Right marketing plans crucial in low season selling for SMEs

Simon, a start up entrepreneur I have been mentoring for the last two years, is a worried man. When I visited him last week, he shared with me his genuine concerns of losing out during the end-of-the-year peak because he does not have enough money to do marketing at this critical stage.

In the last few months, he has been experiencing cash flow problems that he attributes to the low season, which is normal in his business, and diminishing visibility in the market because of inadequate marketing.

The challenge is, sales have been falling making it harder to save money for marketing after paying the bills. Competitors have been attracting most of his customers by communicating crazy discounts and offers through the media, flyers, brochures and sales promotions. Many entrepreneurs find themselves in this situation.

Normally, during low season the market shrinks leaving many players competing for few customers. Some entrepreneurs shed unnecessary staff to cut cost and find strange ways of selling old or slow moving stock procured during the peak season in a bid to release tied-up capital to buy new stock for the next season.

Customers become choosy and often too demanding because, out there in the market, there is always someone with crazy offers or is willing to shave the margins to the bone to just stay afloat.

Smart entrepreneurs respond to this situation by devising ways to win more of the scarce business, retain their loyal customers, win more customers from competitor and, most important, maintain a marketing budget by saving money from increased efficiency.

During low season, it is only by increasing efficiency rather than borrowing externally or cutting marketing spend that entrepreneurs can save the situation in the midst of rising costs and low sales. Any marketing done with limited budget and in low season when returns are not immediate must be carefully planned to achieve maximum impact.

Putting one or two advertisement in the media, printing a few flyers and brochures or giving your website a facelift may not help if it is not sustained. The few customers you are likely to net will hardly cover the cost of the exercise.

The smart way to handle the situation is to appreciate that you have limited funds and focus on strategies that target people who are likely to buy from you. You need to embrace target marketing as opposed to mass marketing.

The Pareto Law, also known as 80/20 rule, states that 80 per cent of consequences stems from 20 per cent of causes.

In business, it means 80 per cent of your sales revenue comes from 20 per cent of your clients. Eighty per cent of your clients who consume much of your resources give you only 20 per cent revenue. This rule works in all industries with little deviation.

The challenge facing many has always been failure to know which 20 per cent constitute 80 per cent. If you can identify the 20 per cent segment that gives you or has potential to contribute 80 per cent of your revenue and concentrate all your efforts on it, you can operate efficiently on a modest budget.

In fishing, it matters where you cast your net. You must know what kind of fish you want and where they are found in the sea. Likewise, you must know what kind of customers you are looking for and where they are found in large numbers.

Is it in up-market areas? Is it in schools? Is it in places of worship? Is it in the streets?

Once you know where they are and the size of the market, you can then allocate your time and resources on pursuing them using the cheapest means. You can seek win-win alliances or reward some of them for endorsing or refereeing you to their colleagues.

Mr Kiunga is the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market. [email protected].