The Six Step Profit Formula is my high level reminder of what you are trying to achieve with your strategic planning and analysis and provides the connection between strategy and tactics.
It can also be used as:
- A guide when you are starting your business to make sure that you’ve covered the basics.
- As a diagnostic for a young business or an established business that isn’t performing as well as you want.
What Is The Six Step Profit Formula
The six steps in the profit formula are:
- Find a starving crowd.
- Create an irresistible promise.
- Get your irresistible promise in front of the eyes and ears of your starving crowd.
- Deliver on your promise with a great customer experience.
- Sell them a second course and then a second meal.
- Encourage word of mouth referrals.
The Six Step Profit Formula In More Detail
Step 1 Of The Profit Formula – Your Starving Crowd
I’ve borrowed from the late, great direct response copywriter and copywriting trainer Gary Halbert who used to ask his students the question…
“If you and I both owned a hamburger stand and we were in a contest to see who could sell the most hamburgers, what advantages would you most like to have on your side to help you win?”
He used to get lots of different answers (e.g. best meat, best location, ability to charge the lowest prices) but the one he was looking for most was to “find a starving crowd.”
If you’re selling something, you need to be selling into a need, a want, an urge to buy.
Customers may not know they want what you have to offer but they must recognise the motivating drive to act.
You’re not going to buy a car if you don’t have a need for personalised transport.
You’re not going to buy an expensive car unless you want to show off your status and success.
It is a tough job to create demand for a product, much easier to transfer existing demand to your product or service.
Step 2 Of The Profit Formula – Your Irresistible Promise
Once you’ve found your starving crowd, you need to make the audience an offer that is compelling.
Mark Joyner calls it an Irresistible Offer.
Theory of Constraints call it a Mafia Offer (an offer you can’t refuse.)
I call it your Irresistible Promise:
- Customers in your target market should find your offer so distinctive and so attractive that it is virtually irresistible (assuming they’ve got the money.) I call this bullseye marketing.
The closer what you offer matches what your market wants, need as and sees as an urgent priority, the greater the probability of making the sale. If you sell a commodity product that is identical or virtually identical to every other competitor, then you’re trapped in the possibly sector along with all your other competitors. If you sell a differentiated product, then some will know that what you offer doesn’t fit but for others you will step away from the competitors and move towards the centre of the bullseye. and increase the probability of the prospective customer buying.
- You see your marketing as a firm commitment to deliver on consistently and reliably. The Irresistible Promise is not based on shallow differentiation of a hyped up marketing promise that doesn’t run through your business system or value chain. You’re selling the steak and the sizzle.
This idea of an irresistible promise works at two different levels:
- The business level to create differentiation away from competitors. Think about what big brands that inspire great loyalty like Apple and Starbucks mean to you to understand the irresistible business promise.
- The product offering level. People are attracted to brands but they choose between and buy product and service offerings. They ask themselves “what do I get exactly for a particular price and do I believe that’s best value for money?” When you’re buying a car, you’ll be attracted to a particular brand and model but you won’t buy if it’s the wrong colour or you can’t have it as quickly as you want.
Step 3 In The Profit Formula – Get Your Promise To The Eyes & Ears of Your Market
Once you’ve created your Irresistible Promise, you need to get it in front of the eyes and ears of your target market.
- First to test the promise. While you will have designed your Irresistible Promise based on customer needs, wants and priorities and priced it at a level that provides competitive value for money and a good profit margin for your business, the offer needs to be validated with customers.
- Once it is proven, it can be rolled out by getting it in front of as many eyes and ears of your target audience (your starving crowd) as possible and as often as possible. You should be using direct response marketing but even the best crafted offer is strengthened through multiple touches or exposures with target customers.
This issue is more marketing than strategy and is mainly about the choice of media (the way your Irresistible Promise is carried).
I recommend you split your attention in two ways to get the best out of your profit formula.
- Search marketing – some of your target customers are actively looking for a solution and your task is to be found. The essential search marketing method is on the Internet and involves being found in the search engines like Google.
- Outreach marketing – I like clients to have three or four outreach marketing methods that work reliably which can be used to turn the lead generation tap on or off depending on the status of your sales pipeline.
Step 4 Of The Profit Formula – Deliver A Great Customer Experience
The most successful businesses know that it is an expensive task to acquire a new customer and the big money is made on subsequent sales . This is what marketers call the back end.
Many businesses fall down in this area and have what I call hidden profit opportunities.
An essential part of the profit formula is making sure that the customer receives the experience they expect.
Customers buy because your business appeared to offer the best value for money, how they assessed customer value.
Many years of research into customer satisfaction and loyalty has revealed that dissatisfied customers don’t buy again and spread negative word of mouth which can be very damaging.
Satisfied customers aren’t very loyal either. You may have done what you said you would but there hasn’t been any emotional connection with the business so the customers are open to approaches from your competitors and may be actively looking for a closer fit to what they want.
The only loyal customers are those who are very satisfied. They’re received a great customer experience and have formed an attachment or emotional bond with the business. Moving away represents a risk that things are more likely to be worse than better.
Step 5 Of The Profit Formula – Sell A Second Course And Then Another Meal
You’ve found your starving crowd and you’ve presented your irresistible offer and they’ve bought.
You’ve then delivered a great first experience so to stay with the food analogy, what would a restaurant do?
They’d ask if you wanted dessert by describing their lusciously tempting puddings and the worst keep parading the sweet trolley with something that attracts your attention and the bit that’s left gets smaller as other diners take their pick.
If you don’t want to indulge yourself with sticky toffee pudding, cherries jubilee or peach cobbler you can expect to be offered a coffee or liqueur.
This process happens because it’s partly good service to look after your customers and to make sure that their needs are met and partly because it’s through effective business design. If 17 year old kids at McDonald’s can be trained to ask “do you want fries with that?” then an upsell or cross-sell should be part of your business system and an essential element in your profit formula.
It shouldn’t just end at the one meal. If it’s appropriate, ask yourself what you can do to set the next purchase transaction into motion.
Step 6 Of The Profit Formula – Encourage Word Of Mouth Referrals
The final step in the profit formula is to encourage your happy customers to do your marketing for you.
Once again it starts through delivering a great customer experience that people want to tell others about.
That doesn’t happen by accident but by carefully designing the customer moments of truth to deliver something really special.
If you’re getting a good proportion of your new business through referrals then that is great but perversely it can signal that there is a much bigger marketing opportunity.
I see accountants who boast that they don’t need to do much marketing but I also talk to business owners who have looked for an accountant, failed to find one with an irresistible promise and resorted to asking other business owners if they could recommend someone because they are so confused by the marketing bingo. That’s leaving your marketing to chance and represents an opportunity for you and a threat.
The Six Step Profit Formula In Perspective
That’s the six steps in the Profit Formula.
The first two – the starving crowd and your irresistible promise are strategic because they answer three of the biggest questions:
- Who are you going to sell to?
- What are you going to sell?
- How can you beat your competition?
Step 3 is marketing as it looks at how your message is carried to your target customers.
Step 4, step 5 and step 6 are about having the right business model in place with the right processes to deliver a great customer experience and then to leverage it into extra sales.
Paul Simister is a business strategy coach who helps business owners to differentiate their businesses and develop winning strategies. Get your free copy of the ebook The Six Steps Profit Formula.
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