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Company Updates
- Jul 5, 2018 Google Adwords Announces Rebranding Jul 5, 2018
- Jun 21, 2018 Squarespace Is Launching An Email Marketing Platform Jun 21, 2018
- Apr 12, 2018 Facebook Changes Their Algorithm Apr 12, 2018
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Content Creation
- Jun 21, 2018 Squarespace Is Launching An Email Marketing Platform Jun 21, 2018
- Mar 1, 2018 Viral vs. Valuable Marketing Mar 1, 2018
- Feb 1, 2018 SEO: 3 Marketing Stats to Keep In Mind When It Comes to Search Feb 1, 2018
- Jan 4, 2018 4 Reasons Why Blogging Can Help Your SEO Jan 4, 2018
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Email Marketing
- Jul 1, 2019 Average Email Open Rates By Industry Jul 1, 2019
- Sep 27, 2018 Squarespace Email Marketing Review Sep 27, 2018
- Jun 21, 2018 Squarespace Is Launching An Email Marketing Platform Jun 21, 2018
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Facts & Figures
- Jul 19, 2018 How Marketing and Customer Relationship Management (CRM) are Connected Jul 19, 2018
- Jun 7, 2018 Search Engine Market Share Jun 7, 2018
- Mar 15, 2018 Some Quick Stats About Mobile and Marketing Mar 15, 2018
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Google Ads
- Jul 5, 2018 Google Adwords Announces Rebranding Jul 5, 2018
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Google Adwords
- Jul 5, 2018 Google Adwords Announces Rebranding Jul 5, 2018
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Google Analytics
- May 24, 2018 Google Analytics: What Is Referrer Spam? May 24, 2018
- Apr 26, 2018 Reading Google Analytics: Direct Traffic Apr 26, 2018
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Ineffective Marketing
- Aug 30, 2018 The Importance of Knowing Your Audience Aug 30, 2018
- Jul 19, 2018 How Marketing and Customer Relationship Management (CRM) are Connected Jul 19, 2018
- May 10, 2018 Advertising: Is It Based On Perspective? May 10, 2018
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Marketing Strategy
- Feb 3, 2022 Marketing From Aristotle: Ethos, Pathos, and Logos Feb 3, 2022
- Mar 17, 2020 Why You Need To Keep Your Marketing During A Crisis Mar 17, 2020
- Jul 10, 2019 The Difference Between PR and Marketing (and where they overlap) Jul 10, 2019
- Jul 1, 2019 Average Email Open Rates By Industry Jul 1, 2019
- Nov 8, 2018 Don’t Leave Out The Psychographics When Building Your Marketing Plan Nov 8, 2018
- Oct 25, 2018 The 5Cs of Marketing Oct 25, 2018
- Oct 11, 2018 The Marketing Mix (Often Called The 4 Ps) Oct 11, 2018
- Sep 13, 2018 How To S.W.O.T. And Improve Your Marketing Plan Sep 13, 2018
- Aug 30, 2018 The Importance of Knowing Your Audience Aug 30, 2018
- Aug 2, 2018 What Place Does Marketing Hold In The Strategic Plan Of An Organization? Aug 2, 2018
- Jul 19, 2018 How Marketing and Customer Relationship Management (CRM) are Connected Jul 19, 2018
- Jul 5, 2018 Google Adwords Announces Rebranding Jul 5, 2018
- May 10, 2018 Advertising: Is It Based On Perspective? May 10, 2018
- Apr 26, 2018 Reading Google Analytics: Direct Traffic Apr 26, 2018
- Mar 15, 2018 Some Quick Stats About Mobile and Marketing Mar 15, 2018
- Mar 1, 2018 Viral vs. Valuable Marketing Mar 1, 2018
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SEO
- Mar 1, 2021 We Quintupled Our SEO Keywords By Doing This Mar 1, 2021
- Jun 7, 2018 Search Engine Market Share Jun 7, 2018
- Mar 1, 2018 Viral vs. Valuable Marketing Mar 1, 2018
- Feb 15, 2018 SEO: What Is a “Nofollow” Link? Feb 15, 2018
- Feb 1, 2018 SEO: 3 Marketing Stats to Keep In Mind When It Comes to Search Feb 1, 2018
- Jan 4, 2018 4 Reasons Why Blogging Can Help Your SEO Jan 4, 2018
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Small Business
- Feb 3, 2022 Marketing From Aristotle: Ethos, Pathos, and Logos Feb 3, 2022
- Mar 17, 2020 Why You Need To Keep Your Marketing During A Crisis Mar 17, 2020
