.

5. Relying On Word Of Mouth Only

Imagine a guy who wants to date. But instead of going out and making connections with new potential dates personally, he relies on his previous dates' introducing him to new women. So a date from 15 years ago introduces him to a friend of hers, saying...

"You must meet this guy. He is the best-looking dude in town and he's amazing in bed."

But by now our hero has become a fat, chain-smoking slob who smells like vacuum cleaner's armpits. On the top of all this his hair is halfway gone. So, when he meets her, she runs away hysterically screaming for her mother.

Now imagine this in business...

"She is an amazing bookkeeper, and her rates are only $45 per hour."

But by now - 15 years later - she is a chartered accountant, charging $220 per hour. But this potential referral expects her to work for $45 an hour. None of those word of mouth people will do business with you due to the shock that your fees cause.

Word of mouth is only one component of your marketing. Why would you make other people solely responsible for your success in business? Why do you ever want to depend on other people's opinions of you?

Yes word of mouth is great but it also creates dependency. It's something we can't control, so it's vital that we have something else in place too to bring us business.

6. The Media Ignores Us Anyway, So Why Play The Media Game?

Why do you think this is the case? Just read the "News" section on most IT companies' websites. It's all about blatant self-aggrandisement about number of awards they managed to conjure up or other trivia or that the president of the company is a New York Times bestseller author. I mean it's important to the company, but not for the market.

Would you want to read about other people's drumming on their own chests, shouting...

"We are the best, we are the nicest?"

And retarded buzzwords like "quality", "integrity" and "service". Who the cricket cares about such platitudes?

If you want to work with the media, then you have to have something worthwhile to say above and beyond empty chest pounding. There can be many things in your company that are actually relevant to your target market, thus could be published in trade publications.

I would encourage you to stay away from general newspapers. It's the general public that reads general newspapers, but in the long run you're better off with very targeted media efforts. You get better return on your investment.

After the publication, let's look at the topics...

Looking at things from the same perspective always produces the same results. So, if your current, maybe somewhat self-centred, media appearances don't produce the desired results, then change the approach and switch to something more client-centred.

Instead of writing about what your company does or what's happening inside your company, write about what your target market and specific clients have achieved as a result of doing business with your company, that is, the impact (value!) your company creates outside itself.

Put yourself into your prospects' shoes. What would you be looking for? Information on sellers or information that is relevant to the issues you're grappling with on a daily basis. I reckon it's the latter.

If you offer them that kind of relevant information, then media will start paying attention to your company. It's a combination of good information presented through good copy. That's all really.

7. We Are Just A Small Company. Marketing Is For Giants

The other side of this sad story is that we are just a small company, and making a profit is only for giants. Small companies are supposed to merely scrape by and barely stay out of bankruptcy courts.

It's like saying that education is only for educated people or physical exercise is only for fir people.

Yes but if we realise that we can't get into Ph.D. school straight from kindergarten, we also understand that there must be a starting point. You have to start taking your message to the market on a small scale first and then tweaking it forever.

But not in a "spaghetti marketing" style that you throw a huge marketing budget to the wall, and whatever happens, happens. And if not enough sticks to the wall and produces results, next year you'll throw more. Let's give that privilege to the giants.

Former Apple marketer, Guy Kawasaki has made a comment about this lunacy of wasting money on chasing after the market...

"If you have more money than brains, you should focus on outbound marketing (chasing after the market). But if you have more brains than money, you should focus on inbound marketing (magnetically attracting the market)."

Also, once all large companies started out small companies, and as a result of good marketing and business development, they gradually have become large companies.

Marketing is a business function, just like accounting or even cleaning the toilets on your premises. These functions have nothing to do with the size of the company. They just must be done.

But without constant marketing, you will never be able to become a big company. And by big I mean blazingly profitable not merely big in headcount.

Many owners of smaller IT companies, driven by this "Marketing is for giants" notion, end up spending their lives spinning their wheels and throwing more and more sand into their eyes making their visions more and more blurry and their journeys more and more painful. Imagine marketing and sales as a continuum. Marketing is the process of building momentum which "climaxes" at the point of landing new clients and then building those transactions into long-lasting mutually beneficial relationships.

Also, let's remember the words of Peter Drucker in

Management: Tasks, Responsibilities, Practices (1974)...

"There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product and service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available; i.e., logistics rather than salesmanship, and statistical distribution rather than promotion."

And although I've been repeatedly beaten up on sales forums for the above comment, I still maintain that that you're better off (in terms of profits, brand recognition, etc.) by beefing up your marketing than merely hiring more salespeople.

8. For Our Target Market Price Is The Most Important Factor

It is, if this is what your marketing messages and your people communicate. Then your market positions you accordingly. If you promote low price, you are expected to become an "economic alternative". The market judges your company on price, which can lead to problems down the road.

By contrast, if you promote value, then your market positions and brands you through that value as a premium calibre company. I've read some studies over the years that indicate that only about 6% of all lost sales are lost on price. And most of the other 94% is lost on the salesperson's incompetence.

And by incompetence I also mean to be a typical salesperson. Today buyers don't want to talk to salespeople. They want to talk to subject matter experts with industry-specific business savvy.

So, if your target market is retail stores, you'd better be intimately familiar with the retail industry's key performance indicators, like, sales per square foot, sales per hour or time spent in the store. These are the terms retail executives use in the boardroom.

And in order to meet boardroom dwellers, we have to speak their language.

Instead of dropping your prices, tweak your lead generation system to screen out price shoppers. Hint: Price conscious people don't buy Ferraris. And those who buy Ferraris, don't expect low prices.

