Sales versus Marketing - different roles but the same goal

The two most essential elements for a business to create profit is sales and marketing.  It's key the two complements each other.  But often, they do not.  There is a lot of underlying conflict between the different orientations of sales and marketing.

Welcome to week seventeen of 50 Weeks of Marketing. This week we will explore the differences and similarities between sales and marketing, and how businesses can ensure these two processes do not contradict each other’s goals and instead, work for the common goal of profit.

50 Weeks of Marketing helps business owners to learn more about the foundations of marketing.

Sales Versus Marketing

Sales refer to the actions and activities of selling of goods and services, and a sales plan outlines the actions, tools, and resources required to reach your sales targets. Marketing is the process of putting your product or service in front of the people most likely to purchase it. A marketing plan outlines products, the price, what customers to target and the channels a chosen to best communicate with this target audience. There is some overlap, but they are two vastly different processes. 

“Marketing and sales are very often separate departments in organizational reality.” (Homburg & Jensen, 2007)

Isn’t marketing and sales the same thing?

Many people seem to assume that sales and marketing are one and the same. And if you are good at one, then you are probably going to be good at the other. In my experience, this could not be further from the truth. 

It is a completely different mindset and set of skills. The best salespeople I met whilst working in real estate (I am talking top 5 in the country) did not understand how marketing works. But they were always on the phone and were great at establishing and maintaining relationships. There were certain scripts they followed on phone calls. The best marketers would prefer to be sitting around, brainstorming ideas for content or talk about the positioning strategy of a random potato chips  brand —  they have no desire to get on the phone and cold call a sales prospect.

The biggest carryover besides trying to establish relationships — although both departments often do this in vastly diverse ways.

“Marketing has been characterized as more long-term oriented and sales as more short-term oriented, marketing as oriented toward products and sales as oriented toward customer relationships.” (Homburg & Jensen, 2007).

An analogy I like to use to explain the difference between sales and marketing is fishing. The goal of marketing is to throw a net out wide, to catch as many fish as possible. The goal of sales is to convert each of these leads, so I like to think of it as a fisherperson killing the fish when it is in their grasp, instead of letting it wriggle away and escape. The best salespeople can be ruthless!

The conflict between sales and marketing One of the biggest contrasts between sales and marketing is that marketing has traditionally focused on products, while sales focus on customers. Product focused marketing is based on planning and performance evaluations, where a customer focus is instead on forming and maintaining relationships.

An example of a time when the two approaches clash is when marketing want to remove and replace an unprofitable product, but sales want to keep the product as it is a good anchor product to start conversations and then try and upsell customers to another option.

“Intrafunctional conflict within marketing was a more important topic than we had expected. The most frequently discussed issue was the conflict between sales and marketing.” (Montgomery & Webster, 1997)

Many large businesses overestimate the influence their sales team has on revenue and can employ 10 or even 20 sales reps for every one marketer. It is even a common strategy for businesses to outsource marketing instead of doing it inhouse. In contrast, it is highly uncommon to outsource a sales team. Business often sees Marketing as an expense, where it should sit alongside a sales team and considered an investment. Like sales, marketing brings in revenue and performance can be measured to ensure an ROI. 

This lack of balance can bring resentment from marketers, contributing to the ongoing conflict. 

Some of the major contrasts between sales and marketing are: 

• Marketing is trying to reach as many people as possible. Sales focus on one-to-one conversations. 
• Marketing focuses on the big picture of the brand reputation. Sales focus on building and nurturing relationships.
• Marketing has a long-term focus, requiring extensive planning to make each decision in the chain to give the customer what they want. Sales are short-term focused with targets, often requires immediate action, initiative and negotiation.
• Marketing analyses mass amounts of data to review the average results and customer expectations. Sales deals with the unique characteristics of each customer and their desires. It cannot be averaged or quantified.  Each deal is different and it is a skill a classroom cannot teach.

“Salespeople accuse marketers of being out of touch with what customers really want… Marketers insist that salespeople focus… on individual customers and short-term sales at the expensive of longer-term profits. Poor coordination between the two teams… increases the cost of sales.” (Kotler, Rackham & Krishnaswamy, 2006)

Sales

The sales process begins once a business has generated a customer lead. Then the sales team or process help that prospect move through their purchase decision. For example, if an advertisement got someone to visit a store, sales take over from there. Salespeople are responsible for managing customer relationships and solving their unique problem, resulting in a sale. Sales generate revenue. It is the bottom line.

In some cases, the sales team could uncover that lead through their prospecting, cold calling for example. Sales are very target focused and the process is driven to maximise the chance of converting a lead into a sale. A sales team will have a quota and volume goals, usually a target measured over a brief period such as a month or a quarter. 

Businesses often give bonuses as rewards to salespeople for reaching and surpassing targets. These incentivise the team to work hard and help the company reach its primary goals.

In sales, you’re often face-to-face with a customer (But it could be over the phone, or via email), trying to convince them to buy your product or upsell them to a more profitable product or service… “would you like fries with that?”

Great salespeople are key to the success of a business. They are good with creating rapport with people and thinking on their feet to provide a solution to any uncertainty. It is their job to reassure purchasers and give them peace of mind in their product or services with satisfying their requirements. Thus, resulting in a sale and ideally, repeat business.

