Presented for your consideration two very similar conversations.

The first never happened. (Well, technically, I did call a few friends and irritate them with the opening question).

The second most assuredly did.

Conversation #1:

Q: I think I need to cook. What should groceries cost me? 

A: Huh?

Q: What should I have to spend on groceries? I haven’t been cooking. I need to.

A: How in the world could you expect me to answer that? There are too many variables.

Q: I asked Bob. He said, “$200.”

A: Will you cook for yourself, or your family, or do you intend to have guests? How big is your family? How many guests? Will you cook one meal or several or all of them? What foods do your family like? How much variety is important to you? How do you feel about leftovers?

Q: You’re making this way too complicated. Just give me a number.

No one would take the “what will groceries cost?” question seriously. As ridiculous as it seems, though, the quite similar “what will it cost to advertise?” question is common.

The following exchange took place about a week ago between me and the absentee owner of a shop which sells handbags and accessories.

Conversation #2:

Q: I think I need to advertise. What should ads cost me? 

A: What?

Q: What should I have to spend on advertising my store? I haven’t run any ads in months. I need to.

A: I have no idea. There are too many variables.

Q: I asked Bingo Radio. They said “$1,000.”

A: Why do you think you need to advertise?

Q: Business is off a bit. I probably need to spend a few bucks to bring customers back to my store. I have an ad we used to run. I just want to know what it should cost.

A: How will you know that your ads are working?

Q: People will come in and sing my jingle to get a discount.

A: Has that worked for you in the past? Because I’ve never seen an audience react positively to “mention you heard this ad.”

Q: You’re making this way too complicated. Just give me a number.

There’s an old saying that a rising tide lifts all boats. Even the leaky ones. Even those which aren’t ship-shape. Even those which are too unsafe to be allowed out of port. The tide doesn’t care.

For the last couple of decades the financial tide has kept leaky, non-ship-shape, unsafe businesses afloat, too. Money has been cheap. Credit has been easy. And it seemed that anyone with an idea could find someone to finance it, purchase inventory, rent a location, and open for business. And as the financial tide kept rising, operators of these marginal businesses were able to sell enough to stay in business.

And why not? Money and credit were not only easily obtained by business, but also by shoppers who bought stuff they didn’t need with money they didn’t have, just because they could.

And now comes the reckoning.

Three years ago when the economy was robust the companies which did the best job of marketing themselves doubled or tripled in size. Today, phenomenally successful marketers are working to repeat last year’s sales. Most companies are shrinking. And too many small businesses don’t even have a marketing program.

For operators who understand the minds of customers, we now live in a time of great opportunity. The loss of sales volume across both retail and service industries has taken a corresponding toll on the media. Today’s advertising prices are a bargain. For the first time in my experience, even the price of your Yellow Pages ad is now negotiable.

But, a great price on an individual ad doesn’t include meaningful content for it’s message. Messages which pulled well two and three years ago aren’t working any more. And a bargain price on an ad which says nothing salient is a shameful waste of money. Today’s most important question isn’t “Where should I advertise,” it’s “What do I say?”

Our handbag shop owner has noticed that business is off. Fewer people are buying, and she suspects that “advertising” might solve her problem, but she has no understanding of how it works. In her ignorance she’s asking questions as silly as the “what do groceries cost?” dialog above. She has no plan. She doesn’t even have a goal. Worse yet, she doesn’t understand why either is necessary.

My prediction? She’ll waste a couple of grand trying to make customers do what she wants them to do, rather than providing what those customers want. Her store will fight to stay open through forth quarter of this year, hoping to pick up some big sales for Christmas. Those sales will not happen. Following a liquidation sale in January her store will close, permanently.

It’s not the bad operators that I worry about.

It’s the under capitalized, non-niched, owner operated small retail or service businesses. The companies which deliver real value for their customers, but haven’t created a marketable position for themselves.

Too many of these operators will effectively become twenty-first century sharecroppers. One hundred years ago they’d have borrowed the money for seed. They’d have planted, and prayed for rain. They’d have worked long, hard hours hoping for a large enough harvest and a market price that would allow them to sell their crop, pay back the loan, and have enough left to feed the family the coming winter.

In a number of conversations with small businesses over the last week the theme which keeps repeating is “I need working capital. I need to be able to purchase inventory.” Credit lines have dried up, and these operators are hurting. Not because they’re bad operators, but because the rules of the game have changed. Assuming they find new sources of capital, there will be limits on how much they can borrow and how quickly it must be repaid.

Get used to the new rules. We won’t be going back.

What can we expect from these new rules?

Every economic downturn shakes out the poseurs, wipes out the frauds, and toughens the survivors. A few will adapt to the new marketplace reality, and thrive.

Those who thrive are the operators who will learn which items to stock. They will meticulously keep an adequate inventory while simultaneously avoiding items which won’t quickly sell.

 

They’ll keep a close eye on customer count, perhaps in increments as small as fifteen minutes, in order to hold labor costs in check.

 

They’ll learn exactly who their customers are, and exactly what is important to them. Every advertising message will attract new customers and persuade existing customers to shop more.

Their companies will be smaller, leaner, and incredibly efficient. And their relationships with those customers will become much more personal.

Great companies are born of adversity. Are you ready for greatness? Shall we get started?

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Chuck McKay is a marketing consultant who helps customers discover you, and choose your business. Questions about effective advertising in this economy may be directed to [email protected]