How to Make Cold Calling Opportunities out of Voice Mails

Turn voice mails into a cold calling journey of discovery
Most people who still use the traditional cold calling mindset look at voicemail as a dead end. They say to themselves, “Oh well, I may as well leave a message and hope he calls me back.”
This almost never happens, and we know it. But we’re often so relieved not to have to talk with someone, that we leave a message anyway. We avoid dealing with another person’s potential negative response to us and we avoid being challenged by the receptionist as well.
By the time the day is over, we might feel good because we’ve played the “numbers game” and made a lot of calls. But our productivity has been minimal. And over time that can make us feel frustrated by our experiences in cold calling.
With the new approach to cold calling, voicemail is an opportunity for discovery.
It leads us beyond voicemail. Voice mail becomes a starting point for you begin the process of locating the person you’re trying to contact.
Our objective is not to pursue people to make a sale in this new way of cold calling. It is to uncover the truth of their situation and to be okay with the outcome, whether it’s a “yes” or a “no.”
So we can begin to feel more comfortable hitting “0” when we get someone’s voicemail. Because we then have an opportunity to go back to the receptionist and begin a dialogue based on asking for help.
Here’s how the dialogue might go:
“Hi, maybe you can help me out for a second? I’m trying to get hold of Mike and I got his voicemail. Would you happen to know if he’s at lunch, or on vacation, or in a meeting by any chance?”
Here, you aren’t just asking to find Mike. And you’re also providing possible solutions to finding Mike. This helps the receptionist feel as if he or she is part of the problem-solving process.
The receptionist is likely to offer one of two responses. The first is, “Yes, he’s in a meeting (or at lunch or on vacation) and I’m not sure when he’ll be back at his desk.”
This answer has just given you a lot more information than you would have if you had just left a voicemail. Now you know your contact’s whereabouts in real time and you can call back at a more appropriate time.
The second response is, “No, I don’t know where he is.” In this case, you would reply, “That’s not a problem…” This low-key statement diffuses any possible pressure that the receptionist might be feeling about not being able to answer your question.
You can then continue with, “Would you happen to know anyone whose desk or office is near him or who works in his area who might know where he is?” Again, you’re offering another option for solving the problem. In many cases, the receptionist will then transfer you to a colleague of your contact who can help you determine his or her whereabouts.
The receptionist may also reply, “No, I don’t know anyone in his area.” You then say, “That’s not a problem…” and offer, “Would you happen to have a paging system or his cell phone number by any chance?”
If the receptionist replies, “Sorry, we don’t have those,” then at that point you can say, “Thank you very much. I really appreciate your help. And then hang up, and call back another time.
Does the idea of paging potential clients or calling them on their cell phone make your stomach clench up? Are you thinking that you can’t cold call people that way because they might reject you?
That fear is only to be expected if your agenda is to sell something to the person. In other words, if you’re still using the traditional sales mindset. But once you master the new cold calling perspective, you’ll feel comfortable calling anyone, any time, using any mode.
As long as you’re 100 percent focused on your potential client’s world, you’ll find that people will be receptive to you. You can easily navigate throughout an organization with the type of dialogue described above, because you’re asking for help in a relaxed manner and you never put anyone on the spot.
Suppose that your efforts to locate your contact in this way fail. At that point you can leave a voicemail, but it should always be your very last option. Here’s an example of an appropriate cold calling voicemail:
“Hi John, maybe you can help me out for a second? I’m not sure if you’re the right person or not, but I’m trying to reach the person responsible for reporting problems about unpaid invoices. My name is John Edwards, my number is…”
Try this way of approaching the situation of voice mails, and you’ll be surprised and pleased at how often it becomes a highway instead of a dead end.

Success Formula for Cold Calls

Making cold calls can be frightening, especially when you are first starting out. Below are some techniques that will help you in becoming more confident before you pick up that telephone.
 Step 1: Be familiar with your company's unique selling point. What are the benefits of what you have to offer? Know these benefits inside and out. Why should a prospect chose you? What will the outcome be of a company that does chose you? Will they increase effectiveness, productivity, or revenue by using your services or products.
 Step 2: Identify the right prospects before your call. Don't just select random telephone numbers - make sure what you have to offer is of interest to those that you are calling. Do they fit in your target market? Know their fears, frustrations, values and decision criteria.
 Step 3: Before making the call warm up to the prospect that you are courting. Find out as much as you can about that company. Before calling become familiar with their pain points. Be ready to present to them how your product or service can ease their struggles. This approach will let them know that you are interested in adding value and assisting them, not just making a sale.
 Step 4: Approach every call with the following question in mind "How can I create value for this company?" This will ensure that you listen to the prospect. Give a brief introduction of your company and the benefits that you offer, ask questions, then shut up and listen. Do not interrupt; listen intently and ask relevant follow-up questions to clarify or acknowledge what they are saying.
 Step 5: Write a script, but don't read it. If you are nervous and want to make sure that you don't forget the benefits that you offer and the questions that you want to ask take a few moments and write a script or outline that will help you.
Tip : Send out a personalized letter that introduces yourself and informs the prospect that you will be calling on a certain day. This take the chill out of that first call - just be sure to promptly follow up.

Network Marketing

Multi-level marketing (MLM) or network marketing is a business model where the selling of products depends on the people in the network. Not only is a product being sold, but other salespeople are being recruited to sell that same product or product line. It's probably not a type of business one would initially consider when discussing retail businesses, but Amway used this model quite successfully for many years.
Advantages: Generally very little startup funding is needed to operate this type of business. Network marketing provides freedom from conventional retailing businesses and offers a greater interaction with all types of people. For those willing to invest the time, huge profits can be made.
Disadvantages: Too many unscrupulous multi-level marketing schemes exist. Some systems require their dealers to be more interested in recruiting new members than in selling the products to consumers. It may be difficult to operate without a storefront.
Support: Most network marketing systems offer motivational materials, training and support.

The Real Problem with Network MLM

It's not the business model itself
It never ceases to amaze me the extreme polar views on the topic of network marketing and MLM. Some people are passionate about it in the extreme, and there are even top celebrity authors like Robert Allen, Mark Victor Hansen, and Robert Kiyosaki doing it and advocating it. Yet, in many circles, you might as well declare yourself a leper as admit to being in network marketing.
So, what is the problem with MLM and network marketing?
Maybe it's the pyramid structure? But you can't really take issue with the tiered compensation structure—almost every large sales organization in the world has that. Salespeople get commission, and sales managers get overrides or bonuses on top of that, and sales directors on top of that, and VPs on top of that.
Or maybe it's the fact that you have to pay to participate in it? But that can't be it—that's a standard franchising model.
And I assure you, the franchise fee of most traditional franchises dwarf the sign-up cost of any MLM program by comparison.
Now certainly, there are illegal pyramid, or "Ponzi", schemes. This is where the money is all being made off of signing up other people, with little or no real product ever being delivered. But in spite of whatever perceptions people may have, the fact is that Amway, Excel, Meleleuca, PrePaid Legal, USANA, and many others have sold millions upon millions of dollars of products to happy customers, many of whom are NOT also reps. So, there may be a perception problem here, but if so, the perception is out of line with the reality.
But surely the bad reputation MLM'ers has some more basis in fact than the occasional illegal pyramid scheme?
The real problem with MLM is not MLM itself, but some of the people it attracts. Network marketing is just a business model, and it really amounts to "micro-franchising". Its upside is that it has a very low cost of entry, with the potential for exceptional revenue, and there are those who achieve that.
But those same things that make it attractive make it attractive to many who are NOT really qualified or prepared to become business owners. The salient characteristics of MLM make it attractive to people who:
 have not done well in their business or profession and have little money saved up to invest
 have no previous experience owning or running a business
 have no previous experience in sales
 have little or no experience developing business relationships other than that of employer/employee/co-worker
 are not satisfied with their current level of income
 have unrealistic expectations of the amount of work involved compared to the revenue realized
Don't get me wrong—I'm not saying that there's anything wrong with any of these things, or that this describes even a majority of network marketers—only that it describes a disproportionate number of network marketers, and that many of them never do anything about it.
As a result, many network marketers end up:
 over-selling the opportunity
 inappropriately discussing business in social situations
 coming across as desperate
 over-focused on new recruits and neglecting existing customers as a result
 being either inaccurate or deceptive when talking about their business
Again, I'm certainly not saying that this describes a majority of network marketers, but it does describe enough of them to tarnish the reputation of the rest. To pre-judge someone based on the basis of a small minority of people in that group is horribly unfair, but we must realize that most prejudices have some basis in reality, even if it has been distorted.
So what's the solution?
There's a first time for everything. And network marketing/MLM is a great opportunity for people to have their first business, their first sales role, etc. My point is this—recognize it for what it is: it's a business, and you are a business owner. And if you've never owned a business before, if you've never done sales before, if you've never networked before, you need to learn about how to do so, not just from the network marketing/MLM experts, but from established experts in those fields.
Network marketers who are serious about building a business should be reading and learning about business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team's weekly or monthly meeting. Act like a small business owner, and people will treat you like one.