- Jul 10, 2019 The Difference Between PR and Marketing (and where they overlap) Jul 10, 2019
- Nov 8, 2018 Don’t Leave Out The Psychographics When Building Your Marketing Plan Nov 8, 2018
- Oct 25, 2018 The 5Cs of Marketing Oct 25, 2018
- Oct 11, 2018 The Marketing Mix (Often Called The 4 Ps) Oct 11, 2018
- Aug 30, 2018 The Importance of Knowing Your Audience Aug 30, 2018
- Aug 16, 2018 Supply Chain Management In The Service Industry Aug 16, 2018
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Social Media
- Aug 30, 2018 The Importance of Knowing Your Audience Aug 30, 2018
- Jul 19, 2018 How Marketing and Customer Relationship Management (CRM) are Connected Jul 19, 2018
- Apr 12, 2018 Facebook Changes Their Algorithm Apr 12, 2018
- Mar 1, 2018 Viral vs. Valuable Marketing Mar 1, 2018
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Website Design
- Aug 16, 2018 Supply Chain Management In The Service Industry Aug 16, 2018
- Mar 29, 2018 What is Responsive Web Design? Mar 29, 2018
Marketing From Aristotle: Ethos, Pathos, and Logos
We may want to believe that every new invention and idea is original, but the truth is, a large majority of our everyday culture are merely improvements from the ancient Greeks. Sports, medicine, law, democracy, language, science, math, buildings, showers, theatre and even alarm clocks and vending machines were first invented by the Greeks way back when. As with all of these other topics, marketing can…
We may want to believe that every new invention and idea is original, but the truth is, a large majority of our everyday culture are merely improvements from the ancient Greeks. Sports, medicine, law, democracy, language, science, math, buildings, showers, theatre and even alarm clocks and vending machines were first invented by the Greeks way back when. As with all of these other topics, marketing can find its roots in ancient Greece as well, by none other than the famous Aristotle.
Aristotle left us with many great things to ponder. One of his most influential pieces comes from Rhetoric, a collection of his students’ notes from his lectures that later became a book. In this, he spoke of the Modes of Persuasion: Ethos, Pathos and Logos.
Ethos (authority, credibility, reliability): This is the ethical appeal and tries to convince an audience of the author’s credibility or character.
Pathos (emotion, sympathy, imagination): This is the emotional appeal and tries to persuade an audience by appealing to their emotions.
Logos (logic, rationality, reason): This is the appeal to logic and tries to convince an audience by use of logic and/or reason.
The Modes of Persuasion have been used in marketing forever, and brands use a combination of all 3 to get their message across. This commercial from Subaru is a great example:
Subaru does a good job of using all of the elements together and overlapping.
Ethos and establishing credibility: The granddaughter in the commercial says “Some relationships get better with time…that’s why I got a Crosstrek.” This indicates to the viewer that Subaru has been around for a long time and that their vehicles are reliable. In addition, the commercial actually shows an older Subaru sitting in the grandmother’s driveway, indicating that she still uses her older model.
Pathos and showing emotion. The commercial features a grandmother and a granddaughter bonding, drinking milkshakes, laughing, etc. This appeals to our emotions and gives us a sense of serenity. In addition, the light music used also helps induce a calmness and playfulness. Subaru’s tagline is “Love, it’s what makes Subaru, Subaru.”
Logos and using rationality. At the end of the commercial, we learn that “97% of Subaru vehicles sold in the last 10 years are still on the road.”, showing they are reliable vehicles. The grandmother’s older version also helps subconsciously tell us that Subarus last for a long time since she has not bought a new one.
