When Making a Profit can be Deadly to your Business

In your marketing, is it necessary to always make a profit? Or to at least have profitability as your goal?

We’re not talking about charities and organizations whose goal is not to make a profit. We’re also not talking about “awareness” campaigns or ones in which your goal is to get people to sign up for a mailing list or something like that. (Some of these things have questionable value to begin with for most small businesses.)

So in cases where you are advertising and your goal is for the ad to generate sales, is it always important to make a profit?

The answer is a big fat NO.

In fact, there are some cases where making a profit from an ad can be deadly to your business.

It all comes down to knowing your average customer.

So this is a strategy that will work only for established businesses. New businesses need sales before they die in infancy.

With an established business that already has some customer base and a sales history, it pays to analyze that sales history.

If you know that, say 12% of your first-time customers stick around to become long-term repeat customers and your typical long-term customer stays with you for three years and spends an average of $3,000 over that time, then you logically want to get as many such customers as possible. It isn’t necessary to make a profit on the very first sale because you will stand to profit on each subsequent sale over the next three years.

Do you want to lose money?

Ironically, there actually are times when it makes sense to lose a bit to attract a customer. Grocery stores do this all the time. Say they advertise coffee for some ridiculously cheap price. They might even be losing a few cents on each can of coffee they sell.

Sure, a few customers will come in, buy the cheap coffee and leave. But most will come in for the cheap coffee and end up doing their whole week’s shopping while they’re there. A few may even go on to become regular customers, having been lured away from a competitor.

Most of the time, however, smart marketers want to price their initial offer so that they just break even. The money brought in from sales should be just enough to pay for the cost of goods plus the cost of marketing.

It’s an educated guessing game but if you can do it, you introduce yourself to a lot of potential new customers at zero cost to you. Some of them will go on to become long-term customers. Now you’ve just made a bundle in long-term profits at no up-front cost.

And all those people who take you up on your introductory offer but then never come back?

Well if you’ve done it right, those people cost you nothing. You made no profit but also lost no money on the deal. You also learned a lot about what will generate response and sales. It’s a win all around.

Knowing and understanding this kind of stuff is where a marketing strategist comes in handy.


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The Long, Sad Chain of Events

Imagine a nightmare scenario

You are out walking, carelessly stumble and break your ankle. You can’t afford medical care (or it simply isn’t available) so you have to live with the pain and just wait for it to heal on its own. Because the break was never set properly, it never heals properly and you spend the rest of your life hobbled with a severe limp and a weak ankle which is prone to breaking frequently.

Sounds extreme? Unlikely?

Not if you’re living in Nigeria.

Here, in one of the poorest and most densely populated countries in the world, minor illnesses and injuries can be a big deal.


Enter a Hero

Sue K. is a Registered Nurse at a teaching hospital in Wilmington, Delaware. She’s been invited to participate in a two week long medical mission to Oyo state in western Nigeria.

Once there, Sue and the other doctors and nurses in her group, will do three valuable and important things:

            1. Provide free medical care to all who need it.
            2. Train local doctors and nurses in the latest western medical practices.
            3. Donate approximately 50 cases of medical supplies and equipment to the hospitals and clinics hosting their group.

Sue Needs Your Help!

Once in Nigeria, all of her expenses are paid for by the charity sponsoring the mission. However it’s her responsibility to get there and back.

All told, Sue needs to raise about $2,300 in order to make the trip.

That may seem like a lot but she really only needs 200 or so people to kick in $10 each and she’s basically there.

And what if she falls too far short of her goal to afford to go? Or — best of all worlds — actually collects way more than she needs?

Well if she doesn’t collect enough, the people of Nigeria would miss out on the services of a dedicated and experienced nurse. (Sue’s been an RN for 13 years and has even trained dozens of other nurses, since she works at a teaching hospital.) However, she has pledged to donate all the money received and use it to buy even more supplies to give to the Nigerian hospitals and clinics.

If she collects more than she needs, any excess will be used to buy supplies to give to the hospitals and clinics.

What’s In It For You

Aside from the wonderful feeling of doing something truly good in the world, Sue is offering two bonuses for those who support her. The fact that they are small allows her to devote 100% of the donations toward helping the people of Nigeria.

  • While in Nigeria, she will take her camera and take pictures of the work that the mission does. Those photos will be posted in a private portfolio online. Only those donors who give $10 or more will be given access to view the photos.
  • For anyone generous enough to donate $100 or more, Sue will find a local Nigerian vendor and purchase a small handcrafted souvenir. Upon her return home, she will mail the souvenir to you along with a note of thanks. (Plus you’ll also get access to the online photos.)

To see a video of Sue talking about the mission in her own words and find out more, go to http://igg.me/p/219228.

San Diego Zoo Wildlife Conservancy

The San Diego Zoo and the Wildlife Conservancy recently held a contest, inviting aspiring filmmakers to create public service announcements promoting their endangered species program. The contest drew some very creative entries.

Here is a screen shot from one of my favorite entries. This PSA is one of three submitted that is up for a People’s Choice Award. You can vote for your favorite here.

This is a great cause. Retweet it to all your contacts to let them know. Here’s another screen shot from the video.