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Principled Profit: Marketing That Puts People First
By Shel Horowitz
Principled Profit: Marketing That Puts People First by Shel Horowitz advocates that companies should market ethically and honestly, not only because it's the right thing to do, but because it creates the most long-term success for a company by building customer loyalty.
Horowitz says companies should follow the principles of quality, honesty, and integrity. He writes, "Create value for others in everything you do. ... You help yourself best when you're helping others."
Principled Profit tells us that many years ago, Arthur Anderson, an accountant struggling to build a new accounting firm, was pressured by a client to overlook accounting irregularities. Even though Anderson faced a cash-flow crunch due to an upcoming payroll, he refused to compromise his integrity. He'd rather lose the client than misrepresent a company's financial statements to mislead investors.
Seventy years later, corporate greed and the willingness to turn a blind eye to similar accounting irregularities at Enron, led to the complete downfall of the company Arthur Anderson founded.
Horowitz says companies that try to duck their responsibilities, hide their mistakes, and mislead consumers are eventually punished. Companies that market unethically and fail to deliver quality are in a perpetual hunt for new customers, have little repeat business, and have few referrals.
Quoting a Nortel study, Horowitz writes: "a mere 5% increase in customer retention can translate to as much as a 75% increase in profitability." We learn it's about five times more expensive to find a new customer than to keep an existing one.
Horowitz says customer acquisition costs vary depending upon the product. For example, we learn that amazon.com had a customer acquisition cost of only $7 by 2000; an online travel discounter might have a customer acquisition cost of $8.66; and a mortgage firm might have a customer acquisition cost as high as $700.
For a typical firm, a Gartner study suggests that it costs $280 to acquire a new customer and about $57 to retain a current customer. Horowitz concludes that companies selling a product priced at $100 probably lose money on new customer acquisition and make money on repeat customers. Thus, if they are to survive, small businesses should work diligently to build repeat business.
Horowitz writes: "By failing to deliver a positive experience to the customer, you're pretty much assured that he or she will go elsewhere... and tell friends and colleagues to do the same."
Horowitz says some "sales jerks" argue that the only way to be successful is to be aggressive in cold calling—that success is a numbers game, the more people you call, the more sales you'll make. Horowitz shows this philosophy is flawed, because it fails to build goodwill and repeat sales.
Horowitz writes: "I never make cold calls. I create marketing that has the prospect calling me. When I get the phone call...they're already convinced that I can help them." Horowitz owns Accurate Writing & More (accuratewriting.com) which creates publicity releases and other documents for clients. (Horowitz writes press releases for many authors and small book publishers and is highly respected in the small press community.)
Though he receives business from 80% of the prospects calling him, Horowitz says most of his business comes from repeat clients who find that his press releases can be six times more effective than their company's in-house press releases.
Horowitz writes: "Since my primary customer-retention strategy is to deliver superior work, at an affordable price, and within a reasonable time, my cost to keep an existing client is close to zero."
Other suggestions from Principled Profit:
* Don't view business as a competition for scarce resources. Rather, see things from a viewpoint of abundance and learn to work with your competition rather than against it. Consider exchanging referrals and subcontracting work when it benefits everybody.
* Consider using e-mail discussion lists to promote your services to people who might be interested. But, don't use spam. Spam destroys credibility.
* Profile your best customers and figure out how to find more just like them. Don't try to sell your products or services to those who don't need them.
* Network with organizations that serve your customer base and become a preferred or endorsed supplier.
* Ask prospects: "What is the biggest problem you face?" And, then, listen. If you can't offer a great solution, turn down the business.
Horowitz says knowing when to say "No" to business is important. If the job would compromise quality, integrity, or honesty, you should turn it down.
For example, Horowitz points out you should turn down business if:
* You don't offer an appropriate solution (honesty).
* You don't have enough time to do the job well (quality).
* You find the job morally distasteful (integrity).
Principled Profit: Marketing That Puts People First by Shel Horowitz is a great marketing book for small business owners who are looking for a better way to build a long-term business.