5th edition.Marketing Without Advertisingby Michael Phillips & Salli Rasberry doc

Marketing Without Advertisingby Michael Phillips & Salli Rasberry edited by Diana Fitzpatrick 1 Nolo’s Legal Updater We’ll send you an email whenever anew edition of your book is publish

5th edition

Marketing Without Advertising

by Michael Phillips & Salli Rasberry edited by Diana Fitzpatrick

1 Nolo’s Legal Updater

We’ll send you an email whenever anew edition of your book is published!Sign up at www.nolo.com/legalupdater

Updates @ Nolo.com 2Check

www.nolo.com/updates to find recentchanges

in the law that affect the current edition ofyour book

Nolo Customer Service 3To makesure that this edition of the book is themost

recent one, call us at 800-728-3555 and ask one of NOLOour friendly customer service

r e pr e s e nta ti v e s Or find out at

www.nolo.com

always up to date

The law changes, but Nolo is always

on top of it! We offer several ways tomake sure you and your Nolo products arealways up to date:

cientbasis.Butthistext

isnotasubstituteforpersonalizedadvicefromaknowledgeablelawyer.Ifyouwantthehelpofatrainedprofessional,consultanattorney

licensedtopracticeinyourstate

please note

NOLO

5th edition

Marketing Without Advertising

by Michael Phillips & Salli Rasberry edited by Diana Fitzpatrick

Fifth Edition Editor Cover DesignBook Design Production ProofreadingIndex Printing MAY 2005 DIANAFITZPATRICK TONI IHARA TERRIHEARSH MARGARET LIVINGSTONMARTIN ARONSON JEAN MANNCONSOLIDATED PRINTERS, INC

Phillips, Michael, 1938 Marketing without advertising / by Michael Phillips & Salli Rasberry. 5th ed.

p cm ISBN 1-4133-0184-3 1 Marketing 2 Small business Management I Rasberry, Salli II Title.

HF5415.P484 2005 658.8 dc22

200504521

Copyright © 1986, 1997, 2001, 2003,and 2005 by Michael Phillips and SalliRasberry ALL RIGHTS RESERVED.Printed in the U.S.A

No part of this publication may bereproduced, stored in a retrieval system,

or transmitted in any form or by any meanselectronic, mechanical, photocopying,recording, or otherwise without priorwritten permission Reproductionprohibitions do not apply to the formscontained in this product when reproducedfor personal use

For information on bulk purchases orcorporate premium sales, please contact

the Special Sales Department Foracademic sales or textbook adoptions, askfor Academic Sales Call 800-955-4775

or write to Nolo at 950 Parker Street,Berkeley, CA 94710

Acknowledgments

With special thanks to Soni Richardsonand Michael Eschenbach

Full Disclosure Note

All the businesses and businessowners mentioned in the book are real.The great majority operate under theirown names in the cities indicated.However, because some of our examplesare less than flattering, and for otherreasons, including privacy, we havechanged the names and/or locations ofbusinesses in a few cases

In some cases, the businesses used as

examples in the book do advertise—theirmarketing ideas are so good we includedthem anyway In most cases, if a businessused as an example does advertise, it is asmall part of their marketing mix.