Sales strategies include:

• One-on-one meetings 
• Cold calling
• Networking 
• Business events such as expos or conferences
• Sales presentations 
• Direct sales 
• Business cards
• Loyalty discounts
• Abandoned cart emails 
• Price negotiation 

Marketing 

Marketing promotes a brand as much as it does an individual product. Marketing encompasses the strategy and all activities that create interest and increase awareness of your brand and what you offer. 

Traditionally this meant using advertising to get your product in front of your target demographics. Now there are far more ways a business can reach and attract potential customers. Now the goal as marketers is to provide content that drives people to your website, and once they are, educating them about your offerings. 

Marketing strategy involves the collection of decisions to reach as many people as possible and to make your offering attractive against alternatives from competitors. Marketers use market research and analysis to gather knowledge better understand the interests of potential customers, to offer them the best solution. This market understanding gives businesses direction on products to make, who to sell to, what these customers want, and the competition. 

Marketing distinguishes the product from competition by choosing strategies such as where to sell the product, price, and packaging. This refers to a positioning strategy. It helps a business communicate effectively with their target customer segments. 

Marketing strategies include: 

• Digital marketing such as social media, blogging and SEO
• Print marketing 
• Branding
• Market Research
• Public relations 
• Product development
• Distribution
• Relationship marketing 
• Branding 
• Email marketing 
• Pricing

Although their functions differ and cause some conflict, sales and marketing share a common goal to attract prospects or leads and then convert them into customers. Marketing changed over the years to align more with sales as businesses have realised, they need a cohesive system to convert as many leads into customers as possible and then retain them. A loyal customer is the best customer.

Trust is slow to develop. Usually, it takes several touchpoints between a buyer and a brand before they are ready to make a purchase. These touchpoints can be marketing, or sales focused.

The traditional view is that marketing takes responsibility for the top of the marketing funnel, and sales take care of the bottom. The reality is, there is a lot of overlap in the middle, and even at the bottom. Everything should have a long-term goal of retaining a customer and continue marketing to them to keep your brand relevant. Marketing has taken a leaf from sales and a customer orientated marketing focus now very key in 2020. Sales and marketing need to become a cohesive partnership with overarching goals and initiatives.

In 2006, Kotler, Rackham & Krishnaswamy discuss a need for businesses to have an integrated approach (see table below). They recommend businesses align and integrate sales and marketing to work together and reduce the conflict to achieve the best result. 

Relationship between Sales & Marketing teams — Kotler, Rackham & Krishnaswamy (2006) 

Sales and marketing teams should align their efforts by taking steps such as: · Regular meetings between sales and marketing to discuss problems and opportunities. · Defining who is involved in what decisions and if consultation is required. · Creating opportunities to integrate teams and for sales and marketing to collaborate on joint projects — for example, hosting industry events. · Having marketers help develop sales tools to qualify leads and take feedback from sales to target new market segments and refine offerings. · Having defined and shared key metrics to analyse and reward the performance of both teams such as sales goals both teams commit to.

Email marketing is an example of where sales and marketing goals overlap. Marketing such as a Facebook advertisement generates a buyer lead and sends the prospect to a website for a free eBook for example, which requires an email address. Here emails can have a different tone depending on whether the buyer is ready to go, or in the information search phase. 

Put buyers on different email lists based on their behaviour, to be sending them the right communication. You do not want to be bombarding someone with information if they are just putting their feelers out. And vice versa, if they are ready to go, you do not want to miss the opportunity to persuade them your brand is the best option.

How the internet has changed the ways buyers behave

With the rise of technologies such as smartphones, the internet and social media, this has drastically changed buyer behaviour. We do not have to go into a store to talk to a salesperson anymore. Consumers have the power with so much information out there and alternatives available to them, the internet has changed how we buy. It happened so rapidly. What businesses were doing twenty years ago is now no longer relevant.

According to figures published by Forbes, approximately 70% of a buying decision is made before the sales process starts. Marketing is taking responsibility for educating customer prospects. Customers often do not need a salesperson to educate them and teach them the benefits of the alternatives, or how a product can be customised. A new car for example. They can learn this themselves from the convenience of a smartphone or laptop.

In many cases, e-commerce business has no sales department. Marketing helps automate the sales process. On AliExpress or Amazon, for example, purchasers rely on product descriptions and reviews instead of a salesperson to make their decision.

Many online businesses do still have a sales team, but it works more like customer service than traditional sales. The website takes care of a lot of the sales activity as some trust has formed, as these prospects have usually done some research previously to getting to that point. For example, instead of the salesperson asking questions about what size or colour, or price range; the website asks all these questions to give the buyer the best option to fulfil their requirements until they decide. This helps smoothen and shorten the buyer cycle process, reducing costs as there are fewer touchpoints required.

Simplify this process by using a marketing and sales funnel to map out the buyer journey, ensuring you convert as many leads as possible into customers. I talked about this in week 11, see below for an illustration of this process.

