Chapter 19

Marketing

In good times and bad, hundreds and thousands of companies fail, especially young ones. But hundreds of their competitors get rich in exactly the same businesses, because for them a recession is cherry-picking time, and good times mean an endless assembly line of hot fudge sundaes. They do well no matter what the economy dumps on their doorstep. How do they do it? Marketing!

Great entrepreneurs create their own capital through marketing, and the better they are at it, the less capital they need. I should know, because when I started The Ruff Times, I was broke, and successful marketing, along with some gutsy, calculated risk-taking, turned us profitable in short order. When I became rich and famous in the late 1970s and early 1980s, it wasn't because I had a monopoly on good newsletters. There were some very competent competitors. Some were very talented writers, and some had just as good a track record of successful market calls, or even better, but I was a better marketer. Because of that, I dominated the financial newsletter industry for many years.

In the Introduction I told you that in the late 1970s and early 1980s I became rich and famous, but I didn't tell you how I got that way. Then, in Chapter 14, I told you how I lost my fortune—by failure to market aggressively when times turned bad in my industry. Now I'm going to give my failure a postmortem and share the inside story with you.

With the help of my partner, Terry Jeffers, The Ruff Times was the first publication in our industry to turn direct mail marketing from a shot in the dark into a by-the-numbers science, and now that's the way everyone does it. We first made the calculated decision that it was easier to sell a personality than a publication, so we made my name into a household word by the sheer volume of direct mail, supplemented by an aggressive publicity campaign conducted by Michael Baybak (4515 Ocean View Boulevard, Suite 305, La Canada, CA 91011, 818-542-6880) and a very carefully crafted TV show called Ruffhou$e, an interview and financial commentary show featuring yours truly as the host. We bought the air time for it in the markets we wanted and sold the advertising to offset the costs, but it was never profitable—in fact, it lost a lot of money. But we carefully tracked the direct mail results in the zip codes where the show was airing, and the increased mail results justified the losses on the TV show and then some.

Exploiting Terry's IBM background, we were the first in our industry to lease an IBM mainframe and track the results of our test mailings by lists. We also tested headlines on the mailing pieces, offers, and various prices, and carefully measured, quantified, and compared the results. If our tests showed the results of a partial list to be break-even or better, we rolled out the whole list and repeated the mailings until the results dropped below break-even, assuming that the profits would show up at renewal time. It was a numbers game, pure and simple. It was scientific marketing.

My job was to make sure The Ruff Times gave real value in financial education and good forecasting and market calls and was fun to read, because good marketing of an inferior product, or one that was not an honest representation of the product (me), would implode with high cancellation rates and low renewal rates. It had to also be honest marketing, which is the only kind that has staying power. We didn't promise anything I wasn't sure we could honestly deliver.

So it's time to admit that, although I am a real person, and what you see is what you get, the public Howard Ruff is a marketing creation, and you will have to decide from my writing whether I can justify the hype. If I hadn't spent a lot of productive money on marketing, you would never have heard of me.

I've gone into this detail to show you that, when it comes to marketing, I know what I'm talking about. Marketing is a science, but most attempts at marketing don't work because they are run by amateurs who don't understand the science. If you take the trouble to learn the science, you dramatically raise the odds of business success.

Marketing separates the winning sheep from the losing goats in any environment. Marketing is the last remaining great secret of the Really Rich who got that way in business. Without this secret, they either are among the majority of new ventures that fail, or they just limp along in the business twilight called “muddling through.”

I saved this chapter for last because until you have made the decision to become rich through capitalism—starting your own business and taking it public—it probably won't be of any value to you. A real education on marketing would take several books and audio tapes, so I have a limited objective here—to stimulate you either to learn all you can about the subject or to bring into your company someone who really knows the subject. I also want to guide you to the sources that can teach you the most about this pivotal subject, and not just academically; most academic marketing courses are useless, even MBA-level courses, unless you just want to be trained to work in the bowels of the marketing department of a Fortune 500 company.

If you decide to hire that marketing talent, be sure it is someone with a real-world track record in small-company marketing. Sometimes there is a good marketing class at your local junior college. Often these are taught by real-world businesspeople or marketers. The experience of the real-world instructor is all-important. Maybe you can hire him or her.

WHAT MARKETING IS SUPPOSED TO DO

Marketing has several objectives, such as sales, differentiating yourself from your competitors, and finding hidden corporate assets that can make money. Marketing includes public relations and publicity, labeling, finding cost-efficient ways to penetrate market segments, pricing, sales, product bundling, product design, advertising, direct mail, image making, positioning, franchising and licensing, customer development (back-end sales), and a host of other factors. Marketing also includes joint ventures, risk reversal, and underexploited asset deployment strategic alliances, unique selling propositions (USPs), and dozens of other mind-blowing concepts that will seem ridiculously obvious only after you hear them. In effect, marketing will teach you how to reshape your business as you see it through the eyes of the public and potential customers to produce several times the results, and it will all be called “Marketing.”

Your competitors may have equally good products—some-times even better. They may have more capital and more skilled financial management. But when times get tough, the winning sheep will outmarket the losing goats! They will have made louder noises in a quieter environment as other marketers foolishly pulled in their horns—and they will have made money when their competitors are losing theirs.

A PATH TO YOUR DOOR?

