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Marketing
Marketing To Affinity Groups: The Smartest Thing To Do Now
Ah... affinity groups. We all have them. We are a part of many, whether we realize it or not. From the clothes we wear to the music we listen to, down to the teams we support, and the products we buy — they're everywhere. They account for our needs and wants and reflect our values and lifestyles. Amazon affinity groups are just one type I can mention. It has 13 employee affinity groups but they are becoming increasingly popular (and resourceful) as a marketing tool as well. The affinity groups membership program allows employees who identify with a certain group to connect and engage with each other. The benefits are two-fold: First, Amazon employees get to connect with like-minded people. And second, companies can use affinity groups as a way to target marketing initiatives. When done right, affinity groups can create a strong sense of community and loyalty among employees and customers alike. Businesses, in general, have long understood the power of affinity marketing. It's one of the smartest things you can do to reach your target market. So, what exactly is an affinity group? And how can you use affinity marketing to grow your business? Keep reading to find out...
What is an Affinity Group?
When it comes to marketing, targeting affinity groups is one of the smartest things you can do. As I just mentioned, Amazon knows this well. It's evidenced by its successful Amazon Prime program. What then are affinity groups? Affinity groups are simply groups of people or a customer base who share common interests or characteristics. That could be something as general as being a member of a particular generation (like Millennials). Or it could be something more specific, like being cat lovers or avid gamers. The key to successful affinity marketing is understanding the consumer needs of your target group. Then, discover the best way to reach them through an effective marketing distribution channel. Value-added services are also vital, as they give people another reason to join and stay with your program. Promotional materials, customer service, and loyalty rewards are all examples of value-added services that can keep affinity group members returning for more. If you're thinking of starting affinity partnerships or an affinity marketing program, doing your research ensures you're targeting the right audience. Once you have a solid understanding of your target market, you can start planning your marketing strategy and working on ways to add value for your members. With a little effort, you can create a successful affinity marketing program that will help you build long-term relationships with your members. Psst... Hey there... Are you interested in establishing an affinity marketing program for your home services company? Wizard of Ads® would be elated to strategize a successful program that meets your business's and customers' needs. Book a call today!
Find Your Tribe
“Identify a tribe. Develop the tribe. Market to the tribe.” – Ryan Deiss
In a Wizard Academy class he taught, Ryan Deiss had that to say about affinity groups. What exactly does he mean? Affinity groups have an affinity for, or an attraction to, something specific. And that something is almost always a value or belief system. To identify an affinity group, look for people sharing common values or beliefs. Value + Belief = Affinity Group It could be as broad as all Republicans or all birdwatchers. It could be as specific as Harley-Davidson riders or Christian home school mothers who love to cook. The point is, the more specific you can be, the better. The narrower you can cast your net, the more you’ll catch of the type of fish you’re fishing for.
The Law of Attraction
The Law of Attraction states that like attracts like. In other words, you attract people who hold the same rsonance as you. That's why it’s super important to be clear about who you are. The universe will match your frequency and deliver people who are a vibrational match. You can relate the law of attraction to affinity groups. When you’re clear about your needs and wants, you’ll attract others who are also clear about their needs and wants. That creates a powerful force of attraction. For example, if you're a plumber, you can attract people who appreciate how you approach plumbing challenges. If you're a roofing company that places repairs ahead of replacements, you'll attract people who want the right roofing solution, not just the cheapest roof. The better you deliver your message, the easier it will be to attract the right people. When it comes to marketing, businesses use all sorts of affinity strategies and tactics to reach their target audiences. At the end of the day, one important rule all businesses should live by is knowing your audience. Your audience is the group of people, or affinity group, who are most likely to buy your product or service. To be successful, you need to understand what they want and how to reach them. Affinity groups are attracted to each other because they share common values and beliefs. For example, Harley-Davidson riders share values including freedom, independence, and self-reliance. They also share beliefs such as a love of the open road and a passion for motorcycles. These values and beliefs attract Harley-Davidson riders to each other. They also attract other people who share these values and beliefs. People who don’t share these values and beliefs are less likely to be attracted to Harley-Davidson riders. And that’s okay! The goal is not to attract everyone. The goal is to attract people who share your values and beliefs. When you know your values and beliefs, you can start to look for others who share them. That's the beginning of finding your affinity group. Affinity groups can be large or small, formal or informal, online or offline.
What Really Matters Is…
“Tell me what a person admires, and I’ll tell you everything about them that matters.”– Maggie Tufu
In other words, to know a person’s values and beliefs, look at what they admire. For example, someone admiring professional athletes is likely to value health, fitness, and competition. Someone who admires artists probably values creativity and self-expression. Knowing what a person values can help you start understanding their behavior. When you know their behavior, you can begin to predict it. That's the key to marketing to any group of people. You need to understand their values and beliefs so that you can speak their language and appeal to their needs. Magicians, for example, are some of the best marketers in the world. They know how to read people and understand what they want. And they use this knowledge to give people exactly what they desire. To be a successful marketer, you must learn to do the same. You must understand your audience's values and beliefs to appeal to their needs.
Who Controls the Gateways?
Data miners. Data miners are the people who collect, analyze, and sell data. They have become some of the most powerful people in the world because they control the gateways that allow us to access the internet. Data miners use this power to segment the information that we see online. They do this by tailoring ads and content to appeal to our desires. For example, Mark Zuckerberg made billions by allowing advertisers to reach affinity groups on Facebook. This process of data mining and tailoring content is called microtargeting. Microtargeting is a powerful tool used for good or evil. On the one hand, microtargeting is used to sell products and services we actually want and need. On the other hand, microtargeting is used to manipulate our emotions and get us to believe things that aren't true. Remember, you are the product. That's why everything you find on the web is free to you. You're not paying for it with money, you're paying for it with your data. And that data is priceless. It's valuable to companies because it allows them to micro-target us with ads. And it's worthwhile to bad actors because it allows them to manipulate us. So, how can we protect ourselves from microtargeting?
- Be aware of it.
- Make sure you get your information from reliable sources.
- Think critically about the things you see on the internet.
Just because something appears on our screen doesn't mean it's true. We have to be careful not to believe everything we read. Also, remember that affinity groups can be useful. They can help us connect with like-minded people and learn about new things. But we should be careful not to let them become echo chambers. We need to make sure we hear a variety of perspectives so that we can make informed decisions. We want to make sure we belong to the right affinity group. Do you know your target audience? Do you know their affinity group? Do you understand their needs and wants? If not, Wizard of Ads® can direct you to the right resources. Book a call.
Advertising
Relational and Transactional Ads: The Perfect Combination
Do you want a quick sale or do you prefer building a solid customer base you can retarget for future transactions?