Sales and marketing tools

There are several tools and software available to businesses to help them stay organised and efficient with keeping track of customers and potential customers. Often, businesses use a customer relationship management system or CRM. Oracle is a well-known system that can be customised to a business’s requirements or something like Microsoft teams which also has a free option with limited functionality.

Traditionally used by the sales team, CRM are now across organisations to store important details about people who have interacted with the company. This database helps the business manage their relationship with people depending on who they are (lead, prospect, customer or past client) and what stage of the customer lifecycle they are in.

Social media is another great tool for business to use to nurture relationships with customers and potential customers, and businesses can use social media from a marketing and sales perspective.

That is week sixteen of 50 weeks of marketing! I hope you enjoyed this week’s content on sales and marketing.  Let's work together!

See you next week, 

Dan

12 strategies to price your products or services

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Price is perhaps the most crucial aspect of the marketing mix to determine whether customers make the purchase. If priced too low, profit goes out the door and you must work harder. Priced too high, customers will overlook you. This article discusses several pricing strategies that businesses can use.

Welcome to week fifteen of 50 weeks of marketing. This week's blog explores price and the numerous pricing strategies that businesses can use.

Pricing

Price is the value placed on a product or service to purchase it, based on research, experience, and an understanding of the marketplace. It is an educated calculation of the price needed to be profitable and sell enough volume to be sustainable as a business. Price also must stand its ground against alternative options from competitors.

Pricing is at the core of marketing strategy, being one of the original ‘4Ps’ of the Marketing Mix.

Changing other core marketing strategies such as advertising or new product development is expensive and time-consuming, but the price is very flexible, and business can change it according to the needs of the situation. Price is the most adjustable aspect of the marketing mix, allowing a business to quickly respond to marketplace changes.

For customers, price is often the most crucial factor of their purchase decision. Businesses use price as a differentiating factor to set them apart from competitors and to target a segment of customers. Your price reflects your positioning in the market. Pricing helps create your brand identity.

“One of the more basic, yet critical decisions facing a business is what price to charge customers for products and services.” (Morris, 1987)

Factors that impact the price

There are several factors to consider with a pricing strategy.

The first factor to consider is cost. Or, what your time worth? Cost Plus takes into consideration production costs, then adds a certain percentage of profit to that total. This is a basic way to price a product, and often business use more than one pricing strategy in unison. There could also be other internal considerations within the business that can impact pricing such as quality.

The perception of value in the minds of customers is another important contributing factor a business must consider with their pricing. What do consumers think a reasonable price to pay is? Price and value will not always align with customers, and this perception of value will change over time. The more a business understands what their customers value, the easier it is to price your offering.

“This decision is particularly critical in what The Economist (2013) calls the “age of austerity” — an era characterized by sales stagnation, no reasonable possibility of cutting costs further, and price as the only remaining lever. In this competitive environment, more than ever, a sound pricing strategy is required to facilitate customer value creation, structure price decisions, and earn a profit. (Kienzler & Kowalkowski, 2017)

The competition, of course, must come into consideration. What are they doing? What are their prices? How does their product or service compare to yours? If there are similar offerings that are equally attractive but at lower prices, then you probably will not have many customers.

Economics is going to impact your market and therefore your price also. What is the economy doing? Are people willing to pay a premium? Is there a shortage of supply? How highly regulated is the market? We have recently had the Covid-19 outbreak around the world, forcing many businesses to close and changing business environments. There are now many incentives required to bring customers back to some industries where there has been a reduction in demand. Demand will have increased for other services such as delivery services.

Getting the price right

Pricing your products exactly right to get the absolute maximum profitability is easier said than done. Getting the highest volume of sales must balance at a profitable price. You could have the most brilliant math minds in the world looking at every single statistic possible to create a calculation for maximum profitability, and still not get the price right. There are so many factors outside of your control. Having said that, there are many things a business can do to ensure they are not getting it horribly wrong. Pricing decisions can have significant and disastrous consequences.

It is often the first and most important considerations for customers and it determines your profitability and ultimately, your success. It is the only marketing tool that provides the income — every other activity is an expense.

“Developing an appropriate pricing strategy is both crucial and highly complex. Prior research emphasizes its dependence on various factors, such as the environment, firm objectives, customer characteristics, and the pricing situation” (Kienzler & Kowalkowski, 2017)

 

Pricing Strategies

There are several methods and strategies a business can use to price their products. At a basic level, there four basic pricing strategies — premium, penetration, economy and skimming. I will discuss these along with several other strategies that businesses can use in unison in their pricing strategy. Kienzler and Kowalkowski (2017) identify many of these as being the most discussed in the marketing literature over the past 20 years. The eight other strategies are Loss Leaders, Differential, Competitive, Price Promotion and discounts, Psychological, Everyday Low Price, Bundled and Captive.

Premium pricing

Using a price structure that is higher than many of your competitors is a premium pricing strategy. The premium price alludes to the fact that the product or service is of a much higher value, usually consisting of a certain competitive advantage or unique characteristic in the minds of customers. Like a Ferrari or Aston Martin. They have a certain look, high performance and level of luxury not found in a Toyota or Ford. Keeping the price high creates an impression of higher quality than alternatives. You are unlikely to ever see a stock clearance sale on a premium brand.