Secrets from the top network marketers every business owner should know

Network marketing, or multi-level marketing, is one of the fastest-growing business models of the past few decades. Between 1993 and 2003, total direct selling revenues grew by 7.1% annually, dramatically above the rate of growth of the economy -- and of total retail sales (according to the Direct Selling Association).
The most prominent examples of direct selling companies include Amway, Avon, Mary Kay, Nu Skin, and Herbalife, which recently went public. In 2003, U.S. total direct selling sales totaled more than $29 billion, or almost 1% of the over $3,397 billion for total U.S. retail sales (U.S. Census Bureau).
Any business model that has achieved this kind of success probably has lessons that all business people can learn from. We define this family of business models as a method of distribution in which people are paid for sales volume generated by people they have recruited into the distribution network.
20% of American adults reported they are now (6%) or have been (14%) a direct selling representative -- defined as "the sale of a consumer product or service, person-to-person, away from a fixed retail location." In 2000, 55% of American adults reported having, at some time, purchased goods or services from a direct selling representative.
A significant number of network marketers have negative experiences with the industry. That is why 70% of all people who have ever been a direct selling representative are no longer in the industry. For the purposes of this column, we will not go into the challenges and problems in the network marketing model. There are plenty of Web sites on that topic.
We all work for ourselves. Gone are the days of being a "company man" -- your career is your business. Multi-level marketing just makes that explicit. Yet one of the things that makes the sector most attractive, the low barrier to entry, also creates some its greatest dangers. Many people get into it without the necessary skills to run a successful business.
We are primarily interested in what lessons all business people can learn from successful network marketing practices. We recently interviewed some of the industry's top experts and found seven lessons that all sales and marketing professionals can use to be more effective, regardless of their industry:
1. Every business is a relationship-based business
So says John Milton Fogg, founding editor of Networking Times, author of The Greatest Networker in the World, and one of the most successful teachers of network marketing. You cannot sell an inferior product with a superior relationship, but you need at least a functional relationship to sell your product. That is particularly apparent in multi-level marketing, an industry built around belly-to-belly sales.
2. Think analytically about your network
Shaul Gabbay, in his book Social Capital in the Creation of Financial Capital: The Case of Network Marketing, reports that the fastest-rising group of entrepreneurs [of the direct selling representatives whom he studied] were those who had initial weak ties to dense networks. In other words, successful salespeople penetrate an untouched market, and then work to gain a high market share in that market. This is easier to do if that untouched market is highly dense; everyone in it knows all the players. Why? Because word of mouth in that type of network will spread more rapidly about the value of your product or service. This principle is particularly evident in network marketing, an industry where "networks go to work." However, the same idea applies to almost any business.
3. Create a community around your product
One of the great ironies of the software business is that not only do many software companies outsource their development off shore; many also outsource their customer support to their own customers! When Best Software encourages you to visit their user forums to discuss your issues in using Act! software, that is a very cheap way for Best to support their product. Multi-level marketing companies rely almost exclusively on their communities for sales, support, follow-up, and recruiting.
4. Leverage the unleveraged
In 2002, 79.9% of the direct selling sales force was female. 56% completed only a partial college education, technical or trade school, or have only a high school education. This sales force looks very unlike the traditional American corporate sales force, which typically is much more male and has a higher level of education. However, the direct selling sales force looks just like their customers. People can be very effective salespeople when selling to their own community, because the common culture and interests create a foundation to build strong relationships more quickly.
5. Build a relationship first
"Internet marketers and network marketers share a common, terminal disease," Fogg says. "If you think of the whole process like dating, we bring someone to our Web site, and then we ask them to have sex immediately. There has to be some courtship first." One of the delicate aspects of network marketing is that people leverage their personal relationships to sell a product. Although that leverage makes some people queasy, the success of the network marketing model shows that many people do comfortably build multiplex relationships: Their friends are their customers, and vice versa. With delicacy, you can do the same thing.
6. Not everyone is a prospect
One mistake some network marketers make, as do many other sales people and marketers, is thinking of everyone they meet as a prospect.
7. In network marketing, this is known as the "Three-Foot Rule", i.e., anyone within three feet of you is a prospect. But top network marketers don't do this. Max Steingart, creator of the "Success Online" training course for network marketers, says that it's not just about figuring out when to make your pitch, but even if to make your pitch. "You just build relationships with a lot of people. Some will become prospects and some won't," he says. "There's no timetable. If the time is right, you'll know."
8. Use online networks
The network marketing industry is a particularly good industry for leveraging online networks. Steingart teaches people how to "make the world your warm market," specifically by using online networks. He reports that when he instant-messages someone to start a conversation about potentially joining his distribution network, 50% of the people he contacts will respond to the conversation. More and more sales and marketing professionals will use online networks to accelerate their sales.
What else can traditional businesses learn from the best practices of successful network marketers? We welcome your comments and feedback.

You Too, Can be a Salesperson

I am not a sales and marketing guru. I've written two books on marketing and taught thousands of people how to sell themselves, but really, I don't know more about sales and marketing than most of you.
What I know how to do is talk to people, all kinds of people -- restaurant owners and waiters, CEO's and receptionists, entrepreneurs and kindergarten teachers. I don't try to sell these people anything; we just have a conversation. But sales happen as a result.
In my book "Get Clients Now!" I define marketing as telling people what you do over and over. That's part of the secret right there. I've seen too many business owners fail because they simply don't speak up about their business. Or else they tell someone once what they do for a living, and then think they never need to mention it again.
But there's another piece of the sales and marketing puzzle that often gets left out.
When you talk to someone about your business, you need to be direct, authentic, and unattached to the outcome.
Clients and students often ask me questions like, "What do I say when I call Mr. Big to find out if he's ready to buy?" They're shocked when they hear my answer: "Hello, Mr. Big, have you decided to purchase our product?"
Or maybe the question is how to follow up with someone you met at last night's event who expressed some interest in your service. My suggestion is to say: "When we spoke last night, you seemed interested in my services, and I'd like to continue our conversation."
What do you do when you fear that the client doubts your qualifications? How about: "You seem a bit unsure of my qualifications to do the job, and I'd like to address that. What are your concerns?"
These are all conversations. You ask a question; they answer. They ask a question; you answer. It's like a friendly tennis match -- all you have to do is keep the ball in the air, and nothing is at stake.
But that's the catch, isn't it? You think there's a lot at stake. What if you don't get the contract, the client, the money? So you make the conversation overly significant, put on your marketing face and your selling voice, speak someone else's words... and the result is anything but direct and authentic.
What impact does this have on the person you're speaking with? The opposite of a direct approach is an indirect one: devious, underhanded, sneaky (check your thesaurus). The opposite of authentic is inauthentic: phony, fraudulent, insincere. Isn't this exactly what you have always been afraid of -- sounding like a used car salesman or telemarketer reading a script?
Scripts are for rehearsals. In a meeting or on the phone, keep some talking points in front of you, but don't read. Every word should be one you would use in normal conversation -- use instead of utilize; fix instead of rectify; help instead of facilitate. Get to the point quickly, and tell the truth about it. "I'm just calling to introduce myself," is not only an ineffective aproach, it's a lie.
Show a sincere interest in people by asking questions about their goals and problems. When you see a place where your business can help, don't hesitate to say so. Be respectful of people's time and really listen to what they say. Respond to what you heard instead of continuing to the next item on your agenda. Don't be afraid to toot your own horn while staying true to who you are.
But these are just tips for changing your behavior. The real key is in your attitude. If you can recognize that being indirect, inauthentic, or attached to the outcome is causing you to lose sales instead of make them, you'll have a powerful incentive to do things differently.

