Five Minutes to Understand Marketing With the Sender-Message-Channel-Receiver Communications Model

A hitchhiker makes a sign to passing cars. He doesn’t stand in a park, or stick his thumb out in a mall. His message is aimed directly at his target audience: the people in cars traveling down the highway in the direction he wants to go. Your messages must be clearly directed to audiences with the greatest potential for positive response.

The Sender-Message-Channel-Receiver Communications model can help you visualize the process of communications. A model is a representation, not reality. Communications doesn’t work exactly like this, but it does give us a way to talk about the different steps of the communications process, and a way to explore how to direct our messages in the most effective ways.

Briefly, the Sender is the person creating a message. The Message are his ideas, the words he says (or writes, or draws). The Channel is the means of communication — the telephone, sign, or website. The Receiver is the person who gets the message — the listener or the reader.

In telephone terms, the Sender initiates a call. He speaks his Message. The telephone is the Channel (including the phones at both ends, and the wires and the switching stations between them). The Receiver is the person who picks up the phone and listens.

This model was developed to analyze problems with telephone communications. Researchers wanted to pinpoint sources of Channel Noise (like static) in order to reduce or eliminate it. We can use these concepts to keep our messages on track.

This model works great for telephony, but it misses some important aspects of communications. For instance, what the Sender says and what the Receiver thinks the Sender means may be two different things. Messages aren’t communicated exactly: they depend on the shared knowledge of the two communicators; a shared vocabulary, experience, and world view.

Then there’s the problem of Channel Noise. The phone may have static, or the listener could have the television on. The print job on the advertisement could be so bad it can’t be read, or the website features small grey lettering on a black background.

Another problem with this model is it leaves out Feedback. When we talk with people in person, they constantly reassure us of their attention and understanding, by nodding their heads, making encouraging sounds, or even asking questions.

In our mediated communications we can look for feedback in other ways. For example, feedback can take the form of orders. We can test a message by changing it in a small way, then noting a change in the response.

We can test every part of the communications process by measuring changes in response. For example, by sending the same message to two different audiences and comparing the responses, we’ll know it’s the target audience that makes the difference, all other things being equal. Or we can test the Message – say, with a sales offer, or a different headline – and see if orders go up.

Getting Started with SMCR

So how to get started crafting a successful marketing campaign? Getting back to the hitch-hiker analogy, as marketers we want to send our messages to those with the most likelihood of responding. We choose our Receivers. As potential customers, we’ll call these Receivers our Target Audiences.

The Target Audience is composed of the type (or types) of people we think are most likely to respond. Cooks read Cookbooks, so if we’re selling cookbooks we look for Cooks. What do they want? These are the Benefits we feature, the problems the product solves. Where do we find them? What Channels reach them? Cooking magazines, bulletin boards in supermarkets, mailing lists of people who have bought fancy saucepans. We may have more then one channel for each potential audience.

What will convince each audience to respond the way you want, with an order? You’ll send them different information; you’ll also try to psych out the particular need your product will satisfy, and create a message that appeals to this need.

We do this in various ways. One method of crafting Messages is to think in terms of Persuasive Appeals. Ask yourself why one type of person would want your product. You’re focusing on different Receivers or Target Audiences. Who are they? What need will you satisfy? What starts as one Audience can become several. A single woman may want to create a romantic meal; a mom wants a nutritious one; a working mom a quick one; a football fan wants to give a party and not be in the kitchen. So you use different Channels to reach each one.

Obviously, the appeal will be different in each. You’ll present a solution to each problem, satisfy their need to impress, to nurture, to sell. So the Message may be different for each Audience, too.

Spending Your Restaurant Marketing Budget Wisely (1st Part)

A few years ago, I bought my first restaurant. It was a turnkey operation; a charming small and upscale Italian restaurant with loyal clientele in a great location.

The previous owner, an experienced guy who spent all his life in the restaurant business. I still remember what he told us about the restaurant: “It is working fine. Don’t change anything…”

For a while, I complied. I didn’t have really much experience running a restaurant, and as they say: “If it ain’t broke, don’t fix it” right? So we kept on running the business as he was doing, including repeating his marketing investments and advertising expenses.

Well, after a few months I realized that we were spending a large amount of money (several thousand dollars each month) in marketing. Now, I am fine with spending marketing dollars if I can see the results of my marketing expenses, which, in the case of a restaurant, appears as people walking through the door and having a meal at your place.

You as a restaurateur have a really big advantage over many other businesses: when a person walks in your door and sits at your table, you’ve pretty much have made the sale (unless your service is so slow or your staff screws up so badly that your customers leave your place without paying!).

Very few other industries can claim this advantage. Many businesses spend thousands of dollars in marketing campaigns just to bring people to their stores or websites without any guarantee that these people will spend any money on their goods or services.

