Small Businesses Can do Customer Focused Promotions

Many small business owners see the big box stores doing promotions and wish they could do that. They can do them but differently and quite often more effective. It only takes some careful thought and partnering.

Promotions

Sales promotion spending has grown dramatically in recent years because a good planned out promotion drives people into the store and can generate purchases. In today’s very competitive environment, sometimes a promotion gives the edge to a retailer and creates an opportunity to make a life-long customer once he gets into the store.

How to Get New Customers

If a store’s product mix is in the mature life cycle stage, then only growth can come from stealing market share (customers) from a competitor. If the store’s mix is commodity with few distinctive features, then the marketing of all store’s is relatively the same.  Finally, with America coming out of its worst recession in decades, spenders are slowly opening their purses and are looking for reasons to buy – hence a promotion.

Sales promotions are not meant to generate long term behavior changes but rather short term increases in sales.   This increase is caused by the change in the price/value relationship a consumer sees in a product. For example, a customer sees a lower price for the same value product, this can cause a change in decision on which to purchase very quickly.

Small Business Efficient Promotions Strategies

How can a small business owner effectively do promotions? When asked that question in both

my classes and counseling sessions, I ask questions back.  I often start by “who is the target audience you are trying to reach?” “Tell me more about them beyond just age, gender, marital status etc.- tell me why they buy this product?” These and other questions get the owner thinking more in depth about why do a promotion.  

The Effect of Promotions

Once we have more knowledge of the audience, the promotion can be planned to better appeal to them.  For example, I once had a client in my advertising career, who wanted to generate more traffic parents with children.  After doing some research, I came up with the grand prize of two electric race cars to be given away. We sought out partners and the local Coke bottler signed on and became the main sponsor.  They got displays at the front of the store and end aisle and the car prominently placed on the top of the product.  The results were overwhelming.  The store sold more Coke in two weeks than they had sold in months and definitely noticed an increase in families in the store. Coke was happy because they were selling more to the store than they had recent months since Pepsi had agreed to higher slotting fees and gotten more shelf space.

As local store owner, a great place to start planning is with your local media partners. They have many opportunities to help you plan promotions and can be very efficient in reaching your target audience. Also, my office is always willing to help small business owners plan out their events.  Your local Cape Girardeau County SBTDC can be reached by contacting Richard Proffer at 573-243-3581 or emailing him at profferrd@missouri.edu. 

Business Planning 101

Developing a business plan is sometimes a daunting task and hard work by business owners. However, business planning can help advance any company or small business forward. Why write a business plan, you may ask, it provides entrepreneurs a powerful tool for the foundation and goals for their business. There are many reasons to why writing a business plan is essential to any owner. Scott Pietreface, owner of Fumatore di Sigaro Premier Lounge and Cigar Shoppe located in Cape Girardeau Mo., said that, “All businesses should have a business plan because this allows entrepreneurs to brainstorm ideas that they would like to implement how to accomplish them.”

 Importance of a Business Plan

Think of a business plan as a blueprint for a home. What can help keep the house up and steady? What makes a blueprint for a house successful? As for businesses, what can help a business stay steady and up and running? Also, how can a business increase profit? What can help make a business a successful one? The answer is preparation and developing a business plan. Business plans are excellent tools for implementing the company’s vision, mission, and goals to investors, customers, and even employees. Also, to give any business any chance of success, writing a business plan will guarantee that business owners pay attention to financial details, such a budgeting. According to Rieva Lesonksy, author of A Business Plan Doubles

Your Chances for Success, says the findings of a new survey, “The study indicated that the type of entrepreneur who completes a business plan is more likely to run a successful business.” Pietreface spent two and a half years developing a thorough business plan. He said, “I always had a vision of what I wanted the business to look like, but didn’t know how to get there.” The business plan laid everything out for Scott and for many other business entrepreneurs.

Competitors

With every company, comes a competitor, and establishing a business plan will provide business owners with strategies to differentiate their products.  This allows them to better market their business to customers better than the competitor can. Also, business planning is a critical time process because it allows entrepreneurs to test “what-if” situations and create back-up plans just in case the first plan turns out a little differently than what was expected. Pietreface included, “Fail to plan, then you plan to fail.” The business plan can show you what your business’s strengths and weaknesses are and this forces the entrepreneurs to create a timeline of events that must happen. Also, plans can help provide organization tactics for business owners. Nonetheless, business plans will help entrepreneurs survive over time and have a constructive impact to their business.

