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Retail Traffic – Bringing Customers in Part II

Bringing Traffic in your Front Door.
Successful Retail Marketing/Part Two.

I worked with the owner of a restaurant who blurted out over a hot cuppa coffee that since he sold food, “Everyone is a prospect”. “No, don’t give me that crap.” I fired back. Humph – cheap client, only gave me coffee even when I continually showed up at lunch time sporting a lean, hungry look on my face!

While his restaurant was upscale, it wasn’t “Le Fountain Bleu” and no one was going to drive an hour to eat there. So right away our target market was limited to people who lived or worked within a half hour’s drive. That “market segment” qualification of our prospects was just for starters. How long people will drive to reach your business as a destination is one consideration in finding a market segment worthy of spending money to reach.

You see in marketing, everyone you reach, and every time you expose your message to someone, there is a cost associated with that contact. It’s called “CPM” or “cost per thousand” – and it’s the cost to reach 1,000 people with your message. Cost per Thousand. Different media have different CPM,

Reaching people with your message can get expensive in a hurry, especially if you consistently reach the wrong people – who don’t care about what you’re selling and who are not in the market for your goods or services.

What you are looking for in your marketing dollars is quality customers who are ready to buy. What you are looking for in an effective marketing campaign is the ability to reach the maximum number of customers who are the most qualified and are ready to buy right now. You need to reach them at the lowest possible cost and get them to call or come in by effectively delivering a message that they will respond to. Read this paragraph again, it about good, solid marketing.

Since this article is talking about retail stores, or local service providers, most of the campaigns in the article will target a geographic center. Everybody likes to shop in their own backyard. Let’s look at a few campaigns, some of the figures, and how to increase their effectiveness.

Newspaper campaign

Newspapers can be a good retail tool for advertising to a specific geographic community. Here’s how to make your newspaper ads more effective.

Suppose you take out an ad in a local newspaper and it costs you $100; you get 20 phone calls, and 8 people come into your place of business and 4 people purchase something. The cost per inquiry is $5 (20 calls cost you $100), the cost to acquire each customer is $25 (from your $100 ad, 4 people purchased). Well, that was easy.

Did you make any money from this campaign?

Campaigns succeed or fail depending on what customers purchase and the profit margin of each item. Using the above campaign, if you owned a car dealership you made lots of money selling four cars. But if you owned a flower shop, chances are you lost money because each sale of $20 bucks wouldn’t support your initial customer acquisition cost of $25. So, to figure out if your ad is profitable (and you should keep running it) what is your AVERAGE ORDER SIZE. And how much profit do you make on this sale, after you subtract the cost of goods? (There is another piece of the puzzle, call the lifetime value of a customer, and we’ll look at that in a moment.)

Now let’s enhance our campaign with a more clever marketing approach. Suppose you ask each caller for their name and address – so you can send them “Invitations” to the “Private Sales” you hold several times a year. 10 prospects fork over their name and address, and you mail them a post card each month (yearly cost, 12 times $1.00 = $12, times 10 customers = $120, + $50 for post cards = about $170 for the year’s campaign). With this campaign, four people come in initially, but over the course of the year six more people from this list come in and buy something. Now your customer acquisition cost is $17. The actual cost for these last six customers is less. That’s the value of having a database of prospects and customers.

What can you afford to spend to acquire each customer?

You need to know not only how many customers call or come in, but also what customers spend as an immediate direct result of the campaign. Also, you’ll need to know the annual value of a customer… and as long as we’re figuring, what is the LIFETIME VALUE of a customer or “LVC”. Good marketing can make a customer come in the first time, but after that – hey man, it’s up to you to serve up “good value” to make them come back.

Probably the best example of this concept of a customer’s annual value or lifetime value can be seen through a restaurant owner’s eyes. Patrons may spend only $30 on dinner each time they come in, but how many times a year do they eat in your restaurant? And for how many years do they stay customers? In our above example, our customer acquisition cost was $16 – which we may not have made in the first meal he ate at $30, but if the customer came in once a month for a year and spent $30 each time, our $16 acquisition cost was returned in 2 months, and we profited very well by serving him and his guest the other 10 meals throughout the rest of the year.

Knowing these statistics will allow you to figure out a budget for a cost-effective marketing plan to acquire customers.

Next time we’ll look at some additional campaign examples, along with a plethora of different LOCAL advertising options including cable TV, a deeper look at newspapers, direct mail coupon packs, direct mail in general (post cards, letters and self-mailers). Upcoming columns include using PR and establishing a public relations program for small businesses; and a few techniques such as media events, and private sales. We’ll also look at referrals and testimonials… plus whatever you can do to inexpensively make the phone ring and have people knock on your door…

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