Subaru doesn’t just use Ethos, Pathos and Logos in their commercials, however. Their entire marketing strategy is built with these. Alan Bethke, Senior Vice President, Marketing at Subaru of America, stated in 2017:
“..the Love campaign, inspired by Subaru owners’ love of their vehicles, loved ones, and causes they keep close to their hearts, continued to build a new identity for Subaru…Under the notion that ‘Love’ is the uniting factor among the brand’s loyal customer base and ‘It’s what makes a Subaru, a Subaru,’ we created a personality to compliment the brand’s quality vehicles…Today, Subaru has a demand that exceeds its supply, resulting in 8 consecutive years of record-breaking sales and 9 consecutive years of sales increases.” — Alan Bethke, Forbes, Source.
We can see Ethos on full display in ads for vehicles, cologne and more with the use of celebrities. The two ads below feature actors Chris Hemsworth and Daniel Craig, yet they aren’t doing anything but standing there. That’s ok, because your brain fills in the gaps and makes the connection between credible (an actor you like) and the brand, which must also be credible, right? If you overthink it, it’s a silly concept — we know these celebrities are getting paid for these ads and that they may not even use them. Regardless, it’s a tried and true method that companies have been doing for a long time:
As brands age, they may require less Ethos to establish credibility or Logos for rationality. An example would be Coca Cola, who has been around for so long that their main goal is just to create top of mind awareness. When brands have been around and are established, their main focus when advertising is usually around Pathos:
The above print ad uses Pathos by showing the emotion of “happy” and implying drinking Coca-Cola brings happiness.
The use of Ethos, Logos and Pathos by companies goes deeper than just print or television ads, however. Organizations incorporate these concepts into their entire brand — their mission statements, their marketing materials, their positioning, how they train their employees, their PR, etc.
Walmart, for example, states the following on their “About” page:
“From our humble beginnings as a small discount retailer in Rogers, Ark., Walmart has opened thousands of stores in the U.S. and expanded internationally. Through innovation, we’re creating a seamless experience to let customers shop anytime and anywhere online and in stores. We are creating opportunities and bringing value to customers and communities around the globe. Walmart operates approximately 10,500 stores and clubs under 48 banners in 24 countries and eCommerce websites. We employ 2.2 million associates around the world — nearly 1.6 million in the U.S. alone.”
Ethos: 10,500 stores, 24 countries, shop anytime and anywhere
Pathos: humble beginnings, Innovation, seamless experience
Logos: 10,500 stores, 24 countries, 2.2 million associates, bringing value to customers and communities around the globe
Companies use the Modes of Persuasion in their business model to make themselves more than just a company. The average consumer may not consciously pay attention to these but subconsciously, we all do. Organizations need to not just sell a product or service, they need to tell a story, and that’s where Aristotle’s framework helps.
Why You Need To Keep Your Marketing During A Crisis
You may have heard it before: In times of crisis, the marketing budget is the first thing businesses cut. And why not? It’s one of the easiest ways to free up some cash. In fact, when business is slow, there are basically two things a company can do to improve cash flow: Get more sales and/or cut costs.
You may have heard it before: In times of crisis, the marketing budget is the first thing businesses cut. And why not? It’s one of the easiest ways to free up some cash. In fact, when business is slow, there are basically two things a company can do to improve cash flow:
Get more sales
Cut costs
You don’t always have control over more sales, but you do have control over your costs - and here’s where many businesses make a critical error, by choosing costs instead of sales. As marketers fear waking up each day during the COVID-19 outbreak, it’s up to us to find unique ways to keep businesses open and justify our existence. After all, if the NBA is willing to lose hundreds of millions of dollars by shutting down, what chance do small businesses have?
The truth is, there’s always opportunity. When one industry struggles, another one thrives. Can’t go to a nice sit-down restaurant? No, but I can order a pizza. Grocery stores are certainly exceeding their annual expectations. Bookstores are closed but Amazon is open for business. Movie theaters are shut down, but now might be the time that moviegoer finally decides to sign up for Netflix. Speaking of movie theaters, Universal Studios just announced they are making some of their new movies available on-demand during Coronavirus Outbreak. For Universal, it won’t be a total loss. In fact, some movies may even do better on-demand.
But not every company is Universal Studios, with segmented product offerings and millions in the bank to cover their losses. What about YOUR business? People may be temporarily spending less now, but that won’t last. Businesses still need services, and consumers still want things.