Penetration pricing

The strategy with penetration pricing is to under-price a new product or service initially to gain market share more quickly. It is common with a product launch, increasing the price after this initial promotional period. The aim is to penetrate the market and steal customers away from competitors. If you can get customer loyalty and positive word of mouth during this period, that also helps marketing efforts.

Economy pricing

A no-frills brand or range of products have an economy pricing strategy which is based on a high volume of sales. Margins are low as are any overheads such as marketing costs. Many brands in a supermarket have an economy pricing strategy, and the supermarket itself will have this strategy. Targeting is at the mass market to gain a large market share, and there is little to differentiate any product besides the low price. The packaging is usually extremely basic.

Low price often equates to low quality in the eyes of customers, so there’s little chance of ever-increasing price as customers will be very price sensitive.

Skimming strategy

Initially charging a high price and then lowering it over time is a called a skimming strategy. This strategy is useful until the market has become saturated with competitors and lower the price accordingly. This strategy is usually only reserved for brands with a first-mover advantage or a strong competitive advantage such as a unique technological advancement. Wealthy segments of the market are usually targeted.

Examples of this are when mobile phones first become popular, texting and call charges were extremely high with just one or two providers. Similarly, with smartphones, the original series of the iPhones only had the one expensive model when there were not alternative android models for much cheaper with similar capacity.

Loss leaders

Whilst most of these pricing strategies are on a brand or product level; Loss Leaders is a store level strategy. Certain retailers such as supermarkets sell high profile and high volume brands such as Coca Cola at a low price, maybe at a slight loss depending on competition, intending to attract customers rather than being a profitable product. This strategy is based on the fact these customers are highly likely to purchase other products that are more profitable items.

You just want to get people into the store. Sales work the same way, a highly discounted TV because they might purchase the cabinet and home theatre that comes as a bundle. But often this is a day to day pricing strategy. After all, who goes to the supermarket just to grab some Coke, right? You will probably grab some potato chips or a bag of nuts, maybe some bread, toilet paper or milk, some bread, maybe some beer…

Differential pricing

Also known as discriminatory pricing or multiple pricing, differential pricing uses the law of demand as the key principal. Recognising that certain customers are willing to pay extra for a product based on the market segment they belong to; selling the same product or service to different customers at different prices.

Think about going to an auction for a property. If there are ten bidders, for example, they will also see value at a slightly different level. As the price goes up, the number of customers reduces.

Businesses can offer slightly different value propositions to different market segments with differential pricing. Pricing at a sports game or a concert is an example of differential pricing. Kid’s prices, family prices, corporate boxes, front row seats, VIP passes, season tickets… This helps the businesses maximise their potential profit by focusing on their customers’ unique valuations.

Brand Image in product segments such as clothing and cosmetics can also allow for different pricing in different markets, location, and time such as early bird tickers are another variable.

Competitive pricing

Also known as reference pricing, Competitor pricing is set by the market, priced just below the price of a competitor’s product. The term reference explains the use of the competitor’s price as a reference for the price, they are willing to pay.

In New Zealand, in the past because of our geographic isolation and low population, multi-national companies often leave us alone, leading to monopolistic and duopolistic markets. Telly-communications and Airlines in particular.

Air New Zealand has enjoyed a free market for extended periods, and occasionally a company like Jetstar or Virgin will come along to take a share of the market. Not often successfully. But when they do, forcing Air New Zealand to lower prices to match the competitors. Volumes of sales increase accordingly.

Going rate pricing is a by-product of highly competitive markets, where the companies have little to no control of the market price. E.g. Mobile phone rates are all similar and standardised across the market. The price of a regular-sized coffee is usually $5 in New Zealand, regardless of what café you visit.

Price promotion and discounts

Using price as a tool for sales promotion is common marketing and sales tactic. Usually, a product or service temporarily discounted in price. We have all seen it, 40% off all Tupperware for three days only! For many consumers, the value that they perceive in a brand’s product or service increases with a reduction in price. A short amount of time to purchase creates urgency around the transaction that the buyer might miss out.

Discount coupons are another form of price promotion which is also designed to promote brand awareness as the consumer a required to hold onto it physically, meaning brand recall should be higher as the coupon might be noticed often when rummaging through a purse or draw for example.

Price discounts often are a strategy to clear out-dated inventory. A study by Ailawadi, Lehmann and Neslin (2001) who looked at data from P&G when they changed their pricing strategy to cut deals and coupons and invest more into advertising, and they found coupons and discounts help with market penetration, but have little impact on customer retention and product usage. Overuse of discounting pricing can be harmful to a brand image over time and reduce the brand equity — being the premium a customer is willing to pay over a competitor.

Trade and volume discounts are common pricing strategies in B2B, especially in the trades with wholesale buyers. This also helps enhance loyalty as there are often many competitors in the market. Some products may have seasonal pricing, often summer clothing is on sale in the middle of winter and vice-versa.

Psychological pricing

Businesses can design their pricing to have a psychological impact on purchasers. Marketers using Psychological pricing to “trick” the customer’s brain into thinking the price is lower than it is. It is a common tactic in retail — we have all seen pricing at $99.99 instead of $100.00. The price rounds up to a hundred anyway, but the customer sees the 99. The lower number is more attractive to purchasers.

