James Caan is the newest dragon on the BBC television show Dragons’ Den. He
is the chief executive of private-equity firm Hamilton Bradshaw and has been
building and selling businesses since 1985 in various sectors, including
publishing, HR, recruitment, software and franchising. A graduate of Harvard
Business School’s Advanced Management Programme, he has since won several
awards for his entrepreneurship.
Ten years ago, businesses would have commissioned expensive advertising
campaigns incorporating any or all of print, radio or TV media. But nowadays
this whole concept has changed. Why print brochures that are expensive to
produce and distribute when the internet has transformed the way we can
promote our businesses? With customers no longer randomly looking for a
product or service, the internet offers a great opportunity to develop a
targeted route to your market.
With the ever-increasing amount of websites, firms need to focus on the
content, functionality and positioning of their web presence. Just as a
successful high-street retailer will regularly update its shop window to
increase foot fall, a website must be dynamic if it is to showcase a
business effectively. The potential for new customers on the internet is
enormous, with 2.7 billion searches each month on Google alone.
As people become more dependent on the internet, this audience will not go
away and should be addressed accordingly. However, it is not sensible to
rely on just one method of promotion. To catch all potential customers it is
important to adopt a creative approach by using a mix of the internet,
telesales and direct marketing.
A question often asked in the Dragons’ Den is “Has the product actually been
sent to your target market?” Too often the negative response indicates that
people overcomplicate their marketing strategy and don’t simply identify the
customer and put the product into their hand.
If, when selling to an organisation, you haven’t had a reply, don’t assume
that it’s because the buyer is too busy. Try to find out why by asking “What
has to be done for this to fit your requirements?” The feedback will improve
your marketing strategy. Priced at £10, your product might have been
rejected, but by looking at production costs and reducing the price to £5 it
might become the product the buyer has been looking for all year.
The key is not to be obsessive or possessive about your idea but to be
flexible. For example, I introduced the concept of Rec2Rec (sourcing
recruitment consultants for recruitment agencies) to a sceptical market.
Nobody wanted the service. However, by asking the right questions I
identified the presentation that addressed their needs. Instead of giving up
I listened to the market and created a huge revenue stream for my company.
This leads me to the human factor in promotion. If you employ a sales force to
reach your market, how do you attract, remunerate and motivate them? In one
of my early acquisitions a member of that firm’s sales team told me our
commissions were not competitive. I learnt that, although we paid the same
industry basic salary, our top rate of commission was 25%, whereas others
paid 40% on fee income bands that were structured like a ratchet. What was
significant was the focus on the 40% and not the ratchet.
I questioned why we, too, could not pay 40%, with the company keeping 60% of
the higher fee income secured. We changed our rate and overnight became more
competitive in the market with a highly motivated sales force. Staff
productivity and profit margins increased along with their commissions
without increasing the cost base.
In addition to benefiting from available advertising channels and a more
motivated sales force, look for “savvy” marketing techniques. I believe that
the two most impressive examples at a global level are Microsoft and Intel.
Microsoft is the market leader in its sector as a result of the way it
presents its products. Microsoft’s competitors sold individual software
packages, so when we bought a computer we had to buy different types of
software. Microsoft doesn’t sell individual components. When you buy a
Microsoft package such as Windows, the individual components and updates are
free.
Rather than product quality, Microsoft’s success is due to the clever
marketing and packaging of their “free” products. This makes competitors
look expensive and in effect locks them out of the market.
Intel realised that its product could be replicated and possibly made cheaper
by anybody, so it presented its microchip not as a commodity, but as a
value-add that epitomises the concept of a commodity. When we buy a car how
many of us have any idea of what manufacturers’ components are in the
engine? That the Intel chip has become a premium product is almost a
ridiculous idea. Yet through collaborating with Microsoft and IBM
advertising campaigns, Intel has communicated to consumers that if they were
to buy a computer without an Intel chip it would be an inferior product -
how smart this is.
The chip maker agreed to contribute to the advertising campaigns of some of
the world’s top technology companies -– which were both current and
potential customers - and pay them not with a cheque on day one but as a
rebate on volume sales that these companies placed with Intel stimulated by
the mass global advertising campaigns they ran. Intel’s success is therefore
not just about an advertising campaign but also about its collaboration
agreements that enables it to ride on the back of its customers’ success.
Essentially, these examples demonstrate that taking a simple idea and turning
it into a global brand within a competitive environment make it necessary to
be creative with your marketing strategy - the rewards will then surely
follow.
