Marketing: Opportunity vs. Insensitivity

The nation watched as Hurricane Sandy wreaked havoc in the Northeast and impacted our cultural, economic, and media capitol, New York City. The effects of Sandy on businesses and individuals are still being tallied, but early evaluation of the marketing response was generally positive. Examples of businesses demonstrating sensitivity to the plight of their customers have been acknowledged such as banks waiving fees and companies including Allstate, American Express, Delta, and Jet Blue have been commended for the ways in which they have reached out to customers and the affected areas.

At the same time, there have been brands that not only failed to seize the opportunity to demonstrate genuine concern for customers and others, but they decided Hurricane Sandy provided a tie-in for an impromptu promotion. American Apparel was skewered on social media for its ill-timed email marketing promotion touting a “Sandy Sale”that offered free shipping as an incentive to shop “in case you’re bored at home.”

While American Apparel surely meant no offense (at least one would hope a business would not go out of its way to use marketing resources to offend people), the unintended consequence of a Sandy Sale was creating perceptions that the company was insensitive to the implications of the storm and generally oblivious to the world around them. American Apparel’s CEO defended the tactic, touting that it generated tens of thousands of dollars in sales. And, he said criticism of the promotion was limited to about 25 bloggers who were responsible for stirring the masses.

I cringed at American Apparel’s promotion because it made me think of a blog post I wrote in 2010 (see “Make Any Occasion a Selling Opportunity”). In that piece, it was implied that selling opportunities are created within the boundaries of good taste and common sense. But, as I often remind my students, marketers do not always stay within those boundaries. I look forward to seeing what American Apparel will do to help with Hurricane Sandy relief efforts. Hopefully, it will be a better strategic fit with socially responsible business practices than its Sandy Sale.

Marketing Daily – “Most Marketers Lauded for Reactions to Sandy”

Winning with Social Coupons

Consumers flocked to coupon offers in the past two years as the recession put a dent in our buying power. But, coupons really are not for us; they are ultimately for the gain of marketers that offer them. This small but significant point has been lost on many businesses that have experimented with social couponing services like Groupon. Many businesses have gotten burned because the revenue hit taken and expenses incurred to offer deep discounts to attract customers is not always recouped.

A recent study from Rice University found that nearly one-third of businesses running an offer through Groupon say that lost money on their promotion. More than 40% of businesses surveyed said they would not run an offer on Groupon again. These figures are alarming for the future of social couponing. The medium holds great promise because information about coupon offers can be transmitted through permission marketing and word-of-mouth, channels that are much more cost efficient than traditional channels used to deliver coupons.

Rather than shy away from social coupons because of a bad experience or because of hearing about bad experiences other businesses have had, marketers should take the following steps to manage a social coupon campaign:
1. Do the Math – The expenses associated with a coupon offer can be calculated on a per unit basis when evaluating an opportunity. Revenue sharing with a service like Groupon, cost of goods sold or given away, and any additional labor costs to handle increased demand must be considered when making a decision to participate in social couponing. Realistically, Return on Investment should be based on incremental profit, not revenues. What is the additional profit a promotion brings in once all expenses are deducted? Social coupon offers can be capped; set a maximum number of offers to sell to manage profitability of the promotion.

2. Prepare Employees – One of the problems businesses have had with demand generated by a Groupon offer is that employees can become overmatched in meeting the influx of customers. And, in the case of service businesses, many employees have found that Groupon customers are not always the best tippers, basing tips on the deeply discounted price rather than regular price. Companies should take steps to increase service coverage, train employees on handling service encounters with new customers attracted by a coupon , and monitoring employee satisfaction during peak business periods.

3.Think Long-Term – A coupon can get customers in the door, but other factors will determine if they return. A great customer experience, which is highly related to #2, can demonstrate the value offered and persuade customers to return without the incentive of a coupon. If employees can be persuaded to view these customers more like a new friend than a nuisance, the initial service encounter can set the stage for repeat customer visits. Also, businesses should seize the opportunity of a visit by first-time customers to invite them to expand the relationship by opting in for permission-based marketing in the form of email or by friending a brand in social media.