Everyday low price

Another store-level strategy, Everyday Low-Price strategy is popular with large format retailers. Margins low and therefore prices are low, selling in high volume. Think Walmart in the USA. People shop there because they know prices will be low, therefore the business does not need to spend money advertising their prices. You do not have to offer discounts to get people through the door. This saving on advertising costs keeps prices low and customer loyalty is often high, as people know what they are going to get and there are no gimmicks.

The two largest home and hardware store chains in New Zealand, Mitre 10 Mega and Bunnings Warehouse both use this strategy. It is more than just a pricing strategy; it is a business strategy.

Studies (See Montgomery, 1997) have shown that having micro-marketing pricing strategies instore — e.g. not promoting discounting options besides an aisle display that is low cost and low in labour, can improve profits by four to ten percent. This also allows organisations to maintain their consistent brand image but still alter prices to adapt to local markets.

Bundled pricing

When more than one product sold together at a lower than the price to buy the same items individually, this is a bundled pricing strategy. The products could be similar, e.g. shampoo and conditioner, or they could be dissimilar but under the same brand. This is an effective way for businesses to clear old stock. Buy one, get one free is an example of bundled pricing.

Other examples of bundled pricing are signing up for both power and broadband services from the same company and get a discount, or a bundle deal at the local pizza store to get 2 large pizzas, garlic bread and large drink for cheaper than purchasing individually. A Big Mac combo instead of a Big Mac. The strategy behind this approach is to stop customers dwelling on the price but instead on the benefits of the bundle.

Captive pricing

Captive pricing is where a primary product has secondary consumables that customers must purchase to function. Battery companies often manufacture torches for example or razor blades. The initial offering is cheap, but the consumables are not. This is a popular pricing strategy when there are other complementary goods you can also sell the consumer.

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That is it for this week’s topic about pricing. I hope you learnt something new!

There are many strategies a business can use to base their pricing — hopefully, this makes it all a bit easier to understand.

The profitability of customer loyalty

Loyal customers are profitable to a business. We need to look after them.

This week's blog discusses the topic of customer loyalty, using marketing theory to first define what loyalty is and how it relates to your relationships with customers. 

Marketing strategies businesses can use to enhance the loyalty of their target customer are also explored.

What is Loyalty?

The mass-marketing approaches of the ’60s and ’70s ignored the role of customer loyalty as an important parameter of marketing activities. There has long been a shift from this transaction based-approach into a relationship-based strategy. 

The focus changes from acquisition to retention. The new goal is to enhance customer loyalty by focusing on the lifetime value of existing customers, considered just as important as attracting new customers.

Loyalty is the maintenance of trust in a person, a party, an institution; which fosters strong feelings of support or allegiance. An individual has a sense of belonging to a relationship. In business, this feeling of loyalty a customer feels with a brand or business yields a deeply held commitment for consistent future consumption. Often, businesses use repetitious purchase behaviour as an indicator of loyalty. I use the term customer loyalty in this article as opposed to brand loyalty to emphasise that loyalty is a feature of people, rather than a characteristic of a brand.

“Customer loyalty is difficult to define. In general, there are three distinctive approaches to measure loyalty: behavioural measurements; attitudinal measurement; and composite measurements.” (Nyadzayo & Khajehzadeh, 2016).

 

Conceptualisations of Customer Loyalty (Uncles, Dowling & Hammond, 2003)

Loyalty pays off

Customer loyalty is profitable. A study found that “when a company retains just 5 percent more of its customers, profits increase by 25 percent to 125 percent.” (Bowen & Chen, 2001). Loyal customers provide more repeat business and are less likely to shop around, this higher retention of existing customers reducing marketing costs.

When a brand has generated loyalty from customers, their customer base becomes less sensitive to the marketing efforts of competitors. It makes sense that business focus their energy into strengthening relationships with customers, to enhance their loyalty.

The effect of value-adding strategies in a long-term relationship (Ravald & Grönroos,1996)

Relationship marketing

The foundation for a relationship marketing strategy is “a core service around which to build a customer relationship, customizing the relationship to the individual customer, augmenting the core service with extra benefits, pricing services to encourage customer loyalty, and marketing to employees so that they, in turn, will perform well for customers (Berry, 1983).

Relationship marketing is marketing activities that attract, develop, maintain, and enhance customer satisfaction and fostering customer retention. The focus is the lifetime value of the customer rather than the value of a single transaction –the underlying assumption being that establishing and maintaining relationships with customers will foster customer retention. Businesses use strategies to bond with their customers to enhance their commitment.

As you can see in the model above, trust is a component that comes before loyalty. Trust is one of the foundations of relationship marketing, and it is a customer’s willingness to rely on a certain business or brand. This reduces uncertainty and vulnerability, so it gives customers a good reason to stay in a relationship as they can value relationships that they do not have to monitor. 

Building a relationship is based on the formation of a bond. This bond is the psychological, emotional, economic, or physical attachment that binds parties together. The strength of this bond can determine a customers’ commitment and loyalty to a brand.

