[This is what was hot on the blog a year ago today]
When I work with a new marketing client, one of the first things I do is go deep into their business model.
This intrigues some…and pisses off others.
“Listen up,” I’ll hear, “we’re not paying you to fix our business, we just need more people coming through the door.”
To which I reply:
Let me ask you a question. In my car, I have a box. Actually, it’s a very sophisticated machine. Downright visionary. It took a boatload of money to create and a few years of work by me and my team. I believe in it wholeheartedly.
Now, this machine, it’s got a slot on the top with a printed label next to the slot that reads ‘Insert $100.’ And, here’s the fascinating thing, every time you insert a $100 bill, it gives you back $90. Now, didn’t we know this machine would end up doing this until we’d actually finished creating it. It was supposed to give us back $120 for each $100 we put in.
The first time we tested it with a $100 bill, we thought it was just a calibration error. So, we dropped in another…same result. So, here’s my question, knowing what you now know about this machine, would you keep feeding it $100s?
For some people, it clicks right away. Sometimes, it takes a few beats.
Many businesses think they have a marketing problem, but what they really have is a business model problem. They’ve created what I call a greedy beast. It may be based on a fundamental solution or idea that was sound, but somewhere in the execution, things went astray.
And, left unchanged, their greedy beast eats money for lunch, leaving them losing money with each sale.
If that was your business, would you want to drive MORE traffic, MORE prospects and MORE sales?
The obvious answer is…HELL NO!
Because the faster you feed a greedy beast, the faster it eats itself and you alive.
The less apparent answer, though, is…maybe.
If the reason you’re losing money on each sale is because you can’t bring your cost structure down to a level where each sale is profitable until you scale to a certain volume, and you’re capable of hitting that tipping point, you might be well served by sucking up the losses in the name of a viable longer-term equation.
Problem is, many businesses never do this analysis.
They assume they need to feed the beast more aggressively, without understanding when and why the beast either giveth…or taketh.
So, what’s the takeaway?
Before you go running to ramp up or fix your marketing, take a bigger step back and ask whether your problem is really a business model problem. This is especially important if you’re in a business that did well for years, but has seen a recent decline.
Demand changes over time, the need for solutions evolves, pain points move and even established businesses need to move with them.
Make sure you fix the beast before you end up feeding it its own limbs.
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