Job losses, due to the upheaval of the Covid Pandemic, have driven people to establish new businesses, many that sell products. The race is on for market share and investment funds. It’s essential to understand engines of growth for businesses to succeed. These are the mechanisms that will achieve sustainable success.
An effective marketing campaign will bring in a period of new sales but it does not generate continuous revenue. Generally, transactional businesses rely on repetitive marketing activities to generate the next sale. This can be expensive if not optimised thus impeding expansion.
Let’s look closer at where growth comes from. At least one of these engines will apply to your specific product business.
Most products decay in value over time as they age. As soon as you drive a car out of the showroom it depreciates. This is not the case with digital products like restaurant or hotel booking sites with ratings. They engage the network effect. Review sites are designed to allow users to participate in creating value, usually with content. The more content the more value the product delivers to users.
The use of advertising to sell products is nothing new. Most companies will use some form of paid promotion to gain visibility in the marketplace. This activity will only grow the business if the cost of advertising is less than the sale value. Such metrics need to be monitored regularly to ensure the marketing budget is not being wasted. Also understanding advertising data can present opportunities for optimisation. For this to become an engine, the cost of acquiring a new customer must be driven down or the revenue must increase per sale.
Digital companies such as Software as a Service, commonly charge a monthly fee which generates recurring revenue. In this situation the product needs to be important enough for running the customer’s business to ensure continued use.
For product companies it’s a challenge to implement a sticky or subscription business. Traditionally this business model is transactional. This means each new purchase requires grabbing the attention of customers with a new interaction like a new ad or sale to achieve the next purchase.
The cost of regular marketing places an impediment on growth or scaling the business. Having said this, some product businesses have created a recurring revenue model. An extreme example of this is Amazon. They bundle in free delivery for all products bought if the Prime subscription is taken up. Amazon then strategically included streaming of TV and movies. This has resulted in an incredible 85% of US households subscribing.
Word of mouth
Buyers of products trust word-of-mouth the most from people they know. Next is online recommendations which are now readily available. As a result, almost 95% of consumers read reviews before making a purchase decision.
Word of mouth marketing produces at least twice the sales of paid media. In addition, it is s the most disruptive to consumer decisions. So make sure your customers are not complaining about you! Bad reviews influence 50% of purchase decisions. Many of these sales journeys could result in an abandoned sale.
Conversely, conversion rates from positive word of mouth traffic are considerably higher compared with other channels. Pushing this will decrease your cost of customer acquisition.The major takeaway here is to nurture evangelists for your products.
To drive customers to become evangelists for your product a business must provide an outstanding customer experience. No matter how high the quality is for your product, growth is derived from excellent customer service. People buy from people they like. A warranty focus can help achieve this by:
- Building connections with customers immediately after a sale with warranty registration.
- Implementing an efficient warranty claim process that rectifies a fault quickly.
Software as a service warranty management solutions such as Taskmatix can affordably drive the culture of excellence in customer service within your organisation.
Successful companies have implemented strategies that scale their customer base and revenue better than their competitors. Growth comes from network effects, repeated purchases and good old fashioned advertising. For small product companies word of mouth is the most effective in terms of return on investment.
If your product solves a problem and a need well for many consumers, word of mouth kicks off a chain of free promotion. One person tells another person, who then tells someone else and so on. Add to the mix excellent post sales service such as a rapid processing of warranty claims and you’ll create evangelists for your business.
Taskmatix can help drive your growth engine with warranty management software.
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