Gift Certificates Beat Coupons

June 11, 2002

Randy Blair is Director of Improvement at Pizza and Pipes in San Jose, Calif.

Waiting in line today at Boston Market, a woman told me she'd noticed the Pizza and Pipes logo on my van and my shirt. We chatted briefly, and then went to our tables, but then, while we were eating, I got up and went out to my van and got a $10 gift certificate and gave it to her.

After she thanked me profusely, I wound up having an "Ah ha!" moment. I thought, now I've got a new customer who's had a memorable experience about Pizza and Pipes -- and she's never even been in my restaurant! Isn't that cool?

Experiences like that have made me a big proponent of giving out gift certificates rather than coupons, and here's why.

1. For me, coupons don't have near the perceived value of gift certificates, and they're less likely to be redeemed. Therefore, assuming you do a great job when customers come in to redeem their gift certificates, you stand to gain many loyal customers by giving them out.

Also, when you break it out, the cost of a $10 certificate also becomes pretty small: about $2.50 in product and a few cents for the actual certificate.

You say you don't like giving food away? If so, ask yourself these questions:

Would you pay $3 in cash for one new customer?

Would you pay $300 in cash for 100 new customers?

How much do loyal customers spend?

If you're a sharp operator, you answered "yes," "yes," and "a whole lot."

The truth is, most companies spend far more than $3 per new customer on ineffective advertising. Restaurants are very personal choices for customers, so get out there and be personable with them.

2. I strongly suggest you place your logo on your car, your spouse's car and the car of anybody who will let you. Let that become a mobile billboard hundreds or thousands of people will see every day, and consider adding the words, "Ask me for a free gift certificate," followed by an e-mail address. You could have a lot of fun throwing wadded up gift certificates into other cars while stopped at red lights. And you will be passing out gift certificates (read, "getting new customers") wherever you go. If your e-mail is memorable, people will e-mail you requests for gift certificates.

3. Wherever fitting, wear clothing bearing your logo. It's a great conversation starter, and can lead to finding new customers. I'm currently looking for some really cool shirts, maybe some that look like a giant piece of cheese or a big pizza. I want to put my logo on the back and "THE BIG CHEESE" on the front. Can't you see the conversation that would start?

"So you're the big cheese, huh?"

"Yep, you betcha. Take this $10 gift certificate and bring your family to my restaurant for some free food."

"Wow, you must be "THE BIG CHEESE!"

4. Find a starving crowd and then pass out your gift certificates to them. We've all paid high prices for cheap food at the ball park, the circus and the movies. So why not tap into that market with your lower prices and better food?

This year we're going to try out an arrangement with the local minor league baseball team. At the ballpark, the staff there will pass out certificates for a free small pizza or $10 off a large pizza (one per, family per visit, dine-in only). At the beginning of the game, the PA announcer will tell the fans that the certificates are good for redemption at Pizza and Pipes if the team wins by a shutout or blow out (which could happen about 10-12 times per season). Come the ninth inning, if it appears the home team is going to win in such fashion, the PA announcer reminds the fans again of the deal.

My cost to do that is about $1,000 (which I spread over six months), plus $2.50 in food product for all offers redeemed. My direct return on that is unknown, but I can calculate an educated guess.

Based on customer interviews we've done, most of folks would redeem the 10 off certificate and then spend an average of $15 more. Average attendance at those games is about 1,500, divided by average group of three customers equals 500 potential visits per game. Multiply that by 10 occurrences (games), and you've got 5,000 potential visits.

But let's say only 1,000 families (20 percent) respond and spend only $10 beyond their $10 certificate. That's $10,000 in top-line revenue. To get to the bottom line, subtract the following: $1,000 advertising cost, $2,500 for the promotional food product cost ($2.50 each offer), and the regular food cost of 25 percent ($2,500).

I still wind up with a $4,000 profit.

Since customers can redeem those certificates from April to October, that's about 143 more visits per month or five per day -- all during my slow time from June 15 to Sept. 15.

Of course some of the families will be repeat visitors, so let's adjust the number down to only 60 new families per month, or about 15 per week. That's still a lot of potential loyal customers and lots of potential future revenue for a small investment.

* Hint: For any promotion, remember to track returns so you can change or eliminate less successful ones and amplify and improve the most successful ones.

Topics: Commentary , Independent Operation

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