I am changing the order of the marketing strategies here because it is important to cover this Yellow Page ad design marketing strategy next. When I first started advertising in the Yellow Pages, there were 1500 competitors in the carpet maintenance/water damage industry in Orange County, CA. Nearly all of them focused on the 1 way they understood about how to stand out from the competition which was having the lowest price. Experience has taught me that being the lowest price provider always results in delivery and customer service problems.
My service business struggled while I tried to compete on price also. Then one day I got smarter about this. I doubled my prices and started to openly state in my Yellow Page ad design that I was not the lowest price.
I stated clearly in my Yellow Page ad that if all you want is the lowest price, please call someone else. A surprising thing happened. I started to get the bigger more luxurious homes which doubled my average job and tripled my profit margin.
What I learned is that the high-income earners shop differently than the pure price-shoppers. Most every one got 3-5 bids on their carpets cleaning. In the past, I had always tried to be the cheapest choice. But when I was the cheapest, I never got the big jobs because I later learned that the high-income earners most always throw the lowest bid out. They know that the lowest bid only means trouble for them. So they throw out the low bid and choose from the bids that are left.
When you are the lowest bid, you generally get the worst work. This was 100% true in the carpet maintenance business. When I was the low price guy, I did all the rentals down by the beach in Newport Beach, CA. I got a lot of regular business, but these were the absolute dirtiest carpets in the county. They were so full of sand and beer from beach parties that I had to send my carpet cleaning machine to rehab at the end of SummerJ. So I was doing the most work and getting the least pay for it.
When I raised my prices and started getting into the more luxurious homes in Newport Beach, a wonderful thing happened to my business. I started working less and making more money because these were now the BEST maintained carpets in the county. The rental carpets I did at a low price were nearly destroyed and need restoration, while the carpets in the high-income earners homes only had a few spots and were easy to clean. The high-income prospects were the clients that were willing to pay a premium for true carpet maintenance. My business was now more than 300% more profitable targeting these easier jobs.
I found that the clients valued me more and treated me better as well. I began to get sandwiches, colas and cookies while I was on the job.
My referrals increased in the gated communities I was serving because the high-income prospect refers you more than the low income prospect.
There was almost no competition once I began serving the high-income prospect. Although there was massive competition in the carpet maintenance industry, it was all price competition.
Only 5% of prospects are true price shoppers. These are the ones that drive a Yugo, wear $2 shirts, buy the $2 dime store reading glasses and get their shoes at the Goodwill. The other 95% of prospects are only price shoppers on commodities like what they can get at Costco. When it comes to having a smile makeover, their house landscaped or painted, buying their car or their wardrobe, and having their carpets and upholstery maintained, they want better than the cheapest.
The other reason it is double-dumb to target price-shoppers is they have no loyalty. Their loyalty is to price alone. The minute they see a lower price, they are lost as clients. So there’s no point in trying to build a database of price-shoppers because they will be constantly seeking the lowest price and leaving your business.
The top 20% of income earners have 47% of the disposable income. It is this group exclusively that can and will continue to spend in a down economy. Targeting the lower income groups that have little if any disposable income only wastes your advertising and marketing dollars on prospects that can not and will not pay you for your products and services.
This fundamental shift in your targeting and marketing is difficult for small business owners to do because they think they will lose all their clients. I had the same price resistance in my head before I raised my prices in 2000. I thought that I would lose most of my clients that had become used to my low prices. But when I implemented my new pricing, I was surprised by my client’s response. Most stated, “I thought you’d have to raise your prices, so I was expecting a price increase.”
To my astonishment, only 1 client out of 800 complained about my new pricing. She was a client that always wanted something for nothing, and was generally a pain to service. I fired her as a client and never looked back. I now had 799 clients paying my new prices and the 1 client that was always a problem gone forever.
In hindsight, raising my prices was the smartest thing I could have done and I should have done it sooner. It tripled my profit margin and took me out of competing with 1500 carpet maintenance businesses that focused on low price. I now had only 1 other carpet maintenance business that focused on the high-income prospect, and frankly there was enough high-income homes to keep us both busy charging the highest prices in Orange County, CA. The high-income prospect is the most underserved prospect of all, and the ideal prospect for all small business marketing unless you own a $.99 store. I recommend that all your advertising and marketing efforts avoid the low income prospects and target the high-income prospect. You’ll be making more profits and doing less work which is always a welcome relief. And your marketing strategy of targeting the group with the most disposable income that is underserved will double or triple your ROI on all your print and Yellow Page advertising.
Tags: advertising, high-income prospect, marketing, marketing strategy, pricing, profit margin, small business marketing, Yellow Page ad design, Yellow Page advertising
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