Basics for Marketing Your Home Business

Essentially, home business marketing is just like marketing for big businesses. In order for your business to be successful, you need to make money. For your business to make money, you need sales. To make or increase sales, you need to market your product or service effectively.
It's important to understand some basic marketing terms so you'll know how to go about finding customers and prospects and how to secure their business. Whether you personally perform all of your home business marketing tasks or have someone else perform them for you, at least you'll understand what's going on and why it may or may not be important.
Marketing Terms for Home Business
Home business marketing activities may include public relations, market research, collateral publication and distribution, along with strategy and analysis.
Positioning, branding, distribution and advertising are also a big part of marketing activities for most businesses, and home business are no exception. Here are some basic definitions to get you started:
 Public relations – may consist of a variety of activities engaged in by organizations or celebrities that are intended to promote a positive relationship or image with their customers and prospective customers (members of the public). Public relations activities may include maintaining relationships with the media and establishing a visible presence at trade shows and other public or private events. It may also include the preparation and distribution of press releases, which are newsworthy articles intended to be published in the media for the purpose of showcasing the company's activities to the public.
 Press releases - newsworthy articles intended to be published in the media for the purpose of showcasing the company's activities to the public. Often considered an effective form of "free" advertising, although it may cost some money to hire someone to write the article and/or pay to distribute it over the news wires.
 Market Research – the activities undertaken by an organization to determine the nature of its customers and competitors, as well as the demand for its products or services along with the features that customers prefer in similar products or services. These activities may include customer surveys, business intelligence and test marketing the reaction to a product or service being offered.
 Marketing collateral - a collection of marketing communications materials used as part of an organization's marketing strategy. Marketing collateral might include brochures, data sheets that provide an overview of the features of a product or service (often a technical overview), and white papers, which are articles or reports written to showcase an organization's products or services, the effectiveness of the technology behind them, and/or a comparison of the organization's products, services or method of operating compared to its competitors.
 Positioning – techniques used in marketing intended to identify the place or position of an organization's product or service within its target market compared to its competition. These techniques are used to influence and/or reinforce certain perceptions that customers and prospects have of the product or service. Once an organization is able to identify how it wants its customers to perceive its product or service, marketing activities can be focused on achieving the desired results. Understand your competitive advantage.
 Branding - is the organization's representation of what it stands for, often based on cumulative impressions and positive reinforcement. Like a cattle brand, a business brand can be identified readily and is used for increased awareness of the business. Branding is used throughout the company, such as in its logo, stationery, business cards, on its web site and in its tagline. A great example of effective branding is the Nike "swoosh" logo because it's instantly recognizable around the world.
 Distribution - is the mixture of methods used to get your product or service to its customers. For example, you may need to decide if you will sell your products through a catalog, on the Internet, in a brick and mortar store, or a combination of these. Understanding the best methods or channels for how your product or service is distributed is important for maximizing your sales. Your decisions in this area will greatly impact your other marketing activities.
More Home Business Marketing Terms
1. Marketing campaign - one or more marketing activities undertaken in an effort to increase business. A campaign usually has a starting and ending date, an objective, and a means to measure how effective each activity was in accomplishing its objective. The overall effectiveness of the campaign is also tracked. Gathering and analyzing campaign results is important because it helps identify activities that should be repeated, and which activities were not worth the time or expense. Marketing campaigns may include Internet marketing and search engine marketing techniques
2. Lead generation - the process of accumulating contact information on prospective customers (prospects) for your business.
3. Cold calling - the process of visiting prospective customers in person (such as in going door-to-door) or in telephoning prospects without their advance knowledge of your visit or call. The effectiveness of cold calling is largely dependent on the nature of the product or service you have to offer.
4. Internet marketing – marketing your product or service via the Internet. Techniques include search engine marketing, banner ads, and a variety of Web publishing and search engine optimization techniques that will be discussed in future articles.
5. Search engine marketing - The act of marketing a Web site via search engines, whether this is improving rank in organic listings (non-paid search results), purchasing paid listings or a combination of both.
Put Your Marketing Knowledge to Work
Now that you have a basic understanding of the terms used in home business marketing, its time to put them to use. Knowledge alone won't bring customers to your door. For one thing, you need to know your competitive advantage keep it in focus, and then center your marketing efforts around it.
Many home business owners claim they don't have the time for marketing. Without it, the business is not very likely to succeed. Setting aside a specific time of the day and/or day of the week is one way to stay on top of your marketing efforts.
Remember, the more effectively you can market, the bigger return you'll get for your time and money. Strong marketing efforts do not necessarily require a big budget. But they do require some time, careful thought, and results tracking.

How to choose the right business plan format

Business planning is a vital component of starting and growing a successful enterprise. Many different templates and variations of business plans exist, so you must choose the right one for your purpose and your enterprise.
Who is the intended audience?
Some business plans are designed for internal audiences (owners, employees, Boards of Directors or Advisors, and senior management) for an existing organization for the purposes of implementing a growth strategy and may be referred to as a strategic plan. It can also serve as a guide solely for the owner of a new business to help clarify their vision and goals.
A business plan could also be for external audiences (investors, clients, suppliers, new hires, bankers and other lenders such as government) for the purposes of attracting financing, talent or suppliers for a new or existing business.
A document for this audience may initially take the form of a condensed version of the larger business plan, especially for attracting funding. This version is known as the business opportunity document or business funding proposal and is typically followed by the business plan itself. Obtaining financing is a significant issue for many businesses and this tool can be an enormous advantage when approaching investors or lenders.
What goes in the business plan?
The business plan is a comprehensive document that is created to describe the future of the venture, consisting of:
 executive summary
 company history and background
 clear description of the business concept and value proposition
 marketing analysis including competitive analysis and market development plan
 production and operations assessment and development plan
 financial assessment and projections
 management and human resources assessment and plan
 implementation plan
 identification of resources and proposed deal structure for investors (if appropriate)
 survival strategy describing inherent risks and mitigation strategies
 growth strategy
 exit strategy
 summary
 appendices
Some of these may be longer or shorter, or even optional, depending on the format and the intended audience.
The reader should be able to clearly understand what the value proposition is, why the business will succeed and how it is going to achieve this success. If the plan is being pitched to investors, the investor should understand as soon as possible what the proposed deal structure is and what the return will be. To do this you must support any claims and assumptions about what the business will do with realistic research. Unrealistic financial projections are a sure fire way to lose investors’ interest or for an owner to lose perspective.
How long should it be?
A typical business plan may consist of 20 pages although some business plans can be 100 pages or more, depending on the purpose of the plan, who the target is, and the nature of the business. For example, if the plan is going to be used to attract investors it may require more detail than if it was to be used internally to communicate a growth strategy, while if the business concept is relatively simple it may be conveyed more briefly than a more complicated enterprise.
Should I use a template? Or a consultant?
There are so many business plan templates to choose from that it’s tempting to simply cut and paste or hire outside consultants to write your business plan. However, it’s best for the owner(s) of an organization to write the plan, even if you decide to bring in outside help to review and refine it.
Often entrepreneurs do not take the time, nor do they feel a business plan is necessary for their businesses to succeed. They often think that taking time to write a business plan is just impossible and would be a waste of time. But when they learn how the process could benefit their organization they are more likely to get started! Even if there is no immediate audience for the document itself, the planning process itself is invaluable.
Conclusion
A business plan is an easy way to communicate the business idea to the prospective audience, to assist in preventing problems, and to identify growth strategies, as well as a tool used in the search for funding. A business plan should be used as a tool for the entrepreneur to guide the business operations rather than a strict manual or blueprint to be adhered to and implemented exactly. The business plan can also be designed to help owners of businesses to clarify the strategy of a particular business and provide insight to manage risks.
Entrepreneurial training is becoming a significant component of many learning institutions in response to the escalating numbers of business start-ups worldwide. Business plan writing is being taught to would-be entrepreneurs more than ever before. New venture analysis is an integral part of the business plan creation process as is what to do with the opportunity once it is identified.
Although being a successful entrepreneur is attractive, over 70% of new businesses do not survive after year two. Having a business and knowing what to do with it are very separate issues and creating a well-executed business plan for the right reasons will enhance the odds that your venture will be one of the ones to succeed.

Create A Money Winning Business Plan Outline

A business plan outline is the second most important starting point once you've pre-determined your audience. The business plan outline should be prepared before the actual research and writing of the business plan. Once your outline has been set; organize your research files around the layout of your plan.
Every business plan follows a generic outline but not every business plan is the same. Business plan outlines differ on 2 factors:
1. Type of Business: Details of critical success factors for businesses in your industry must be included in the plan. Technology companies will discuss R & D, intellectual property, and time to market. A retailer will feature pricing methods, inventory control, merchandising and location. Ensure that your plan is complete by addressing factors important to your industry.
2. Type of Audience: A banker business plan will be different from an investor plan. Bankers like to see risk assessment and planning, loan amounts, repayment terms and collateral. Investors want a return on investment, an exit strategy, and planned growth with the funds.
Business Plan Outline General
1. Executive Summary: overview of most important points of business plan and selling your business.
2. Company Description: mission statement, company overview, industry briefing, corporate history, legal structure.
3. Products & Services: description, R & D, pricing, delivery, production.
4. Marketing & Sales: market definition, customer profile, competitive & SWOT analysis, strategy, sales & promotion.
5. Operations: Legal & government issues, staffing, suppliers, alliances, policies, risk assessment, facilities, location, insurance, milestones.
6. Management: key job descriptions, responsibilities, management team, organizational chart, advisors.
7. Financials: Profit & loss, cash flow, balance sheet, financing, debt schedule, use of funds and assumptions, break-even analysis.
Business Plan Outline Extras
The extras are what takes a plan from 10 pages to 20 pages. More in-depth and detailed for higher levels of funding and a greater complexity of investors. No real need for extras if your plan does not require it. Here's a brief description of some of the extras that can be added to your business plan outline:
1. SWOT Analysis: As part of your competitor profile, adding a Strengths, Weaknesses, Opportunities and Threats analysis can show your investors you understand the competitive landscape and your business can operate within that environment.
2. Porter's Five Forces: Michael Porter's 5 forces framework is a standard business tool used by companies to evaluate an industry's key forces. This is an important extra to add to your business plan outline especially if you are a start-up or an existing business entering a new market.
3. Glossary: If your business plan audience is not well-versed in your industry jargon, a glossary adds value to your overall plan. If you are writing a biotech business plan on gene therapy agents, determine the level of knowledge your target audience has on the subject.
4. Publishing Value-Adds: These are simply publication elements to improve the readability and presentation of your plan. This can include: a cover page with logos, graphics, charts, and table of contents.