As a business owner, you're always looking for ways to improve your advertising and marketing techniques. To this end, one important distinction you should clearly specify is between relational and transactional ads. Relational advertising, as the name suggests, focuses on being relatable with a customer's sentiment, while transactional ads lean towards cheapest price and lowest barrier to entry. While both marketing approaches have their merits, what you ultimately choose will depend on your business goals. Do you want a quick sale or do you prefer building a solid customer base you can retarget for future transactions? Relational ads are more effective in the long run, especially for businesses in the residential home services industry, but that doesn’t suggest you should abandon transactional ads. This is because customers are more likely to hire your services again if they feel like you care about them as people, not just as a potential revenue source. In this article, we'll explore everything you need to know about transactional and relational advertising: from its origins, and history, then down to their perfect combination to ensure steady year-over-year growth. Let's dig in.
Hippocrates on Information-Gathering and Decision-Making
Hippocrates believed that the body was primarily made up of humors or bodily fluids, which are blood, phlegm, yellow bile, and black bile. According to his teachings, how humans gather information or make decisions are dictated by the imbalances of the four humors. The excess or lack thereof of each bodily fluid influences the expression of our humanistic moods, emotions, personalities, and behaviors, including people's susceptibility to diseases. Throughout history, many academics like Empedocles, Alcmaeon, and Galen, and also screenwriters like Shakespeare have all built on the belief that Hippocrates originally theorized. These personalities have all been instrumental in affirming, codifying, honoring, and personifying Hippocrates' four temperaments, which are now known as:
- Sanguine
- Choleric
- Melancholic
- Phlegmatic
You might be thinking, "what does this have to do with my business?" Well, you may not know this but business has more to do with psychology than anything else. Remember that securing a sale demands an alignment of beliefs between you and your customers. That’s why knowing your audience’s temperaments should be a part of your marketing approach. A clear understanding of your prospect's personalities, respective preferences, and approaches to decision-making will ultimately help you influence their behavior and guide them to your desired outcome. This enables you to frame your campaigns in a relational advertising tone, helping you connect with prospects on a deeper level which builds a long-lasting relationship with customers.
Shakespeare and the Full Range of Human Behaviors
Among all playwrights of old, only Shakespeare came close to expressing the full range of human behaviors in his plays. Literature has never produced a character as rich and humanly recognizable as those created by William Shakespeare. He accomplished this feat by following and abiding by Hippocrates' theory and beliefs on the four temperaments. It's truly mind-boggling how Shakespeare understood human personality better than the rest of us considering his only basis was Hippocrates' teachings. Shakespeare wove these temperaments into his plays in order to create characters that people from all walks of life could identify with. In doing so, he has given us a timeless gift that will continue to entertain audiences for generations to come. Despite the theory of bodily humors heavily being discarded in the scientific community nowadays, there's wisdom in Shakespeare's example: For business owners, the four temperaments enable us to recognize our customer’s respective stories and craft a better and more personal experience through relational advertising that speaks to our prospect’s felt needs. The four temperaments sanguine, choleric, melancholic, and phlegmatic are each expressed through different characteristics. For example, cholerics are known to value results over relationships, but they are also open to building professional ties if businesses can provide the results they want. As a residential home service business, you can connect with choleric people by stressing the importance of quality workmanship and speedy results in your advertising. Sanguines, on the other hand, are people-oriented and love to socialize. They’re often drawn to businesses that offer a personal touch and relational customer service. As a business owner, you can appeal to sanguine prospects by highlighting your company’s friendly atmosphere and commitment to great customer service. The point is, while relational advertising may seem like a new concept, it is actually based on an age-old idea. By understanding the 4 temperaments, you can create ads that resonate with your target audience on a deeper level, increasing the chances that they will take action. Want to link your way of thinking to your customer’s mindset? Book a call with Ryan Chute of Wizard of Ads® and he’ll Professor X your way into your prospect’s psyche.
The 4 Basic Temperaments in Every Form of Storytelling
Since the imbalances of the bodily humors produced the 4 temperaments we all know and love, Hippocrates stressed that the balance and good mix of these humors defined good health and the ideal personality. This concept of complementary relationship among the four humors, and in turn the four temperaments, have been the explanation why Shakespeare's plays were the best and the golden standard of the world's most renowned TV shows. Shakespeare's Henry IV is described by some as the greatest literature of all time and the masterpiece of historical drama. It is also known to be the closest to the ideal humoral balance. The reason being each of the four main characters represented a specific temperament. King Henry IV himself exhibited melancholic qualities, Prince Hal had sanguine, Sir Harry Hotspur was choleric, and Sir John Falstaff showed phlegmatic qualities. In today's media, we see the same pattern among characters: Star Trek
- Sanguine: Captain Kirk
- Choleric: Spock
- Melancholic: Scotty
- Phlegmatic: Bones
Friends
- Sanguine: Phoebe and Joey
- Choleric: Monica
- Melancholic: Ross
- Phlegmatic: Rachel and Chandler
Seinfeld
- Sanguine: Kramer
- Choleric: Elaine
- Melancholic: George
- Phlegmatic: Jerry
Sex and The City
- Sanguine: Samantha
- Choleric: Miranda
- Melancholic: Charlotte
- Phlegmatic: Carrie
Schitt’s Creek
- Sanguine: Moira
- Choleric: Johnny
- Melancholic: David
- Phlegmatic: Alexis
Game of Thrones
- Sanguine: Arya
- Choleric: Sansa
- Melancholic: Jon
- Phlegmatic: Bran
This ethereal combination of the four temperaments is the cornerstone of a good novel, a hit TV show, and effective relational advertising — basically every type of long-term entertainment. Why? Because the interweaving of the four temperament's inevitable conflicts and persisting need for one another is the quality that keeps the storyline intriguing and interesting for audiences. Needless to say, if you want to build long-term relationships with your clients, craft relational advertisements that speak, complement, harmonize, augment, and enhance their temperament’s language. Sprinkle in the trifecta of a killer value proposition — meets their felt needs, caresses their pleasure points, and soothes their pain points — you successfully align their beliefs to yours.
