4 reasons why SMEs choose to lose 122 billion every year. and how they can get it back

Transcription

1 4 reasons why SMEs choose to lose 122 billion every year. and how they can get it back

2 There is a story about a man who was struggling financially. His bills were mounting up and he could see no way of paying them. He lay awake at night, worrying about what would happen to his wife and children when their home was repossessed. After a particularly difficult day, his neighbour, whom he didn t much like, told him: The old miser who lived in your house before you buried all his money at the bottom of your garden. All you have to do is dig it up and your problems will be at an end. The man thought about it for a moment and replied, Things like that only happen in movies. Besides I ve heard your word is not always reliable and when I have so many pressing problems to deal with, I can t afford to waste time looking for what isn t there. A few months later, after the man s house had been repossessed, the new owners moved in. The neighbour told them the same story. They listened and did what he told them to do and found a fortune buried at the bottom of their garden. 2

3 The story seems incredible. When times are hard why wouldn t the man at least look to see if the money was there? It is, however, a story that is very familiar to businesses throughout the UK. Every year, SMEs lose 122 billion in lost sales because they refuse to invest in marketing. There are four reasons for this refusal: 1 Ego Depletion 21% blame lack of time 36% blame lack of money Running a business takes large amounts of cognitive and physical energy and SME owners blame a lack of time (21%) and money (36%) as the main reasons for not implementing a marketing plan. The effort of running a business, depletes their reserves of energy, so they are driven to sustain the status quo rather than change it. In a remarkable study, psychologists found that judges were less likely to grant parole if the claimant s case was heard just before lunch as opposed to after the judge had eaten. In other words, hunger leads to ego depletion and because freeing a prisoner rather than keeping him where he is takes greater cognitive effort, hungry judges, like weary entrepreneurs, are resistant to change. 3

4 2 Habit Much of our behaviour is driven by habit. Repeating the same behaviours has two positive effects: it gives us the comfort of familiarity and it reinforces our need to believe that our world is more stable than it is. This is why, for instance, 35% of business owners and managers admit they purchase stationery ahead of marketing even though it is unlikely that 122 billion in lost sales will be recouped by over-stocking copier paper. 35% buy paper before marketing 3 Representativeness To avoid ego depletion, we derive general conclusions from specific experiences. If we have a bad experience with a marketing company, we make that company representative of ALL marketing companies and given the fact that many marketing agencies do not function well in a non-corporate environment, there will always be sufficient experiential evidence to make such a generalisation. 4 Lack of Statistical Thinking The brain has two systems. Psychologists, rather unimaginatively, call them System 1 and System 2. System 1 is fast, intuitive and happens automatically. System 2 requires effort and concentration. Statistical thinking is obviously a function of System 2. Habit, representativeness and the effects of ego depletion are the preserve of System 1. Missing out on 122 billion in lost sales is a function of System 1, since sustaining a coherent marketing plan requires concentrated effort

5 What can business owners do to recover their share of the missing 122 billion? With the average SME only achieving 39% of its planned marketing activity, business owners need to remind themselves that marketing is fundamental to achieving better margins and increased sales. They also need to understand that effective marketing is: Planned Evidence-based Measured against tangible commercial objectives The effort it takes to engineer and sustain a marketing plan will be worth it. After all, how much of 122 billion can you afford to lose? Undertaken in partnership with trusted professionals 5

6 About Cognition Cognition specialises in accountable, evidence-based marketing. We re the leading outsourced marketing services provider for the non-corporate sector in the UK. We specialise in partnering small and medium-sized businesses where traditional marketing agencies struggle to make a significant impact on growth and profitability. Our Route to Growth process is evidencebased and effective. We have a proven track record over the last 17 years of engineering better futures for businesses like yours. Our methods work and they can work for you. Contact Paul Houston, Director, on or paul.h@cognitionagency.co.uk 6