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Marketing Dollars: Expense or Profit?
Here is a little nugget from our marketing experience that has worked well in generating more business and higher profits.
Now this may come as a surprise to many of you, but your marketing dollars should be a profit center with measurable results to the bottom line, and not a cost of doing business.
“But” you say, “I have to pay for marketing and advertising materials. How is this not an expense against sales?”
OK, let me give you an example. Let’s say you want to start a loyalty program that will accomplish two things: 1. You want to retain the customers you now have, thereby getting more of their money, and 2. You want to attract new customers.
To achieve these two goals let’s say you decide to issue a loyalty card to your customers with the idea that they will come back again in order to take advantage of some special offer(s) only available to repeat customers as they present their cards with new purchases. Obviously, you are going to have to pay for the cards, and probably some advertising materials about your program.
Your first instinct is to give away as many cards to your customers as you can as they come to you for business. But this is exactly what you should not do. This approach only guarantees you a cost rather than generating a profit with the same dollars.
To turn your “costs” for setting up this program into “profits,” instead of giving a free card to your customers you should charge them something for it. This will do two things: 1. By selling the cards (for some reasonable amount) say $5 or $10 each, you will have more than paid for the cost of the cards and accompanying advertising piece explaining the program, but you will also have planted in the minds of your customers that they are receiving something of “value”. Anything acquired for free is perceived as having no value. So by selling the cards, which when presented during future purchases provide some additional benefit such as a substantial discount, or other premium not available to all customers, you have made a profit on the distribution of the cards, AND you have given your customers an incentive to “come back” to your business as repeat customers.
Voila! With loyalty marketing, though less measurable in terms of how many new customers you have attracted, you have turned your marketing dollars into a profit center. It’s human nature to be attracted to good deals, and most people are on the lookout for them. You can at least be assured that loyalty marketing will over time attract some new customers to your business, even if only by word of mouth.
In our next nugget we’ll share another idea on how to create more profits with your marketing dollars.
Tags: loyalty marketing, marketing