The Perfect Combination of Ads for a Consistent Year-over-year Growth
As the world of advertising rapidly changes, so do the marketing techniques that companies use to reach and engage their target audiences. In order to stay ahead of the curve, it’s important to understand the different types of ads and how they can be used complementarily to create a successful ad campaign. For starters, relational advertising is a form of relationship marketing where your focus is on bonding with your customers. This sets the stage for your client's long-term brand loyalty and satisfaction. Transactional ads, on the other hand, are designed to generate a sale today. They establish a traditional relationship between brands and customers where the focus is simply selling a product or service. In other words, you're not in it for the long haul, you only want a quick buck (buyer’s perception). That's not to say transactional marketing isn't a good tactic. The strategy leans toward selling efficiency and increased volume in point-of-sale transactions which is the foremost priority of buy-and-sell businesses. However, for industries like the residential home service where customer retention and client membership are the lifeblood of your business, you need to establish a solid rapport with customers to thrive in the biz. While both types of ads have their place in a well-rounded marketing strategy, relational ads are often more effective in driving consistent year-over-year growth. That’s because they create an emotional connection with the customer that goes beyond the transaction. Think about it: when was the last time you repeatedly bought a product because you had a “transactional” relationship with a company? Probably never. While you’ve presumably made multiple purchases from businesses with whom you have a relational connection. Still, what are relationships if you don't get your customers moving to where your blow the wind? Relational advertising is meant to bond with customers, but the transactional ad is what activates the sale. Formulating a balanced recipe is what you need to do when crafting a killer ad campaign. Thankfully, we have the formula served on a silver platter for you, which is:*drumroll*
- 2/3 Relational customer-bonding ads
- 1/3 Transactional sales-activation ads
Every marketing campaign you develop must have this magical combination. After all, asking a big favor from a person whom you've built a meaningful relationship with is FAR easier than asking the same from a stranger. The key here is making the whole process holistic. Your relational advertising techniques must be supplemented by other touchpoints within your business like customer service. Here's an example: An HVAC contractor can produce relational ads that focus on the buying experience, customer satisfaction, and righting industry wrongs, while preserving the temperament-fit style and tone. Then, when the shoulder season rolls around and you’re scrambling to fill the appointment board, the business can switch to transactional ads that offer a value-add for scheduling an appointment or tune-up within the next 24 hours. The relational ads create top-of-mind awareness, build credibility, and establish the company as a trusted source for HVAC services. The transactional ads will then provide concrete, tangible reasons to choose your particular company over others. Of course, your ad campaigns will be unique to your residential home service business, but the general principle remains the same: 2/3 relational ads + 1/3 transactional ads = 1 successful marketing strategy. If you need professional guidance in concocting the perfect ad campaign, Ryan Chute from Wizard of Ads® is the expert who can blend your marketing strategy into a juicy beverage that hits the spot. Book a call.
Marketing
Consumer Behaviour's Reliance on Today's Social Media
For many people, scrolling Facebook, chatting over Twitter, and surfing Instagram is now part of the daily routine. Our social media today is a result of all twists and turns we’ve endured over the pandemic. It has forced businesses to rely more readily on social media channels to communicate and engage with their customers. Today, social media apps are some of the leading tools making up a relevant portion of income streams from both large and small businesses. Moreover, social media statistics reveal that social media has the ability to influence consumer behavior to a brand’s advantage. How? In this article, discover how consumer behavior relies on social media today and how you can leverage your residential home service business to consumers on social media apps.
A Social Media Dependent Society
Deep down, underneath the calm exteriors, people are driven by one inextinguishable desire to belong. Social media, in one way or another, appeals to the inherent desire for belonging by enabling people to create an online persona that projects their ideal self. Through social media sites, you can be up-to-date with the latest trending news. You can also upload posts and stories that entertain your target audience, aligning your brand identity with their personal identity, and giving them a sense of belonging with your tribe (brand). On the flip side, we cannot downplay the negative effects of social media. It has created a window to access and covet other people’s lives, breeding an even stronger desire to keep up with the Joneses. This is a big reason why businesses thrive on social media. Social commerce allows businesses to meet consumers where they already are, at the peak of their whims and fancy. For this reason, social media today is no longer merely about connections but also conversions. Businesses have infiltrated social media networks because of how fast the market grows within each platform. A company that doesn't include social media in its digital marketing strategy is ignoring an inexpensive, practical, and quick way to reach half of humanity. Calling society social media dependent is a bold claim but current data indicates it’s a hard truth. Let’s explore the numbers below:
How many people use social media today?
Compared to previous years, 2022 has marked the era where more than half of the world’s population uses social media. According to Datareportal, 58.4 percent of the world’s population is on social media today. That number accounts for 4.62 billion people around the world. Within only a year, social media users have bumped up by a staggering 424 million who spend two hours and 27 minutes daily across seven social media platforms, on average. With that in mind, it’s likely that the majority of your prospects in the residential home service industry belong to those numbers. According to Deloitte, 40 percent of users utilize social media to find home improvement providers. That accounts for 1.8 billion people worldwide.
How do social media users connect with brands?
In many ways, social media is comparable to TV and radio. First of all, it doesn’t cost a dime for consumers to watch or listen to commercials in your social media feeds. Secondly, it’s the brands that want to be featured who shoulder the heaviest advertising costs. The real trick to winning on social media today is entertainment. Entertainment is the currency of a too-busy public, and on social media, people are looking to decompress from their busy lives and have a chuckle. This makes social media advertising particularly important when it comes to your overall marketing strategy. Social media sites are governed by patented algorithms that control the information every user receives. Brands can use advertisements to reach out to their market. Alternatively, you can use behavioral retargeted ads to recapture the attention of users who expressed interest in your products and services but didn’t convert. This is helpful because SproutSocial says one in three customers prefer social media to learn about brands moving forward. The numbers make it clear that social media has become a pillar in today’s society, not only for social circles but even for businesses. If you want your residential home service to dominate social media today, Wizard of Ads® has the chops to make that happen. Book a call.
Generational Consumer Behavior in Social Media
Social media today offers countless opportunities to tailor-fit your products and services to the right customers. However, comprehensive demographic data is required to define your target audiences. Every generation has its respective nuances that determine how people will interact with your brand and it’s imperative to know these subtle details if you want to maximize your social media advertising efforts.
Generation Z
Born: 1997 onwards Age range: 18-24**Who are they?**Generation Z, otherwise known as Gen Z or Zoomers, are the most digitally native among all generations. Given their youth, most of the people belonging to this category have had social media interaction for almost half of their lives. For this reason, they are tech-proficient, 66 percent say social media is a vital component of their day-to-day living. However, unlike other generations who prioritize connecting with family and friends, Gen Z primarily uses social media platforms as a pastime. Despite that, I do urge residential home service businesses not to sleep on the tech-savvy generation. They will be the huge drivers of the social media landscape in the years to come.**Consumer Behavior in Social Media?**Given Gen Z’s proclivity to social media today, they expect brands to be in step with them. It’s very important for this generation to have initial online interaction before storefront transactions.
According to the SproutSocial findings, 76 percent of Gen Z say that social media allows them to interact with brands. Seventy-eight percent report that social media helps them discover new businesses. Unlike other generations on the list, Gen Z people are fully aware of how businesses use their personal information. For this reason, 64 percent expect businesses on social media today to craft more personalized experiences to appeal to them better. They suggest that companies should analyze their posts, activities, and previous interactions to create a “level of familiarity” with them. In other words, the majority of Gen Z’s are relational buyers who value affinity prior to purchase.**What does this mean for residential home service businesses?**The best way to appeal to Gen Z is through ads or posts that spark engagement or interactions. Your aim is to involve them in relevant conversations surrounding your niche. This may not be so easy in the residential home service since you’re selling a grudge purchase. Nevertheless, maintaining active interaction with this group is the key to winning their loyalty. Work on your buying experience by being more active in responding to questions, comments, or messages. Make this the forefront of your strategy and you will win Gen Zers over.
