This week I attended one of my rituals of the summer, standing in line to buy peaches off the truck direct from the Georgia peach growers. The location was a restaurant parking lot. Since the restaurant where the truck had been stopping had closed, this year the truck parked for the first time at a different location. I arrived at the starting time, noon, and joined a line of over one hundred people. By the time I left, the line was as long as when I had arrived.
After standing in line for fifteen minutes, I a girl walked up to me and handed me a two-sided, full color 4 1/4 x 5 ½ piece about the restaurant. “What is this?” the lady in front of me asked.
“This is information about our restaurant,” the girl replied. “You might as well stop by for lunch before you leave.”
The lady turned to me and the person beside me. “Well, this is surprising. What a good idea!”
She was right. The piece that the girl handed out was a good idea and a good effort. Management at the restaurant was taking advantage of the over two hundred people in the parking lot to give them information about the restaurant. That was good.
While I applaud that effort, management could have gone from good to better to best with some thought. That would have yielded more profitable results.
If management had thought the situation through from the customer’s point of view, a pertinent question would have been asked. A good one would have been “What do customers standing in line want?” That would have revealed an important point: those in line for peaches were on a mission. They were focused on getting their peaches and taking them somewhere cool. They were very unlikely to sit down for a meal at that time.
However, the day was warm, and the sun reflecting off the blacktop made standing in line at noon even hotter. All of us were hot and thirsty. Looking at the situation from the customer’s point of view would have revealed how those in line would be feeling. Asking “What do customers standing in line need?” would have uncovered an opportunity. That would have lead to a better effort which would have been to sell water to those in line along with handing out the piece. That would have made a good impression on those standing in line and brought in more revenue for the restaurant that day. Water may have even saved the lady who collapsed from the heat and was taken away in an ambulance.
Thinking the situation through from the customer’s point of view could have lead management to the best effort. Considering that people in line wanted to get their peaches and leave would have brought the realization that they would not stop at the restaurant that day. That leads to the question, “How do you bring them back?”
One way to do that would have been to distribute a coupon or introductory special inviting people back another time during the next couple of weeks. Setting an end date on the coupon would use urgency and encourage them to return soon. That would spur more people to come back to the restaurant before they forgot about it.
The combination of tailoring the piece with an offer that had urgency, having water available to purchase, and distributing information about the restaurant would have been a best effort. That would have been reached through thought. Good efforts require action. Best efforts require thought.
Are you thinking through your marketing so that you achieve the best effort?
Showing posts with label promotion. Show all posts
Showing posts with label promotion. Show all posts
Friday, July 15, 2011
Tuesday, July 15, 2008
The Cost of Basing Your Business on Price
This morning I heard of more price corrections from the airlines. "Airlines are looking for every way they can to monetize," the expert stated. "They have to. This is about survival. We may not like this, but we should embrace it so that we have airlines for travel."
The report went on to say that the days of $59 flights to Florida for the weekends are over. The airlines are even tacking on an extra fee for frequent fliers who will now pay anywhere from $25 to $60. The first checked bag now costs $15 and the second $10.
For years low-priced airline tickets have enticed passengers to travel. Airlines have offered frequent flier miles which reward customers with free flights after so many miles. That was a good idea for encouraging repeat customers. Recently, however, the airlines morphed that idea into a promotional effort by giving away enough frequent flier miles for a round trip with the purchase of certain products. T-Mobile had one such offer at Thanksgiving last year. If you signed up for a two year contract with T-Mobile, you received enough frequent flier miles for a round trip flight. With programs such as that, the airlines bastardized a good repeat customer idea into a price-dropping promotion. The airlines also have drastically discounted fares during certain times of the year. Whenever they have needed revenue, the airlines have offered special fares. In fact, their preferred method to stimulate business has always been to drop price.
