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Many small businesses do not discover the art of focused targeted marketing and positioning their product or service until they are going out of business. Targeted marketing is critical to your success. I will focus this discussion more on the service oriented business, but those with products can adapt the focus.

Understandably, in the early stages, many small businesses will be more than happy to chase or even react to, the latest opportunities that seem to come before them. Put into context, it is actually a “fight or flight” syndrome in business – don’t pass up the revenue stream – you need cash flow. The result is that you develop or inherently have, competencies possibly in several areas – and you use that to follow up on any and all opportunities that come your way. I did it when I started my IT services company.

But this is operating in a short sighted, reactionary mode. Sure, growing your business by doing what comes your way is probably instinctual, and perhaps necessary – but only in the early stages. But I call this ‘shotgun marketing’, and inevitably, you will miss the revenue target necessary to stay in business.

To be a proactive business, with longevity as a focus, you must sit down with your team and ask the hard questions.

Say you have competence in several areas – in my own technology services company, we were competent in several sectors with several skill sets on several computer systems.

First and very critical to your existence – you must sit down with your team and ask:

How does my customer perceive their problems?

How can I serve this customer so that they see me as their solution?

Without even comparing ourselves to the competition, How can we differentiate our product or service so that the customer thinks of us every time?

To really create long term viability for success, you must start out by understanding what you can be the BEST in the world at. Just because you may have several competencies, it doesn’t necessarily follow that you will be the best in the world at it. Conversely, you may not now be doing what you are the best in the world at!

This exercise requires the commitment of the entire management team, and time, as well as regrouping continually to check your direction.

Jim Collins, researcher and consultant who wrote the best seller Good To Great, says he observed the great companies not only defining what they could be the best in the world at, but also identified passion and a well defined economic denominator as the 3 criteria for transitioning from a good to great company. I highly recommend Jim Collins and Good to Great.

By focusing and knowing what you can be the best at, target a niche - niche marketing. A niche marketing strategy is a small group of referencable customers in a specifically targeted market. Most businesses try to avoid this, as it puts them in uncharted territory. Instead they want to follow up on all opportunities as I described before. All successful companies “niche” themselves. Before Microsoft became its huge diverse self, it actually positioned itself first as an operating system vendor.

This creates the “big fish” in the “small pond” scenario. You know are the subject matter expert and deliver targeted solutions in this area.

Also critical to this approach is to “Move the Free Line”. It is the key to differentiation. By educating your client or consumer with information and knowledge transfer of how your service or product works, how they can solve their problem, or even information on the segment in which they operate in, creates a partner relationship that will lead to up-sell opportunities.

Another strategy is to differentiate yourself from the competition. No, the client does not make a decision by comparing how you may be the “leading” so and so vs. your competitor. Make it personal – moving the free line is one example. But also show them how you can help their problem. You see, it’s not about you and the competition, its about the client’s business problem and intended solution. Show them how to solve their problem, through demonstration, or case studies of other client. Make the client care about you – about calling you first!

Then create a repetitive recurring model that delivers the same quality of differentiation, the same way, every time.

Also, begin to identify the solution or product you have in that niche with writing up case studies of key performance indicators. This will begin to identify you as an expert in that field.

And you don’t have to go head to head with the big guys because you are first operating in that small pond. However, the big guys will see you as a complement to their solution or product, because they are operating now in many ponds and will look at a partnering solution, or possibly merger to reach or to satisfy more of their customer!!

This strategy will begin to move you into a mainstream market over time and done strategically. We will discuss this in other blogs.

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The mainstream media is full of stories about the Federal Reserve cutting rates, but the bigger story is the fall of the dollar below the accepted index standard of 80 , which was barely mentioned!

It’s critical to understand the ramifications of the U.S. Dollar value in our global economy, since it affects your ability to carry on business transactions; much of the problem is tied to the credit crisis and trade crisis I discussed in a previous blog.

The dollar has taken a pounding since the Fed slashed its benchmark rates on Tuesday by half a percentage point to 4.75 percent.

The deep US rate cut has raised concerns about whether it can ease the credit squeeze.

According to one analyst at Sumitomo Mitsui Bank: “Appetite for the dollar is weakening due to receding hopes that rate cuts can resolve the credit crunch”.

I watched the Fed chairman Ben Bernanke makes his testimony at a Congressional hearing on the Fed decision. I noticed a distinct sense of fear and anxiety while he was discussing the Economy. He said that the US economy and markets had reacted to a wave of foreclosures in the US sub prime, or high-risk, mortgage sector in a manner that has “far exceeded even the most pessimistic estimates.”