Millennials
Born: 1980-1996Age range: 25-40**Who are they?**Although Millennials are born the closest to Gen Z’s, their consumer behavior varies significantly when navigating through social media today. Most information regarding them is plagued with obsolete stereotypes, so don’t be confused. The majority don’t primarily use social media to kill time like the tech-savvy bunch. Rather, 61 percent use social media today to reach family, friends, and colleagues. Only 51 percent use social media platforms as pastimes, while 47 percent use it to discover new trends. Forty-three percent use it to know the latest news. The best way to describe Millennials is that most are starting to navigate through adulthood. This includes every nitty-gritty detail that comes along with it: work milestones, parenting, property-owning, household management, etc.**Consumer Behavior in Social Media?**Since Millennials are slowly dipping their toes into adulthood, they value businesses to be instrumental in their major life decisions. Compared to other generations, Millennials approach their careers, family, and future differently and it shows in their social media behavior. Since they prioritize making the best choices, they’re keen to join online communities and interact with other customers or with your business to know they’re in the right hands.**What does this mean for residential home service businesses?**A Millennial, say, with a new property, will be particular in selecting the business they’ll trust for their HVAC installation. Assurance also matters so much for Millennials and this can be challenging for residential home service providers. The best course of action to appeal to Millennials is to build your own online community via social media today. I see this benefiting your brand in three ways:
- Previous customers can share their past experiences working with your business. They can post pictures, upload videos, and testify to how your brand has helped them. In other words, free word-of-mouth marketing.
- You gain a free space where you can present the newest services or limited-time offers to encourage your previous customers to repurchase.
- You get a higher chance of tipping the scales into a sale once non-consumer Millennials part of your community validates the legitimacy and effectiveness of your services.
Generation X
Born: 1965-1979Age range: 41-56**Who are they?**Have you heard of Gen X before? Not too many have, but we are the small group in between the Boomers and Millennials. Don’t sleep on us just because we’re small in number. We may be the best customers you can get for your residential home service business. Despite our small size, Generation X accounts for a large proportion of users in social media today and we’re not slowing down. According to research, 74 percent of Gen X users see social media as a vital pillar in their daily lives. Among the social media platforms, Youtube and Facebook are their most preferred apps through and through. This means they are likely to stick with these social channels for years to come. With that in mind, casting your net over these sites will give you better odds with Gen X prospects.**Consumer Behavior in Social Media?**Compared to Millennials, Gen X’ers use social media platforms more habitually. They average around six hours and 58 minutes of social media usage per week. The latch key generation is also known as the counter-culture generation because of their penchant for independence and smart purchase decisions. Gen X’ers are more likely to fall under the category of Transactional Shoppers. This means they care about the ROI, logic, and product research to make their final decision. According to studies, 56 percent of Gen X consumers discover new brands through social media. **Sixty-eight percent base their purchases on online reviews. What does this mean for residential home service businesses?**If you wish to target GEN X’ers, the best course of action is to acknowledge what motivates them the most– independence. Allowing them to dive deep and learn more about your residential home service business will help them develop their final purchase decision. In other words, whatever educates them, excites them. Keep their excitement at an all-time high by providing resources, videos, tutorials, and in-depth explanations that illustrate how your brand can solve their felt needs (money, energy, and time). You will want to cover your solutions’ features and benefits too, and how these elements can give them the advantage they’re looking for. Convincing customer reviews are another method for capturing the hearts of Gen X’ers. Similar to Millennials, fostering an online community where they can interact with other customers will facilitate them to choose you over competitors. Moreover, work on your local SEO strategies to ensure better odds if they decide to check your Google Business Profile listing. Finally, DIY videos that explain how users at home can troubleshoot, say, a minor plumbing problem demonstrate your care for customers. You can use videos like this to your advantage when targeting Gen X’ers. Edutainment is the name of the game.
Baby Boomers
Born: 1946-1964Age range: 57-74**Who are they?**Baby boomers were the slowest to adopt social and only 40 percent believe that social media today is a relevant component of their lives. Nevertheless, the recent social distancing brought about by the pandemic led this generation to embrace social media as a means to communicate with family and friends. Similar to Gen X’ers, Boomers prefer established and popular platforms like Facebook. Experts project that this group will increase its usage of social media in the next 3 years. This is following the nearly doubled number of Boomer Facebook users in 2012 and 2019.**Consumer Behavior in Social Media?**Baby Boomers share similar similarities with other older generations when it comes to social media behavior. According to research, only a measly 35 percent of Boomers use social media today to discover new brands. That’s even though 48 percent report that social allows them to interact with companies. That said, Boomers are likely to stick with the social media platform they’re accustomed to, primarily Facebook as a brand discovery and communication medium. Taking Boomers beyond the awareness stage will take up time since data suggests that only 20 percent have finalized a sale from a social media platform. Most will choose physical interactions over online shopping.**What does this mean for residential home service businesses?**Social media today is still useful to provide Boomers with information when finalizing their final purchase decision. However, it’s not ideal to push them down the sales funnel online. You can make the biggest impact with your residential home service business when your campaigns complement their brick-and-mortar preferences. What this means is strengthening your local SEO performance through local SEO tools. You can win Boomers by publicizing your address, and contact details, and dominating the Google Map Pack and Google Local Service Ads ranking. While you can use your online presence to share timely store updates, offer value stacks, and post new products that will motivate Boomers to visit your office.
How Many Sales Are Made Through Social Media?
Social media influence can never be underestimated especially when we’re talking about sales. The reason why social media has become one of the frontrunners in sales is because of its accessibility and the unspoken mental gymnastics that push people to buy your products and services. In recent social commerce research from Business of Apps, they revealed that a whopping 82 percent of social media users made a purchase after seeing a product on social media. Another report from The Influencer Marketing Factory found that more people now prefer online shopping (40 percent) over in-store shopping (13 percent). E-marketer predicts that social commerce sales will grow to $56 billion in 2023 and boom into a staggering $80 billion industry by 2025. While the information above covers eCommerce more than residential home service businesses, we can infer that online transactions generally matter more in social media today. What this means for your residential home service industry is that you must pace up to meet your audience where they’re at. While the best sale you can make is an appointment, your first goal should be to endear yourself to your target audience so they feel they know, like, and trust you before they even need what you sell. It’s hard to imagine a life without social media, but eventually, the main competitive field could very well be within the social media platforms.
