Want a hundred new customers?

By Dave Ostrander

Every couple of years our friends in Washington DC. decide it's time to increase minimum wage, by about fifty cents an hour. With a stroke of a pen I lost approximately fifteen thousand dollars a year. Here's the math. My annual payroll was about one hundred and fifty thousand dollars a year. My average wage was $5.25 an hour. One half on my crew is full time, old grizzlies, and the other half are rookies, still learning the ropes. If I give a rookie two bumps in wages, as required by law, I must also give my veterans a similar increase, to keep wage parity. I concluded that payroll would increase roughly 10% over the previous year. After the hidden costs of matching social security, unemployment and workmen's compensation insurance I was certain I would have to generate at least fifteen thousand dollars, in net profit, in the upcoming year just to break even with the prior year. If I couldn't accomplish this, the shortfall would come from my personal income. This was not an option. A close friend of mine, Jim Hancock, has a very true saying. We've spent well over two hundred days together doing pizza seminars all over the country. He's from North Carolina and talks with that slow southern drawl that commands attention. The truism goes like this. "If ya' always do what ya' always done, ya' always get what ya' always got." Translation from southern. How can you expect your situation to change if you don't change something? History always repeats itself.

This challenge turned out to be a formidable one. If you've ever been to one of my seminars you have heard me describe the job description of a restaurateur. What we do for a living is solve problems. Our days of making, baking and taking are history. Sure we'll step in, during a rush, and show them our stuff but our first and foremost responsibility to our operation, crew and family is doing what no others can do. That simply is fixing every single problem that arises, short term as well as long term.

I know of only five ways to generate more bottom line profits.

  • Raise prices across the menu.
  • Reduce food cost. Use less food, or purchase inferior less costly products.
  • Reduce overhead, operating costs.
  • Create a larger customer base, at your competitors expense.
  • Get your existing customer base to purchase more frequently.

I scrutinized the first three items and didn't discover any major areas of savings. My market is very price sensitive, item one is out. I refuse to degrade my pizza. My supplier operates on a low margin, in turn for my loyalty. Item two is also out. We run a very tight ship. Item five is on going and is never ending. It was slightly promising but probably wouldn't be the silver bullet solution we needed immediately. Being a Streetfighter and Guerrilla Marketer, I focused on item four. This option would allow me to get out of the box and unleash my creative marketing juices, focusing on my competition. I needed a low cost, high impact quick, solution. I decided to get pro-active, rather than re-active to the pending crisis.

I know a lot of people in my town, however my employees know a lot more, I'm not above asking my crew for help. It empowers them and gives them a sense of pride when we pull of a marketing coup together. This was one of those times. After all, their paychecks were on the line too. I decided to announce my plans and solicit help at the next voluntary, mandatory staff meeting. Typically this is the first Saturday of every month, 10am. be their or be square. It lasts exactly one hour and they punch the time clock. After the normal stuff, employee of the month, POP stories (pick on people), how we did in the prior month, etc. Etc. The stage was almost set. I asked them to raise their hand if they wanted a raise. Almost everybody raised his or her hand. The ones who didn't, thought it was a trick question, they know me and are slightly skeptical, or the Mountain Dew hadn't kicked in yet. I informed them that they all were getting a raise in a couple of weeks, compliments of the government. They cheered! I then asked them if they wanted another raise in the fall. This time they all raised their hands. The caffeine was kicking in. I then preached my sermon on where the money comes from and the limited options all entrepreneurs share. I flatly told them that the restaurant would not be able to afford the mandated raise, let alone another one in six months. I felt like Scrooge. They thought I was Scrooge. Then I dropped the magic word, unless. Unless you might help me get past this problem. I had their attention. It was time to pass out, the magical Employee Bounce Back Certificates. Each and every one of my twenty plus staffers was given a packet of ten of these cards.