Why You Shouldn’t Cut Your Marketing Budget
Unless you are working with endless amounts of capital, you can almost never cut your costs to profitably. Cutting costs is a good way to stay stationary, but if you want to increase profitability, you need to increase sales - and that’s where marketing helps.
Brand awareness can take time, and if you aren’t getting the word out, someone else is. You don’t have to spend millions, but you definitely shouldn’t be spending $0. People want to work with brands they trust, and marketing helps build that trust. I don’t mean throw money at everything, but smart, targeted spending can help to maximize your company’s image while creating real ROI. As the ASI points out:
“It seems like common sense, if you advertise when everyone else stops marketing…
1.) Your message is more likely to be noticed due to fewer ads in the market
2.) Your business is more likely to be remembered when everyone starts advertising again”
In addition, if you have been advertising and suddenly stop, you will start to lose some share-of-mind and miss out on future sales. So with that in mind, here are some marketing-related items to invest in during this time:
Marketing Game Plan
Perhaps first of all, if you don’t already have a strategic marketing plan, now might be the time to create one. Start by creating a SWOT analysis.
Adjust Your Marketing Course
There may be less people out in public, but there’s almost certainly more people online. You don’t have to spend $5,000/month on Facebook ads, but even $300 will get your message in front of people who may not know about your services. While you’re at it, now may be a good time to adjust your marketing message. Is there a call-to-action? What separates you from the competition? Try creating two different types of ads, split the budget between the two and run them simultaneously. Then, review the analytics to see which one worked best and most importantly, WHY it worked best.
Build Up Your Marketing Arsenal
Have you been meaning to write some blogs? Maybe there’s been a dead page on your website forever that needs deleting. Here’s an idea: record some videos in your home office. You can shoot 6 videos at the same time and only publish them once a month, thereby giving you half a year’s worth of new content. Just a reminder: we’re not all Wes Anderson, so don’t forget to ask for help from a professional if needed. To start, here’s a helpful resource with 12 Tips for Making Your Videos Look More Professional.
Focus On Your 1,000 True Fans
You can’t market to everyone. And actually, you shouldn’t be marketing to everyone. Some people will want your product or service and others will not. If your business is experiencing some difficult times, try focusing on 1,000 True Fans. As author Kevin Kelly points out,
“To be a successful creator you don’t need millions. You don’t need millions of dollars or millions of customers, millions of clients or millions of fans. To make a living as a craftsperson, photographer, musician, designer, author, animator, app maker, entrepreneur, or inventor you need only thousands of true fans.
A true fan is defined as a fan that will buy anything you produce. These diehard fans will drive 200 miles to see you sing; they will buy the hardback and paperback and audible versions of your book; they will purchase your next figurine sight unseen; they will pay for the “best-of” DVD version of your free youtube channel; they will come to your chef’s table once a month. If you have roughly a thousand of true fans like this (also known as super fans), you can make a living — if you are content to make a living but not a fortune.” - Kevin Kelly
You can read the full article HERE. This method isn’t for everyone, but narrowing your audience is a good way to find out what’s really important in your messaging. If you can make 1,000 people really admire your brand, your message will spread…just maybe not as fast as some viruses do.
The Difference Between PR and Marketing (and where they overlap)
Marketing and Public Relations (PR) can look like interchangeable terms. However, in the wide array of communication terms, they are not actually synonyms. Here are the different contributions that PR and marketing bring to business success.
Marketing and Public Relations (PR) can look like interchangeable terms. We hear people say things like “That company has good PR” and the first thought that comes to mind may be an ongoing advertisement, a recent publicity campaign, a sticky phrase from a TV commercial or just the memory of a positive referral to a product. However, in the wide array of communication terms, they are not actually synonyms. Here are the different contributions that PR and marketing bring to business success.
The Difference
PR focuses on building relationships. The Public Relations Society of America (2012) defines PR as “a strategic communication process that builds mutually beneficial relationships between organizations and their publics.” These relationships can refer to reputation management, media coverage, government relations, pre-and post-campaign research, audience identification, etc. The term publics refers to the stakeholders, employees, target audiences, the media and potential donors, among others, that are relevant to build relationships with. So, in simple terms, PR is all about creating, maintaining and repairing relationships between a group of interests for an organization and the organization itself.
