ThinkNear.com

I just read about a new mobile advertising group called ThinkNear that will promote flash deals similar to Groupon and Living Social are beginning to do.  There are two main differences with ThinkNear is that ThinkNear will inform cell phone users about deals through mobile ad networks and only during times when there is a need to attract customers to your business.  And the deals will change depending on how busy you are.  Watch the Youtube Commercial and let us know what you think of this idea for your business.

Thinking About Discounts #1

This week we're going to take a look at discounts. Discounts can be like sales, or they can be closer to the clearance section.

Either way, we'll delve into the affects of discounts on business and why most retail businesses use discounts to move products. We'll also look at how your business can use discounts to help bring in more business.

So before we start, you should ask yourself - "Will a discount be helpful for my business?"  Don't worry, if you don't know the answer yet. We'll figure that out by the end of the week.

Let's start with a basic explanation for today. A discount is a reduction of price, whether permanent or temporary. When you get your weekly grocery store flyers, they announce discounts on certain products. This is a temporary ploy to entice you to get to the grocery store for those sales, because they have such a limited time frame.

The permanent discounts are often seen at retail stores because every season brings in a new truck load of items to display, so they have to make room for the new items. These clearance sections are usually at the back of the store, so you have to make your way through the temptation of new items to get to them.

Either way, discounts are designed to bring you in to a store, so you'll be tempted to buy full price items, while you're getting some great deals!

Coupons, Discounts and Promotions - The Five Questions You Should Ask

The five questions you need to ask before your business starts a coupon, discount or promotions effort.

Coupons, Discounts and Promotions - Questions

Do I need to run a coupon, discount or promotion?

- Example – Jeffrey’s Restaurant and Bar, in Austin, TX, had been in business for 35 years. While the business was relatively stable, the owner, Ron Weiss, was starting to see a decline in sales. In 35 years of being in business the restaurant had never once issued a coupon or discount. Ron decided to take a chance and offered a Groupon deal. The deal was a one-time discount of $35 for $75 in gift certificates for the restaurant. The coupon was good for 90 days, during the restaurant’s slower time of the year. The restaurant takes half of the Groupon sales and Groupon takes the other half. Ron and his staff stayed unbelievably busy over the next 90 days and while he didn’t make money on the offer, he did gain a lot of new customers. (MP Mueller, NYPost.com, “Is Groupon Good for Small Business?)

How will this affect my business or brand?

- Example – PearlParadise.com owner, Jeremy Shepherd saw that sales were declining as the economy worsened. Sales of his pearly jewelry, above $1,000, were usually his major source of revenue and if sales continued to be off through his December busy time his company would be in trouble. After examining sales charts, Jeremy saw that jewelry under the $1,000 was still selling well. So Jeremy decided to discount his strands of Tahitian Pearls from $700 to $300, calling the jewelry line, “Luxury For Less.” By offering only one line of pearls at a discount price, Jeremy was able to keep his main brand from looking like a discount jewelry store, but still increasing sales for his company. (Ryan McCarthy, Inc., “How Low Can You Really Go?”)

Can my business afford this?

-Example – It is important to ensure that your business can not only handle the influx of customers who will come in during the promotional time period, it is also important to accurately calculate whether this is a cost you can afford. In order to calculate this you must first know the following: the cost of your goods or services, an estimated purchased amount for each coupon, discount or promotions customer, an estimate of the quantity that will be redeemed (this is more of a guess – to be safe, estimate an 80% redemption rate for coupons), the approximate number of return customers or new customers who come in after the coupon (figure about 10%), the cost to run this coupon and the percentage of existing customers (assume 40% for this example).

For instance say you sell widgets for $40. It costs you $25 to make this widget. So you make $15 on each widget.  You run a coupon for 50% off your widgets.  The coupon costs you $1,500 to run and you send 3,000 of them out.

So you get about 2,400 coupon redemptions and each customer buys your widget for $20. You don’t make any money on these sales, but you do break even. You then calculate that 60 of the customers who used the coupon were new to your business and likely to tell a friend. That is 1,440 new customers and if 10% tell a friend you’ve got about 140 new customers. If you’re making $15 profit on each widget, you’ve made $2,100. Subtract the $1,500 you’ve spent and you’ll end up coming out ahead of the game with $600 over the long-term.

What method and discount will work best for my business?

            It is always good to have a good mix of coupon tactics to appeal to your diverse customer base. Use the space to write down your ideas for your business.

How should I distribute my coupon, discount or promotion?

            Polling your customers on the types of coupons, discounts and promotions they prefer can be a great starting point for your business. It is also a good idea to look and see what competitors are using. What ideas do you have for your business?

How will I measure my campaign?

            The best way to measure your campaign is to educate your employees on the importance of keeping track of coupons or promotions. You won’t be able to accurately calculate your total costs without this data. How will you encourage employees to be diligent?

Have more questions? Give us a call or send a message! We're always here.  To see the entire PowerPoint presentation click here!

The Trap!

I got a call from one of my restaurant friends telling me about a great thing he found for advertising his business at no cost- www.restaurant.com.  Restaurant.com would list his site for free on their server and sell discounted gift certificates to his customers, with the website getting the money from the sale of the gift certificate.  The only decision my friend would have to make is whether he wanted to offer $20 gift certificates for $10, $50 gift certificates for $25 or $35 gift certificates for $25.  

This sounds like a great idea, right?  They will advertise your business for free and you can track the success rate by the new customers coming in who use the gift certificates.

You know the saying “nothing is FREE”?  Let’s take a minute to examine some of the problems with restaurant.com.

1.     Many restaurants run a food cost of over 33%, meaning if a customer orders $30 in food, it costs the restaurant $10 just to buy the food they are making.  So when restaurants put a $25 gift certificate with a minimum purchase of $35 on restaurants.com, the restaurant actually spends more money on food then they will see in the cash register.

2.     The discounted gift certificates are available all the time and the website, restaurant.com offers further discounts on the gift certificates to sell more of them.  By being on the site you are allowing your customers to get a $20 gift certificate to your restaurant for as little as $.40, yes that’s right forty cents when they run the 90% off sales.  Why would your customers ever want to pay full price for your services?

3.     When you join restaurant.com you must agree to a one-year commitment with them.  So for one year you cannot stop doing this promotion even if you fear it is not benefiting your business. 

4.     How do you plan to attract customers that are going to pay full price for your goods after the recession when they know your business as a discount place to dine? 

For some businesses discounts are great - pizza, yeah saw a Papa Johns ad this afternoon in the mail. Fast food- yeah my aunt handed me a stack of McDonalds coupons last week.  Coupons and discounts work for these restaurants

High-end restaurants that cater to special occasion celebrations with quality food should resist the urge to discount. 

Are the people who want to only spend $10 on your $30 rack of lamb the people you want in your restaurant?  If so by all means plan to put your restaurant on the list for discount advertising. If not? Research, Plan, Promote, and Buy a little advertising to HELP YOU SUCCEED. Trust me, it’ll cost you far less to do some real advertising than it will to sacrifice your image on restaurant.com. 

For more information on Coupons, Discounts and Promotions - how they affect your business - please plan to attend the Lunch n' Learn session in Gettysburg on January 6th. Please RSVP here:  http://www.eventbrite.com/event/1070141823/efblike