Your local small business technology development center in Jackson, MO is always ready to help any future or present entrepreneur plan for their start up or growth of the business idea.  The Jackson center serves the I-55 corridor from Ste. Genevieve to Pemiscot counties and

includes Bollinger, Madison, Iron, St. Francois and Washington counties. The center is also part of a statewide network so the resources extend beyond Southeast Missouri. For assistance just call 573-243-3581 and ask for Richard Proffer. 

THE THREE PRICING STRATEGIES FOR SMALL BUSINESS OWNERS

One of the questions that comes up in my counseling sessions most frequently is “what can I charge for this?”  After a few discussions and cost gathering, we arrive at a true cost.  Honestly, there are only three pricing strategies a small business owner can use in any situation.  These strategies are: every day low price (EDLP), high price high value and market parity.

The EDLP Method

EDLP is the strategy typically adopted by the big discount chains where they advertise the lowest price. Here the plan is to achieve high sales with low profit. It is a strategy to grow market share, remain competitive or restrict new competition. As a small business owner though, it is a hard one to maintain as the owner may develop a downward spiral on pricing and creating lower and lower profit margins. Main street businesses typically do not have the resources to take on the big chain stores so this strategy is typically not the one used. It does not mean the business can’t temporarily do a sales event where they might have the lowest price but sustaining that price point would be difficult to do. A small business could help control costs by joining a cooperative to increase buying power, work with suppliers to create special events where their products are prominently featured in the store and in advertising or take on new lines with marketing support from the supplier. A price sensitive shopper is the best target for this pricing strategy as they have the lowest expectations for service.

Higher Price, Higher Value Method

The second method is higher price high value when compared to the competition. Here the small business owner can certainly compete because of the high degree of value that can be added to the purchase. In this situation the store is constantly seeking ways to improve the quality of the

experience when shopping, buying and using the purchased product. When compared to a big chain, the customer usually feels they are getting taken care of better, able to get answers to questions from knowledgeable employees who will take the time necessary or the service after the sale.  Most people state they are willing to pay more if they are assured of a quality experience, customer service and support after the sale. This strategy often creates the belief products purchased at this price are better than those at lower prices as they are made with better materials or ingredients, last longer or picked at the best time for taste. Also if a store handles a product with a short life like fresh fish, then a higher price may be charged to account for the lifespan. A store can also use this pricing strategy if they are on the front end of a new product roll out and get it before other stores begin to carry it.

 Same Market, Same Product, Same Price Method

The final strategy is market parity where pricing is held to relatively the same throughout the market for the same product.  With this strategy, the stores offer the same product with little differences in service, price, or quality. This customer is not as price sensitive as the EDLP shopper but is not usually prepared to pay for extras like service after the sale. The key for this pricing strategy to exist is for there to be little difference in the marketplace between all the competitors. Once one competitor breaks rank, customers tend to gravitate towards that business.

The Floor

Pricing is also controlled internally by two factors – ceiling and floor. The floor is where the business adds up all the costs related to the product and says “I have to have this much just to cover my costs.” The old adage “you will make it up in volume” is not true because once a business starts losing money on one product it rarely can buy enough to lower costs to make money at that price.  This floor is typically the breakeven point for the business.

The Ceiling

The ceiling is the highest price the market can bear or the customers will pay. A business owner following the high price high value strategy needs to make sure the value being added to the product or service justifies the price or sales will dwindle. A retailer can test pricing to find the ceiling but should always be aware of what is happening the marketplace.

If a business owner would like more information on pricing strategies feel free to contact Richard Proffer at the University of Missouri Extension Center Small Business Technology Development Center in Jackson, MO.  He can be reached at 573-243-3581 or email at profferrd@missouri.edu. 

Coupons Still a Solid Small Business Sales Strategy

Coupons are the most common sales promotional tool used by businesses. Their usage continues to grow annually as they provide a way to save money for the consumer while the retailer uses them as a way to grow and retain sales.  The coupon has been consistently proven to be an effective tool in business.

 Coupon Use by the Numbers

They are a cost efficient way to generate sales because literally everyone in the buying market uses them at some time.  Here are a few statistics that prove the usage of coupons in the marketplace from 2016 year to date analysis.

