Sunday, January 15, 2012

First the store, then the promotion.

I can see that I need to explain myself better on my assertion that "promotions" cannot save your business over the long run.

If you don't mind, I'm going to use the 80/20 rule for illustrative purposes.

I will make a bold statement -- that 80% of the customers who walk in your door have not been affected by your promotional efforts. Seriously. They've never heard your ad, they don't care that you had an author signing last week, they missed that newspaper article on you.

No, they are there because they are regulars, semi-regulars, browsers, tourists, whatever.

They look around your store and if you have something they want at a decent price they buy. Or not.

I'll take that even further. Of the 20% of the customers who walk in your door who HAVE been affected by your promotional efforts, 80% of them won't buy anything because of those efforts.

So what is that? 20% of 20% is about 4% of your sales.

Not insignificant, I suppose. You have to weigh the time, energy, money, space, and all the other elements that go into a promotion to decide if it's worth pursuing. If so, then go ahead by all means. As long as you know the payoff.

O.K. The 20/80 rule is convenient. So say you go crazy with promotions, and a full 30% of your customers are affected by your promotional efforts, and a full 30% of them will buy something. So 30% of 30% brings it up to 9% of your sales. Again, you've been promoting like crazy ("6000 author signings!) so you have to weigh the costs versus the results.

In my case, I'd say that less than 10% have ever heard any promotional efforts on my part, and almost none of them will buy just because they read a story in the Bulletin or read my blog or whatever.

This is NOT the impression you get reading stories about retail. You'd think that promotional efforts are the most important part of being in business. Image is everything, according to this way of thinking.

But I think it's putting the cart before the horse. It's the equivalent of the Dress for Success. Or driving a fancy car to prove to your clients how successful you are.

I think true successes get there by being efficient and hardworking and honest and experienced and -- on and on.

Otherwise, you're just an empty suit. A nice empty suit, in a nice, debt-ridden car.

It seems to me that most of the stories about business I read are about "image". Almost all the business blogs I see are about "image": how to market yourself online, or with advertising and all that.

And I'm saying it just way too overblown. To the effect that it attracts people who buy that entire message and they are simply unprepared to run a real business. They want to have a successful image without putting in the fundamentals to make it a successful business. And they think they get there by promoting, burnishing their image, joining the clubs, dressing nice --whatever.

Again, most of my customers have never read my blog, or seen an article in paper. I've spent thousands of dollars on advertising before, and had a 1% hit rate when I ask people in the door. I've had months, even years, of a fad driven clientele -- way beyond my normal numbers of customers -- who then disappeared when the fad was over.

So promote your store by all means. Just don't mistake that for success.

3 comments:

Duncan McGeary said...

So for bookstores, it's gone nuts.

It's ALL about the image -- the "Third Place", the events, the comfy couches and coffee, the appealing to "local", the "love us because we love books" thing.

Tell you what; all you have to do is mention that your aren't making money and everyone will tell you what to do.

Basically:
1.) Lower prices. Have a Sale!
2.) Advertise!
3.) Promote, promote, promote.

Usually, if a business is in trouble, none of these things will turn it around -- they might even hurt.

Fundamentals, my friends. Product, and service, and selection, and price, and reliability, and location, and presentation and and and......

Duncan McGeary said...

You also have to understand that a lot of people are trying to make money off you for their "promotional" expertise.

Trying to get you to read their book, their blog, buy their ads, hire them to even coordinate and so on.

I'm sure most of them believe it -- but as a business owner, you need to be more hardheaded about it. Actually weigh the results, you know?

Duncan McGeary said...

So let's go back to the 4% number. That isn't peanuts. Compounded yearly, it can become huge.

BUT and it's a very big BUT! --
You have to weigh the effort, and believe me, it's stressful and time-consuming, and costly, and space eating and so on.

Burnout is a real danger. Just running store, manning the store, will be harder than most employed jobs. You'll be working more than 40 hours at the beginning, probably much more.

So promoting is on top of that.

So it's a huge danger.

I decided that keeping my workload to a manageable level kept me a little more efficient and let me focus on the fundamentals a bit more....

And guess what? That 4% growth rate might happen anyway, without working yourself into an early grave.