So – going back to my experience – after seeing that my marketing budget wasn’t producing enough, I started questioning all these expenses. (I used my business experience at a a large Information Technology company as a reference). I asked myself: Why wasn’t my marketing working? How can I measure if a marketing campaign is working? What kind of advertising brings in clients? Was I throwing money in the garbage?

The first steps were to collect and analyze all the marketing expenses. I realized that I was spending money in the following marketing initiatives:

1. Pocket cards distributed in hotels, some businesses, etc. (Very expensive!)

2. Ads in a weekly local Seattle magazine

3. Big and very expensive ad (1/4 of a page) in one of the Yellow Pages Book

4. Premium positioning in a well-known online city directory.

5. Passport Card program

6. Direct mail coupons

All together, these marketing efforts represented a considerable amount of cash. But how many of these were really working for me?

To make an objective decision, first I looked at which of these campaigns could be measured.

To my dismay, I realized that only half of them (numbers 1, 5 and 6) could actually be measured. The pocket cards have a free dessert as an incentive so we could know how many people actually came to the restaurant with them. Same with the direct mail discount coupons and passport cards, since people needed to present them to get a discount (coupons) or free entrée (Passport card).

The ads in the local magazine and Yellow Pages were a total mystery. I assumed that they brought customers. But how many? No idea.

The CitySearch was an interesting one. I could get specific analytics about how many people clicked in the ad to access our web site (the previous owner only had a very basic and amateurish website so I hired a company to create a new one), but this didn’t tell me how many people actually came to the restaurant because of our web presence.

So with this data in hand, I started by looking at the campaigns that I could measure. Were they effective?

The pocket cards (I won’t mention the name but I’m sure that many of you will recognize them) were extremely expensive, so I asked my servers to collect them and keep them in a special box that I bought for that purpose. After three months, I counted the cards: we had only received around 20 cards and the funny part was that most of the customers were usually single diners.

Of course, this made sense since the main distribution center for these cards were hotels and the audience business travelers. This was double bad news:

1. These were seldom repeat clients (since they didn’t live in the area). If I was lucky they would come once every few months – if they travelled frequently to Seattle.

2. They came alone, so their average ticket was small.

So with these pocket cards, I was losing an incredible amount of money. I could just give away free food to these people and it would’ve been cheaper for me than subsidize the very expensive pocket card. Obviously these cards were gone from my marketing list really fast.

The direct discount coupon fared better, but I realized that it brought very cheap customers who just came to my restaurant looking for a bargain. I looked at the package that included our coupon and realized that ours was the only fancy restaurant in the list. Most of the others were pizza places and fast food chains. Not a good place to be. Again, after compiling coupons for several months, I realized that it wasn’t worth it to keep bringing bargain hunters, so I also discontinued this marketing strategy.

Next was the Passport card. I had mixed feelings – and results – with this one. On the one hand, it brought us many new customers that only go to participating restaurants in the Passport card program. On the other hand, it also brought “the abusers”: parties of two eating just a salad each, nothing to drink (but free water) and three hours of conversation. Total spent: $12 + free water + free bread + service. And they tipped poorly as well (tipping after the discount – even if the rules of the Passport program explained that members should tip before the discount). I decided to keep it for a while, since I wasn’t brave enough to cut all the marketing from the previous owner.

So this left us with the non-measurable marketing: Yellow Pages ad, weekly magazine ads and CitySearch premium positioning.

Before dropping these strategies, I decided to test them. To do this is simple: I just needed to place an attractive discount coupon in the ad and see how many people presented them.

So I did that. We placed a 15% discount coupon in the weekly magazine and same in the Yellow Pages. To get the discount, the customers needed to either bring the original coupon (from the weekly magazine) or a unique code (printed in the Yellow Pages book). I then asked our servers to keep all the coupons and code discounts (and store them in our special marketing box). After a few months, we counted them.

Total disaster! We only got a few coupons a month from both ads. In order to break even, we needed to bring at least 100 or more customers from these ads. We weren’t even close to that number, so I had to cut losses – and discontinue these marketing systems as well.

This left me with the online directory for local establishments. I asked myself: Was it worth it to pay extra to have a big heading in an effort to get more people looking at our restaurant review and web site? Well, the answer wasn’t simple.

First, I went to our restaurant review link in the online directory, and realized that we had less than perfect reviews.

Some people can be really mean when they post restaurant reviews, and I was confronted with a very harsh reality about what some people thought of our service, our food, etc.

If you have read my blogs or subscribed to my free reports or newsletters, you are already familiar with my take on how much you need to make your clients feel special. I learned this the hard way by looking at these reviews.

I realized that it didn’t matter if the premium positioning worked or not. With the negative reviews posted there, I actually wanted people to avoid clicking the link! Obviously, we had lots of improvements to do in our service to make our clients happy before we could even think about promoting our place. I decided to cancel the premium positioning.

