Another small business help tip which is great for helping small businesses to succeed is this. You may think it is wise to sell your product, at the highest price to the most people.
Think again - you can often actually make more money by giving your product away, and then cashing in on repeat sales later!
This small business help technique is the secret behind many seriously successful small businesses. It relies on repeat sales, built up from the initial purchase of the product. The problem of generating the initial purchase is overcome if the product is free, so eventually you should be left with many loyal customers and you can hardly fail to make a fortune.
Lets start with Microsoft - with 90% of the world's personal computers running their software? How did they do it? They gave away their operating system FOR FREE.
And what did all those customers do to get spreadsheets, which were fully compatible with their word processing and database software? They bought them, from Microsoft, year after year after year.
But hang on - Microsoft are hardly a 'small business' are they?
They were when they gave their first operating system away for free!
Before we explain this small business help tip in more detail, let's take another example, Coca Cola - a company whose business has been based on the success of basically one drink. How far would the company have grown, even if they had sold a can to everyone in the world, but nobody bought another one?
The success of the company is of course, built on repeat sales. Coca Cola drinkers don't just buy one can, they buy lots of them, over years and years. The success of the business depends on gaining a customer, providing them with a product they are satisfied with, and then reaping the benefits of repeat sales.
This doesn't just apply to consumable, low cost items. A motorcar is a very expensive purchase, and an infrequent one. Yet, the fortunes of motor manufacturers are dependent on selling not just one car to a customer, but several over their lifetime.
Why does the Ford Company continue to prosper, and why was the Ford Escort a number one seller for so long? Those with rose tinted spectacles would like to think it is because Ford produces the best, most reliable car with the greatest range of features and benefits, at the best price. Many independent observers would differ from this view, pointing to the cars coming from Japan and Europe.
At one time however, Ford did produce this type of car, and this is the point. Once customers start to buy from a supplier, they are notoriously hard to move. Put simply, if they bought Ford last time, they are likely to buy it again, irrespective of any arguments to the contrary.
Here's a good question for you.
How would you find the person who was next to you in the supermarket at 10am last Saturday, if she was buying a loaf of sesame-seed-covered brown bread?
You know the answer don't you? Go and stand in the same place next Saturday at the same time! People really are that predictable. That is why this small business help tip is so reliable.
The phenomenon of brand and company loyalty is very important and explains why corporations spend such huge sums of money in order to persuade someone to try out their product. The initial sale forms only part of the benefit of advertising, and is often little more than incidental. If MacDonalds only encouraged people to enter their restaurants once never to return, their advertising expenditure would be wasted and they would quickly go out of business.
So, what does this mean to you? Whatever small business you are in, it is likely that it actually costs you money to gain a customer. There may well be no profit in the initial sale, which will be swallowed up in marketing costs, whether advertising, direct mail, telesales, personal representation, or whatever.
The fact is this initial sale is crucial in order to make subsequent sales which make a profit. Or is it?
Giving your product away, in the context of the earlier small business help examples above, seems to make sense.
For example. Assume that you produce and market a food supplement which sells by mail for $5. Your product cost is $0.75, and postage and packing another $0.50. The gross profit margin is quite high, although this will be eroded by advertising costs when trying to attract new customers. It could cost between $5 and $10 to attract the new customer, which you would hope to make back when people re-order the product.
Here's an alternative - apply the small business help tip, and offer the product free of charge. The cost to you including postage and packing is $1.25... much less, than it would cost to make a 'sale'. Also, the take up rate will be far higher. You will have a massive database of people who have now sampled your product, and hopefully benefited from it.
When they return to you for some more, you charge them the proper price, again and again.
You may have spotted a flaw in this argument. What about advertising costs? You still have to inform potential customers that they can have a sample for free. Well, yes, you do, but you don't necessarily have to pay for it. Get others to do it for you, for free.
Here is just one way of doing it. A recent copy of The Mail on Sunday in the UK, carried an article about how a young man with a small business, helped himself to build his videotape company to a turnover in excess of £2 million using this method. One of the main methods he had used to achieve this, was by giving away his product for free.
For example, a series of his products was aimed at anglers. He contacted one of the major angling magazines and told them that he had several thousand videos to give away to its readers. They were naturally delighted, because being able to make such an offer helps to sell magazines. The magazine featured the offer heavily and it was a tremendous success.
Although the initial result was a cost incurred, the entrepreneur was able to enclose literature promoting associated videos with the free one. This resulted in many thousands of pounds worth of sales.
You will probably be able to think of many potential uses and spin-offs from this small business help technique. It can be adapted to many different products and markets. Perhaps you have something to sell which could benefit from this approach.
Perhaps you could give a part of your product or service away for free, and then charge for the major part.
Don't forget the next time you are pondering over how to sell more of your product, consider giving it away instead. It's a lot easier and it could definitely be more profitable in the long run.