When the principal way that you stimulate business is to drop price, you are creating several problems. One is that the revenue flowing in will not be enough to cover expenses, especially when the prices of materials, supplies, and/or labor suddenly increase. Even in times when expenses seem relatively stable, dropping prices reduces revenue, leaving your business vulnerable both in the short and the long term by robbing Peter to pay Paul. Eventually, you will have to pay Peter in some fashion. For years, the airlines have dropped prices and marginally stayed alive, often through mergers and acquisitions. This solution just puts two problems together, robbing Peter a bit longer while often delaying Paul's payment. With the rising price of fuel, Peter has come calling on the airlines.
Throughout all this, customers are being taught to wait for the next price drop before they book their flights. The airlines have inadvertently schooled customers to buy only "bargain" rates, never full price. A customer always asks for the discount and searches for the "cheapest" fare because that is the only way the airlines have distinguished their businesses. None of them promote a unique selling proposition. They only promote price.
This sole emphasis on price has brought airlines to a third problem. They are encouraging people who should not be customers of the airlines to use their services. I heard you mentally gasp at that statement because many of us think that everyone should be our customer. That's not true. Some people should not be our customers. When you base your business stimulation on price, you are dealing with some people who should not be your customers. They are not really able to afford your services. For the health of your business, you certainly cannot afford to deal with them because you cannot make enough revenue from them to keep your bottom line healthy. They are not profitable customers.
Doing business with enough of these people will land your business right where the airlines are today: They may end your business. The cost of basing your business on price is a high one. To do this successfully, you must have the right mix of products and/or services and a high degree of control on expenses. The airlines don't. Do you?
The report went on to say that the days of $59 flights to Florida for the weekends are over. The airlines are even tacking on an extra fee for frequent fliers who will now pay anywhere from $25 to $60. The first checked bag now costs $15 and the second $10.
For years low-priced airline tickets have enticed passengers to travel. Airlines have offered frequent flier miles which reward customers with free flights after so many miles. That was a good idea for encouraging repeat customers. Recently, however, the airlines morphed that idea into a promotional effort by giving away enough frequent flier miles for a round trip with the purchase of certain products. T-Mobile had one such offer at Thanksgiving last year. If you signed up for a two year contract with T-Mobile, you received enough frequent flier miles for a round trip flight. With programs such as that, the airlines bastardized a good repeat customer idea into a price-dropping promotion. The airlines also have drastically discounted fares during certain times of the year. Whenever they have needed revenue, the airlines have offered special fares. In fact, their preferred method to stimulate business has always been to drop price.
When the principal way that you stimulate business is to drop price, you are creating several problems. One is that the revenue flowing in will not be enough to cover expenses, especially when the prices of materials, supplies, and/or labor suddenly increase. Even in times when expenses seem relatively stable, dropping prices reduces revenue, leaving your business vulnerable both in the short and the long term by robbing Peter to pay Paul. Eventually, you will have to pay Peter in some fashion. For years, the airlines have dropped prices and marginally stayed alive, often through mergers and acquisitions. This solution just puts two problems together, robbing Peter a bit longer while often delaying Paul's payment. With the rising price of fuel, Peter has come calling on the airlines.
Throughout all this, customers are being taught to wait for the next price drop before they book their flights. The airlines have inadvertently schooled customers to buy only "bargain" rates, never full price. A customer always asks for the discount and searches for the "cheapest" fare because that is the only way the airlines have distinguished their businesses. None of them promote a unique selling proposition. They only promote price.
This sole emphasis on price has brought airlines to a third problem. They are encouraging people who should not be customers of the airlines to use their services. I heard you mentally gasp at that statement because many of us think that everyone should be our customer. That's not true. Some people should not be our customers. When you base your business stimulation on price, you are dealing with some people who should not be your customers. They are not really able to afford your services. For the health of your business, you certainly cannot afford to deal with them because you cannot make enough revenue from them to keep your bottom line healthy. They are not profitable customers.
Doing business with enough of these people will land your business right where the airlines are today: They may end your business. The cost of basing your business on price is a high one. To do this successfully, you must have the right mix of products and/or services and a high degree of control on expenses. The airlines don't. Do you?
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