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[FEATURE STORY]
Bright Ideas
Growing your business through promotions
By Maura Keller
Lou Maiellano |
Promotions. They are the classic sticky wicket. If you do them right, you will thrive. If not, they can make you lose money and potential customers. And for many businesses, promotions—whether provided by distributors or created on their own—can be one of their biggest headaches. The good news? Using the right mix of your own creative promotions and those provided by distributors and manufacturers can expand your clientele and improve your bottom line.
Key ingredient in marketing mix
Marketing, advertising and promotions are vital components of most companies’ business plans, and tobacco retailers are no exception. Having the right promotional mix within a retail environment and what shape it takes is top of mind for many specialty retailers. In today’s competitive marketplace, tobacco retailers must compete to survive. And yet, some store owners believe that simply putting a few cardboard promotional placards in the front window is their best marketing tool. Others would like to see stronger promotions with more impact so that they can have more sales and move more tobacco products.
As part of the marketing mix, promotions can make a critical contribution to a company’s ability to achieve its objectives. And, in fact, one of the most difficult problems facing many businesses is establishing a promotional strategy that is profitable, logical and competitive.
“The single most effective way to build your store’s sales is by getting more transactions from your current customers,” says Bob Negen, owner of WhizBang! Training and author of “Marketing Your Retail Store in the Internet Age.” “In other words, you want people to shop with you more often. Promotions are a great way to get more people into your store, and they are a great relationship-building tool, particularly for tobacco dealers.”
Experts agree that to stay competitive and profitable, you must determine your marketing objectives, which will result in different promotional strategies. For example, your company’s promotional objective might be one (or all) of the following: to increase sales, to increase your customer base, to maximize long-term profits, to stay competitive and/or to establish a stronger market position.
You also need to understand your competition by keeping abreast of what the other tobacco retailers in your area are doing in terms of promotions. Find out what is working for them and what is not. Then create your own strategy.
“A common mistake that retailers make with promotions is that they think the promotion has to be big and powerful and that it needs to make a lot of money,” Negen says. “They feel that each promotion needs to be highly profitable, standing alone.”
But Negen stresses that a promotion has benefits at several different levels. One is that the mere act of inviting someone to a promotion is a relationship-building gesture. “Even if they don’t come to it, it doesn’t mean that it had no value,” Negen says. “The simple act of inviting them is a quality touch. And for independent retailers, the name of the game is having a high quantity of ‘quality touches.’ So the mere fact that you are doing it and inviting someone is positive.”
The second thing that people need to understand is that, even if you break even on the promotion, the people who came to the promotional event think that it was a very high-quality event.
“Let’s say you have a cigar tasting and only six or seven people showed up,” Negen says. “Some people will say, ‘It wasn’t a success because there wasn’t a large turnout,’ or ‘It wasn’t a success because I barely paid for the wine.’ My caution to that is this: While it may not have been the success you had hoped it would be, it was a success. The fact that you did it says something. It says that you did it, you learned from it, and you can do it better the next time.”
Bob Negen and his whistling balloon helicopter promotion entertained retailers and got them motivated in his “Explode Your Sales” talk at the 2006 Retail Tobacco Dealers of America convention in Las Vegas. |
In for the long haul
But simply deploying a series of promotions alone isn’t enough. Although strategic use of promotions has proven to be a good system for some retailers, it is important that it is not the quick fix. Instead it should be a coordinated effort between their marketing and sales functions to support more profitability and increase their customer base.
“You need to create a succinct plan for every promotion that you do,” says Lou Maiellano, president of TAZ Marketing and Consulting Group. “You need to develop a system that will establish both short- and long-term goals as they relate to each promotion, regardless of if you think they were successful or not.”
Indeed. Negen hears a lot of retailers say, “I tried it and it didn’t work.” And he often responds, “You tried it and it didn’t work as well as you wanted it to that time,’” Negen says. “If you are a tobacco dealer and you don’t have a regular schedule of promotions, you are really fighting an uphill battle. The name of the game in hobby-driven businesses, like tobacco—the only way you are going to be successful—is if you stoke the hobby. You feed the passion. You create aficionados. The way you do that is to get them in your store with other aficionados and expert staff and teach them and educate them. You want to fuel the passion, fuel the flame—and promotions are absolutely the most cost-effective way to do it. “
Partners in Progress
While individual promotions can work effectively, partnering with distributors and manufacturers on promotions is also paramount to any retail business.
“One of the things I look at is that promotions help you develop partnerships with your partners, who also have goals,” Maiellano says. “They are looking for ways to grow their business. If you can partner with your partners, it is a win-win situation and very helpful.”
Promotions used in conjunction with distributors and manufacturers are important for several reasons, Maiellano says. “First of all, promotions bring attention to a category,” he says. “You want people to be aware of a category and specific product, either an old, stable product or something that is a new product.” You may need to do promotions to stay competitive, for example, putting items on sale to remain competitive.
“Promotions also introduce new items to a category, give customers value, create excitement around a product or category, and, hopefully, increase sales and profits,” Maiellano says.