The Appendix
Your business plan will require an appendix following the financials for all supporting documents. This acts as a great reference area to back up your assumptions and provide added credibility to the plan. The appendix is not part of the plan but an addition. Therefore, a 10 page business plan will be 10 pages plus the cover, table of contents, and appendix.
What to Put in Your Business Plan Appendix?
 legal documents
 market studies
 resumes
 customer testimonies
 photographs & maps
 distributor/supplier list
 articles
 owner's personal financial statements
 tax statements
 advertising materials & brochures
 credit reports
 character references
 equipment list
 glossary
 reference section/bibliography
Once you have a good understanding of the business plan outline needed for your company then the research and writing can begin.
A business plan novel does not ensure success. Provide enough information for decision-makers to give you the opportunity to sell your company and yourself.

Critical Steps to Writing a Business Plan

Writing a business plan can be an overwhelming task. These feelings often translate into immobilization or confusion as to how to start the business plan. Starting a business plan begins with the first step:
1. Audience & Funding Type: When writing a business plan, you must determine who will be reading it. This decision will shape the business plan. Do you plan to go for bank financing (debt finance) or investors (equity finance)? Each form of funding for your business has pros and cons. For instance, the venture capital market can be very time consuming and competitive. Do you have the time to write the business plan for investor funding and to network within the community?
Writing a business plan for investors is 15-30 pages with in-depth analysis and full details of facts and figures to support assumptions of the market.
Writing a business plan for the bank is 10-15 pages and focused with the bank's concern with risk. A venture plan presents the upside and potential return on investments, whereas a bank plan reduces the risks and sells the ability to repay the loan.
2. Research & Information Collection: Once you have made the decision of the type of funding your business requires, it is time for the research. Business plan research covers several key areas:
 Insight from your experience working and observing the industry you will enter. This data will have to be backed but by the next two sources.
 Published information from library, Internet, and paid database services will provide information on the market growth, overall industry perspective, and customer profiles.
 Field research covers interviews with customers, suppliers, competitors, and industry experts. This provides the real insight behind all the published facts.
3. Collection Files: The easiest way to go about collecting all your experiences, interviews, and research is to create files for each section of the business plan. These files can be: paper-based, computer files or set-up using business planning software. As you start the research and collection phase of planning, fill your files with notes and printouts.
4. General Industry Overview: Begin the research process with an overview of the industry; uncovering industry and association reports. By having a general understanding of the industry, you will avoid embarrassment in contacting experts with basic questions. Begin the field research once you have a good grasp of the industry fundamentals and need answers to the hard-to-find information.
5. Analysis: Once the bulk of the data has been collected, the process of analysis begins. Look at building a competitive profile, contingency plan, risk assessment, etc.
6. Financials: Start the financials when you have found some average industry ratios for your business. Work closely with your accountant to develop realistic projections. Being overly optimistic will raise eyebrows with your investors or banker.
7. Executive Summary: Save the first section for last. When you have thoroughly, completed all sections of the business plan, write the summary. Highlight the key points and include the return on investment or loan payback requirements.
8. Review & Editing: Remember, you only have one shot at making a good impression. A well-written business plan that opens doors and wins the money is a plan that has been revised and reviewed. Do not forget this important step. Ask others for feedback. Make certain to edit, proofread, proofread, and proofread.
Business planning is not easy but by following these critical steps to writing a business plan, you will ensure your business has a chance at funding and success in the future.

Writing a Meaningful Mission Statement

Scores of business planning and strategic experts will state a mission statement is mandatory for your company direction and fund raising. Other advisors suggest writing a mission statement becomes a meaningless few sentences collecting dust somewhere in your office. Is a personal and corporate mission statement necessary for success in today's hostile business climate?
Do You Need A Mission?
The answer depends on whether or not the mission statement you compose has significant meaning to you, or is just another corporate exercise in futility. A mission statement can guide your company in good times and bad. A meaningful mission can act as a moral and corporate compass. It can help you make decisions aligning with your values and goals.
Speaker and author, Laurie Beth Jones of "The Path: Creating Your Mission Statement for Work and for Life" states, "It is the key to finding your path in life and identifying the mission you choose to follow.
Having a clearly articulated mission statement gives one a template of purpose that can be used to initiate, evaluate, and refine all of one's activities."
3 Keys of Meaningful Mission Statements
 Pass the Mother Test: A mission statement must be a concise paragraph describing what your company does and for whom. Show your mission to your mother, if she does not understand it, start again.
 Self-Igniting: Your mission is for you and your business. It does not have to be an earth moving statement. It can be whatever inspires you.
 Value Alignment: Forget the money. A meaningful mission goes beyond the dollars and cents. If your small business is creative, focus your mission on creativity. Try to be what your core competency is.

Revive the Passion in Your Mission Statement

Mission statements should not just be words that look well printed in calligraphy and hung on the wall in a fancy gold frame. Your mission should state your purpose; the reason you are in business. It should reflect the reason that your business opens its doors everyday. It's the passion behind the company, the reason why you would be doing the same thing you are doing even if it did not present you with your daily bank deposit. That is your purpose; your mission.
When your mission statement represents and reflects your purpose it will attract and comfort your clientele, it will bring inspiration and drive to your employees and it will produce measurable results.
With that in mind ask yourself these questions:
 What is the purpose of your business?
 Who do you serve? Who are your customers?
 What needs do you fulfill?
 How do you fulfill those needs?
 What values represent your business?
Now that you have the questions it's time to gather your core team for a brainstorming session. Sit down with your team discuss, debate, and answer the questions above.
Really find out what it is that creates the excitement and the drive in your business. Spend time and determine who it is that you serve everyday. Talk about your values and the philosophy of your company.
When you've finished answering the questions, it's time to put the pieces together. Let me warn you that this process will not be easy and you will have to invest time into this process. The good news is that the end result will be a mission statement that will represent and reflect your purpose for keeping the lights on. That is marketing value.

Creating a Home Based Business

At a recent dinner party, I showed some friends the second bedroom that I had outfitted as an office, complete with desk, computer, speaker phone, file cabinets and bookshelf. Everyone expressed envy at my ability to spend part of my week doing my work out of my home, my cat curled up on my lap, the radio tuned to my favorite station. One friend mentioned that she was burning out on her administrative job wanted set out on her own. Another friend explained that he wanted to work from home so he could spend more time with his children.

I tried to disavow them of their notions of the sheer unending joy of working from home. I cautioned that they'd need to exhibit self-disciplined, and require periods of uninterrupted work time and an office chair with lumbar support. I explained that they'd have to draw a clear line of demarcation between work time and down time. They gazed at me in wonder, asking me if I managed to accomplish all that. Well, I sometimes throw a load of laundry in the washer, while I'm sending a fax, and I like to work late on Sunday nights so I can sleep in on Mondays. I like to blend my personal and professional lives. That isn't for everyone.

If you decide to establish a home-based business, you must be willing to make an investment of time and energy. You'll need to take small steps. The first is to decide on a business. You might want to continue performing the work you are currently doing. For example, if you are an administrative assistant, you might start a business typing and transcribing.

If you are working another job, attending school, or raising a family in addition to starting a new business, you may be squeezed for time. All the more reason to establish a work schedule and stick to it. Set aside a pre-determined number of hours each week to begin working on your business. Try to do something every business day to maintain your forward motion and momentum, whether it's creating a business letter template, working on your database, or attending one meeting.

You will have to deal with legal and financial issues. There may be zoning regulations if you live in a residential area. You may need to obtain a business license, permits, and register your business name. When setting up finances, open a separate business bank account for your home business and set up your bookkeeping system with financial management software. Look into losses and liability insurance. Finally, create a plan for covering start-up and living expenses for at least the first six months of your enterprise.

You may be able to start out for very little money. A used computer, relevant software, a combination fax machine/printer, and second phone line are good places to start. Find a location in your home to dedicate as your office, and if you don't already have them, pick up a desk, file cabinet, office supplies, and that good office chair I mentioned.

