Tuesday, July 1, 2008

It's a great premise.

So why do so many people buy into the notion that these Events are good for business, that they create future customers?

Because the premise is totally believable. It completely makes sense.

I just happen to believe, from experience, that this is one of those cases where the common sense instinct is wrong.

Most businesses downtown probably go along to get along. Some may do well, many others are so new they don't know yet.

It seems to me that every small business opens with certain assumptions, which, if not completely wrong at least have ambivalent results.

1.) Advertising creates new customers.

2.) Discounting increases sales.

3.) All promotions are good.

Obviously, advertising is sometimes effective, but I would submit that when it's not effective, which is probably most of the time, it's a waste of money.

I've talked about discounting, before. How even a 20% drop in price reduces profits by half, and rarely results in double the sales.

Some promotions are a distraction. Whatever money you make, is more than subtracted by the time, space and effort you might have put into it.

The longer I'm in business, the more I weed out these inessential activities, the better I do. I say put the money in inventory and let the product speak for itself. Concentrate on dealing with the customer, one on one. Let your location be your advertising. (Busy foot traffic area, or a busy drive by area.)

I think the same mentality that leads a person to open a business is what leads them to believing in promotions above all else. Instead of promotions just being the icing on the cake.

3 comments:

bruce said...

See the news on Ernesto's in today's BULL?

Duncan McGeary said...

I can't remember the name of the French restaurant, but that's where Linda and I had our Wedding Dinner.

Sad.

Interesting again how it's the more established restaurants calling it quits first.

Jeff said...

"So why do so many people buy into the notion that these Events are good for business, that they create future customers?"

Ahh, Duncan, you're just going to incite your neighbors with this. They'll accuse you of blogging too much, and staying in your store too much. And then, some guy will walk in your store give you another, "There he is, Chicken Little" behind your back, while the wife follows with: "Yep, there he is, Chicken Little." Perhaps a curse was put on you that prevents others from believing your predictions.