Juliet Fay Copy Writer

How special offers can hurt your profit margins

Aug 262010

Let's face it, many products and services are not essential for survival. When all around you are slashing prices, it can be hard to resist the lure of the sales you could make from 'special offers'.

But not every special offer is good for business. Heavy discounting can be harmful as it may shift products but it can drastically reduce profit. It can also devalue your product leaving customers wondering why they should ever pay full price.

How do supermarkets do it?

Many people don't realise that when a supermarket slashes prices it is the suppliers who take the hit.

The 50% discount comes straight off the supplier's bottom line.

Also the reason that the famous BOGOF (Buy One Get One Free) is so popular in supermarkets is that it makes you spend more overall.

You buy products you don't need because the offer seems too good to miss. So do you spend less the next week? Of course not.

How does heavy discounting damage your profit?

If you knock 30% off your product you may sell a few more but overall you will lose out. This type of offer does not encourage people to spend more and that is the KEY to a good special offer.

Let’s look at the figures.

**Analysis of the cost of discounting**
Cost of item	£20.00
Retail price of item @ 45% mark up	£29.00
Gross margin (profit before fixed costs)	£9.00
Discount 25%, item retails at	£21.75
Gross margin	£1.75

So now you have to sell 6 items at the discounted price to make the same as you would on one at normal price.

If the widgets are perishable e.g. organic duck and going to go off if you don’t sell them, then the discount at least gives you some margin, but for non perishable stock, you are simply giving away profit.

Also note if your business is already operating on slim profit margins, then heavy discounting can be catastrophic.

The only other time you might consider discounting is to help your cash flow. If you have a lot of money tied up in stock that is not moving and you need to convert some of that into cash, then slashing the price can give your cash flow a temporary boost, but you will feel it at the end of the financial year.

The whole point of a special offer is to attract more sales.

Special offers are tools to help you attract more sales. You need to make sure your special offer is sustainable financially and that you follow it up with actions that encourage further purchases.

Special offers are often used in email marketing, direct mail and e-newsletters. If your offer is going to hurt your business then your whole campaign is flawed. A well crafted campaign needs a compelling special offer but you need to think about the best offer for you and the customer.

How to make special offers work

It works like this. You give the customer something they value (e.g. a discount or free product) but in return they either:

   •   spend more with you than usual
   •   or your offer encourages repeat business
   •   or it introduces a new customer that you can turn into a regular purchaser

Take a look at these examples:-

Encourage a higher spend e.g. spend £20.00 and get a free item – this works well if your customers' average spend is £17.00 or £18.00. For the freebie choose an item that you can buy cheaply e.g. mug. The idea is the increase in spend is greater than the cost of the freebie. So overall you increase your profit.
Commit a customer to repeat purchases e.g. book 3 treatments and get one free. This works well for alternative therapists who may rely on the client contacting them to book further appointments. If the alternative is one treatment, then nothing – the free treatment pays for itself.
Introduce a new customer offer an M&S voucher or similar for you and your friend when they book a hair colour treatment. This is a good example of where you need to have a follow up strategy in place. If the new customer books the hair colouring treatment, make sure you are ready with the up sell on products or offer a loyalty scheme where they collect points towards the cost of a hair appointment.

Special offers play a key role in your marketing but you need to analyze what works and what doesn't.

Special offers, well done, can lure customers away from the competition and provide you with a boost in sales. Done badly they can hurt your profit margins and devalue your product.

Why a customer database is a vital sales tool for micro businesses

Marketing No Responses »

Jul 212010

Rolodex by Toky Branding & Design So it's time for a big party. You want to celebrate your 40th birthday party and gather together friends, family, work colleagues, and some business associates that you've got close to.

But there's a problem.

You've never gathered all their addresses together. Some are in your address book, some are in the computer, some are on business cards. Some friends sent you change of address notifications which you can't find. Some people you only have email addresses for, others have changed their names when they got married, some of the pages are missing out of the address book, and a cup of coffee spilled over the 'Ts' making them illegible.