Next week, we'll examine what you need to market and promote your home-based business from research to distributing flyers.

Marketing Research

Managers need information in order to introduce products and services that create value in the mind of the customer. But the perception of value is a subjective one, and what customers value this year may be quite different from what they value next year. As such, the attributes that create value cannot simply be deduced from common knowledge. Rather, data must be collected and analyzed. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions.
To maximize the benefit of marketing research, those who use it need to understand the research process and its limitations.
Marketing Research vs. Market Research
These terms often are used interchangeably, but technically there is a difference.
Market research deals specifically with the gathering of information about a market's size and trends. Marketing research covers a wider range of activities. While it may involve market research, marketing research is a more general systematic process that can be applied to a variety of marketing problems.

The Value of Information
Information can be useful, but what determines its real value to the organization? In general, the value of information is determined by:
 The ability and willingness to act on the information.
 The accuracy of the information.
 The level of indecisiveness that would exist without the information.
 The amount of variation in the possible results.
 The level of risk aversion.
 The reaction of competitors to any decision improved by the information.
 The cost of the information in terms of time and money.

The Marketing Research Process
Once the need for marketing research has been established, most marketing research projects involve these steps:
1. Define the problem
2. Determine research design
3. Identify data types and sources
4. Design data collection forms and questionnaires
5. Determine sample plan and size
6. Collect the data
7. Analyze and interpret the data
8. Prepare the research report

Problem Definition
The decision problem faced by management must be translated into a market research problem in the form of questions that define the information that is required to make the decision and how this information can be obtained. Thus, the decision problem is translated into a research problem. For example, a decision problem may be whether to launch a new product. The corresponding research problem might be to assess whether the market would accept the new product.

The objective of the research should be defined clearly. To ensure that the true decision problem is addressed, it is useful for the researcher to outline possible scenarios of the research results and then for the decision maker to formulate plans of action under each scenario. The use of such scenarios can ensure that the purpose of the research is agreed upon before it commences.


Research Design
Marketing research can classified in one of three categories:
 Exploratory research
 Descriptive research
 Causal research
These classifications are made according to the objective of the research. In some cases the research will fall into one of these categories, but in other cases different phases of the same research project will fall into different categories.
 Exploratory research has the goal of formulating problems more precisely, clarifying concepts, gathering explanations, gaining insight, eliminating impractical ideas, and forming hypotheses. Exploratory research can be performed using a literature search, surveying certain people about their experiences, focus groups, and case studies. When surveying people, exploratory research studies would not try to acquire a representative sample, but rather, seek to interview those who are knowledgeable and who might be able to provide insight concerning the relationship among variables. Case studies can include contrasting situations or benchmarking against an organization known for its excellence. Exploratory research may develop hypotheses, but it does not seek to test them. Exploratory research is characterized by its flexibility.

 Descriptive research is more rigid than exploratory research and seeks to describe users of a product, determine the proportion of the population that uses a product, or predict future demand for a product. As opposed to exploratory research, descriptive research should define questions, people surveyed, and the method of analysis prior to beginning data collection. In other words, the who, what, where, when, why, and how aspects of the research should be defined. Such preparation allows one the opportunity to make any required changes before the costly process of data collection has begun.
There are two basic types of descriptive research: longitudinal studies and cross-sectional studies. Longitudinal studies are time series analyses that make repeated measurements of the same individuals, thus allowing one to monitor behavior such as brand-switching. However, longitudinal studies are not necessarily representative since many people may refuse to participate because of the commitment required. Cross-sectional studies sample the population to make measurements at a specific point in time. A special type of cross-sectional analysis is a cohort analysis, which tracks an aggregate of individuals who experience the same event within the same time interval over time. Cohort analyses are useful for long-term forecasting of product demand.
 Causal research seeks to find cause and effect relationships between variables. It accomplishes this goal through laboratory and field experiments.

Data Types and Sources

Primary Data
Often, secondary data must be supplemented by primary data originated specifically for the study at hand. Some common types of primary data are:
• demographic and socioeconomic characteristics
• psychological and lifestyle characteristics
• attitudes and opinions
• awareness and knowledge - for example, brand awareness
• intentions - for example, purchase intentions. While useful, intentions are not a reliable indication of actual future behavior.
• motivation - a person's motives are more stable than his/her behavior, so motive is a better predictor of future behavior than is past behavior.
• behavior

Primary data can be obtained by communication or by observation. Communication involves questioning respondents either verbally or in writing. This method is versatile, since one needs only to ask for the information; however, the response may not be accurate. Communication usually is quicker and cheaper than observation. Observation involves the recording of actions and is performed by either a person or some mechanical or electronic device. Observation is less versatile than communication since some attributes of a person may not be readily observable, such as attitudes, awareness, knowledge, intentions, and motivation. Observation also might take longer since observers may have to wait for appropriate events to occur, though observation using scanner data might be quicker and more cost effective. Observation typically is more accurate than communication.

Personal interviews have an interviewer bias that mail-in questionnaires do not have. For example, in a personal interview the respondent's perception of the interviewer may affect the responses.
Secondary Data
Before going through the time and expense of collecting primary data, one should check for secondary data that previously may have been collected for other purposes but that can be used in the immediate study. Secondary data may be internal to the firm, such as sales invoices and warranty cards, or may be external to the firm such as published data or commercially available data. The government census is a valuable source of secondary data.

Secondary data has the advantage of saving time and reducing data gathering costs. The disadvantages are that the data may not fit the problem perfectly and that the accuracy may be more difficult to verify for secondary data than for primary data.

Some secondary data is republished by organizations other than the original source. Because errors can occur and important explanations may be missing in republished data, one should obtain secondary data directly from its source. One also should consider who the source is and whether the results may be biased.