Some customers will only bond with the company based on price. The first level of relationship marketing relies primarily on pricing incentives to secure customers’ loyalty where business bond with customers on the promise to save money. Service providers often reward loyal customers with special price offers. This advantage is unsustainable, and customer bond based on price will never foster true loyalty.

Practising higher levels of relationship marketing gives greater potential for sustained competitive advantage. Level two is a social bond, and level three is a structural bond. Structural bonds provide solutions to important customer problems, as discussed by Berry (1995): “When relationship marketers can offer to target customers value-adding benefits that are difficult or expensive for customers to provide and that are not readily available elsewhere, they create a strong foundation for maintaining and enhancing relationships.”

Targeting Profitable Customers

Certain customers will be more profitable to a business than others. Some are loyalty-prone if they receive good service, happy to use one brand or business. Whereas other customers are deal prone, always on the lookout for alternative and discount offers.

These types of customers are stayers and switches. Stayers have the possibility of lifetime value, as their motivation is to reduce their available choices and repeatedly use certain suppliers to simplify the process, and it reduces the perceived risks of consumption. Switchers do not exhibit loyalty and have a repertoire of brands from which they regularly choose. Having systems to recognize these characteristics of customers is important to help us target customers who are more likely to stay.

Customer satisfaction

Customer satisfaction is one of the most important criteria for customer loyalty. When satisfaction levels are high, the potential for loyalty is high; when satisfaction is low, there is a very low chance of retaining customers. Satisfaction is a popular measurement that marketers use to determine how happy customers are with their company’s services and or products. 

Businesses can use research such as customer surveys to determine how happy their customers are and how to improve their experiences. Highly satisfied customers will also be far more likely to tell friends about your business. There is a correlation between higher satisfaction and positive word of mouth intent. The same also goes with loyalty — loyal customers are more likely to spread positive word-of-mouth and recommend your business to others.

Tools to enhance loyalty

The cost of replacing defected customers is significantly higher than the cost of retaining them. To enhance customer loyalty, there are several tools a business can use. I will discuss four options: Loyalty programs, benchmarking performance, CRM, and branding.

Loyalty programs

A popular strategy for maintaining customer loyalty is through loyalty programs. For example, a popular one is the coffee card at your local café, often getting the tenth coffee free. This strategy only tends to work if the frequency of consumption is high.

Loyalty programs provide financial and relationship rewards to customers, and there are two aims: · One is to increase sales revenues through increased purchase levels, and/or increasing the range of products consumed. · The second is a defensive aim, to build a closer bond between the brand and current customers, to maintain them in the current customer base.

Benchmarking performance

The second strategy to enhance customer loyalty is by benchmarking service quality. Improving service quality should increase customer loyalty. Relationship marketing and service improvement go hand in hand. Businesses should do everything they can to keep improving their customer experience. This service quality adds more value to the core product, which improves customer satisfaction, strengthening relationship bonds and increasing loyalty. 

Benchmarking a level of performance you expect from your staff and/or systems helps ensure to keep the level of quality high.

Use customer surveys to analyse your services and take the results of your loyal customers. Use this as internal benchmarks for customers service quality. This means to set a minimum standard of service quality. Holding your business to a strict standard does not ensure every customer will return, but there will be an increase in loyalty. Furthermore, often dissatisfaction is because of a negative customer service experience rather than the product or service itself.

CRM — Customer Relationship Management

Advances in technology over the past thirty years has removed many of the barriers for businesses to maintain relationships with clients and customers. CRM is the managing of all your company’s relationships and interactions with customers and potential customers. Email database management for example enables businesses to regularly be in contact with customers. Because past experiences impact customer satisfaction, the quality of a CRM can mediate how customer satisfaction translates into loyalty. When customers perceive a higher quality of CRM, this strengthens relationships.

“CRM quality comprising of trust and commitment is crucial in building and maintaining long-term relationships and enhancing customer loyalty.” (Nyadzayo & Khajehzadeh, 2016)

Model of customer loyalty (Nyadzayo & Khajehzadeh, 2016)

Brand image

The fourth way to increase customer loyalty is through investing in your branding, and the image you portray in the minds of customers. Your brand can be a mediator of the link between satisfaction and loyalty. The more customers connect with your brand, the more they trust you. Research has shown (Nyadzayo & Khajehzadeh, 2016) that a stronger brand image can lead to a higher perceived CRM quality, enhancing loyalty. Just look at Apple around ten years ago! 

A strong brand “increases customers’ trust of invisible products, while helping them to better understand and visualise what they are buying” (Berry, 2000).

That is it for another week and blog — I hope you enjoyed this week’s topic about customer loyalty and learnt something new that you can implement in your business. 

See you next week, 

Dan

How keywords bring you customers

Like hashtags, keywords help a computer’s brain (the algorithm) to understand what a piece of content is about. In the case of search engines, what a webpage is about. If you get it right, your web page will perform better than your competitors on search engines. Potential customers will find you first.

This week’s blog will explore what keywords are, why they are so important to get more website traffic, and how businesses can optimise keywords to get better ranking in search engine results.

What is a Keyword?

According to Google, a Keyword is a word or concept of great significance. It can also be a word used in an information retrieval system to indicate the content of a document. This second definition is exactly how keywords work in digital marketing. It is a term that has skyrocketed in relevance in the age of the internet, with the number of mentions in literature increasing as you can see in the timeline below.

