Promotionals #1

We are getting a late start this week! But for good reasons! Like this one and this one. Oh and we can't forget about this!
If you opted to visit those links and have questions - we understand. Feel free to ask us.


Today, we're going to discuss my favorite part of coupons, discounts and promotions - Promotions!
We may be a bit biased at Xente Media on this topic, because our last conference netted 1 Duracell Bright Light, 2 iPod Touches and an iPad in promotional giveaways.

We also picked up hundreds of brochures, pens, notepads, rulers, key chains, t-shirts and a few jump drives. These are all promotional items. They are similar to promotional contests, just with far more prolific and simpler prizes.

The promotional contests are more high stakes, with higher returns. In exchange for a customers' information, you are giving them a chance to win a "big" prize.

Smaller promotional items only guarantee a few seconds of customers' attention. So, smaller prizes mean smaller rewards. If you're weighing the costs, by the way - a quality key chain with your logo will cost you approximately $495 for 500 and you get hundreds of people who walk up, say "hi" and take one. An iPad will cost you about the same amount and people will give you the names and addresses of everyone on their block for a chance to win.

That is lesson number one for your business.

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