So, “Great”, I thought, “From all the money that I’m spending on marketing, I’m left with only one marketing campaign: the Passport program.” And I wasn’t even really happy with it!

The one positive about the Passport program is that it didn’t cost me anything (other than the free entree available through the program) so at least, I wasn’t wasting money for nothing – as I was doing with the rest of my marketing efforts.

So the bad news was that nothing that I was doing up until that point was really working. The good news was that I started saving lots of money in marketing with no noticeable negative results in the number of clients.

However, this left me with a dilemma about how to invest in marketing wisely. What could I do that really brings in more clients? How could I maximize my marketing budget?

It was obvious that I needed to invest in marketing campaigns and advertising techniques that were measurable (clearly measurable) and inexpensive (if possible). The million-dollar question was: How could I promote my business efficiently?

In my next newsletter, I will talk about what I did and how well it worked.

Happy Sailing,
Jose L Riesco

© Riesco Consulting and Marketing

Jose L Riesco worked at Microsoft for 18 years. He owned an Italian restaurant in Bellevue, WA (he sold it now) and started some other business.

Women and Network Marketing – 6 Trends of Influence

It’s no secret that women make up the majority of the network marketing industry (about 82% according to the Direct Selling Association). But it’s not always clear just how big that influence is since it’s the guys who are often the ones in the spotlight.

So just how do women influence the network marketing industry? Here’s some of the major trends that I’ve been noticing over the past few years that clearly show the powerful influence that women wield in the $30.47 Billion plus network marketing industry.

Trend #1 – Explosion of New Products and Services

The huge explosion in new network marketing companies is a reflection of our niche-based society, but it’s also driven by the fact that women make most of the buying decisions in their families. And they like having choices – and lots of them. They want products and services that fit their interests and fast-paced lifestyles. And the emergence of so many new products and services in the network marketing industry is a direct response to what these women want to buy.

As a result, more companies now see network marketing sales as a viable way to offer their products and services, prompting more retail companies to start using network marketing sales to reach new markets. As an added benefit, more women, and in particular young women have been attracted to network marketing, bringing new growth and opportunities to the industry.

Trend #2 – Focus on Customers, Not Recruiting

The success of the network marketing industry depends on sales – and customers equal sales. In the past, many successful network marketers trained their downlines to focus primarily on recruiting and not retail sales, which generated a lot of negative criticism for the industry. But women have generally rejected this practice, instead choosing to focus on their customers and building a retail sales base as the foundation of their business. Women have found that recruiting from within their customer base is a much more stable and positive way of bringing people into their business, rather then the old method of recruiting everyone and waiting to see who sticks.

Trend #3 – Social Networking Is HOT!

Social networking is all the rage right now, and Party Plan companies are back big time because of it. Why? Because women love to socialize and build relationships, not just sell. And Party Plan companies are enjoying a new renaissance because of this and are changing with the times by offering an easy startup, low-cost business option to women. The Party Plan concept is very appealing to younger women (especially single moms), who need a part-time income, but want more flexibility and a less restrictive option to a regular 8 to 5 office job.

Party Plan selling also offers women the convenience of buying quality products in a fun, relaxed environment – it’s what social marketing is all about. And best of all, party plan sales generate immediate income for women (a huge plus!) — there’s no waiting for a minuscule commission check that’s in the mail.

Trend #4 – Part-time Business Income

Many women only want a part-time business with part-time income, they don’t want to build a million dollar business and the huge time commitment it takes to generate that kind of income. And the industry is moving towards favoring these part-time women who make up the majority of the industry. As a result, more companies (if they are smart) are offering better compensation plans that reward the part-time seller and not just the full-time heavy hitters. Also more companies are offering all their representatives the chance to get health care benefits, a big selling point for many women who have no coverage elsewhere.

Trend #5 – Just the Facts

Women love to do research before they buy something. They want to get the details, facts, and opinions about a product or service first before making a decision. This need has helped drive the profusion of information now available online and off about the network marketing industry and its products and services. We now have magazines, videos, blogs, podcasts, teleconferences, web conferences, web sites, search engines, newspapers and the media providing information about networking marketing companies at an unprecedented pace. Having all this information readily available has also helped to broaden the appeal of the network marketing industry, which brings us to our final trend.

Trend #6 – Network Marketing Goes Mainstream

The Network Marketing Industry has finally caught the positive attention of the mainstream media and women have a lot to do with it. From morning talk shows to local newspapers, the media have been focusing on all types of women in network marketing — moms who work from home, women who start network marketing or party plan companies, women starting a business after retirement etc. For example, CBS’s Early Show recently did an interview with moms making money at home and only featured moms in direct selling companies like Pampered Chef and Creative Memories. This kind of positive publicity from the media is a huge leap for the industry and women are leading the way.