There are several criteria that one should use to evaluate secondary data.
• Whether the data is useful in the research study.
• How current the data is and whether it applies to time period of interest.
• Errors and accuracy - whether the data is dependable and can be verified.
• Presence of bias in the data.
• Specifications and methodologies used, including data collection method, response rate, quality and analysis of the data, sample size and sampling technique, and questionnaire design.
• Objective of the original data collection.
• Nature of the data, including definition of variables, units of measure, categories used, and relationships examined.
Questionnaire Design
The questionnaire is an important tool for gathering primary data. Poorly constructed questions can result in large errors and invalidate the research data, so significant effort should be put into the questionnaire design. The questionnaire should be tested thoroughly prior to conducting the survey.
Measurement Scales
Attributes can be measured on nominal, ordinal, interval, and ratio scales:
• Nominal numbers are simply identifiers, with the only permissible mathematical use being for counting. Example: social security numbers.
• Ordinal scales are used for ranking. The interval between the numbers conveys no meaning. Median and mode calculations can be performed on ordinal numbers. Example: class ranking
• Interval scales maintain an equal interval between numbers. These scales can be used for ranking and for measuring the interval between two numbers. Since the zero point is arbitrary, ratios cannot be taken between numbers on an interval scale; however, mean, median, and mode are all valid. Example: temperature scale
• Ratio scales are referenced to an absolute zero values, so ratios between numbers on the scale are meaningful. In addition to mean, median, and mode, geometric averages also are valid. Example: weight
Validity and Reliability
The validity of a test is the extent to which differences in scores reflect differences in the measured characteristic. Predictive validity is a measure of the usefulness of a measuring instrument as a predictor. Proof of predictive validity is determined by the correlation between results and actual behavior. Construct validity is the extent to which a measuring instrument measures what it intends to measure.
Reliability is the extent to which a measurement is repeatable with the same results. A measurement may be reliable and not valid. However, if a measurement is valid, then it also is reliable and if it is not reliable, then it cannot be valid. One way to show reliability is to show stability by repeating the test with the same results.
Attitude Measurement
Many of the questions in a marketing research survey are designed to measure attitudes. Attitudes are a person's general evaluation of something. Customer attitude is an important factor for the following reasons:
• Attitude helps to explain how ready one is to do something.
• Attitudes do not change much over time.
• Attitudes produce consistency in behavior.
• Attitudes can be related to preferences.
Attitudes can be measured using the following procedures:
• Self-reporting - subjects are asked directly about their attitudes. Self-reporting is the most common technique used to measure attitude.
• Observation of behavior - assuming that one's behavior is a result of one's attitudes, attitudes can be inferred by observing behavior. For example, one's attitude about an issue can be inferred by whether he/she signs a petition related to it.
• Indirect techniques - use unstructured stimuli such as word association tests.
• Performance of objective tasks - assumes that one's performance depends on attitude. For example, the subject can be asked to memorize the arguments of both sides of an issue. He/she is more likely to do a better job on the arguments that favor his/her stance.
• Physiological reactions - subject's response to a stimuli is measured using electronic or mechanical means. While the intensity can be measured, it is difficult to know if the attitude is positive or negative.
• Multiple measures - a mixture of techniques can be used to validate the findings, especially worthwhile when self-reporting is used.
There are several types of attitude rating scales:
• Equal-appearing interval scaling - a set of statements are assembled. These statements are selected according to their position on an interval scale of favorableness. Statements are chosen that has a small degree of dispersion. Respondents then are asked to indicate with which statements they agree.
• Likert method of summated ratings - a statement is made and the respondents indicate their degree of agreement or disagreement on a five point scale (Strongly Disagree, Disagree, Neither Agree Nor Disagree, Agree, Strongly Agree).
• Semantic differential scale - a scale is constructed using phrases describing attributes of the product to anchor each end. For example, the left end may state, "Hours are inconvenient" and the right end may state, "Hours are convenient". The respondent then marks one of the seven blanks between the statements to indicate his/her opinion about the attribute.
• Stapel Scale - similar to the semantic differential scale except that 1) points on the scale are identified by numbers, 2) only one statement is used and if the respondent disagrees a negative number should marked, and 3) there are 10 positions instead of seven. This scale does not require that bipolar adjectives be developed and it can be administered by telephone.
• Q-sort technique - the respondent if forced to construct a normal distribution by placing a specified number of cards in one of 11 stacks according to how desirable he/she finds the characteristics written on the cards.
Sampling Plan
The sampling frame is the pool from which the interviewees are chosen. The telephone book often is used as a sampling frame, but have some shortcomings. Telephone books exclude those households that do not have telephones and those households with unlisted numbers. Since a certain percentage of the numbers listed in a phone book are out of service, there are many people who have just moved who are not sampled. Such sampling biases can be overcome by using random digit dialing. Mall intercepts represent another sampling frame, though there are many people who do not shop at malls and those who shop more often will be over-represented unless their answers are weighted in inverse proportion to their frequency of mall shopping.
In designing the research study, one should consider the potential errors. Two sources of errors are random sampling error and non-sampling error. Sampling errors are those due to the fact that there is a non-zero confidence interval of the results because of the sample size being less than the population being studied. Non-sampling errors are those caused by faulty coding, untruthful responses, respondent fatigue, etc.
There is a tradeoff between sample size and cost. The larger the sample size, the smaller the sampling error but the higher the cost. After a certain point the smaller sampling error cannot be justified by the additional cost.
While a larger sample size may reduce sampling error, it actually may increase the total error. There are two reasons for this effect. First, a larger sample size may reduce the ability to follow up on non-responses. Second, even if there is a sufficient number of interviewers for follow-ups, a larger number of interviewers may result in a less uniform interview process.
Data Collection
In addition to the intrinsic sampling error, the actual data collection process will introduce additional errors. These errors are called non-sampling errors. Some non-sampling errors may be intentional on the part of the interviewer, who may introduce a bias by leading the respondent to provide a certain response. The interviewer also may introduce unintentional errors, for example, due to not having a clear understanding of the interview process or due to fatigue.
Respondents also may introduce errors. A respondent may introduce intentional errors by lying or simply by not responding to a question. A respondent may introduce unintentional errors by not understanding the question, guessing, not paying close attention, and being fatigued or distracted.
Such non-sampling errors can be reduced through quality control techniques.


Data Analysis - Preliminary Steps

Before analysis can be performed, raw data must be transformed into the right format. First, it must be edited so that errors can be corrected or omitted. The data must then be coded; this procedure converts the edited raw data into numbers or symbols. A codebook is created to document how the data was coded. Finally, the data is tabulated to count the number of samples falling into various categories. Simple tabulations count the occurrences of each variable independently of the other variables. Cross tabulations, also known as contingency tables or cross tabs, treats two or more variables simultaneously. However, since the variables are in a two-dimensional table, cross tabbing more than two variables is difficult to visualize since more than two dimensions would be required. Cross tabulation can be performed for nominal and ordinal variables.

Cross tabulation is the most commonly utilized data analysis method in marketing research. Many studies take the analysis no further than cross tabulation. This technique divides the sample into sub-groups to show how the dependent variable varies from one subgroup to another. A third variable can be introduced to uncover a relationship that initially was not evident.


Conjoint Analysis

The conjoint analysis is a powerful technique for determining consumer preferences for product attributes.


Hypothesis Testing

A basic fact about testing hypotheses is that a hypothesis may be rejected but that the hypothesis never can be unconditionally accepted until all possible evidence is evaluated. In the case of sampled data, the information set cannot be complete. So if a test using such data does not reject a hypothesis, the conclusion is not necessarily that the hypothesis should be accepted.

The null hypothesis in an experiment is the hypothesis that the independent variable has no effect on the dependent variable. The null hypothesis is expressed as H0. This hypothesis is assumed to be true unless proven otherwise. The alternative to the null hypothesis is the hypothesis that the independent variable does have an effect on the dependent variable. This hypothesis is known as the alternative, research, or experimental hypothesis and is expressed as H1. This alternative hypothesis states that the relationship observed between the variables cannot be explained by chance alone.

There are two types of errors in evaluating a hypotheses:
 Type I error: occurs when one rejects the null hypothesis and accepts the alternative, when in fact the null hypothesis is true.
 Type II error: occurs when one accepts the null hypothesis when in fact the null hypothesis is false.

Because their names are not very descriptive, these types of errors sometimes are confused. Some people jokingly define a Type III error to occur when one confuses Type I and Type II. To illustrate the difference, it is useful to consider a trial by jury in which the null hypothesis is that the defendant is innocent. If the jury convicts a truly innocent defendant, a Type I error has occurred. If, on the other hand, the jury declares a truly guilty defendant to be innocent, a Type II error has occurred.

Hypothesis testing involves the following steps:
 Formulate the null and alternative hypotheses.
 Choose the appropriate test.
 Choose a level of significance (alpha) - determine the rejection region.
 Gather the data and calculate the test statistic.
 Determine the probability of the observed value of the test statistic under the null hypothesis given the sampling distribution that applies to the chosen test.
 Compare the value of the test statistic to the rejection threshold.
 Based on the comparison, reject or do not reject the null hypothesis.
 Make the marketing research conclusion.

In order to analyze whether research results are statistically significant or simply by chance, a test of statistical significance can be run.


Tests of Statistical Significance

The chi-square ( 2 ) goodness-of-fit test is used to determine whether a set of proportions have specified numerical values. It often is used to analyze bivariate cross-tabulated data. Some examples of situations that are well-suited for this test are:
 A manufacturer of packaged products test markets a new product and wants to know if sales of the new product will be in the same relative proportion of package sizes as sales of existing products.
 A company's sales revenue comes from Product A (50%), Product B (30%), and Product C (20%). The firm wants to know whether recent fluctuations in these proportions are random or whether they represent a real shift in sales.

The chi-square test is performed by defining k categories and observing the number of cases falling into each category. Knowing the expected number of cases falling in each category, one can define chi-squared as:
2 = ( Oi - Ei )2 / Ei
where
Oi = the number of observed cases in category i,
Ei = the number of expected cases in category i,
k = the number of categories,
the summation runs from i = 1 to i = k.

Before calculating the chi-square value, one needs to determine the expected frequency for each cell. This is done by dividing the number of samples by the number of cells in the table.

To use the output of the chi-square function, one uses a chi-square table. To do so, one needs to know the number of degrees of freedom (df). For chi-square applied to cross-tabulated data, the number of degrees of freedom is equal to
( number of columns - 1 ) ( number of rows - 1 )
This is equal to the number of categories minus one. The conventional critical level of 0.05 normally is used. If the calculated output value from the function is greater than the chi-square look-up table value, the null hypothesis is rejected.

ANOVA
Another test of significance is the Analysis of Variance (ANOVA) test. The primary purpose of ANOVA is to test for differences between multiple means. Whereas the t-test can be used to compare two means, ANOVA is needed to compare three or more means. If multiple t-tests were applied, the probability of a TYPE I error (rejecting a true null hypothesis) increases as the number of comparisons increases.

One-way ANOVA examines whether multiple means differ. The test is called an F-test. ANOVA calculates the ratio of the variation between groups to the variation within groups (the F ratio). While ANOVA was designed for comparing several means, it also can be used to compare two means. Two-way ANOVA allows for a second independent variable and addresses interaction.

To run a one-way ANOVA, use the following steps:
1. Identify the independent and dependent variables.
2. Describe the variation by breaking it into three parts - the total variation, the portion that is within groups, and the portion that is between groups (or among groups for more than two groups). The total variation (SStotal) is the sum of the squares of the differences between each value and the grand mean of all the values in all the groups. The in-group variation (SSwithin) is the sum of the squares of the differences in each element's value and the group mean. The variation between group means (SSbetween) is the total variation minus the in-group variation (SStotal - SSwithin).
3. Measure the difference between each group's mean and the grand mean.
4. Perform a significance test on the differences.
5. Interpret the results.