The goal of marketing, as defined by the American Marketing Association (2013), “is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” In a previous blog post, we wrote about the marketing mix (also called the 4Ps of marketing): Product, Price, Place and Promotion. These are some of the essentials for effective marketing in business planning. So, in simple terms, marketing is all about letting customers know a solution to their problem exists. Marketing helps create a demand for a product or service in order to fulfill the customer’s needs.
Yes, they overlap!
Both Marketing and PR focus on selling a product or highlighting a brand, but their final goal is different: sales vs. positive reputation
They are part of the business investment: PR is more of a long-term investment to increase brand’s credibility whereas marketing can be a more straightforward or more direct line to reach customers based on promotion and sales.
They rely on each other: A company needs sales as they need reputation management. A company’s positive sale trends contribute to creating a positive perception by groups of interest or publics.
In Simple Terms
Let’s simplify it further using a quote from S.H. Simmons on the difference between PR and Marketing:
“If a young man tells his date she’s intelligent, looks lovely, and is a great conversationalist, he’s saying the right things to the right person and that’s marketing. If the young man tells his date how handsome, smart and successful he is, that’s advertising. If someone else tells the young woman how handsome, smart, and successful her date is, that’s public relations.”
Don’t Leave Out The Psychographics When Building Your Marketing Plan
While demographics help to explain who your customer is, psychographics help to explain why that customer buys what they buy. You’ve no doubt seen psychographic options when building a Google or Facebook ad campaign…
Everyone talks about demographics, but not everyone discusses the importance of psychographics when developing a marketing plan or advertising campaign.
While demographics help to explain who your customer is, psychographics help to explain why that customer buys what they buy. You’ve no doubt seen psychographic options when building a Google or Facebook ad campaign, they are made up of attitudes, interests, motivations, beliefs, buying power, personalities, values, etc. They help you to understand a buyer’s hobbies, values and spending habits. Only by understanding your target market’s demographics AND psychographics can you effectively reach them.
Let’s say, for example, you sell custom leather products such as bags, wallets and belts. The demographic information of your audience may be:
Male
25–54
Income of $50K+
Location: In and around the DC Metro area
While the psychographic information of your audience may be:
Somewhat or generally concerned with appearance
Luxury shopper
Prefers quality over economy
Enjoys displaying certain brands and will spend money to do so
The majority of the time, marketers break down psychographics into 3 main categories:
Social Class
Personality
Lifestyle
Each of these 3 categories have subsets of categories:
Social Class
Buying power
Spending habits
Income
Personality
Beliefs
Motivations
Life outlook
Morals
Lifestyle
Interests
Activities
Opinion
Attitude
Knowing what categories you need to define for your audience will help create a more targeted approach to your marketing plan. You will find that the further you can break down the specifics of your market, the easier it will be to reach them, provided you find the right mediums to match with the breakdown.
We’ll explore more in-depth research into psychographics in the future, so be sure to check back.
The 5Cs of Marketing
We previously touched on the 4Ps of marketing, also called the Marketing Mix, now let’s talk about the 5 C’s of marketing: Company, Context, Customers, Competitors and Collaborators.
We previously touched on the 4Ps of marketing, also called the Marketing Mix, now let’s talk about the 5 C’s of marketing:
Company
Context
Customers
Competitors
Collaborators
(This is not to be confused with “The 4 Cs and Ps” - read here)
The 5 C’s of Marketing are used for constructing an effective marketing strategy:
Company: Are your company’s resources and capabilities in a position to meet customer’s needs? Start by creating a SWOT analysis HERE.
Context (or climate): Are there limitations due to political (Trade regulations, taxes, legal issues, labor laws), economic (Labor costs, growth rate), social (demographics, culture, education, etc) or technological trends (does it affect cost)? This is also called the PEST analysis.
Customers: Analyze the needs, wants and characteristics of current and potential customers. Try looking at market segments, how frequently purchases are made, how many items are purchased, will the needs of the customer change over time, etc.
Competitors: Look at the strengths and weaknesses of current and potential competitors as well as trends in the competitive environment.
Collaborators: Make a list of potential distributors, suppliers, or any other party that could help with your goals.
Companies that make use of the 5 C’s of Marketing have a clearer vision of what they can accomplish, so give it a try or give us a shout to help out!