When a person searches for something on Google or another search engine, they will type or speak certain words or phrases to guide their search. These are the keywords.

Helping people find you

Choosing the right keywords to use in your marketing copy and search engine optimisation is key to more people finding your website amongst the millions of alternatives. Achieving a higher-ranking result means you will be higher on the Search Engine Results Pages (SERP), and therefore have more people visit your website and a higher potential for income.

The first thing to keep in mind with keywords is that a local search via Google has become commonplace in the age of the digital phone. Search keywords should be optimised for voice search, for people who want to find a café on the go for example.

“The value of a web page’s content to users is inspected by Search Engines using several complex algorithms. Search Engines achieve this by making use of crawlers to identify keywords in the natural readable content of a web page” (Ramos & Cota, 2004)

How search engines use keywords

In technical speak, search engines are “programs that offer users interaction with the internet through a front end, where users can specify search terms or make successive selections from relevant directories. The SE will then compare the search term against an index file, which contains web page content. Any matches found are returned to the user via the front end” (Weideman, 2004).

In other words, a user of a search engine provider such as Google types in some keywords about a topic of interest; and the search engine brain (algorithm) analyses this search query, giving what it considers as the most relevant results based on the keywords.

Websites are giving rankings on individual keywords. For example, you might come up on the first page for digital marketing strategy, but the fourth page of results for social media marketing. This can be based on link popularity (quality and quantity of links), click-through popularity (how many people visit the site), as well as other factors such as keyword density. Google often changes its algorithm and are tight-lipped about exactly how it works. In any case, keywords are very important to get your content found.

“During this process of determining which web pages are most relevant, the SE selects a set of pages which contain some or all of the query terms, and then calculates a score for every web page. This list is then sorted by the score obtained and returned to the end-user” (Zuze & Weideman, 2013)

An extremely high majority of people (something like 80–90 per cent) choose a website that ranks in the first page of results. Out of millions of results, people choose one of the first five or so options by default. Therefore, optimising your search engine result (SEO) is of the utmost importance for customers to find your website.

Keywords and SEO

SEO is a common digital marketing strategy that businesses pay a lot of money for but can do a lot of the work themselves. It is a process of enhancing the ‘searchability’ of a website by optimising your web pages for better ranking in search results pages (SERPs). Search engines crawlers’ sort through the content and use keywords to help identify the most relevant content for a search query, and how a page should rank for that term.

Both on-page and off-page elements of a web site are altered to try and increase the ranking. Keyword usage is one of the most important on-page elements for SEO. Essentially, the higher the frequency of a keyword the better the chance being deemed relevant to that web page.

Choosing your keywords

Take the time to research keywords. It can really make a difference in the quality of your keywords. Keep in mind that you need to think like somebody searching on Google for a business like yours, or information. The keywords should be relevant to your brand positioning, terms easily integrated into your content and copy.

Write a list of potential keywords. First, brainstorm the terms that you think your potential customers might be searching for. Think like your target audience. If you were searching on Google for a business such as your own, what words or phrases would you search for? Write down all your ideas. Using a marketing business as an example, these are some terms you might think of:

· Marketing business

· Marketing consultants near me

· Marketing in Hamilton

· Marketing companies

These are a good start, but they only focus on the core term of Marketing. Other related terms may be:

· Website SEO

· Find more customers

· Social media advertising

· Creating sales funnels

You can expand on each of these, with similar examples for each one. Such as “Social media advertising near me”. If your office has a receptionist who takes customer calls, she will know what sort of inquires you get. Social media hashtags are another way to see what terms people are using, as they work in a comparable way to keywords.

Go into as much depth as you can with this brainstorming process. Create an excel file to use for your keywords to help manage and analyse them, and your data also becomes easily exported. It is valuable to analyse and compare the volume of searches, cost per click and competition for each keyword, so you can be more strategic in your choices. All this information is available by using keyword research tools. This helps you identify how easy it is to achieve a good search position for content using those keywords (keyword difficulty) and whether you can rank at all (keyword opportunity).

Keyword Research Tools

Keyword research helps you understand what search terms are most important to your business, and it also helps give direction to a content marketing strategy. Google offers several great tools you can use for free to find the best keywords for your business. First, go to the Google homepage, and type the industry you are in. For me, Marketing or Branding. The first way to find related terms is to scroll down to the bottom of the page of search results and look at the related searches. This helps you find other relevant search terms that people are looking for related to your industry.

Google Trends shows the trending search terms across the search engine. Check for relevant terms that you can use as your keywords. The tool also allows you to compare different search terms by popularity, region and other variables such as projections.

Google Analytics is another great tool to find information about what keywords are working. You can identify what keyword terms are already bringing traffic to your website. You can find what keywords are bringing people to your website already and use this as a starting point to generating new keyword terms. You can also link a Google Search Console account to give you more data about what people are searching for.