This F-test assumes that the group variances are approximately equal and that the observations are independent. It also assumes normally distributed data; however, since this is a test on means the Central Limit Theorem holds as long as the sample size is not too small.

ANOVA is efficient for analyzing data using relatively few observations and can be used with categorical variables. Note that regression can perform a similar analysis to that of ANOVA.


Discriminant Analysis

Analysis of the difference in means between groups provides information about individual variables, it is not useful for determine their individual impacts when the variables are used in combination. Since some variables will not be independent from one another, one needs a test that can consider them simultaneously in order to take into account their interrelationship. One such test is to construct a linear combination, essentially a weighted sum of the variables. To determine which variables discriminate between two or more naturally occurring groups, discriminant analysis is used. Discriminant analysis can determine which variables are the best predictors of group membership. It determines which groups differ with respect to the mean of a variable, and then uses that variable to predict new cases of group membership. Essentially, the discriminant function problem is a one-way ANOVA problem in that one can determine whether multiple groups are significantly different from one another with respect to the mean of a particular variable.

A discriminant analysis consists of the following steps:
1. Formulate the problem.
2. Determine the discriminant function coefficients that result in the highest ratio of between-group variation to within-group variation.
3. Test the significance of the discriminant function.
4. Interpret the results.
5. Determine the validity of the analysis.

Discriminant analysis analyzes the dependency relationship, whereas factor analysis and cluster analysis address the interdependency among variables.


Factor Analysis

Factor analysis is a very popular technique to analyze interdependence. Factor analysis studies the entire set of interrelationships without defining variables to be dependent or independent. Factor analysis combines variables to create a smaller set of factors. Mathematically, a factor is a linear combination of variables. A factor is not directly observable; it is inferred from the variables. The technique identifies underlying structure among the variables, reducing the number of variables to a more manageable set. Factor analysis groups variables according to their correlation.

The factor loading can be defined as the correlations between the factors and their underlying variables. A factor loading matrix is a key output of the factor analysis. An example matrix is shown below.
Factor 1 Factor 2 Factor 3
Variable 1
Variable 2
Variable 3
Column's Sum of Squares:
Each cell in the matrix represents correlation between the variable and the factor associated with that cell. The square of this correlation represents the proportion of the variation in the variable explained by the factor. The sum of the squares of the factor loadings in each column is called an eigenvalue. An eigenvalue represents the amount of variance in the original variables that is associated with that factor. The communality is the amount of the variable variance explained by common factors.

A rule of thumb for deciding on the number of factors is that each included factor must explain at least as much variance as does an average variable. In other words, only factors for which the eigenvalue is greater than one are used. Other criteria for determining the number of factors include the Scree plot criteria and the percentage of variance criteria.

To facilitate interpretation, the axis can be rotated. Rotation of the axis is equivalent to forming linear combinations of the factors. A commonly used rotation strategy is the varimax rotation. Varimax attempts to force the column entries to be either close to zero or one.


Cluster Analysis

Market segmentation usually is based not on one factor but on multiple factors. Initially, each variable represents its own cluster. The challenge is to find a way to combine variables so that relatively homogenous clusters can be formed. Such clusters should be internally homogenous and externally heterogeneous. Cluster analysis is one way to accomplish this goal. Rather than being a statistical test, it is more of a collection of algorithms for grouping objects, or in the case of marketing research, grouping people. Cluster analysis is useful in the exploratory phase of research when there are no a-priori hypotheses.

Cluster analysis steps:
1. Formulate the problem, collecting data and choosing the variables to analyze.
2. Choose a distance measure. The most common is the Euclidean distance. Other possibilities include the squared Euclidean distance, city-block (Manhattan) distance, Chebychev distance, power distance, and percent disagreement.
3. Choose a clustering procedure (linkage, nodal, or factor procedures).
4. Determine the number of clusters. They should be well separated and ideally they should be distinct enough to give them descriptive names such as professionals, buffs, etc.
5. Profile the clusters.
6. Assess the validity of the clustering.

Marketing Research Report
The format of the marketing research report varies with the needs of the organization. The report often contains the following sections:
 Authorization letter for the research
 Table of Contents
 List of illustrations
 Executive summary
 Research objectives
 Methodology
 Results
 Limitations
 Conclusions and recommendations
 Appendices containing copies of the questionnaires, etc.
Concluding Thoughts
Marketing research by itself does not arrive at marketing decisions, nor does it guarantee that the organization will be successful in marketing its products. However, when conducted in a systematic, analytical, and objective manner, marketing research can reduce the uncertainty in the decision-making process and increase the probability and magnitude of success.

Market Segmentation

The division of a market into different homogeneous groups of consumers is known as market segmentation.
Rather than offer the same marketing mix to vastly different customers, market segmentation makes it possible for firms to tailor the marketing mix for specific target markets, thus better satisfying customer needs. Not all elements of the marketing mix are necessarily changed from one segment to the next. For example, in some cases only the promotional campaigns would differ.
A market segment should be:
 measurable
 accessible by communication and distribution channels
 different in its response to a marketing mix
 durable (not changing too quickly)
 substantial enough to be profitable
A market can be segmented by various bases, and industrial markets are segmented somewhat differently from consumer markets, as described below.
Consumer Market Segmentation
A basis for segmentation is a factor that varies among groups within a market, but that is consistent within groups. One can identify four primary bases on which to segment a consumer market:
 Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate.
 Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income, and family status.
 Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.
 Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought.
The optimal bases on which to segment the market depend on the particular situation and are determined by marketing research. market trends, and managerial judgment.
Business Market Segmentation
While many of the consumer market segmentation bases can be applied to businesses and organizations, the different nature of business markets often leads to segmentation on the following bases:
 Geographic segmentation - based on regional variables such as customer concentration, regional industrial growth rate, and international macroeconomic factors.
 Customer type - based on factors such as the size of the organization, its industry, position in the value chain, etc.
 Buyer behavior - based on factors such as loyalty to suppliers, usage patterns, and order size.
Profiling the Segments
The identified market segments are summarized by profiles, often given a descriptive name. From these profiles, the attractiveness of each segment can be evaluated and a target market segment selected.

Change Management for Your Brand

Things change. In fact, everything changes. Sometimes in a matter of minutes. Sometimes slowly and imperceptibly. But regardless of effort, resources, management or absolute control, things change. The discipline of change management helps business executives to ensure that change works to their advantage.

Yet, frequently change management practices stop short of considering the impact that change has on one of your most important assets — your company’s brand. Recognizing that fact and responding to the manifestations of change with intelligent action is what separates the successful brand from the soon-to-be-forgotten product or service brand.

Maybe that’s too blunt, too harsh. Perhaps we should say things evolve and pursue a more palatable approach to facing the challenges our customers, our competitors and our marketplace present. I doubt it.

While it may appear that there is plenty of time, no real threat or no urgent need to revisit your brand promotion strategies, the fact is, each and every day your competitors are looking for a way to unravel your positioning, dismiss your unique advantages and rob you of your market share.

If you enjoy brand recognition or brand advantage, a periodic fresh look at your brand is crucial. Change happens; successful companies recognize when their brand requires more than a “business as usual” approach. They begin with customer-focused positioning and messaging. Then they monitor and measure their brand and brand promotion strategies in key areas, such as:

- Validating language with their target audiences and monitoring their success in communicating those key messages
- Testing creative executions and adjusting as necessary
- Watching closely how their target audiences are responding to their advertising, both quantitatively and qualitatively
- Going where their customers go. They explore, they measure and they explore some more.

This is not intended as a scare tactic. In fact, this shouldn’t be scary at all — at least not for those advertisers and their advertising agencies that are following a prudent process that checks for the need of more aggressive branding change management measures.

Yet, it never ceases to amaze me how little well-established enterprises know about their customer base. While they can trot out statistics on sales volume, cost per lead and the like, they are often unaware of the underlying motivations that drive these people to act in their favor or dismiss them all together. They haven’t yet made it past the occasional customer satisfaction survey – possibly their sole view into the hearts and minds of their customers.

In the pursuit of building brand value and generating greater ROI, successful brands not only adapt to change, they anticipate it, and they respond, re-positioned if necessary, to capitalize on it. They change manage their brand.

The more unique your owned advantage is, the better it will hold up over time. Change management practices should extend to your brand promotion strategies. Practices such as measuring how your brand performs and observing the impact of change to your brand promotion strategies are key. Great campaigns often have great longevity. But nothing lasts forever.

