Why you can never stop selling

by Allan Nation

I remember a grazing conference attendee asking Joel Salatin once why he spent so much time and effort on marketing. “Why can’t you get to a certain size, quit selling and just produce for the customers you’ve got?” he was asked.

While I forget Joel’s answer to that question, here’s mine.

Whenever you find an un-filled niche in the soul of the American consumer, you will have an initial rush of customers who have just been pre-sold and are just waiting for a supplier. Too often, new marketers interpolate these easy early sales into a straight-line growth curve which arcs straight up.

Eventually, this small pocket of pre-sold customers is exhausted and growth slows dramatically. Then it starts to decline. Here’s why.

No matter how enthusiastic your customer base is, you are going to lose some of them each year. The average North American corporation statistically loses 100 percent of its customers every five years. In other words, the average well-run business can expect to statistically lose around 20 percent of its current customers every year.

Most new businesses don’t understand this inherent customer attrition factor and decide they can just supply existing customers, rely on word-of-mouth for growth and avoid all marketing expenses. When they wake up in the future with 20 percent or more fewer customers, they are faced with the really expensive part of marketing math.

To make up a 20 percent loss in old customers requires a 40 percent increase in new customers. To increase your customer base by 40 percent a year is incredibly difficult (and expensive) if you are dealing with a business of any size at all.

This is why you can never quit seeking new customers. All businesses have to jog just to stay in one place and your marketing effort has to be continuous.

It’s just like fertilizing your pasture. It’s a game of a little, often. You’ll spend far less money in marketing by spending a little often than allowing your customer base to decline and then trying to rebuild it.

Now, I know most novice marketers believe they can avoid needing continual marketing by producing a superior product that their customers just have to have. I believed that once myself but here’s the fallacy in that belief.

Here at the Stockman Grass Farmer we have what we call the “Four Horsemen of the Apocalypse” that negatively affect our circulation. These are death, divorce, disease and disaffection. While you can work to avoid disaffection, there is very little you can do about the other three.

Fifty percent of all Americans divorce, half of all men have a heart attack and 30 percent of all males and 50 percent of all females will get Cancer. Even more worrisome, 100 percent of your current customers of both sexes will die. If your business is not actively seeking new customers on a frequent basis, it will die too.

SUBSCRIPTION MARKETING

Back in the 1970s, a Dr. Whatley - a professor at Tuskeegee University in Alabama - wrote a popular book promoting the idea of subscription marketing to small acreage farmers. His theory was that you shouldn’t produce anything that was not pre-sold. This idea worked better with vegetables than with meat and dairy products where the lead time for production is measured in years rather than weeks but it found its adherents.

Joel Salatin started out with a 100 percent subscription marketing operation. Now, he said he relies less and less on this particular marketing venue every year. In 2002, only 40 percent of his sales were by subscription.

A major problem with subscription marketing - that is the sending out a letter asking your customers to order their meat or milk products in advance - is that you won’t know what your customer renewal rate is until delivery season is upon you.

If it takes a big drop, it is usually too late to begin looking for new customers for that year’s production. This is why most marketers have found that they must have more marketing options than just a once-a-year mailing to previous customers.

Joel has found that a direct-marketed farm’s profit is determined by three things.

These are production, processing and marketing.

In his operation each of these three areas requires about the same amount of direct expense and each creates about a third of the product’s retail value. In other words, marketing is just as important as production.

Joel said that the premium price received for direct marketing was a return to the increased risk involved. For example, a necessary evil of all meat marketing is an investment in refrigerated storage. This is because you can never get supply and demand to exactly equal each other at the same point in time.

HAM AND EGGS GO TOGETHER

He said there is more marketing risk in poultry products than in beef as there is no “realizer” commodity market for an oversupply of pastured eggs or farm-processed broilers as there is for beef and lamb. With beef cattle, you can always sell an 1100-pound grass steer at the local auction for some price. Joel said getting “some price” for your cattle beats turning them into compost.

He said even as long as he had been doing it, he still misjudged markets. He said his pastured hogs were an essential ingredient of his egg production as they were a quick way to balance egg supply with demand.

While none of us like to make our customers wait for our products, a slight oversupply of demand to supply is absolutely necessary to maintain a market premium. The quickest way to break down marketing resistance is to tell someone they can’t have it.

In conclusion, you can never get enough customers to stop marketing because the work of the four horsemen never stops. Your best customer today might be claimed by them tomorrow.

As the Chinese say, “We should never fear growing slowly. We should only fear standing still.”

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