1)      Over half of consumers use a coupon at least one of every four purchases (RetailMe Not).

2)      45.1% of Millennials use coupons (CCG Catalyst).

3)       Valassis reports

a.       88% of affluent shoppers use coupons from the mail

b.      81% find print coupons before shopping

c.       77% search for deals in store circulars.

4)      Print and online are the most frequently use mediums to search for incentives

5)      85% of consumers look for coupons (non-grocery) prior to visiting a retailer (Retail MeNot).

 Who Uses Coupons

There are myths as who uses a coupon to shop.  Typically, women are the biggest users of coupons at 82% while men are at 56%.  The difference is related to the idea that women do most of the shopping but as times continue to change, I believe men will use coupons more and more. Interesting as heavy coupon users (5+ coupons used weekly) women and men are very close with a four percentage point spread.  Roughly 70% of all households use coupons and of the heavy user households it is about 30%. In age brackets, adults 18-24, 66% have used coupons (a group many retailers feel do not use coupons at all). With coupon usage continuing to climb as the age group ages to 61+ at 80% usage. Missouri households tend to use coupons at 81% while heavy users are 16%, so the practice is very active here in our state. (Information for these statistics is from the Manufacturers Coupon Control Center).

How to Get Your Coupons Out There

As a retailer, you have many options to choose from for coupon delivery.  Some, like the FSI, are used mainly by national companies. For our local businesses, the options are direct mail, ROP newspaper, local magazines, handouts and electronic. Each has its own advantages and disadvantages and to get the best results the retailer needs to evaluate them against his/her marketing objectives for the coupon.

How to Attract with Coupons

Another question is how much should the coupon be for? According to NCH Promotional Services, consumers require a coupon value of 23 cents before they would consider using one. For a product they have not tried before, a value of 44 cents was required. The survey pointed out that by increasing the value did not necessarily mean a higher redemption rate. 

So as a local small business, the idea of couponing should be considered as part of your promotional marketing mix.  It can deliver an audience ready to buy.  If there are questions about this article or would like to set up a time to discuss your business marketing strategies, feel free to contact Richard Proffer, University of Missouri Extension Business Development Specialist at 573-243-3581 or profferrd@missouri.edu. 

BRANDING YOUR LOCAL BUSINESS

As we think of a company what do we remember about it? The logo, the slogan, the price or the experience we have with the store or product? For most shoppers, it is the experience they have they remember the most and for the longest. This is because it helpful in solving a need the shopper had at the time or a pleasant impulse purchase.

For stores to attract customers, they need to provide solutions to the desired customer’s needs and desires.  This self-created image allows the business to stand out and be noticed by the most desired customers and to attract customers who have just entered the marketplace for the store’s product mix.

The image or brand is often described as the promise made to customers about what and how they will experience when they shop the store.  This image helps in creating the identity that people can relate to while shopping. This philosophy must then run all through the operation to be successful at every customer touchpoint.  For example, Disney has a strong family entertainment philosophy and their branding portrays families, fun, clean environments and strong customer service.  This idea extends to the employees also where they are called “cast members” instead employees. 

The benefits created from a strong brand are helpful in growing a business. According to the Kauffman Foundation, “businesses with strong brands often see these benefits: 1) enjoy a higher perceived value of their products or services, 2) maintain higher margins over their competitors, 3) create loyal customers who don’t switch easily, 4) cross-sell other products and services easier and 5) develop new products and quicker.

Some questions a business owner should ask regarding how to communicate the brand to customers and prospects are: 1) What can my customers expect from doing business with me?, 2) Why will customers choose my business over my competitors?, 3) What are the core values of my business?, and 4) How do I want my customers to describe my business to others?

Once those answers are developed, then the owner can look at how to tell the story of the business.  That story needs to contain the mission statement and core values of the business in a way that clearly tells why the business exists and relates to the customers. That message needs to be included in all touchpoints with customers, employees, suppliers, etc. so all users see a consistent message.

None of this happens overnight but rather over time spent thinking and rethinking.  Often it helps to spend time with a person skilled in this area to help the business owners really get the message down pat and ready to be used daily.  Your local University of Missouri Extension Business Development Specialist can help you at no charge in this process.  The owner just needs to call Richard Proffer at 573-243-3581 or email him at profferrd@missouri.edu. 