Instead of thinking about discounts, think about how you can improve the way of presenting the value of your solutions.

9. Our Sales Are Already Growing. Why Waste Money In Marketing?

This comment reminds me of the last words of General John Sedgwick at the battle of Spotsylvania in 1864...

"They couldn't hit an elephant at this dist..."

...the general boasted. Before finishing his sentence, a Confederate sharpshooter's bullet caught him in the left eye, and the Union Army soon had a very dead general "Uncle" John Sedgewick to deal with. He was the highest ranking Union general to be killed in the war.

The nub: Bragging is not a good idea.

Your sales are for now. Marketing is about investing in the future, making sure that your sales keep growing. Marketing today will create the steady stream of clients tomorrow.

But look at what most IT companies do. In order to increase sales they hire armies of salespeople (with the average annual attrition of 42%), and then with no or barely minimum subject matter expertise and business savvy, these salespeople go out cold calling, pounding pavements and breaking through "No solicitors" signs to make their quotas. Then they get burnt out or just plain pissed off because there is no support from the company, only retarded demands, so they leave for the competition.

So, while most IT companies can say their sales are increasing as the years go by, only a handful can say that their net margins (or even better: net margin per employee) are increasing. In spite of the great management fads, most IT companies' existing performance is a far cry from their potentials.

Never mind whether or not your sales are growing. Are your profits growing? This is the question here. How much of what you make can you actually keep.

10. We Know Where Our Potential Clients Are

Business development folks must be 100% certain about who exactly your potential clients are. However, as the market changes, it's important to keep pace with those changes.

Unfortunately, only very few IT companies do that. And this can be your advantage.

Create an Perfect Client profile (both perfect company and perfect buyer profile), including demographic, psychographic and maybe even technographic (general technical aptitude) profile on clients.

And here I also have to warn you about marketing research. You have to consider two major factors.

One is the Hawthorne effect, which basically states that people behave differently when being observed or surveyed. In surveys, they may tell you how much they are interested in your stuff, but when push comes to shove, they are even more interested in keeping their money instead of investing it in your stuff.

The other is the Participative Universe principle, which says that researchers find what they are looking for.

Think of Kentucky Fried Chicken's research in the 90s. Researchers concluded that there was high demand for healthy, low calorie food options. According to research, people wanted it. Realistically people wanted quantity, not quality. The plan failed miserably.

Other example...

In 1943, Thomas Watson, the then-chairman of IBM spent a small fortune on hiring a prestigious consulting firm to research the computer market. The firm concluded that there was a market "maybe only for a few computers." Now we know better.

Yes, erring is human, but erring so much is research.

Most people in my clients' marketing departments spend the majority of their time observing their markets and learning more about them. They read their trade publications and attend their conferences.

And as their sales departments are shrinking, which is a good sign, their marketing departments are growing. And marketing's jobs are observing the market and creating unique and valuable content for their changing markets. And it seems to work.

So, instead of wasting your time and money on excessive research, just observe and pay attention what's happening in your market. Take hard evidence with a grain of salt, and pay more attention to soft evidence. Remember, soft evidence is from the real world, whereas hard evidence is merely hypothetical or documented academic mish-mash.

Let's consider this baby...

We know that people are getting more and more allergic to receiving cold calls. Yes, I've seen some recent research documents indicating that buyers are more and more receptive top receiving cold calls.

Now, is it "more allergic" or "more receptive"?

No matter what the research says, we know the answer is more allergic.

And we can toss the research.

Summary

As you can see, client acquisition/retention is an important cornerstone of successful IT businesses.

Many business owners ignore it, even when they realise that the alternative is sheer backbreaking grunt work selling. Their people end up pounding pavements and dialling for dollars.

Hell, you have to sell your stuff either way to turn it into money, but when you have an automated business development system, then you can sell more stuff at higher margins and with fewer staff and with less effort and money wasted.

There are three ways we can increase sales... in order of importance...

Increase the profit generated from each client - Higher fees and prices

Increase your lead to sale conversion rate - More new clients

Increase The number of sales leads generated - More new prospects

#1 gives you higher margins. #2 gives you more clients. #3 gives you more prospects and the most headaches.

Yet, most IT companies focus on prospecting to create more interest. But a large part of the interest comes from tyre-kickers.

One more point: The earlier in the buying cycle you connect with buyers, the longer the cycle will be, but the more those buyers are willing to pay for the solution.

Consider the three stages of the buying cycle...

In the early stage buyers know the symptoms they're suffering from, and are looking for solutions. They are in education mode, and are open to listening to experts. They are open to considering several feasible options to solve their problems. And they are willing to consume huge amounts of relevant and valuable information.

In the middle stage buyers have their eyes on certain solutions but they are still pretty flexible to look at other compelling options. But they are no longer willing to plough through reams of documents no matter how relevant the information is.

In the late "right now" stage buyers are ready to buy. This is about 3% of the market. They have their purchase orders approved and signed, budget allocated. By the time buyers reach this stage, they've become very narrow-minded. They are cock-sure of their choices and now they are looking for the biggest bang for their bucks. In many cases the lowest price. They issue RFPs, and let the bidding madness start. Many of them also want to see obscene amounts of references and testimonials.

So, using education-based direct response marketing, the sooner you connect with buyers in their buying cycles, the higher margin you'll make.

And that requires smarter marketing not just more salespeople pounding pavements and dialling for dollars.

Otherwise you can easily become just another sales...

What do you think?

Running a business is not about martyrdom. It should be a form of self-actualisation, just as we've learnt it from good ol' Abraham (Maslow).

Come and let's discuss this newsletter issue on my blog...

Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.