The Marketing Mix (Often Called The 4 Ps)
Every business major in college had to take Marketing 101, but it’s always good to run a refresher course when possible. In that class, students would have learned about the Marketing Mix, also referred to as The 4 Ps: Product, Place, Price and Promotion.
Every business major in college had to take Marketing 101, but it’s always good to run a refresher course when possible. In that class, students would have learned about the Marketing Mix, also referred to as The 4 Ps:
Product
Place
Price
Promotion
The mix is especially important in designing a strategic marketing program for bringing a new product or service to market, and all of them represent what you as the business are able to control during in the process. Each one of the components should be consistent with each other, thereby creating a clear message.
What do each contain?
Place
Locations
Brick and mortar or online
Inventory levels (where is it stored?)
Product
Features
Quality
Packaging
Warranties and/or guarantees
Style
Brand name
Services
Options
Promotion
Any type of advertising (physical, online, etc)
Sales promotion
Personal selling
Publicity
Point of purchase (POP) materials
Price
Value to the customer
List price
Payment period
Rental or lease
Discounts offered (and where/why)
Credit terms
Questions to ask yourself when developing the marketing mix for your product or services:
What are your competitors doing in terms of product, price, place and promotion?
Why would your customers need this product or service?
Why would your customers need a particular feature(s)?
How could you improve your product?
We will expand more on the 4Ps in later blogs. In the meantime, let us know if we can help develop your marketing mix!
- Consumer
- Costs
- Convenience
- Communication
(The 4 Ps are Product, Place, Price and Promotion)
The idea here is that the 4Ps make you business-oriented, while the 4Cs make you more customer-centric.
- Product becomes “Consumer needs/wants”
- Price becomes “Cost to the consumer”
- Place becomes “Convenience to the consumer”
- Promotion becomes “Communication to the customer”
The Importance of Knowing Your Audience
I recently attended a presentation by a “Digital Marketing Expert.” Yes, I was scoping out the competition. However, it seems I have nothing to worry about; and not because of his lack of knowledge or expertise, but because of, ironically, his own marketing tactics.
I recently attended a presentation by a “Digital Marketing Expert.” Yes, I was scoping out the competition. However, it seems I have nothing to worry about; and not because of his lack of knowledge or expertise, but because of, ironically, his own marketing tactics.
This particular event was hosted by a local chamber of commerce and was a 25 minute presentation from this gentleman on social media advertising, mobile marketing and websites. If I could sum up the theme, I would call it “Ways to Make Your Business Stay Trendy and Hip to Younger Audiences.” The attendees, minus myself and a few select individuals, were older business owners who may not have the most up-to-date website or know a ton about social media (hence why they came to the event).
The presentation was a well-thought-out PowerPoint and he made some really good points. Afterwards, I approached him to compliment his notes and ask if we can stay connected...then I asked for his business card. His response? “Oh I don’t carry business cards, they’re outdated.”
I understand what his method is. His company is in digital advertising, a newer medium and therefore is on the cutting edge, and business cards are a thing of the past. That may be true, but as I looked around to others asking him the same question, there was plenty of confusion across the many faces. This guy had just spent 25 minutes telling everyone his company could solve their social media problems and yet did not have a simple way for potential customers to reach out to him. Sure, people could connect with him on Linkedin or “like” his company’s Facebook page, but that’s not the audience that was in attendance, and those people would still need a name to search for. Many of these business owners were old fashioned (I talked with several of them). They like business cards. They like a simple email or phone number to reach out to and don’t want to mess with messaging on social media or finding the contact page of a website.
The point is, don’t give a presentation to small business owners who don’t know about social media and tell them you can handle their social media and then make the only way to contact you through said social media, which they would need you to show them how, but they can’t, because they can’t contact you...
Know Your Audience.
Supply Chain Management In The Service Industry
For supply chains, many people only picture tractor-trailers, large container ships, forklifts, and huge warehouses – but what about the service industry? What many do not realize is that a “supply chain” is not only for tangible products, but also for services offered.
There seems to be confusion when it comes to the term “supply chain.” Many people picture tractor-trailers, large container ships, forklifts, and huge warehouses – but what about the service industry? What many do not realize is that a “supply chain” is not only for tangible products, but also for services offered. With the constant explosion of tech start-ups, many young entrepreneurs do not have a business background for which to build a working supply chain model to use in their new venture. The key to building a successful business is, of course, the product, but also a reliable method for continuing to make or provide that product or service. This is where supply chain and logistics come into play.