The Impact of Stories on Consumer Purchase Decisions
Social media is but a singular piece in the myriad of tools businesses use to sell their products and services. We have to keep in mind that using social media today as a means to leverage your businesses will not always reap rewards. The truth is, it’s just a medium — a communication channel. Roy H. Williams once said: “The media doesn’t make the message work. The message makes the media work.” Media platforms will remain platforms until you put them to work for you. If you want to influence your customer’s purchase decision, you need to craft impactful and moving stories and not ephemeral content. You heard it right, stories. Most consumers, even the radically ROI-driven Transactional Shoppers, like to think logic is what drives their purchase decision. Here’s the thing: it isn’t. We like to think we’re logical beings that weigh all relevant information prior to purchasing. However, research shows that all of our decisions, both major and minor, are made subconsciously with emotions, only being justified by logic once the decision has already been made. Persuading consumers to use your solutions means speaking their language. Focus on developing stories, high-quality content, and ads that make your prospects FEEL your products’ benefits. You also want them to EXPERIENCE how your solutions can give them the advantages they desire. Why? People make ALL their purchase decisions from the area of their brain that EXCLUSIVELY FEELS. A part that doesn’t listen to logic and doesn't have the faculty for words. That’s why helping your clients imagine your solutions through persuasive stories is your key to sales success on social media today. Your prospects are ripe for the picking, but sometimes, you need expert advice to show you the tools for the harvest. Book a call with Ryan Chute of Wizard of Ads® if you want your residential home service to dominate social media today.
Entrepreneurship
The Power of Magical Thinking (For Business Growth)
Magical thinking is a term for sales psychology, a skill every entrepreneur must use. The best negotiators can't compete with businesses offering great value at fair prices.
Ask any business owner, contractor, or entrepreneur you know, and they'll 100% agree that it's facts, figures, and logic that matters when running a company. They're absolutely right. Analytical thinking is a predominant driver in business, but what they might not realize is that magical thinking is a powerful tool for business growth, too. Wait, what? Allow me to retort. Businesses want consumers to believe that their products or services will make them happier. That means soothing a pain point or caressing a pleasure point. This is what magical thinking is all about. It’s a form of psychological persuasion aimed at transforming externally motivated, grudge-driven buyers into happy customers. Intrigued? Let’s take a closer look into magical thinking and how you can implement the mental game for your residential home service business.
Win the Heart, the Mind will Follow
Magical thinking is the belief that our thoughts, words, and actions can influence the world around us in ways that are seemingly unrelated or illogical. This type of thinking has been linked to success in various areas of life, including business. Come to think of it, people see something they want and they buy it, believing that it will improve their lives one way or another. In Roy H. Williams’ Monday morning memo, he said: _“The mind will always create logic to justify what the heart has already decided.” That’s a universal truth of business. Everyone who steps foot into a store already harbors internally motivated perceptual reality. In a customer’s mind, they may be looking for products that make them look pretty, or fidgeting through the latest and greatest tech, or embodying that beach body just in time for summer. Like waving the red cape on a raging bull, there’s no stopping a customer once their heart latches onto the desired outcome. The aim of magical thinking is to relate to your client's perceptual reality. By infiltrating their thoughts, illustrating how your products or services will have their felt needs MET (money, energy, and time), and satisfying their pain and pleasure points, you will have better odds of selling your solution. Looking for a magical-thinking expert that can help leverage your residential home service business? Watch your sales skyrocket through Wizard of Ads® proven skills in psychological persuasion. Book a call.
Documentation of Brain Lateralization
The concept of magical thinking follows closely the theory of brain lateralization, introduced by Dr. Roger Sperry. According to the Nobel Prize winner, the brain isn’t simply divided into two hemispheres but is composed of two competing and practically independent minds. Below we’ll explain how brain lateralization works and describe how they relate to marketing and business.
The Left Brain
The left hemisphere, otherwise known as the digital brain, houses the human ability to be verbal, analytical, factual, and orderly. Based on Sperry’s research, the left brain helps people with:
- Logic or deductive reasoning
- Reading
- Writing
- Computing
- Sequencing
- Linear or systematic thinking
The left hemisphere understands fact from fiction. What’s real and what’s fake. It’s the part of the brain that links people to the real world and leans towards suspicion and doubt. In business, the left brain is the part that rationalizes every purchase decision that customers make. This is more evident during grudge purchases like in residential home services. Your customers don’t find pleasure in hiring you. They simply want a contractor that will help have their felt needs MET (money, energy, and time).
The Right Brain
The right hemisphere, also known as the analog brain, is the part believed to be more visual and intuitive than the left hemisphere. Unlike, its counterpart, the right brain is less orderly but more creative. Sperry suggests it helps people with:
- Feelings
- Holistic thinking
- Imagination
- Intuition
- Artistry
- Music
Revisiting Roy H. Williams’ quote earlier, you may imagine the right hemisphere functioning as the heart. It harbors every desire, dream, and yearning of a person. Unlike the left brain, the right hemisphere connects you to a desirable world where a customer’s perceptual reality comes to life. Here’s the rub. Despite any customer attempt to rationalize their purchase decision, a business owner who masters the craft of magical thinking can guide prospects into a desirable mindset - from an externally triggered cause to an internally motivated purchase decision. You’ll learn how below.
How to Use Magical Thinking
Magical thinking is a useful skill to learn for all types of businesses, but most especially, those that belong to residential home services. As opposed to conventional businesses like health and beauty where people WANT what they sell, you’re selling an externally triggered grudge purchase. In other words, people don’t want to avail your products or services, they have to. Unlike new bling, it’s hard to imagine a customer flaunting her new unclogged toilet. These ‘unsexy necessities’ are the reason why selling home services is more challenging. People would rather spend on things that align with their innate impulses. They want things they can show off. Even if internally motivated and externally triggered purchases have their differences, they share one thing in common: desirable outcomes. Customers may not obtain instant gratification from a grudge purchase, but underneath their annoyed exterior, they’re still after an advantageous perceptual reality. Whether that’s the kiss of cold air of a new HVAC system or the shimmer of a well-illuminated room. This is where magical thinking shines through. Another word for magical thinking is cognitive distortion because you want to distort customers’ cognitive motivations away from the angle of necessity (why they need the solution) into the angle of advantage (how the solution will make them feel). In magical thinking, it’s not enough to give your prospects a detailed list of your product features and benefits. Your task is to identify the features that make them FEEL, walk them through the benefits they will reap, and link their feelings to their desired perceptual reality. Once they feel the advantages of having your product or service, they’ll be more inclined to choose your solution. Why? Because people’s decision-making is anchored in the part of their brain that HOPES and EXCLUSIVELY FEELS (right brain). You can incite that emotion through magical thinking.