As I pointed out last week, more homeowners face difficulties making payments on adjustable rate mortgages that are being reset with higher interest rates.

The expectation of bigger interest rates cuts in the US is now having a huge affect on

global currencies.

The US Dollar is weakening relative to other currencies in the world.

Why is this important?

Because there is a delicate balance of currency values which determines the global trade in the world. To illustrate, China’s booming economy is based on its export of manufactured goods - mainly to the U.S. So, U.S. dollars are spent on Chinese goods in places like Wal-Mart. The Chinese are paid in U.S. Dollars. Because so much money changes hands internationally, the U.S. and Chinese agreed to set (’peg’) their currency, the YUAN, to the U.S. dollar’s value. Without this, their exports would become more expensive to buy! In addition, they have to invest in our currency to keep the machine going.

The Chinese have bought $800 billion of our treasuries!

The Japanese have bought over $3 Trillion!!!

Why would a foreign government buy so much of our currency?

TO KEEP THE VALUE OF OUR DOLLAR HIGH SO WE CAN CONTINUE TO BUY THEIR EXPORTS!!

This setup can only work if the dollar stays high relative to the economy. What we see now is a credit crisis (also trade deficits) that is touching the ability of the dollar to stay above an established index (over 80, relative to other currencies).This has been a sort of benchmark for the economic order of things since 2002, a low. With the current credit crisis, China has an ongoing conflict with the US regarding the Yuan, which is now trading higher relative to the dollar. The Chinese have threatened to dump USD reserves if the US pressures China further on trade issues. If that were to happen, we would be obligated to repay this debt, our dollar value would fall perhaps 40%!

What does it matter if the index stays below 80. If you were the Chinese, Japanese, Korean or other central banks, would you buy an asset in dollars if you fear the dollar will lose 40% of its value in a few months? In reality, there is nothing “safe” about a Treasury in which you can lose that much of your principal - it’s a lousy investment!

We are increasingly seeing the weakness of the dollar now relative to other currencies.

Yesterday, for the first time in many years, the Canadian Dollar is on a par with the U.S. Dollar.

Russia is in the process of building the strength of the Ruble into a super resource currency, and is getting rich selling resources and oil with record prices in these.

And take a look at this comment on the strengthening Euro:

“It is all about dollar weakness and Euro strength this morning again, with Euro/dollar touching a new record high of 1.4120,” said Audrey Childe-Freeman, economist with the Canadian Imperial Bank of Commerce in London.

The Euro is gaining status as an “alternative Reserve Currency” for the world banks - as there is concern the USD is losing its advantages. The OPEC oil exporters threaten to use Euro as a standard, sidestepping the U.S. Dollar. Again, as I spoke about, this is due to the weakening US economy and huge trade and fiscal deficits and record debt. Also included is declining US interest rates which will reduce the interest rate premium US bonds have enjoyed, and supported the USD.

And probably the most impact on global trade is now the increasing strength of the YEN, Japan’s currency. Most of us have never heard of the “Yen Carry Trade”. Why should we be concerned? The yen carry trade has supported U.S. equity and lending markets for over 15 years on a large scale. The interest rates in Japan have been about 1% forever; investors and the like borrow money in Yen to finance purchases of bonds, treasuries, and derivatives in other currencies. For instance, borrow large amounts of cash in Japan at 1% interest rates; then invest the borrowed funds in U.S. Treasuries paying 4.5%, or leverage the money into derivatives or equities purchased on margin. This only works if the index ratio to the dollar stays at about 115. When the interest rates and value of the Yen go up (and dollar is going down such as now), this affects the ability for all those debts to be repaid. The index ration is heading south of 113. This requires selling of equities, derivatives and bonds from what was originally borrowed in yen. So the Japanese bank is intervening to keep the ratio of the U.S. Dollar to the Yen steady, no small feat.

WHAT DOES ALL THIS MEAN TO US?

A major change may for the world economy, trade balances, and just about everything economic. The whole system has been based on a relatively strong USD. If this were a human body in critical care, I would liken these events to taking off the life supports. The Fed cut was nothing more than a pain killer to delaying the inevitable.

I will discuss proactive strategies to investing in GOLD and alternative currencies (i.e., Euro) to protect your portfolio, which we will investigate in future posts…

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