Social coupons may fall under the category of “spend money to make money,” but when properly executed and managed they should not lose money and hopefully set the stage for developing repeat customers.

Promo – “Groupon Social Coupons Unprofitable for One-Third of Marketers: Study”

Should Customer Acquisition be Painful?

Retailers and service providers use coupons to attract new customers to their businesses. The all important trial that an incentive like a coupon can provide is crucial for creating relationships. A new genre of couponing that has emerged is known as “social couponing,” driven by social media’s capability to spread information quickly from person to person. The leader in social couponing today is Groupon, the Chicago-based company that has become a $350 million dollar company in annual revenue in less than two years. The basic premise of Groupon is that a retailer or service provider offers a coupon at a deep discount (e.g., $10 worth of food at a restaurant for $5) as a carrot to create traffic. Groupon’s cut is up to 50% of the coupon sales. Most Groupon offers are local in scope, but it executed its first nationwide offer this week for Gap.

Deep discounting like that required by Groupon can succeed in adding new customers and revenues. My family found a great restaurant in Nashville, The Local Taco, which we would have never visited had it not been for a Groupon offer. We have been back once at regular price since using our Groupon, and we will go back again in the future. But, for all of the stories like mine, there are many other stories of failure to establish customer connection that will bring them back for future visits without the deep discount.

Businesses considering a Groupon program should be prepared to hold their noses while giving away about 75% in the transaction. Groupon may bring customers in to visit, but the experience they have once they arrive and marketers’ efforts to engage them (e.g., encourage sign up to receive emails to continue the relationship) will ultimately determine if the short term pain actually leads to long term gain.

Your Customers, Your Sales Reps

Wouldn’t it be nice to generate additional revenues without paying salespeople a dime? Simple, recruit customers to sell for you. Clothing retailer Men’s Wearhouse has done just that as it prepares for the busy prom season. The company has created a Prom Reps program in which prom customers are transformed into word-of-mouth marketers. Their job is to promote Men’s Wearhouse as the place to rent tuxes for prom. The payoff? If a rep is responsible for 10 tux rentals, his tux is free. Men’s Wearhouse even provides reps the capability to track their performance online.

This idea is outstanding! Word-of-mouth can be a powerful channel for reaching teenage boys, particularly for a purchase that many of them may have never made before. In the absence of prior experience, prospective renters are likely to place heavy weight on recommendations for tux rental outlets from people whom they know. Can you think of ways to enlist your customers to help promote your company? If you explore this approach, be prepared to answer the question that your customers would almost certainly ask: What’s in it for me? In the case of Men’s Wearhouse, the prom reps are typically going to be high school students who may be thrilled if they are spared the outlay for tux rental.

If one of my sons was attending prom this year, I would strongly encourage him to go to work for Men’s Wearhouse… at least for prom season!

DMNews – Men’s Wearhouse launches tuxedo campaign for prom season –

When Is It OK to Give Away Your Product?

Denny’s Grand Slam Breakfast giveaway featured in Super Bowl commercials attracted about 2 million visitors to restaurants across the country. The costs of the promotion include production of commercials, buying air time during the Super Bowl, and of course, the food that was given away. The total costs of such a promotion raise the logical question “Is it worth it?” The answer is “maybe.”

Product giveaway promotions are a good tactic in some cases. Conditions under which this type of promotion is most likely to be effective include:

1. Little brand awareness exists – Sampling is a great way to let a consumer try a product risk-free. If the product is deemed to possess value, consumers may buy it. If not, at least you succeeded in achieving product trial.

2. Entice customers to return to the brand – Customers who have bought previously but for some reason have not made a purchase for a certain period of time may still be good prospects. An offer of a free item may rekindle interest in your brand.

3. The door is opened for future marketing opportunities – Despite all of the hype about Denny’s free breakfast promotion, an even better promotion it is running is a free meal offer (burger and fries) for people who join Denny’s rewards program. More than 300,000 people have taken advantage of the offer already, with a goal of 500,000 by mid-February. Adding this many people to a customer database creates marketing opportunities throughout the year to people who have some level of interest with the brand.