G Listings: “Advertising” That

C Fantasy: A Growing Part of Retail

Marketing 3/10

D The Test of Time

3/13

C Giving Customers Choice About Price

4/6

4/9

5

How You Treat the People Around You

A Tracking Reputations via the

Grapevine

5/2

B How Employees Spread the

G Business Friends and Acquaintances

6/5

E Openness With Ideas

8

How to Let Customers Know Your

Business Is Excellent

Yourself 8/3

B Help Customers Judge for

Helping Customers Find You

A Finding Your Business

D Telephone Accessibility 9/8

E Listing Your Services Creatively andWidely 9/13

F Getting Referrals From People inRelated Fields 9/15

G Trade Shows and Conferences 9/18

10 Customer Recourse

A Elements of a Good RecoursePolicy 10/4

B Designing a Good Recourse Policy 10/6

C Telling Customers About YourRecourse Policy 10/9

D Putting Your Recourse Policy inWriting 10/11

Marketing on the Internet

A Business Uses of the Internet:Demystified

D Designing an InternetSite 11/11

E Interactivity and Customer Screening 11/14

F How to Help People Find YouOnline

G International Marketing 11/20

H Blogs for Your Business 11/23

F

Openness 12/8

C Marketing Actions and Events: The

“What” of Your Marketing Plan 13/5

D Direct Marketing Actions 13/7

E Parallel Marketing Actions

F Peer-Based Marketing Actions 13/21

Creating a Calendar of Events

A Marketing Calendar for an InteriorDesign Firm 14/2

B Marketing Calendar for Jerry andJess’s New Chiropractic Clinic 14/4

C Marketing Calendar for Lolly &Criggle’s—

an eBay Children’s Boutique ClothingWebsite 14/11

By the Publisher

Take a look around your community

and make a list of truly superior smallbusinesses—ones you trust so thoroughlyyou would recommend them to yourfriends, your boss, and even your in-laws.Whether your mind turns to restaurants,plumbers, plant nurseries, orveterinarians, chances are good your list

is fairly short

Now think about all the ads for localbusinesses that fill your newspaper,clutter your doorstep, spew out of yourradio, cover the back of your groceryreceipts, or reach you in dozens of otherways How many of these businesses are

on your list? More than likely, not many

In fact, I’ll bet the most heavily advertisedlocal businesses are among the businessesyou never plan to patronize—or patronizeagain—no matter how many 50%-off

specials you are offered.

If, like me, you have learned the hardway that many businesses that loudlytrumpet their virtues are barely average,how do you find a top-quality businesswhen you need something? Almost surely,whether you need a roof for your house, anaccountant for your business, a math tutorfor your child, or a restaurant for aSaturday night out, you ask for arecommendation from someone youconsider knowledgeable and trustworthy

Once you grasp the simple fact thatwhat counts is not what a business saysabout itself, but rather what others sayabout it, you should quickly understandand embrace the message of this brilliantbook Simply put: The best way tosucceed in business is to run such a

wonderful operation that your loyal andsatisfied customers will brag about yourgoods and services far and wide Instead

of spending a small fortune on advertising,it’s far better to spend the same moneyimproving your business and caring forcustomers

It’s the honest power of this honestmessage that made me excited to publish

Marketing Without Advertising back in

1986 Uniquely among small businesswriters, Phillips and Rasberry weresaying the same things I had learned as aco-founder of Nolo—that the key tooperating a prof

do and how you do it This means not onlyproducing top-quality services andproducts, but also demonstrating yourrespect for your co-workers andcustomers.

After many years of success, it’s adouble pleasure for Nolo to publish

another updated version of Marketing Without Advertising Yes, lots of things

about small business marketing havechanged in the interim To mention just afew, today many of us routinely use faxmachines and email to keep close to ourcustomers And, of course, the Internet hasbecome an essential marketing tool formany businesses But some things haven’tchanged A trustworthy, well-run business

is a pleasure to market, and the personalrecommendations of satisfied customers

are still the best foundation of a successfuland personally rewarding business.

Marketing Without Advertising has been

updated to provide a new generation ofentrepreneurs with the essentialphilosophical underpinnings for thedevelopment of a successful, low-costmarketing plan not based on advertising.But this isn’t just a book about businessphilosophy It is full of specificsuggestions about how to put together ahighly effective marketing plan, includingguidance concerning business appearance,pricing, employee and supplier relations,accessibility, open business practices,customer recourse, and many other topics

Consumers are increasingly savvy,and information about a business’s quality

or lack thereof circulates faster than ever

before The only approach worth taking is

to put your planning, hard work, andmoney into creating a wonderful business,and to let your customers do youradvertising for you Ralph WarnerBerkeley, California

Chapter 1 Advertising: The Last Choice in Marketing

A The Myth of Advertising’s Effectiveness

1/3

B Why Customers Lured by Ads Are

1/8

C Why Dependence on Advertising Is Harmful 1/9

D Advertisers: Poor Company to

“Really high spending on advertising

sales is an admission of failure I’d much

prefer to see investments in loyalty

leading to better repeat purchases than

millions spent for a Super Bowl ad.”

broadcasting your message to many

uninterested members of the public, and

“listing,” which is directing your message

to specific people interested in the

product or service, such as in the Yellow

Pages

—Ward Hanson, author of

Principles of Internet Marketing From The Industry Standard, 4/10/2000.