THE SUPPLY CHAIN DEFINED
Let us start off with the basics in answering, “What is a supply chain?” One of the clearest definitions comes from the Small Business Advancement National Center of the University of Central Arkansas, which states:
“A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to, new product development, marketing, operations, distribution, finance, and customer service.”
– Small Business Advancement National Center, 2014
DIFFERENCES IN THE SERVICE AND MANUFACTURING INDUSTRY SUPPLY CHAINS
Now that we have the basics of a supply chain down, let’s move on to the differences between the supply chains in the manufacturing versus the service industry. Elliot Taylor, a writer for the Houston Chronicle, states there are four main differences within the two industries in the areas of inputs, logistics, finished goods, and the optimization of supply chains. For inputs, the difference between service and manufacturing is that the latter requires an input of physical labor (packaging, shipping, etc.) and the service industry requires input of labor in the form of developing relationships or “manipulating information.”2 In logistics, manufacturers move physical material while in the service industry, no physical product is moved but rather information is exchanged via phone, email, and more.2 Taylor does point out that for service industries, new software and tools are used to “speed the flow of communication.”2 Finished goods are one of the largest differences between the two industries. In manufacturing, a finished good is a raw material that has been “completely transformed” whereas in a service industry, it is a “closed file.”2 In the category of optimization, however, both the manufacturing and the service industry are different but similar at the same time – both of these industries work to improve their operations such as the speed of delivery or reducing costs.2 By reducing bottlenecks and finding better prices on raw materials, manufacturers better optimize their business. By building better partnerships to help in the areas where a service company is not strong, they better optimize their business and help “eliminate virtual bottlenecks.”2
“Service firms have different operations requirements from manufacturers. Companies that maintain or repair things, sell consulting, or provide health care or other services generally have higher labor content and lower investments in plants and equipment.”3 For this reason, a service-based company’s most important asset is their people. It is not just the employees, but also the relationships with other businesses that are extremely important to the continued success of a firm. A service company must work hard to keep employees, business partners, and other people surrounding the company happy. My first job in high school was working for a fast food company (as are many people’s first job). This company was very good at offering incentives to the ground level employees to keep them happy. Gift certificates, cash prizes, and other items were offered to keep employees motivated. This fast food chain knew that happy employees translated into happy customers. Consider a way to encourage your employees to stay happy about their job.
A MANUFACTURING COMPANY SUPPLY CHAIN EXAMPLE
A great example of a manufacturing company with a supply chain would be a metal fabrication shop. Metal fabricators take raw pieces of scrap metal and turn them into a finished product for another company to use in the construction of their final product. Metal fabrication companies are generally in the middle of a different company’s supply chain, but also have a supply chain of their own.
For example, let us say a real estate development and construction firm is hired to either renovate a building or build a new facility from scratch. From there, the architects make simple drawings of everything needed to complete the building, including fabricated metal and special parts. The company then sends out a request for proposal (RFP)to several different contractors to find the best fit within the correct price range. A company, such as a metal fabricator, will develop a “cost estimate” from the architect’s blueprints and submit a price to the development/construction firm. To get the correct price, the metal fabricators must first get the sub-prices in the metals division. The price of metal constantly changes, which means the cost of goods sold (or COGS) is also constantly changing. This process of finding prices helps a metal fabricator develop the most accurate price so both companies can determine their overall costs. After the metal fabricator has won the contract, they must start the submittal process. A metal fabrication shop may send 2-3 different drawings over to the firm for approval. In addition many metal fabrication shops specialize in custom metal fabrication, which means every job is different, and also means that many times it will take more than one attempt to gain an approval on the drawings. The metal fabrication shop must now finalize a deal with the metal vendor they have chosen and decide on a delivery date.