There are many other tools out there to give you valuable information such as search volume, ranking difficulty (useful for content strategy and SEO), keyword value (useful for pay per click advertising), and competition. These tools help you spy on your competition to see what is working for them in terms of keywords. Some of the better tools are:

· Ahrefs

· Google AdWords Keyword Planner

· SEMrush

· Uber Suggest

· Word Stream

Managing your keywords

If you have been brainstorming keyword terms as discussed above, and managing them in an excel document, you have a fair volume of options now. Category or topics should separate keywords to make them more manageable. For example, some of them will be more specific to your products, and others for content marketing such as “how does SEO work”.

You can now use these keywords for different purposes and put into different sections of your website and marketing content. Keywords are useful in the following areas on your website:

· The title of your page. Both in the page title and the SEO title, which may be different. This is the first point to help Google understand the relevance of a page. As well as having keywords in your title, include them in your sub-headings, section headers and the page URL.

· The meta description. If you do not have an SEO tool for your website that allows you to write a meta description, then the first 160 characters of the content will automatically come up. This describes the search engine that helps describe the webpage and could be the reason people click or not.

· Social media. Try and include the same keywords in your social media posts. Use a hashtag for your keyword terms, as they work in the same way.

· Photo captions, image file names and links. Many people leave image descriptions and alternative text blank, but these are another key place to leave keywords.

· Throughout your marketing copy, but specifically within the first couple of sentences of each page, and in the last paragraph. Your marketing copy gives you plenty of opportunities to use a range of keywords.

How many keywords should you use? Keyword density

There is a lack of agreement amongst marketing researchers as to what the perfect keyword density is, but there is agreeance that it should be under ten per cent, and the sweet spot is around four to eight keywords per 100 words of text. You want your content to be keyword-rich, but also just as readable. Avoid using some many keywords that it discourages readers. You want your website to draw people in, but you also want to keep them there.

“Unnaturally high keyword densities should be avoided, since it would probably deter human visitors. This is directly in opposition to the reason web site owners desire high rankings: to draw visitors to web pages, and keep them there.” (Zuze & Weideman, 2013)

Keyword “tails”

There are three main types of keywords: short-tail (also called the head), middle-tail (also called body) and long-tail. Businesses should use a mixture of all three types of keywords, as they each have their benefits. For example, short-tail keywords have the highest volume of search but long-tail keywords have the highest chance of a conversion.

Short-Tail Keywords

Short-tail keywords are one or two words — for example, Marketing. These keywords are broad and generic and have a high search volume. Also referred to as Seed keywords, these are the platform for your list of keywords. Sorting your list of keywords by volume will produce a good list of short-tail keywords. The rule of thumb is, the shorter the keyword, the more competition there will be. Short-tail keywords are not very targeted, so it will be an irrelevant search result for many people. The conversion rate is very, extremely low.

Middle-tail keywords

These keywords tend to consist of three to four words. An example of a middle-tail keyword would be “Digital Marketing in Hamilton”. More specific than short-tail keywords, and middle-tail keywords receive less search volume, but are more likely to convert. These keywords are moderately competitive and have more search volume than long-tail keywords.

Long-Tail Keywords

Consisting of four or more words, long-tail keywords are specific and detailed and have low search volume. An example could be “Content marketing strategy for small businesses”. These can be specifically related to your niche market and geographic location. The big advantage of these keywords is that your competition is low and the customers these keywords attract are more likely to convert as the keywords are more targeted toward their specific needs.

The danger of writing purely for SEO

As well as writing copy to be keyword-dense to help with SEO, it needs to be well-written and compelling enough to connect with your reader. Or they will leave, and your ranking will start to suffer if you have a high bounce rate (People who leave instantly instead of viewing other pages). Avoid keyword stuffing, keywords should comprise of around five to ten per cent of your total word count. Search engines will penalise anyone stuffing the same keywords numerous times into a piece of content. Have your main keyword in mind and write alternatives naturally into your content. While you want to include long-tail terms, doing so naturally is not easy when they are so specific. A short-tail keyword such as marketing strategy is far easier to include in copy than “Content Marketing Strategy in Hamilton”

“Web sites and web pages are blacklisted (Yung, 2011) and excluded from search engines’ (SE’s) indices due to “black hat” (unethical) techniques employed on them. One of these techniques is keyword stuffing: the practice of repeating important keywords on a web page to the point where the excess goes against the grain of readable English text.” (Zuze & Weideman, 2013)

Keywords and Blogging

When choosing your keywords, do not make the mistake of just choosing commercial ones. In the first stages of the buyer journey, consumers require information about their problem. Having content on social media and in blog posts that provide information are a suitable place to leave relevant keywords. ‘How does content marketing work?’, for example.

Blog posts are one of the easiest ways to use keywords strategically on your website. A good blog post will be laden with short, middle and long-tail keywords.

Keywords on YouTube

Keywords are just as important on YouTube as they are on your website. YouTube works comparably as a search engine, it gives users relevant video results to their search term. Having optimised keywords in your Channel keywords, your profile description as well as in your video keywords helps give YouTube information and context about your channel. This can help increase the visibility of your channel as your videos become more likely that they become a recommended video to other users, based on what they are watching. YouTube learns what type of content you produce and who your target audience is.

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That is it for another week! I hope you learnt something new about keywords that you can implement into your marketing strategy.

Dan