I think it’s abundantly clear from these trends that women have had a huge positive influence on both the image and the substance of the network marketing industry and that they will continue to do so in the future.

Technical Analysis – How to Use the 200 and 50 Moving Average to Gage Market Internals

Using Market Internals

Long before we had any type of software that could significantly impact our trading decisions, multitudes of investors depended on reading market internals to successfully plan their trades for a day, a week and even for a quarter. Today, we have far more tools at our disposal but that doesn’t mean we shouldn’t adhere to the same theories of using stock market internals to our benefit. While in days past charting by use of a point and figure graph was the popular option, it’s more important what these graphs showed than what they were. Point and chart graphs were specifically designed to allow us to identify breakouts, resistance levels, support levels and to help determine which direction a security price was heading. These market internal based charts provided the widely used indicators of ‘percentage over 50′ and ‘percentage over 200′ indicators that many traders still use today to make more informed decisions about their positions and their trades.

Percentage over 50 Indicators

First we need to identify what a percentage over 50 indicator is – simply put this shows an early indication of a new short term trend by reflecting a change in the moving average (over 50 days) of a security. While a percentage over 50 indicator might not be appropriate the best indicator of a single stocks breaking a resistance point, if a large number of issues are moving over upwards or downwards through their 50 day moving averages, it could be an early indicator of the entire market moving in a specific direction. If a large percentage of stocks are moving over their moving average during this time it may reflect an early indication of a bull market on the horizon. If a large percentage are moving below their moving averages it may conversely be an indicator of a bar market. Using this indicator to determine your trades helps you take advantage of trends that you might not have identified otherwise.

If you are a trader who favors a specific industry – computers, oil, etc. – identifying these trends early should also help you identify securities within that industry who are leading the market and this may give you a slight edge in placing your trades.

Percent over 200 Indicators

A two hundred day moving average is a slower moving indicator – but can be more important in the terms of trading for longer terms. These charts tend to easily identify issues that become over bought or even oversold and a reversal may signal a rapid change in the overall market. If you’re using the 200 day moving average it is often helpful to compare it to the 50 day moving average which can help you identify any possible trends that might be reversed. While individual positions may be a good indicator that something is not working well in a specific industry you can utilize the 50 and 200 day moving averages to easily identify up and down market trends.

Percentage Indexes are a stage of signals that may signal a trend in the market to move to a bull or bear position and can help you set an appropriate trading strategy. There are six accepted signal stages and strategies for each stage. The ‘bullish percentage index’ is always one of these six stages:

The bullish percent index is always in one (and only one) of six stages. These six stages signal the mode of the market (bullish or bearish), and for each mode there is an appropriate strategy. Here is a list of the six stages and what they mean:

Bull Confirmed is just as it sounds – This signal indicates to all traders that there long positions are typically safe and the market is trading in a solid bull pattern. The most bullish signal the index reflects, gives traders a green light to take on multiple long positions with confidence. Sale of positions can safely wait for higher prices.
Bear Confirmed is the least bullish signal and confirms that the overall market is in a down trend and this is a good time to consider short positions and covering outstanding positions to protect their value.
Bull Correction only occurs after the bull confirmed stage and typically offers a slight correction but may also should be carefully monitored for signals that it is heading into a bear confirmed stage. Trades should be carefully monitored using market tools.
Bear Corrections occur when the bear confirmed stage and typically indicates side-wards movement and encourages the trader to use their short positions with an extreme amount of caution and monitor trades carefully.
Bull Alerts indicate issues that might be over bought or over sold and it can be safe to assume that readings below thirty percent are oversold and readings above seventy percent are overbought and trades should be handled accordingly. Bull alerts can be a signal to take a longer term position but with an eye to caution.
Bear Alerts use the same figures as above in opposite directions. Bear alerts typically indicate that the market (or a particular issue) is overbought and may be ready for selling. Short positions should be carefully considered and positions that show profits of upwards of fifteen percent are probably ready to be sold since the overall market trend may be reflecting a new trend.
In Conclusion
As a responsible trader (whether online or otherwise) you need to understand when it’s time to use leverage and how to be successful at your trading. Watching institutional traders and determining what their actions are can help you make a decision on what issues you want to either invest in or sell.

Following a stocks tick price, whether up tick or down tick, means that you have the ability to make a more informed decision, set your expectations and allow you some small leverage in your trading. Ticks of plus or minus five hundred typically indicate that there is little institutional activity and ticks of plus or minus a thousand will indicate there is a great deal of activity. This can help you gauge what your response might be especially if monitored over several days of trading.

Using market internal signals is a great way to leverage your power as an investor whether your goals are short or long term trading. Educate yourself on the various ways that these internal signals work and you’ll be pleasantly rewarded.