You Need A Frustration-Free Solution
In any case, there are perks to selling home services that other industries don’t offer. For example, if a prospect experiences a breakdown, they don't have to be convinced to take action. Anyone in need is already highly motivated to purchase from people who can help them — that’s you. All you have to do is persuade them to choose YOU. What makes your solutions better than your competitors? Even with all the social psychology magical thinking you employ, unless your products or services don’t ease their pain points or satisfy their pleasure points, don’t expect a sale. You can’t sell something that doesn’t solve their felt needs. At the core of your competitive advantage is an irresistible value proposition. This is not merely a feature or a benefit that makes your products attractive to consumers. Your value proposition embodies that value you promise to deliver, the pain and pleasure points you aim to please, and the positive impact your solution has on their money, energy, and time if they decide to buy your solutions. What is your value proposition, then?In a grudge-purchase-battlefield like the residential home service industry, most customers seek affordability. All things being equal, customers will gravitate toward companies that charge cheap. A lower price for your home services is a low bar to entry in a saturated market and you’ll be forced to compete in the market share with countless others like you. In that case, a lower price as your value proposition isn’t ideal, whereas, if you bump up the price tag in exchange for a tremendously huge value, you will influence the demand in a much more powerful way than by selling cheap. I call this your perfectly fair competitive advantage. _A lifetime non-prorated service warranty? Waiving the diagnostic fee if they decide to hire your services? Free unlimited drain cleaning if they sign up for your club membership? A 10-year no-risk lemon replacement guarantee if the same thing breaks 3 times? Whatever it is, your value proposition should set you apart from the competition. You need to make them think that they’re getting more value from the sale than what you are willing to offer. When you create a unique offer that your competitors refuse to do, you establish a perfectly fair competitive advantage. Craft a unique value proposition combined with genuine self-imposed punishment should you fail to deliver on your promises, woven in a magical thinking offer — you become the front runner among your competitors for a sale.
Want to employ the Power of Magical Thinking?
Magical thinking is a fancy word to describe sales psychology, which is a skill every entrepreneur must be comfortable employing. But even the best negotiators pale in comparison to businesses that are willing to offer immense value at reasonable prices. To be the residential home service leader in your community, create a tremendously irresistible value that’s easy to say “yes” to. Drizzle psychological persuasion over, and the market is yours for the taking. Leverage your residential home services through magical thinking. If you need help, book a call with Ryan Chute at the Wizard of Ads® and watch your sales accelerate by multiples.
Branding
Persuasion: The Reason Apple Doesn't Give Store Directions
Apple knows how people are influenced, and why people are persuaded. That's why Apple is a preferred brand to the masses.
We've all seen and heard a business promote itself on our local TV or radio station. They shove their store hours, phone numbers, and address in the face of their audience. They’ll occasionally even turn toward giving directions. Something called the “door in the face technique.” Thus eating up all of their advertising space. Why? They believe the only thing holding their consumers back is a lack of information. In other words, they assume their audience can’t connect the dots and get from point A to point B. With that in mind, they invest countless time and money into ensuring their audience knows precisely how to find them. This is one of the biggest marketing mistakes a business owner can make. On the surface level, there appears to be nothing wrong with this approach. After all, most business owners only see their customers when they walk through the front door. Naturally leading them to believe that is the beginning of the process. However, in reality, it's just a continuation. The customer's journey begins long before they step foot in the store. And long before the business owner becomes personally involved. It starts with persuasion. It’s the art of convincing your audience not to find you, but rather think of your business as a great choice they need to find. When you use persuasion, you won’t need to advertise your phone number or store hours. Your audience will find all the information they need on your website. That's what Apple understands arguably better than any other business on the market. Apple knows how people are influenced, and why people are persuaded. This understanding allows them to create advertising campaigns that speak to their customers on an emotional level, which results in more sales and loyal customers. Now, we must consider using the same persuasive techniques to achieve results. So, how can you start persuading your consumers? That’s what we’ll discuss below.
How To Get In Touch, Rather Than Why
You likely understand why you should use persuasion techniques to get in touch with your audience. However, that still leaves a critical piece of the puzzle. **How?**How do you redirect your marketing efforts and ensure you’re persuading your audience? Look toward the biggest brands. Big brands, like Apple, already understand how to connect with their audience. No Apple commercial that has ever made it out of their doors has given directions to their stores. You don’t see Tim Cook on the screen saying, “Come to Apple, on the corner of main street and something-or-the-other.” They simply don’t do it. (Not to mention it would be awkward seeing Tim Cook, Apple’s CEO, in an ad when it’s usually some celeb.) Every advertisement from Apple or other brands such as Volvo skips directions. Instead, they focus on one thing—value. Value is easily the most important component in marketing. Prove to your audience that your product or service will add value to their life. They’ll jump through the necessary hoops to contact you. Think of all the memorable commercials you’ve experienced that listed off their convenient hours, directions to their location, and friendly, knowledgeable staff. Drawing a blank? Me too. However, if the commercial just told you a story about a customer facing a problem and the win they got working with you, you’d remember that. Even assuming you didn’t Google the industry, you’d be able to pick their name out from the crowd. That’s the power of focusing on value. That’s how you become genuinely persuasive. Book a call with the Wizard of Ads®. We can discuss how to connect better with your audience. Click here.
Spend More Time Persuading Consumers = Less Worry
It starts by using more persuasive words. Words such as “easy,” “free,” and “results” are some of the many powerful words you may want to use. For a complete list of 26 of the most persuasive words in marketing, visit this article from LinkedIn. When you use persuasive rhetoric in advertising, your business will be better off. You will spend less money and effort on ads, as each dollar spent will go further. You can also enjoy being less anxious about whether someone will walk through your front door.
Apple Doesn’t Give Directions to Their Stores
Let’s watch some advertisement examples, together. It’s called the Best Apple Commercials in 2021. Wait, don’t roll your eyes. Take five minutes and watch the video. It’s worth it. You’ll see my point. There’s a reason they are the best advertisements. Each commercial in that video has one thing in common. There are no directions. They don’t include their main office’s phone number or address. No matter how crazy the plot of these commercials become, they follow a similar pattern—benefits, benefits, benefits, brand. That simple pattern is one of the most persuasive strategies. It captures your audience’s attention. It informs them of what you offer. They infer the value. Then finally, it gives them what they need to continue their customer journey on their end. In Apple’s case, it’s the simple image of, you guessed it, an apple. Using a symbol or a name instead of directions allows your audience to continue if they want. Another thing to note is how selective Apple is with its words. Apple doesn’t slap a paragraph on the screen, short of Star Wars movie intros, nobody will read those. So, they keep it simple. They often only have one word on the screen at a time, giving all persuasion words individual impact. That’s how good advertisements should be. You'll do great if you can mimic that same rhetoric in advertising your business. Even outside of persuasive ads, in blogs, you want to follow that same method. Create persuasive articles by using impactful persuasion words regularly instead of filler.
The 95% Law of Influence
All of this brings us to one rule you should follow above all else. Invest 95 percent of your effort into telling your audience why they should contact you. Not how. That builds the credibility of your brand, and it helps the audience trust you. Once they do, they’ll seek you out on their own accord. All that you need to do at that point is ensure that your brand pops up when they hit search. Not too hard, right? Here’s how you can invest that effort:
- Discover what your audience wants and address it with persuasion words.
Apple and other big brands, like Nike, know what their audience wants to see and hear. Apple’s audience wants sleek, high-functioning technology that isn’t complicated to use. Nike’s audience wants a product to help them surpass their limits and be great. They want to just do it. Meanwhile, other brands are trying to convince their audience with all the boring bits. Whatever your audience wants, find it and leave out all the boring bits.