Marketing means running a first-ratebusiness and letting people know about it.Every action your company takes sends amarketing message Building a businessimage is not something invented by a P.R.firm; it’s a reflection of what you do andhow you do it

A clever ad is what pops into mostpeople’s minds when they think aboutgetting the word out about their business.The fact is, most of us know little aboutadvertising and a whole lot about

marketing We are really the marketing

experts for our business because we know

it better than anyone else

It may surprise you to know how many

established small businesses havediscovered that they do not need toadvertise to prosper A large majority—more than twothirds in the U.S., certainly

—of profitable small businesses operatesuccessfully without advertising

In this book we make a distinctionbetween “advertising,” which is

Here’s where the figure about smallbusiness and advertising comes from:There are about 20 million nonfarmbusinesses in the United States Of these,about two million are involved inconstruction; another five million deal inwholesaling, manufacturing, trucking, ormining A small minority (30% of thetotal) generate customers by advertising.The rest rely on personally knowing theircustomers, on their reputations, and

sometimes on salespeople orcommissioned representatives Of theremaining 13 million businesses, 70% arerun by one person It’s very rare for theself-employed to find advertising useful;the single-person business, whether that of

a lawyer, doctor, or computer consultant,relies almost exclusively on personalrecommendations That leaves thepercentage of businesses who might evenconsider advertising useful at less than19% We think most of them don’t need it,either

There are four main reasons whyadvertising is inappropriate for mostbusinesses:

• Advertising is simply not cost-effective.Claims that it produces even marginalfinancial returns are usually fallacious

• Customers lured by ads tend to bedisloyal In other words, advertising

does not provide a solid customerbase for future business

• Dependence on advertising makes abusiness more vulnerable to changes involatile consumer taste and thus morelikely to fail

• Because a significant percentage ofadvertising is deceptive, advertisers areincreasingly seen by the public (bothconsciously and unconsciously) asdishonest and manipulative Businessesthat advertise heavily are often suspected

of offering poor quality goods andservices

Let’s now look at these reasons inmore detail

A The Myth of Advertising’s

The argument made by the proponents

of advertising is almost patheticallysimpleminded: If you can measure thebenefits of advertising on your business,advertising works; if you can’t measurethe beneficial effects, then yourmeasurements aren’t good enough Or youneed more ads Or you need a differenttype of ad It’s much the same type ofrationalization put forth by the proponents

of making yourself rich by visualizingyourself as being prosperous If you getrich immediately, you owe it all to thesystem (and presumably should give yourvisualization guru at least a 10%commission) If you’re still poor after sixmonths, something is wrong with yourpicture It reminds us of the man in

Chicago who had marble statues of lions

in front of his house to keep awayelephants: “It works,” he said “Ain’t noelephants in this neighborhood.”

James B Twitchell, the author of

Adcult, notes, “Although elaborate proofs

of advertising’s impotence are available,the simple fact is that you cannot put ameter on the relationship betweenincreased advertising and increased sales

If you could, agencies would chargeclients by how much they have increasedsales, not by how much media space theyhave purchased.”

Paradoxically, even though somesmall business owners are beginning torealize that advertising doesn’t work,many still advertise Why? For a number

of reasons: because they have been

conditioned to believe that advertisingworks, because there are no other models

to follow, and because bankers expect tosee “advertising costs” as part of abusiness proposal

It’s important to realize that yourjudgment regarding advertising is likely to

be severely skewed You have beensurrounded by ads all your life, andyou’ve heard countless times thatadvertising works To look at advertisingobjectively may require you to re-examinesome deeply held beliefs

According to E magazine, advertising

budgets have doubled every decade since

1976 and grown by 50% in the last tenyears “Companies now spend about $162billion each year to bombard us with printand broadcast ads; that works out to about

$623 for every man, woman and child inthe United States” (“Marketing Madness,”May/June 1996) Information Resources, aglobal marketing resource firm(www.infores.com), studied the effect ofadvertising and concluded, “There is nosimple correspondence betweenadvertising and higher sales Therelationship between high copy scores andincreased sales is tenuous at best.”

To illustrate how pervasive the

“advertising works” belief system is,consider that if the sales of a particularproduct fall off dramatically, most peoplelook for all sorts of explanations withoutever considering that the fall-off may be aresult of counterproductive advertising

Skeptics may claim that you simplycan’t sell certain consumer products—