These, credit card sized, heavy stock cards allows any employee to give a friend or acquaintance a fifty percent discount on their next pizza purchase. This is a high liability promotion. Half off gets a lot of attention. I wanted a lot of attention. I wanted the cards to be turned in. I intentionally left two blank, fill in lines on the card. The first was for name of the customer and the second was for the name of the employee. I urged them to pass out as many of these cards as humanly possible in the next thirty days. I informed them that these cards were not designed or meant for existing customers. We were already meeting the needs of our existing customers. I asked them to only pass them out to non-customers. I knew they were asking themselves the question, "What's in it for me?" "Why should I hand these out, at the risk of being rejected?" A hundred-dollar bill got their attention and answered all of their questions. I passed it around the big table. They all touched it and smiled. I announced that one of them would be the proud owner of this baby in a mere thirty days. "I'm going to thumbtack it to the wall of my office, and the person that gives out the most of these certificates that are redeemed in the next month wins it." "That's why I left room for your signature. It'll make it easy to keep track of the returns," "Oh, by the way, all contests have rules and this one only has a couple.

Rules of the Game

  • You may not pass them out while you are on the time clock, or on restaurant property. This will be done on your time.
  • You may not give one to an ex employee or relative.
  • You may pass them out only to non-customers, one per household. Defined; if they haven't ordered in over six weeks.
  • When the card is redeemed, either at the cash register or at their door, the person will be cordially asked to print their name, address and phone number on the blank backside of the card. We would like to send them more preferred customer discounts certificates in the future. This step is a must for tracking purposes.
  • You must personally hand out the certificates. One at a time. Hopefully with a testimonial, lauding the qualities of Big Dave's, and promising them that they will be impressed at the service and taste, guaranteed. Do not give a stack of signed cards to your Grandmother to hand out, for you, to her girlfriends at the senior center.
  • If you forget any of the above mentioned rules, and are found out, five of your cards will be ripped up. Don't risk losing the big money by taking short cuts.

Before the meeting was adjourned I restated the intention of the promotion. To sample as many new people as possible in the next thirty days. Allowing them to compare our pizza with any other pizza at a huge price reduction. I also provided them with a few pick up lines. "Do you like pizza? Where do you buy pizza? You know I've worked at Big Dave's for three years. If you come in next Friday night I'll personally make your pizza. It will knock your socks off. Could you use a card like this?" Marketing is very similar to getting first dates. Candlelight, wine and roses are not uncommon because you are trying to impress your sweetheart. After the tenth date it may be a beer and a burger. The relationship has been established and reality sets in. I know from experience that most contests and promotions start on fire and lose momentum in a few weeks. To get around this natural law of behavior I sweetened the pot. "I have four twenty dollar bills. I'll be tracking the certificates on a weekly basis. If you are the weekly leader I'll give you one." "That's five ways to win." "Besides if you have a measly three turned in, you're name will go in the hat and well select another twenty from the non grand prize winners." Let's remember that I promise to give the traditional Fall raise if we pull this off as a team, and reach the rest of our goals. Any more questions just ask. Let's go get 'em! Take no prisoners!

The meeting adjourned promptly at 11am. We took in our first certificate at 11:10AM. Big Dave's Platoon had hit the streets running! My lips curled in a twisted smile knowing I had created a band of Guerrilla Pizza Mercenaries, wrecking havoc on the enemy and creating friends and customers for life. I savored the thought of doing the body count every night at closing.

The Results

The final body count surprised even me! Three hundred and fifty six Bounce Back Certificates had been redeemed in thirty days. The fifty-percent we charged the new customer covered my food and labor cost. I didn't make any money on the pizza but didn't lose any money either. I broke even. Any yo-yo can give away food at half price, including me. The true test would be how many of them would return to pay full price in the future? One hundred eighty seven did! We tracked the new customers, by name and phone number for six weeks. If they returned to purchase from us more than four times in six weeks we counted them as a regular, loyal customer. On average a loyal regular customer spends, conservatively, five hundred dollars a year. Every promotion we run must pass the Return on Investment Acid Test. I hope all of your promotions are analyzed in a similar fashion. All marketing promotions must be measurable and goals set out in advance. Remember my goal was increasing sales ninety thousand dollars in the next twelve months.

The Math

Associated Costs
Printing of cards $40.00
Cash to employees $200.00
Thank you mailers $112.00
Total Costs $362.00

New income;
187 new customers X $500.00 = $93,500.00
This promotion had a $250.00 To $1.00 Return on investment (ROI).

We have run this very successful promotion twice a year for the last six years. We have modified the prizes from cash to things like concert tickets, paid days off, CD collections, and a neon Pepsi clock. We kept these all in budget. According to the newspapers we're in for another minimum wage increase in the near future. What are going to do about it? By the way our sales went up an additional $25,000 that year.

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