- Speak about an entry point that is a no-brainer.
It makes sense that “free” is one of the most persuasive words. Everyone likes free, and everyone likes a good deal. Mention those in your advertisements.
- Use Positive Mental Images.
Another thing that Apple does well is paint in a positive light. Most of their commercials are visually appealing and mentally light, capturing our imagination much more.
Become a Preferred Brand
An individual's preferred brand is the brand they consistently choose over others. Most consumers develop their preferred brand after a few trial runs. But the majority of brands don’t even make it into the competition. No consumer will try every brand in a given industry. At most, they may try five brands and find the one that works best for them. You need to be among those five with persuasion-based marketing. From there, it’s only a matter of how good your product or service is compared to the competition. With that in mind, you may want to ensure that your business as a whole is ready. That way, it can match your new advertising and outperform your competition. Then achieve the highest goal in business—being a preferred brand. If you can do all of that, you can relax and enjoy your business with less stress and anxiety. If you would like help becoming a preferred brand, book a call with Wizard of Ads® here.
Entrepreneurship
Cost-Cutting: How Not To Build a Business
Everybody looks after the bottom line. After all, it’s one of the best indicators to describe the status of an enterprise. If you’re a business owner, you may have devised ways to improve your bottom line and it typically falls into two approaches:
- Increasing revenue
- Cutting costs
It’s always a good idea to improve your revenue and efficiency, but if it can’t be helped, prioritize increasing your sales if you can spare cutting costs. In the words of acclaimed accountant, Adrian Van Zelfden, “You cannot shrink your way to profit.”While cost-cutting is a popular business strategy, it's not without its risks. When done correctly, being cost-effective may improve a company’s bottom line by becoming more efficient. However, cost reduction can also lead to problems that can affect a brand’s customer base and jeopardize the future of a company. In this article, we’ll take a deep dive into what cost-cutting is, why it’s a counterproductive strategy if you want to build your business, and what are its risks for residential home service businesses.
“You Don’t Understand Business”
The cost-cutting process is used by companies to reduce their expenses and increase their profitability. The most common time for a company to implement cost-cutting measures is when it is undergoing financial stress or experiencing an economic downturn. In some cases, if a company's management anticipates profitability issues in the future, then cost-cutting can become part of the business strategy. While there are a number of reasons why businesses may choose to cut costs, it’s not an ideal practice to sustain a company’s longevity as I’ll explain later. In Roy H. Williams’ recent exposition on cost-cutting, he explained briefly explained the dangers of cutting costs as he revisited the rise and fall of the once-pinnacle of American automobiles, General Motors. For context:General Motors was formerly described as the world's richest and most powerful automaker. The year 1981 marked GM’s slow and painful death with the installment of Roger Smith as the company’s CEO. Although Wall Street saw him as a brilliant businessman who maximized profits through his cost-cutting strategy, anyone who was passionate about cars saw that he was destroying the American icon from the inside out. The fruits of Rogers’ approach failed as GM’s one-of-a-kind identity slowly fell into the Sea of Sameness along with other car manufacturers. The 46% market share that GM held prior to Roger’s arrival dropped to 35.4% after 9 years. Finally, GM ended its downhill reign in 2009 with a net asset of -$91 billion. Whenever Roy voiced his complaint regarding GM’s market performance, his brother-in-law would retort, “You don’t understand business.” The same 4 cold-hearted and demeaning words every single time. The thing is, it’s easy to understand. You cost-cut your way through business, always looking for ways to save a few bucks. And it worked. By reducing expenses, your business increased its profits, boosted the bottom line, and remained competitive in a tough market for a while. Eventually, your cost-cutting caught up with you. Your residential home service business went bankrupt. You're left scrambling to find a new job. If you're thinking about cost-cutting as a way to build your business, think again. It's a surefire way to ruin your business and end up jobless. Learn from GM’s cautionary tale and avoid making the same mistakes. Cost-cutting may seem like a good idea in the short term, but it's not a sustainable way to run a business. Do you know what’s sustainable? Increasing your sales. Wizard of Ads® will help improve skyrocket your revenue and improve your bottom line without the detrimental repercussions of cost-cutting. Book a call.
Depriving a Brand of the Oxygen of Creativity and Innovation
If you take a closer look at Wall Street bigshots and private equity firms, they’re typically always all-praise for cost-cutting CEOs. They hail them as heroes thanks to the short-term gains contributed by cutting costs. These people focus on the outward financial stature, but not the internal and revenue impacts of cost-cutting. The most common cost-cutting measures done by companies are the following:
- Laying off employees
- Decreasing employee salary
- Closing down certain business facilities or branches
- Streamlining the supply chain
- Downsizing offices
- Relocating to less expensive buildings or regions
- Limiting outsources services
The problem is that cutting costs limits a business and its constituents the room they need to grow. In a fast-paced, highly evolving, and viciously competitive market, like the residential home service industry, cutting costs may spell doom for an enterprise. Take an HVAC company, for example. A steady pool of readily available technicians provides the company a headroom to deploy people in multiple projects. A fleet may focus on installing ductwork for a large building, while another group is sent to a household for diagnostic and repair. Cost-cutting through employee terminations will hurt the business, especially during peak season. In the age of the internet, customers value speedy response times above all else. According to HubSpot Research, 90% of customers say that ‘immediate response’ to customer service questions is essential (60% agree that ‘immediate’ means 10 minutes or less). Moreover, McKinsey & Company says that 70% of customers’ buying decisions are based on how they feel companies treat them. With these data in mind, reconsidering cost-cutting should always be high up your priority list. Otherwise, you will likely lose your clients to your competitors. A focus on customers should always be maintained before, during, and after cost-cutting and the process shouldn’t be seen as a mere revenue-enhancing ploy. Residential home service businesses that ignore what customers value are at risk of wasting valuable revenue. Based on MIT Sloan’s assessment, cost-cutting companies that overlook customer value exhibited the worst gross margins. Conversely, companies with high levels of cost-cutting while retaining high levels of customer value displayed the highest margins. This is known as Operational Excellence. In other words, cutting costs and upholding customer value are two peas in a pod. With that in mind, before embarking on a cost-cutting strategy, it’s necessary to set up a strategy that will cater to the cutback procedure. There are some non-negotiable costs to keep the biz in operation, so it’s a good idea to segregate each before you arbitrarily and haphazardly cut costs. Cutting costs isn’t a sustainable bottom-line-boosting measure. However, if it can’t be helped, focusing on customers is the key to a more effective cost-cutting strategy.
Risks of Too Much Cost Cutting in Home Services Businesses
As the United States is slowly reeling into recession, Residential Home Service Businesses may find it more difficult to generate the usual number of sales. This may even force some companies with tight cash runways to cut costs in order to keep the business running. These are dire situations and often, they also demand extreme measures. Cost-cutting is an effective band-aid solution to the problem, but it doesn’t come without possible backlashes. Below, we outlined some of the risks associated with too much cost-cutting among home service businesses.