Suddenly sending out 100 invites has become a monstrous task. Why?

You don't have a system for organising contact information of all these people.

Big pain in the neck when you want to bring everyone together for a party.

A constant pain in the neck for businesses that want to communicate with their customers but don't have an organised system for keeping track of customer and potential customer details.

The result?

These businesses often don't get in touch with their customers or potential customers because it's just too hard.

What is a customer database?

It is simply a system for keeping track of customer details such as name, postal address, telephone numbers and email. You can add all sorts of information to these core details such as buying history and birthdays etc subject to the Data Protection Act*.

*Click the link for more information on complying with this act if you're in the UK. Search online for data protection in your country if your outside the UK.

Why do you need one?

Micro businesses or owner managed businesses often feel that a customer database is for companies that have an office, reception and staff.

Wrong.

A customer database is one of the most important tools for generating new and repeat sales. Micro businesses especially should look after every customer's details as carefully as they look after cash. After all they are the key to future 'cash' sales.

How do you create one?

First you need to choose a system.

Will it be paper or electronic?

Given that email is increasingly used it would make sense to go electronic as transferring a paper system to a computer in the future, will be laborious. A low cost route is to use existing software on your computer.

For PCs – Windows Contacts which integrates with Windows Mail in Windows 7
Windows Address Book which integrates with Windows Mail on Windows Vista
Windows Address Book which integrates with Outlook Express on Windows XP
For Macs – Address Book which integrates with Mail (OSX)

Both systems allow you to select which information you want to store and there is a space for notes if you want to jot down important information about your customer e.g. they hate pink!

These systems cost you nothing and yet both powerfully integrate with other applications such as Windows Microsoft Office and the iWork suite from Apple.

Another advantage of starting with these simple systems is that you can easily export the data to a more powerful system later on. Many of the e-mail marketing systems will accept contact data from Windows Contacts or Mac's Address Book.

When do you collect customer information?

By simply analysing the pathway a prospective customer takes, you can find a convenient point at which to collect the information.

Convenient for your customer as well as your business.

If you trade in markets or have a farm shop, you may not want to slow down the queues by collecting customer information at the point of sale.

In this case you could provide forms with pens for people to fill out the information themselves. To get people to do this, you'll need to offer an incentive – a prize draw offering a decent amount of free product should do the trick.

If people generally telephone you to make enquiries, or bookings – that could be a good time to collect their information.

If most enquiries come via your website, you may be able to collect information from your form, though beware of asking for too much information. People don't like forms.

Whose information should you collect?

Anyone who buys from you, should have an entry in your database.
Anyone who makes an enquiry should have an entry in your database.
All your suppliers should have an entry in your database.

Once you have a customer database, an organised system for collecting and retrieving customer data, then you can get your party started. Keep in touch with customers regularly by postcard, letter or email.

How one simple question can add 15% to your market takings

Food producers, Selling No Responses »

Jul 052010

Chickens in Turin market

Chickens in Turin Market

You're busy serving at the market stall. After you've handed the purchase over to your customer, what do you do? Say thank you very much? Move on to the next customer?

There is a simple question that can increase your takings:

"Do you want something for later in the week?"

That's it. That's the question. I told you it was simple.

That simple question tells your customer that you can solve another problem. Not just

"What shall we eat tonight?" but

"What shall we eat on Monday, or Tuesday, or Wednesday?"

That simple question makes your customer look again at your display with a different question in mind.

And hey presto they find that those chicken thighs will be ideal for a casserole after Ceri has football training on Wednesday evening.

You have a responsibility to solve more problems for your customer.

Once you have sold once to a customer, if they are happy and return, then you have become a trusted 'problem solver". The customer will be happy to take your advice on future problems. You have a responsiblity to anticipate problems you can solve for that customer.