Advertising Your Business by Word of Mouth

To begin with, we need to get something straight. Word-of-mouth advertising is a misnomer. The dictionary definition of “advertising,” according to Webster is: “The action of drawing something to the public’s attention with a paid announcement, often through a printed notice or a broadcast.” Therefore, WOM is NOT advertising. It is neither bought nor controllable, to any large extent. Spreading WOM advertising is more akin to allowing the wind to control a kite. Sometimes it goes up and often times eventually, comes down. When a consumer uses your product or service, your job is done. Then the person has a variety of choices. They can (a) tell a friend or relative how great the experience was, (b) tell them how awful it was, or (c) tell nobody at all. It depends on the result. More often than not, if your business has simply met their expectations, they will likely do nothing. If you produced a superior product or service, they may tell a few people. Ah, but if you have done a lousy job, watch out. They’ll tell the world about the awful item or event. Therefore, WOM has a 66% chance of not working in your favor. It works exactly like the news. A terrible situation with a tragic outcome has a far better chance of making the news than a warm and fuzzy, feel-good piece. It’s human nature. People are fascinated by horrible traffic accidents and will gawk for minutes or hours. They still discuss Princess Di, John F. Kennedy, Jr, and John Lennon’s death, even decades later. But, do they celebrate the living with the same enthusiasm? Knowing all that, why would any business continue to ignore traditional advertising channels and rely solely on WOM? At least with the media, they can structure their own program, target their market, and track the results. It’s not just a matter of money. Sure, advertising costs money, but it’s an investment in the company. WOM is free promotion, but is it positive? From what I’ve just written, you tell me. I sold Yellow Page advertising for almost 25 years, and during that time, I rarely had an advertiser call me up when the directory delivered to thank me for the wonderful ad. But, if there was even the tiniest mistake with the ad, guess how long it took for them to make that call? Can you say “nanosecond?” So become proactive and get that marketing program underway and control your destiny. It’s foolish to think that all your customers will take it upon themselves to do your promotion for you, unless you enjoy negative publicity. I know if I had a disastrous experience in your store, you and all my other readers, would be seeing it here in my next article. Oops!

How Personal Are You In Your Email Marketing?

If you market your business using email you probably already use some form of personalization in your emails. If you don't you really should. If you DO use personalization you might not be doing as much as you should.

The most common form of "personalization" in email marketing is to include your recipient's first name in the Subject Line of your email, and also in your "salutation", as well as repeating it at least once in the first few lines of your message.

You probably use personalization because you know that it increases both "open rates" and "click through rates" substantially.

But there are other forms of "personalization" that can improve your results even further.

You might, for instance, send out an email that in some way references their most recent product purchase, and the date. You do that using your autoresponder software, and the "automatic merge" function. You store the info you need in your database, and then construct a message that "merges" the information right into the email.

Each customer then gets a "customized" email that refers to what product they purchased, or how long it has been since they purchased from you, or how long they've been a subscriber to your newsletter.

To do this, you need to collect as much information as you can about your subscribers. You might do so using a survey which asks about their most pressing problems in their business. Or you might simply try to gather the information right on your subscription form.

Another way to do this is to gather and store information about your customers ... what products they've bought,the dates of their purchases, etc.

Once you have that information, you can take your efforts at personalizing your messages to a whole new level. You must keep in mind that people *prefer* to feel that you know something about them, and personalizing your emails to them is a great way to accomplish this.

Studies have shown that merely personalizing with your recipient's name increases response substantially. Studies have also shown that adding other personalizing information will sometimes exponentially increase response rates even further.

Niche or Die

Lately I’ve noticed a worrying trend. Despite the fact that ‘niche’ has become a new buzzword, I still hear people – especially coaches and consultants – speak about their business in vague, general terms. I know why they do it; I used to do it myself. You think that if you present a broader range of services and talk about many things, then people will think of you for a wide variety of work and you won’t miss any opportunities.

I truly believe that just the opposite is true. I used to speak about all the things I was involved in and a contact actually said it was confusing and I was hurting his brain. Nice.

So, what are the benefits of niching?

1. Clarity. You get very clear about what you are doing and where you are going. This helps you see things more clearly and make decisions more quickly.

2. You get better and better at what you do. Without having to worry about everything else, you can focus on one main thing and become a real specialist.

3. It will actually help others remember you. Have you ever been to a networking event, picked up a bunch of cards and then looked at them a few days later? I’m willing to bet there were some cards that just left you cold. What the heck did they do? Those were the vague, general ones. If you give people one thing to remember, chances are they will.

What are the financial implications of choosing and articulating your niche?

1. You become the expert. People begin to look to you for information, knowledge, dare I say it: wisdom.

2. As the expert, you will be quoted more often and given more business referrals. You will stand out from all the other people in your industry who are not articulating a clear message.

3. You will have to say ‘no’ to all those other things that come into your sphere. I know it is tempting to get involved in exciting new projects, but if they are not core to your business, you need to be ruthless and filter them out. Being a specialist will bring you far greater rewards than being a jack of all trades, master of none.

4. And finally, you will be able to put together outstanding information products. My clients who have put the time into developing their clear, specific messages are producing amazing books, CD’s, website material, speeches and much more.

My friend Reg Athwal recently said, “Choose a niche, then go narrow and deep.” He was talking about becoming a real expert and specialist in one thing and getting to know the small but loyal market that will look to you to provide that product or service. I would take that one step further and say that if you are not going narrow and deep, you are probably digging a big, wide hole for yourself.

How to Target Your Ideal Customers

While many of my clients and students are filled with trepidation when we embark on this step, all come back feeling affirmed and inspired to create a stronger “brand” identity. The process is simple:

Step One:
Create a focus group of 12-18 people who know you and your work. Include those who will give you honest feedback and respond within a short period of time. Your goal is to get 10 survey responses so that you can identify patterns, strengths and core messages. If you do not receive that number after your initial distribution, send a few more until you reach that goal.

Step Two:
Create a letter to send to your focus group explaining that you are repositioning your business or redesigning your marketing materials. Tell them that you'd appreciate their input about what you bring to the marketplace and what might be getting in your way.

If you send your letter and get responses via email, you'll streamline your efforts because you'll be able to cut and paste the answers into one document for final review. With snail mail or face-to-face interviews, you'll need to transcribe responses.

Step Three:
Determine focus group questions. Suggestions:

- What kinds of issues do you want me (or my business) to solve for you?
- How would you describe my services?
- How do you expect to feel following an interaction with me (or my organization)?
- Why might someone choose NOT to purchase my product or service?
- Who do you see as my competitors?
- How can I differentiate my services to create a stronger brand?
- What trends in the marketplace might impact my success?

Step Four:
Assemble the data you collected. Review your survey results with a friend or colleague to ensure that you are not overlooking key findings. The answers you gather from this action step will help you better understand the value you bring to prospects and clients.

Action Step:
What's the buzz on you? Survey customers and clients, listen to their responses, and create a plan to serve them even better.

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Make Your Own Luck: Find your Ideal Targets

Anyone can put a direct mail piece together and drop it at the post office. But without knowing who your target market is, you won’t score many sales.

The first consideration in any marketing campaign is to define your audience. Precisely who is your market? The more clearly you can see your target audience, the better you’ll be able to aim your mailing, and the better your response will be. The goal is to maximize response per thousand—to make that one extra person in 1,000 stop, look, pick up the phone and call.

Anyone can put a direct mail piece together and drop it at the post office. But without knowing who your target market is, you won’t score many sales.

Direct mail is like shooting fish in a barrel.

* First, you’ve got to find the right barrel: this is selecting the right lists.
* Then, you’ve got to figure out which barrel has the most fish: that’s buying the list with the most prospects.
* Narrowing the size of the list further with proper list selection overlays—such as recency, frequency, and monetary purchase criteria—is like reducing the size of the barrel, thus making sure the fish are big.
* Now you have a better chance at shooting the most fish with each shot—that is, getting the most response from each mailing.

The more clearly you can see your target audience, the better you’ll be able to aim your mailing, and the better your response will be.

Defining Your Market
The more precisely you identify your perfect prospect (the more tightly you specify your list), the better your response.

For example, suppose you’re selling a pilot’s bag to airplane pilots. You mail to a list of small airplane owners compiled from plane registrations. Your response is one percent, and you break even. All that work and you made zero profit.

Now let’s say you mail to a list of flying instructors. These pilots are airplane enthusiasts. Since your bag has a cool picture of a plane on it, they love it. Your mailing draws two percent and you make a little money.

Now you try a different tack: You mail to a list of mail order buyers who have recently made a purchase from an airplane specialty catalog. This time your mailing brings a six percent response. Old friends start dropping by to swim in your new pool.

Now you’re getting smart. You buy a list of flying instructors who own planes and who recently made a purchase from an airplane specialty catalog. Your mailing draws nine percent, the size of your pool doubles and you’ve learned the value of purchasing the correct mailing list.

Granted, list research and selection is not glamorous work. It’s the behind-the-scenes grind to figure out and specify the best list parameters. It’s not like creating a slick brochure. But you can see your mailing go from no response to profitable in a hurry, just in the extra attention to and correct selection of your mailing list.