An event like the cigar-rolling parties that CF Dominicana Cigar Co. and Cigar Catering® offer free to their retailers is an excellent way to reward current customers and draw in new ones. |
But tobacco retailers (and their distribution and marketing partners) often face difficulty with certain promotions, particularly surrounding cigarette promotions. “If I were in a fair-trade state, where the tax department is watching how you promote cigarettes, I can’t sell cigarettes and give a lighter away unless it is funded by the manufacturer,” Maiellano says. “In today’s tobacco marketplace, there is significant monitoring of who is paying for promotions and that can create challenges for everyone involved.”
Ideas that work
So what are some marketing and promotional techniques that work? Whatever the method, a good promotional strategy is a balancing act between targeting frequency, reach and timing. The decisions you make about these three factors will determine how your promotional campaign is weighed.
“It’s also about proper communication,” Maiellano says. “You have to communicate what the deal is and have a clear plan of execution. You have to have a mechanism that evaluates your performance, and the performance of your employees. You also want to have a plan in place. The majority of small businesses don’t plan. You need to put together a plan and communicate that plan to those that execute it.”
For regular customers, adding value to their purchase is a key promotional technique. Whether you use discounts on products or free products for bringing new patrons to the store, it’s up to you to make your frequent customers feel really special.
“Some of the most successful promotions are those where there is a bundling of something,” Maiellano says. “Multi-pack deals, such as ‘buy two, get one free,’ are very popular with consumers.”
When working with distributors and manufacturers on their specific promotions, Maiellano recommends retailers have a checklist in hand. “Too often, promotions are sent to stores and end up in the back room, never being displayed. The retailer may simply rely on the register to ring up, ‘buy one, get one free,’ rather than spend the time and energy promoting the promotion.
But, Maiellano says, retailers should clearly identify which promotions are best suited to their retail environment. And they need to develop a system of how to effectively utilize the promotional materials received from the distributors and manufacturers.
Of course, zeroing in on the potential audience most likely to respond to your promotions is essential. This is achieved through choice of media, position or placement in the media, along with the messages your promotion delivers.
“For independent retailers, e-mail marketing has become critical,” Negen says. “If you start an e-mail database, you can create a regularly scheduled e-mail blast, such as a weekly cigar update. Then you have an opportunity to do small promotions regularly and promote the promotions. If you don’t do e-mail marketing, you don’t have very much leverage.”
Here’s why. Let’s say you want to do a big cigar-tasting party but you don’t do e-mail marketing. You have to do all the work associated with the promotion: designing, printing, labeling and mailing the postcards. “When you do e-mail marketing, it may cost you the time of maintaining the list, but for mere pennies you can promote your promotion several times,” Negen says. “E-mail marketing is a key component for anyone who wants to create successful promotions.”
Marketing professionals agree that timing a promotional campaign is an art. Marketing is 99 percent good timing—you might synchronize promotions to reinforce a product launch or to back up a direct mail or e-mail campaign. According to the experts, promotions that appear out of nowhere with nothing else to support them usually do not generate the desired results.
Making the most of your efforts
So how often should you do promotions? That depends on who you ask, but experts agree that quality, not quantity counts.
“You want to do promotions as often as possible. If you can have a weekly tasting, absolutely do it. For example, you could have a cigar of the week,” Negen says. “A lot of people look to promotions to get new customers. It is tough when you have a tight niche like tobacco retailers face. If I owned a cigar store, I would do virtually no traditional advertising. I would do all of my new-customer acquisitions through promotions to my current customers, with such incentive strategies as ‘bring a friend.’ Traditional advertising is so expensive. I would build intensely loyal customers and when I had promotions, I would provide gift certificates for people to give to their friends.”
You can also develop cross-promotional events that will drive traffic into your store. Let’s say you decide to have a tasting of a new cigar line. Consider partnering with a charity, whereby a certain percentage of the sales goes back to that charity. Not only can you promote the event yourself through various channels, but the charity can also help promote the event.
Negen recommends that you strategically send out several promotional e-mails. The first would be to announce the event, the second to remind people to put it on their calendars, the third e-mail would remind them that it is in two days, and the final e-mail could be an after-event ‘thank you’ to those who attended, with photos attached. The people who didn’t attend will be able to see, firsthand, the fun that was had and make a point to attend the next event.
“These simple, cost-effective techniques can really drive people into your store,” Negen says.
One very cost-effective way Maiellano recommends retailers promote their products is through their key assets—their employees.
“You want every promotion to be loudly and clearly communicated to your customers,” Maiellano says. “Use employees to communicate it. They are walking, talking billboards for your store. Not only do you want to build promotions that are easy for the employees to communicate, but also incorporate those promotions on their uniforms, hats, or buttons that they wear.”
“After the promotion is over, evaluate your profitability and the performance of that promotion. Also evaluate the execution of the promotion and how well your employees sold the promotion to your customers,” Maiellano says.
Of course, one thing we know from tapping the heads of consumers is that promotions alone are rarely the primary motivator in the purchasing decision. That’s true whether you’re in a high-, medium-, or low-price niche, a mass marketer, or specialty retailer. So, whether you’re selling high-end cigars or discount cigarettes, the purchasing decision is part of a complex formula rooted in how customers know and understand your store and the products and services you offer in terms of both quality and confidence.
That doesn’t mean your promotional strategy shouldn’t be continually evolving. Rather, striving to take the continuing pulse of your marketplace, creating your own scenario of probable future changes in the market, and revising your promotional strategy accordingly will help maximize your profits.
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