What if the customer raises a concern?

"Will they keep until Wednesday?" No problem, you are there, ready with the solution. Either

"yes you can keep them in the refrigerator", or "pop them in the freezer when you get home today and then just take them out on Tuesday morning and let them defrost in the fridge."

Happy, they make the additional purchase.

That customer's £12.00 spend just turned into a £18.00 spend.

If every third customer buys another £6.00 item you will increase your market takings by 15% just by asking one simple question.

Why your best customer holds the key to unlocking more sales

copywriting, Marketing No Responses »

Jun 302010

"How do you make Yorkshire Puddings?", asked my husband.

"Look in the The Good Housekeeping Cook Book." I shout back as I exit the kitchen.

We have tons of cook books, but it is The Good Housekeeping Cook Book that's our bible.The one we always consult.

You can tell, because it's the one with dog eared corners, butter stains and scribbles in it from our children's toddler days.

Why? It knows everything we want to know about cooking everyday meals and puddings. It understands our needs, level of knowledge and gives us reliable information time after time.

That Good Housekeeping cook book is like your best customer.

Your best customer knows everything you need to know about your product or service.

She holds vital information about your business. Not -

how you made the product,
what the cost of sales are,
how long it takes to grow,
process or manufacture it

- you know all that.

What this person knows is the really important information that you don't have within your business.

She knows:

what your product or service does for them,
why they are attracted to it,
what difference it makes in their lives
how they feel when they buy it
how they feel when they use or consume it

How does this information unlock more sales?

With this information you can write targeted sales messages on your website, leaflet, brochure or poster.

Instead of trying to appeal to everybody, you can focus on attracting more people like the ones who already love and buy your product.

Instead of listing the features and benefits you can show your potential customers the difference (big or small) that your product or service can make in their lives.

Build your marketing around this information.

Think about it.

This information can help you plan so much about your marketing:

how your website should look
who you are talking to when you write sales messages
what shows or events you might go to
what to write on your leaflets
where to distribute your leaflets
what articles to write for your newsletter
where to advertise

Who is this best customer?

It is the customer who regularly spends their money with you.
It is the customers who spends most money with you over a year,but more than that it is the customer who puts a smile on your face.

The one who is delighted with your products or services.

If you could have one hundred customers like this one, who would you pick?

How do they know so much about your product or service?

This customer has invested time and effort in finding your product or service. They know it, love it, use it and expect your product or service to satisfy and delight them.

And it does.

They stick with your business and maybe buy other products or services from you because dealing with you makes them feel good.

So how do you get this information?

Your customer holds the key. Just ask.

Go now and arrange to have a coffee, a beer or a glass of wine with your very best customer. Ask them to help you. You'll be amazed at customers' willingness to help. They already love your product, and most people love to talk about themselves.

What specifically can you ask?

Stick to one product or service and then get the customer to tell you all about what their life or business was like before they found your product or service.

Find out what they were looking for and why.
Ask how they found you.
Ask what was the first thing that attracted them to the product or service.
What else had they tried?
What did they find?
What did they like most about it?
What is difficult about buying this kind of thing?
What is easy about buying it?
What difference does it make in their lives?
How do they feel when they buy it?
How do they feel when they use or consume it?
Where do they look for this kind of product?
Where do they hang out (online or offline).

Have you made that call yet?

Go now and set up a date to do this. If possible record the conversation (with your client's permission).

You can get voice recording apps for the iPhone and Android phones, or purchase a simple recording device.

Sounds like a lot of bother?

Maybe but if you want to create sales messages that attract people who are going to love your product or service, doing this will set you off on the right course.

Your customer is your most valuable asset for present and future sales.

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Useful Marketing Tool: Testimonials With Testosterone Audio

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How special offers can hurt your profit margins

Why a customer database is a vital sales tool for micro businesses

How one simple question can add 15% to your market takings

Why your best customer holds the key to unlocking more sales

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