Product giveaway promotions can be costly, and if there are not strategic reasons for such a promotion (e.g., increased brand awareness, greater brand consideration, more customers in database, higher sales) it could be an expensive mistake. If planned with an eye toward future marketing efforts with the target audience, product giveaways can be the inspiration for strengthening relationships with customers.

Make Rewards Programs Simple, Relevant

Starbucks is streamlining its Rewards program in December, consolidating the two different programs it has now (one free, one fee-based) into a single program with tiered rewards. Good move on Starbucks’ part, a move that is long overdue. Each program offered certain perks such as the fee-based Gold program’s 2 hours of free wi-fi internet access per visit. At $25 per year, Starbucks realized $17.5 million from Gold card membership fees between November 2008-March 2009. With results like that, what was the motivation to consolidate the programs?

Reward programs should be rewarding to customers, not marketers! I posed a challenge to students in my Promotion class earlier this semester, asking them to critique Starbucks’ two-card program. Although they had been in class less than 3 weeks at the time, they already understood something about promotion: incentives should be structured so that they entice customers to take action. Students were nearly unanimous in their belief that Starbucks’ program did little to drive sales.

Customer reward programs are valuable for maintaining brand loyalty and even increasing customers’ purchase volume. Their impact can be maximized by keeping them simple and providing rewards that customers value and can access conveniently. I recall a rewards program for Baja Fresh restaurant in which I was enrolled. it gave a $5 discount for every $100 spent with the restaurant. A decent reward, except one had to go online and enter a 20-digit card number (no exaggeration – I counted) to access the reward. I thought that was bad, but it got worse when Baja Fresh ended the program. Not coincidentally, my visits have dropped substantially.

Marketing Daily – “Starbucks Reward Change Signals Strategy Shift”

Affluent People Like Deals, Too… Maybe That’s Why They’re Affluent!

The country’s economic recession tightened the purse strings of many households. In some cases it was out of necessity as job layoffs or reductions meant less money coming in. In other cases, consumers were being more cautious with expenditures knowing that there was much economic pain being felt by other people. In response to the recession and accompanying consumer pullback, a surge in coupon usage and offers was observed. Consumers sought to save money, and marketers wanted to offer incentives to nudge buyers to take action.

It is tempting to generalize that coupon usage is a practice found mainly in middle and lower income households. After all, they need to save money more than high income households. It turns out that such an assumption is incorrect. A recent study done by Harris Interactive found that a higher percentage of persons with household income of $100,000-$149,999 reported using coupons from newspapers, Internet, and magazines than persons with incomes below $100,000. The most interesting finding was the use of the Internet as a source for obtaining coupons. Two groups of affluent consumers, incomes of $100,000-$149,999 and $150,000-plus, reported greater use of online coupons than the overall population (51% and 53%, respectively versus 40% overall).

Marketers targeting affluent segments should realize that just because these customers have more money does not mean they are less interested in saving money or receiving added benefits via coupon offers. It seems there is greater potential in targeting this audience with coupons in terms of coupon redemption as well as buying power. In particular, these consumers look to the Web for incentives to buy. Affluents are affluent for a reason: they understand spending less money than you take in builds weatlth. Thus, it is not surprising that many of them are coupon users. Respond to them with offers that compel them to buy!

eMarketer – “Web Coupons a Hit for the Affluent”

Jet Blue’s All-You-Can-Jet Promotion: Gimmick or New Trend?

Jet Blue had its brand splashed across media outlets nationwide this week when it announced a promotion that allows passengers to fly the airline unlimited times during a 30-day period for $599 (restrictions apply, of course). The promotion, which is set up for flights between September 8 through October 8, give buyers the flexibility of scheduling flights as little as 3 days in advance. Customers must take action quickly; the last day to buy the plan is August 21st.