1. Severance Pay
Laying people off is one of the hardest cost reduction approaches you must do as an owner because it means having to cut jobs. Severance pays are compensatory benefits that employers extend to employees when the employment comes to an end. Some contracts require employers to issue severance pay, while others include severance packages that include benefits and health insurance. Employers are required to provide severance If a clause of a residential home service technician’s contract indicates it. There are severance packages that also cover employees who resign or are fired. Factors such as length of employment and cost-cutting measures can influence how much the employee receives. These costs add an additional burden on behalf of the company, especially if they’re going through economic distress. Unless otherwise stated in the contract, an employer may decide whether or not to offer severance pay. In some cases, it could be a gesture of goodwill to help employees have a buffer until they secure a new position.
2. Unemployment Benefits
If residential home service businesses do not indicate a severance pay clause for employee downsizing, they may still suffer financial losses from unemployment benefits. Unemployment benefits, more commonly known as unemployment insurance(UI), are state-imposed insurance for eligible individuals who lost their jobs. That includes those people who were downsized. Commonly, people who qualify are those who were separated from their work due to cost-cutting. On the other hand, those who resigned or were fired with just cause don’t qualify for UI. Although unemployment insurance is a federal law, each state is responsible for administering it. Workers who aspire to join must meet the State’s required work and wage, including the time rendered. The UI program is funded through taxes on employers. This includes the state tax and Federal Unemployment Tax Act. In other words, it remains a part of a residential home service business owner’s obligation to support downsized employees.
3. Rehiring Costs
One reason why many companies are reluctant to downsize is that cutting costs can backfire on the business and hurt their economics further. If economic downturns and the threat of failing businesses happen to be short-lived, another heavy toll on the finances is rehiring costs. On-boarding new employees is daunting, especially in industries like residential home services where technical training is required. The actual cost of hiring employees means more than just their salaries. If you factor in the cost of recruiting, training, and the 5 to 8-month period before newly hires reach full productivity, business owners will feel the cost surge. For this reason, it’s best to give it some time and thought before home service businesses engage in cost-cutting. Expertise takes time to teach and acquire. In extreme cases, choosing other cost-cutting measures like relocating or decreasing office hours is better.
4. Lowers Morale of Retained Employees
Downsizing can have a significant effect on employee morale. When cost-cutting measures result in layoffs, employees who remain with the company may feel insecure about their own jobs and worried about the future of the company. This can lead to decreased productivity and engagement, as well as increased absenteeism and turnover. Employees who are affected directly by downsizing can also experience a range of emotions, including sadness and betrayal. These feelings can be exacerbated if they are laid off without warning or given insufficient severance pay. Residential home service companies should communicate openly and honestly with employees about the reasons for cost-cutting measures such as downsizing. By being transparent, companies can help to build trust and maintain employee morale during difficult times. While downsizing can have negative consequences for employees, there are steps that companies can take to mitigate these effects. For example, offering outplacement services and providing counseling can help employees deal with the psychological impacts of downsizing.
5. Overworking the Remaining Employees
When cost-cutting or downsizing measures are implemented in a company, the remaining employees often have to pick up the slack. This can lead to overwork and burnout among these employees. In the residential home service industry, this is often seen when housekeeping or maintenance staff are cut. The remaining employees have to work harder to keep up with the demand, leading to longer hours and less time for breaks. This results in lower quality of work and disgruntled employees. While cost-cutting measures may seem like a good way to save money in the short term, they can actually lead to higher costs down the road in the form of employee turnover and lower productivity. When employees are overworked, they are more likely to make mistakes, miss deadlines, and have accidents. This can cost the company money in terms of lost productivity, legal fees, and insurance claims. It is important for companies to find a balance between cutting costs and maintaining a happy and healthy workforce. downsizing should only be done as a last resort, and even then, care should be taken to ensure that the remaining employees are not overburdened. Otherwise, the company may end up spending more in the long run.
Is There Such Thing as “Good” Cost Cutting?
Asking if there’s a “good” form of cost-cutting is a double-edged sword. The very reason for cutting costs is anchored more often in an unfavorable situation that coerces management to adopt cost-reduction strategies. Moreover, companies are often accused of cost-cutting at the expense of quality, customer service, and employee morale. Alternatively, sometimes new technologies or economies of scale allow for cost savings that aren’t detrimental to the employee or buyer’s experience. For example, if you have optimized your radio buy for frequency and reach, there is no need to spend more budget if the job is being done. There's no denying that cost-cutting is detrimental if done for the wrong reasons. Cutting costs to improve the bottom line is usually not a good idea. This can lead to corners being cut and quality plus customer service suffers in the exchange, which ultimately does more harm than good. In reality, there are some ways cost-cutting can be beneficial, especially when they’re done for the right motives. To understand the concept of good cost-cutting, it’s important to first know what good, bad, and best costs are:
- Good costs
Good costs are the expenses dedicated to the growth of a company. They are aligned with the company’s customer values and are either used to meet your customer needs or product/service needs. Good costs help your business achieve its goals by providing room to train employees, support their growth, or allow your company as a whole to innovate. An example of this cost would be resources used for advertising and marketing.
- Bad costs
Bad costs, on the other hand, are expenses that don’t reflect the company’s growth strategy. They are often overlooked and waste valuable company funds. Some bad costs may be necessary but are not significant in improving your business or reaching your goals.
- Best costs
Your company’s best costs are the expenses associated with the elements making your company unique. They tie in closely to your unique sales proposition. For example, a residential home service business may waive diagnostic fees if customers decide to commit to a full repair or installation. These costs fall into your best cost because it makes your company what it is. Your company is on the right track, a.k.a. Implementing a good cost-cutting strategy when you minimize bad costs. This way, your company can free up resources that you can use for more productive endeavors. Like improving the efficiency or streamlining operations that save more money in the long run. Do note that not all cost-cutting measures mean cutting a cost. For example, using applications that allow companies to monitor employee productivity and time spent on projects or tasks is an example of optimization and efficiency. The management can introduce time-saving ways to make task accomplishment more efficient.
You Cannot Shrink Your Way To Profit
“It is easier to increase sales than it is to cut expenses.” - Roy H. Williams
If you had to choose between maximizing revenue streams and cutting costs, choose the former. You may suffer irreparable consequences in extreme cases. Cost-cutting measures should always be approached with caution. They should only be enforced if there's a clear benefit to the company, and they should never come at the expense of your product’s or service’s quality. When done correctly, cost-cutting can be a good thing for your residential home service business. It can improve efficiency, save money, and help simplify operations. Just be sure to approach it carefully and always keep the best interests of your company in mind. Don’t wait until you have no other choice but to cut costs. With the help of Wizard of Ads®, you can increase your revenue and propel your bottom line without cost-cutting measures. Book a call.
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