The owner of a successful HVAC business recently experienced an early winter with little growth. Year-on-year sales were flat despite an effective marketing campaign.
He is in a competitive industry and dealing with two forces every HVAC contractor must work with: the weather and the economy.
The fall weather was unseasonably warm. With winter late in coming year-on-year sales of new furnaces were down significantly. Sales were further depressed because his home province is experiencing an economic slow-down.
Sales were flat yet we still described his marketing strategy as effective.
How is it possible to have flat sales and still describe a marketing campaign as effective??
The answer to this question is important for any business owner growing an independent enterprise.
An independent enterprise earns an income for its owner even if the owner doesn't 'show up for work'. Money while you sleep. An independent enterprise is also a saleable enterprise.
Marketing exists to grow sales. But when you are growing an independent enterprise, marketing has an equally important role: growing market share.
Read also Growing The Ultimate Small Business
Game-changing market share (approaching or exceeding 40%) is critical to growing an enterprise for two reasons.
- Economies of Scale. An independent enterprise is one of the largest players in its market. The marketing, administration, and management of an independent enterprise requires a certain size (most typically measured as number of employees). That size creates economies of scale for procurement and manufacturing and other costs and investments. Economies of scale increase profitability.
- Brand value and mindshare. Good market share is self-reinforcing. The market tends to conflate success (evident market share) with quality, to the benefit of successful brands. Growing market share leads to growing positive mind share. The more positive the mind share the greater the possibility for charging higher prices. Price-setting authority is critical to growing an independent enterprise in reasonable time.
Both elements improve profitability. Profits fuel growth.
For a business owner growing an independent enterprise marketing is about growing market share. Sales growth becomes only one goal of an effective marketing strategy, market share is the ultimate goal.
This strategy is rooted in relative growth. In our story our HVAC contractor wasn't happy sales were flat in a tough market. But he was happy that he was holding his own in a market where his competitors were shrinking. Even zero growth is relative market growth when your competitors are tanking.
The owner's suppliers were sharing freely he used to be one of their top 10 buyers. This fall he reached top 3.
How to get there? Growing market share means doing six things.
- Outspend or 'out-buzz' the competition. Or both. Market share acquisition costs time, creativity, and money. We outspend our competitors in traditional media and social marketing. We create buzz through innovative guerrilla marketing.
- Respond to broader needs. It is tough to grow market share in an old economy business without offering multiple price points or other forms of choice for buyers. Increase market share by introducing new products at a range of price points, new skus, related services or products. Create new opportunities through tactics like offering financing.
- Speed. Get to people faster. Especially in retail, speed is critical. Everything from Twitter to Amazon to Netflix is conditioning us to want what we want now. Same-day responses might be fine in B2B environments. In retail we have to strive for same-minute responses.
- Be responsive. Ask customers about their experience of your business. Great follow-up is always a good idea, but when growing market share use follow-up to drive growth. The closer you can get to a closed loop of 'deliver-ask-innovate-deliver again', the faster your market share will grow.
- Buy the competition. You can buy your competitors or you can buy their customers. Most of this article has focused on the latter. Sometimes the cheaper thing to do is buy your competitors, their talent, and their customers. The Great Recession is making this option more appealing as many business owners are struggling and open to reasonable ways out.
- Stand out. You make it harder for customers to move towards you if they can't tell why you are different. Strong positive differentiation allows you to be the Purple Cow in your market. Strong differentiation allows you to set up a 'pull' relationship with your market. 'Pull' is more profitable than a 'push' relationship because it always costs money to persuade. You can pour money into persuading people, or you can create a unique, visible beacon to draw customers looking for positive change.
Want to learn more? Download our free blueprint for growth: Six Things That Will Absolutely Improve Your Business!