Is Jet Blue’s promotion the marketing gimmick of the month, or does it signal the beginning of a new trend in marketing promotions? Cynics would go with the former, questioning whether Jet Blue is aiming to score publicity quickly and inexpensively. I believe (and hope) there are longer-term strategic objectives for the promotion. Sure, the promotion gives Jet Blue brand exposure via the numerous media outlets that covered the story. It also puts the Jet Blue brand name in the minds of consumers, both frequent fliers and the occasional traveler. A sales promotion that enables customers to use and evaluate the product more than once, as this promotion is structured to do, can be effective for persuading consumers to consider your brand.

Most importantly, the promotion could persuade would be travelers to book on Jet Blue. This possibility is important for attracting first time Jet Blue customers. Also, a promotion such as this one could entice ex-customers to give the airline another try. This fact cannot be overstated given the very public customer service failures Jet Blue has experienced in recent years. Ultimately, it is not the one-price promotion that will win customers for Jet Blue. It is the experience passengers have from the time they book a flight until the time they touch down at their destination. If the experience does not meet expectations, it will take more than a unique promotion to win back those customers.

NPR – “Jet Blue Offers $599 ‘All You Can Jet’ Pass”

Promotion Clunkers Hurt Brands

Word that the government’s Cash for Clunkers program has run out of money contains a lesson for businesses. The program, which provides financial incentives to consumers to trade low gas mileage cars for more fuel efficient models, is well intended to reduce our dependence on oil. The $1 billion available has been snatched up quickly by eager consumers. The desire was to have $4 billion to fund the program, and it is looking like every dollar of that amount would have been used if allocated.

So, what’s the problem here? We often encounter offers that suggest “hurry- quantities are limited- act now!” The problem is that a promotion poorly implemented can disappoint customers and lead to dissatisfaction with the business offering the deal. Remember KFC’s botched grilled chicken giveaway this spring? The idea was brilliant, the execution was weak. The promotion had to be halted after a few days, leading to a great deal of negative publicity in the media and angry customers in stores. On top of that, KFC spent additional money mailing coupons to consumers for a free dinner to make good on the promotion.

The strategy behind sales promotions is relatively easy to understand. If a marketer can determine what incentives will move the target market to take action, it becomes a matter of creating awareness of the promotion. The more challenging part it seems is in the execution of promotions. Has enough money been budgeted to allow all customers that want to participate to do so (the answer is a definite “No” in the Cash for Clunkers program)? If the promotion is executed at retail, do employees understand the program and how to process the promotion for customers? Is additional inventory needed? Additional customer service help?

When a promotion goes very wrong like the KFC grilled chicken fiasco, one wonders if the brains behind the promotion ever spent any time on the front lines serving customers or if they fully understand the challenges faced. Great promotions can positively impact sales and generate excitement among customers, if implementation issues are thoroughly considered. Conversely, a promotion gone awry has the opposite effect of what was intended and efforts must be made to undo the damage to the brand.

When Customers Dress Like Cows… and Like It!

When is asking your customers to dress like a cow not humiliating, but actually rewarding? When you are Chick-fil-A and you are honoring cows with a “Cow Appreciation Day.” That is exactly what is taking place at Chick-fil-A restaurants today. Customers that come dressed cow-like will receive a free meal, while patrons that may not have full cow gear but have a cow accessory (whatever that might be) can still get a free entree. Chick-fil-A even makes it easy for customers to get a cow costume by making available a printable costume kit at

This promotion might seem a bit odd, but it is a winner on several fronts. It is a great tie-in with Chick-fil-A’s “Eat More Chikin” campaign that has run for several years. It is a playful promotion that allows Chick-fil-A and its customers to have a fun experience. The promotion reinforces the humorous brand associations Chick-fil-A has built over the years. On top of these benefits, the promotion is cost effective as much of the communication for it has occurred in-store, via word-of-mouth, and through online channels. Brand publicity is already accruing as media outlets were covering Cow Appreciation Day in advance.

Chick-fil-A is a very unique brand. On one hand, it holds strong organizational values that include a policy of all locations being closed on Sundays. On the other hand, it does not take itself too seriously, delivering a consistent customer experience while having a good time. So, if you have time today celebrate cows by visiting Chick-fil-A… lunch is on them!

Ad Age – “Want to Boost Sales? Tell Consumers to Dress Like Cows”