"ADvice" from John Boggs

John Boggs has been in the advertising business for 30 years. This excerpt is from his May 30, 2008, e-newsletter.

The first basic lesson of business is to bring in more money than goes out. Yes, there are times when you need to invest in product, promotion and/or customer development. But in the long run, business is about making more than you spend. Therefore sales must always be a prime focus. Regardless of your sales paradigm, money coming in is the result of some form of sales. You may have a sales force, you may distribute through a system of wholesalers, or you sell directly to the consumer. If you are in business, you are in sales and all sales principles apply to you whether you embrace them or not.

The No. 2 basic business lesson is that there are only two ways to increase a company's profitability: increase revenues or decrease costs. More often than not a combination of the two is the course taken. You must understand that cutting costs can go only so far. Eventually, cutting back affects the quality of your product or service, and hence, will have a negative impact on your value equation, adversely affecting sales.

There are only two basic ways to increase revenues: Sell customers more product and/or services, or sell products and/or services to more customers. The first involves increasing the value of each transaction, and the second involves increasing the number of customers making transactions. In this day of Internet marketing, maximizing the value of each acquired customer is accepted as the least expensive way to increase revenues.

Acquiring new customers is, of course, the second way to increase revenues, but that is viewed as more expensive and sometimes more elusive than adding sales volume on your existing customers.

Advertising, although often misunderstood, works to sell more product as well as to garner more customers. Few advertisers are aware of the task they need their advertising to accomplish. If the task is clearly defined in their mind, the decisions that are necessary to execute the plan become more obvious. Case in point, if the advertiser wants to increase sales to current customers, the advertising needs to be focused within the media that the advertiser is currently using. The message should be consistent and the image should reflect much of what consumers already know about the product and/or service. If the business wants to sell to additional (different) customers, then the advertising can be in the same and/or new media. The message should be new, and product features should be different from what has worked with other customers. The image can also be expanded or viewed from a different perspective, to make it acceptable to a different audience.

The third basic business lesson is to understand the value of your customer. A customer buys your product and/or service. It is our hope that the customer will return and make additional purchases throughout the year. Many of our product offerings are intended to create just that scenario. The more transactions and the higher those transaction values, the more valuable is that customer. As an advertising medium, I am constantly telling my advertisers not to dwell on the single purchase a new customer from my magazine makes, but to look at each new customer in terms of lifetime value. I am always amazed at how small-business people often believe their businesses can survive without advertising when giants like Coca Cola, Chase Bank, General Motors, etc., know that they cannot survive without it. It is just common sense, watching what successful businesses do and then doing those same things ourselves. The next time you are thinking of doing something you perceive as extraordinary, stop and ask yourself, would Coca Cola cancel their entire advertising budget in a pinch? Would Chase Bank stop selling credit cards for the remainder of the year? Would General Motors not come out with next year's model in order to save money? If your answer is the obvious one, then maybe your decision is not the right one to make. Remember these large companies have remarkable common sense and business savvy. Maybe, just maybe, we could learn from following their lead and using our own common sense.