If I had a dollar for every time an enthusiastic new entrepreneur, or a Ruff Times subscriber who has just invested in one or is related to one, has told me, “This product (or service, or idea) will sell itself.” That is nonsense; nothing sells itself. The old cliché says, “If you create a better mousetrap, the world will beat a path to your door.” That alleged mousetrap is claptrap! That attitude will kill a new company faster than anything I can think of. Marketing is the only way to get the world to beat a path to your door. The world won't even know you exist until you tell them about your gee-whiz product or service, and that requires marketing.

I seriously doubt that you will become a successful capitalist until you can convince customers to come into your establishment (advertising), pick out your product from the shelf in preference to your competitors' products right next to it (packaging), or overcome their skepticism enough to try out a new product they've never heard of risk-free (risk reversal), without one or more of the many forms of marketing.

For example, I was able to pioneer the no-risk guarantee using the risk reversal principles I learned from my friend, marketing genius Jay Abraham. Subscribers could get all their money back at any time they decided they did not like The Ruff Times for any reason. At that time, hardly anyone had even heard of me. Sales soared, and, strangely enough, cancellations dropped. Using the same principle, we offered my latest book as a premium, and subscribers could keep the book if they asked for a refund. These were revolutionary methods in the late 1970s and early 1980s, and they still work today.

Here are a few great examples of creative marketing I learned about from Jay, who is the best marketing educator of them all:

• He taught a dry cleaner how to license his very effective ads to thousands of other dry cleaners in other towns. The dry cleaner made more on licensing fees than on dry cleaning—hundreds of thousands of dollars every year.
• One of Jay's clients had a local lumberyard doing a modest amount of business and a unique kiln-drying process for his own lumber. Jay taught the client how to teach 200 other lumberyards how to use this process and then license them to use it. The client made $1.8 million a year in license fees.
• Another client had a car wash and an effective system for increasing the number of customers who asked for a hot wax. Jay convinced him to license his methods to 2,000 other car washes, and he made more from the licenses than from his own car wash.

You can design irresistible sales offers where you assume the risk, not the customer, and prospects see that it is obvious they will be worse off if they don't respond to your offer.

You can develop your own unique selling proposition (USP) that can be expressed in a few words to ring a bell in the potential customer's mind (“We're Number Two—We Try Harder”). Nothing is more important in establishing you and your product or service—not just in the marketplace, but especially in the customer's mind—as the only viable solution, not just a better one.

You can package complementary products together to get a bigger unit of sale and much bigger profits per transaction.

You can raise your prices, even in a weak market, and increase the market's perception of your product's value to them and increase your sales.

You can develop a back end of profitable sales of other products to your existing or inactive customers. You spent a lot of money to get them, and now you can “monetize” them for life. Your business can generate additional multiple income streams year after year from those same customers. It doesn't matter what you sell, the principle will work.

You can make money by joint-venturing, endorsing, recommending, introducing, or representing other products and services that you don't usually sell that might be attractive to your customers. You may have built up a good name and reputation and a list of customers who know who you are and have a good opinion of you. There is a huge pile of cash for you in understanding and exploiting this unrecognized asset.

CREATIVE MARKETING CASE STUDIES

Here are a few case studies gleaned from Jay Abraham's files.

Case #1: David Beal took a single office-suite leasing company, figured out what other products and services he could sell, lease, or rent to his tenants, and obtained the right to be their commercial broker when they grew and moved out. Beal's operation grew to 480 locations in 17 countries with gross annual revenues of more than $600 million.

Case #2: Mark Victor Hansen and Jack Canfield got the idea for the many spin-offs of the Chicken Soup For the Soul books and built a $40 million publishing empire with Chicken Soup for just about everything and anyone.

Case #3: An Australian software company was selling very expensive software ($15,000 to $250,000) and only converting about 1 out of every 200 leads. But they realized that fully 75 percent of the leads needed the software—they just couldn't afford it. They found another piece of software that did the same basic job, acquired it on a royalty basis, and offered it for between $2,000 and $5,000. They were able to close one-third of the people they couldn't close at the higher price and made as much money on the ancillary product as they did on the main one.

SEND ME A MAN WHO READS

You need to read two books to start on your marketing education: Positioning, by Al Ries and Jack Trout (Warner, 1928; available in paperback at any good bookstore, and the best marketing book ever written), and How to Get the Most Out of Everything You've Got, by Jay Abraham (St. Martin's Press, 2001). Jay also has audio tapes and special marketing reports that are loaded with mind-blowing concepts and well worth a lot of hours of study.

Jay's advice is ordinarily very expensive. People pay him $5,000 an hour ($40,000 a day) for his personal help. His seminars go for $25,000 a person. His tape sets run as high as $5,000 per set. But at my request he has prepared a complete marketing education of extraordinary audio tapes, expensive books, and special reports for a modest $500 for readers of this book. They are easily worth 10 times that amount. It includes a live audio tape of a seminar for which the attendees paid $5,000, a book worth $400, and a series of special reports.

If you phone my office (801-224-3660) or e-mail me ([email protected]), I will forward your order on to Jay.

THE END OF THE ROAD

As the preacher said, “Thus endeth the lesson.” In this book, I haven't told you everything I know, just the essence of what I thought was important to get you started. If I have only helped you to choose which path you want to take, and you are happy with it, I'm pleased. If I haven't, I still wish you well.