Figure 1: Floor Plan & Supply Chain for Manufacturing Industry
Once the raw materials (metal) arrive at the shop, the metal is unloaded and cut based on the approved blueprints. This is also the stage where smaller custom parts are made and fashioned in a special designated area. Next, the extra pieces are tacked onto the cut metal beams and sent down the line for review. Once an employee reviews the blueprints to make sure the pieces were connected in the right area, everything is welded together. At this point, some companies need the metal painted in rust protectant or perhaps a color to match other areas of the building. The parts are then loaded onto a truck and delivered to the proper location. Figure 1 gives a visual of how this process works.
A SERVICE COMPANY SUPPLY CHAIN EXAMPLE
Now we will take a look at the supply chain of a service based company. We will use the example of a marketing firm that specializes in website and logo design as well as branding. In a company such as this, there is a process of obtaining supplies, but the supplies are generally software and online tools.
A marketing firm is a service company, which means the supply chain focuses mainly on human interaction instead of large physical products using various suppliers. The production system is based on a pull strategy where the customer initiates the demand. Logistically, the services are customized depending on the need of each individual client (much like the metal fabricator’s different clients have different demands). Customer relations are critical to success and should be one of the main priorities. The supplies for a marketing firm are made from a combination of software, hardware, and print materials, meaning the inventory will remain low. The difference for this company, as opposed to a metal fabricator, is that a “finished good” means the website, print materials, and marketing report is delivered to the client which translates to a finished product. Generally speaking, each client will have different requirements for their marketing, which means there is no definite timeline.
Figure 2: Floor Plan & Supply Chain of a Marketing Firm
Figure 2 gives a visual of the process in the marketing firm. Just as the same metal part is transferred from place to place within the metal shop, the “marketing plan” makes its way to each department, gaining value along the way with the addition of a website, logo, and more.
One of the main differences between these two examples is that the metal fabrication shop uses suppliers at the beginning and end of their stage whereas the marketing firm uses different suppliers for each stage. For example, a special application may need to be added into the website design stage. For this, the designer will go to a third-party application manufacturer and buy the required pieces needed. At the end of the process, the website, logo, and marketing plan are “packaged together” on a computer and the file is sent electronically to the customer. In addition, the client may choose to let the marketing firm monitor the progress of their advertising campaign in which case the firm may use a third-party such as Google Analytics or a billboard company to display the advertisements that were created.
CREATING A SUPPLY CHAIN FOR YOUR START UP
Now that you understand the basics of value adding and supply chains, let’s look at some important points to remember when developing a supply chain.
At the core of a supply chain are the relationships the company builds with their suppliers. With advancements in online communication, it is no longer necessary to only work with suppliers in your hometown. Consider looking at suppliers in other states and even overseas that help compliment the areas your firm is not as strong in. If you respect your suppliers, they will in turn respect you.
Also, consider the costs of suppliers. There are many software and online tools to help collaborate on projects, such as Basecamp and Smartsheet (refer to links below), but be sure to factor in the cost of these tools. For some projects, it may make sense to use third-party online applications, but for other projects it may not. If business is slow, then eliminate some of these applications. Other times, it may make sense to incorporate more tools to help finish a project.
Before spending money on online applications, however, be sure to research the free tools available online. Companies such as Google offer many free tools such as Google docs, video conferencing, and more.
Building a supply chain in the service industry means making partnerships. Find a reliable printing service for when you need them, a reliable shipping company for when a client needs hard copies, or other suppliers you may need down the road. Transforming your start-up into a successful business starts with being prepared for anything that may happen. As your company grows, you may need to incorporate actual physical suppliers into your supply chain. When this step happens, be sure to research each supplier and focus on building a lasting partnership with mutual trust and respect.
References:
1 Small Business Advancement National Center. (2003). What is a supply chain? The University of Central Arkansas. Retrieved from http://www.sbaer.uca.edu/index.php/publications/
2 Taylor, E. (2014). Differences in supply chain designs for a manufacturing industry vs. a service industry. The Houston Chronicle: Managing Employees. Retrieved from http://smallbusiness.chron.com/differences-supply-chain-designs-manufacturing-industry-vs-service-industry-14610.html
3 Bangs, D.H. (2005). Business plans made easy, third edition. Canada: Entrepreneur Media, Inc.
4 Basecamp – Online Collaborating Document Tool. www.basecamp.com
5 Smartsheet – Online Collaborating Document Tool. www.smartsheet.com
*This article originally appeared in a 2014 marketing blog from David Griffin