Wednesday, July 25, 2012

Return on Investment

In June 2011 we launched a generous Birthday Club.  We offered our customers a $10 gift certificate on their birthday and a chance to ring the Birthday Bell - a thirty-two pound brass bell hanging on a pole in the middle of our store.

We were looking for three things from this promotion.  Traffic, Smiles, and Word of Mouth.

Traffic
Prior to the launch of the Birthday Club we had been in a traffic decline due to the economics of this region and severe decline in youth population in our area (almost 10% drop in children under 18 since 2000).  Since the Birthday Club we have had five months with increased traffic, even as our population base continues to decline.  

Smiles
We take a picture of each kid after ringing the bell.  The current month gets posted on the wall.  The previous months are cataloged in a posterboard-sized book that customers are always looking through.  Those smiles are evident.  Some of the most telling smiles, though, are the comments on my Facebook page.  We asked how the Birthday Club was doing and had a dozen comments in a couple minutes all raving about it.

Word of Mouth
Some of that is happening right now on Facebook.  Some of that is happening as people take pictures with their own cameras and send them to loved ones and friends.  Some of that is happening when people talk about their plans... "Oh. we're going to the Toy House today to spend our Birthday Gift Certificate."

So far so good.

But at What Cost? 
So far year-to-date we have redeemed over 53% of the coupons we sent out.  The average ticket has been much higher than projected.  Our profit margin on those sales even after the costs of printing/mailing/redeeming the gift certificate is 32% compared to 48% on non-birthday gift certificate sales.  

So the big question is... Is the 16%  in lost revenue on those sales worth it?  

The Birthday Club generates Traffic, Smiles, and Word-of-Mouth, oh yeah, and Sales.  Would a 16% off coupon generate the same?   

Yeah, some might say there is a better way for me to spend those dollars to increase my sales.  And they would be right... if sales were the goal.  
The most important element for me is the long-term investment in the Smiles. 
Since I am in toys, my customer base is always shifting.  The kids shopping today will take a short break until they have kids of their own.  The parents shopping today will take a short break until they become grandparents.  The Birthday Club is one way I invest in their return, first by giving them an incentive to return even in the "non-toy" years and second, by creating long-lasting memories that will bring them back when the time is right (and still generate that WOM as they talk about me to their friends, even when they aren't in a buying phase.)


-Phil Wrzesinski
www.PhilsForum.com

PS  The key to any promotion is to know exactly what you hope to accomplish.  Then measure your results based on your goal.  That is the only way to really know the Return on Investment of any advertising campaign.  The best method I have for determining your goal for anything is to finish the following statement...
"This will be a success if..."

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