Increasing Sales Through Events

When I was in the cable ad sales business, I helped small businesses plan promotions (sweepstakes or contests) to drive customers into their stores.  One in particular stands out to me.  It was called “Mountain of Coke®” and a local grocery store chain in Lansing, MI.  We worked with the local distributor to provide a tall display of Coca-Cola® in the front of the store in a shape of a mountain with a motorized car on the top.  People would register to win the car on a given day. This activity along with the store’s agreement to special pricing, sold more product that month then the store had ever sold. So promotions do work if planned out carefully.

Sweepstakes Vs. Contest

What is a sweepstakes versus a contest promotion? The former has the winner chosen purely by chance – their name is drawn from a list of people who registered and no purchase required. The later has the winner chosen by demonstrating some sort of skill like writing an essay on how the person would use the car and purchase could be required to win.

Why Use a Sweepstake?

Sweepstakes pull in a larger number of registrations due to the simplicity of being able to win. According to Manufacturers Coupon Control Center, sweepstakes attract more than ten times the number of entrants than contests.  Sweepstakes are best used to attract a large audience to your business or product whereas contests are used to appeal to a more targeted audience (hence the skill element).

Either tactic can create excitement around your business, event or product and provide a burst of short term sales.  It could also help undecided buyers purchase the product or shop your business for the first time. Also the business’s image can be reinforced to current customers as the place to purchase solutions to their needs or wants.

As a small business owner, it is not advised to go out and start running your own sweepstakes or contests.  There are legal factors that need to be addressed on the federal, state and sometimes local levels.  By partnering with your local media salesperson to plan such an event, you can get them to help in this area or contact your own attorney to get legal advice. 

My grocery client was very happy with the results. His goal of having a burst in sales over a specific time period was achieved and exceeded his expectations. All small business owners should be encouraged to try this marketing tactic to drive sales and extend brand awareness.  If interested, feel free to contact me at 573-243-3581 or email me at profferrd@missouri.edu.  

10 Do’s for Website Promotion

The internet has become a household tool that everyone knows how to use it seems. Even first graders know how to wiz around on the web faster than I do sometimes. But while it is now a common place part of our lives, as a small business owner, do we effectively use it to benefit your own business?

Your Website

Just because you have a website does not mean people (your potential customers) will see it. Yes, it can make your small business look as capable as a large business but the people still have to see it. The need to promote your website is just as important the budget you developed to get it built.  So once the gate is built, you have to develop ways to keep it open for your target audience to find it and either go shopping on it or learn more about your small business.  You have got to promote the website to make this happen.

 Promotion of Your Website

To make your website promotion effective, a small business owner needs to decide why do you want to be on the web anyway? Some reasons come to mind immediately – to communicate to staff or customers. Another one is to share your knowledge about a topic so you appear to be a source of information for people seeking that information. Thirdly, it is a way to show your business’s personality so people know what to expect when they go in. Or it is one method customer’s can shop your store. Hopefully, you know your reasons for wanting to be on the web and use them as a guide in developing your website.

 Website Efficiency

Understand for a website to be effective, you need to constantly adopt and adapt it to what is happening in the marketplace. Understanding what is working is essential to a successful website promotion.  If it works, keep it on the site and tie it your other promotional activities. If it is not,

then adapt it by trying new ideas.  You should always be aware of the new techniques or ideas that exist in your industry and be willing to give them a try.

 Ten Commandments to Follow

A book called “Streetwise Low Cost Web Site Promotion” suggests the following 10 Commandments of website Promotion.

1)      You need to make a commitment to planning and doing website promotion so you can stay on top of your competitors.

2)      Know your visitors so you can make sure your website delivers their wants and needs and drive traffic to your business or create online sales.

3)      Be open to learning new things to help you promote your website.

4)      Don’t be afraid to look at competitor’s websites and borrow their techniques if you see a need for them.

5)      Be like Gumby, the ‘80’s TV character, always willing to go with the times (when it makes sense).

6)      Make changes to your website based on feedback from your visitors and users.

7)      Use the analytics from your search engines to help make decisions.

8)      Your decisions on website promotion will be based on their ROI not personal favorites.

9)      Take at least 1 hour per day to work on website promotion.

10)  Do not spam.

If you have questions about your website marketing or general business questions, feel free to contact Richard Proffer, business development specialist for the University of Missouri Extension at 573-243-3581 or email him at profferrd@missouri.edu.