MARKETING: ''Lazy' customers will turn ''a 180' on the 30/60/90 plan

July 17, 2003

Kamron Karington is a marketing specialist and former owner of two pizzerias. He is the author of "The Black Book: Your Guide to Creating Staggering Profits In Your Pizza Business."

Are sales declining? Do you need to turn things around fast?

Well, you'd never know it from the mind-numbing number of complicated theories out there, but are three ways only to increase your business. They are:

* Attract more customers.

* Entice them to spend more each time.

* Lead them to buy more often.

Most businesses expend the vast majority of their resources "beating the bushes" for new customers. They spend a fortune to make one sale, and then they move on.

That's a pity, because it costs seven times as much to get one new customer through the door than to get a previous customer to return.

The fact is, your existing customer

Kamron Karington

base is four or five times more likely to buy from you than a "cold" market, and the "lifetime value" of these customers is one of the greatest assets of your business.

One reason why pizza is such a wonderful business is because people who buy it, buy it all the time. It's not like the furniture business, where people buy every now and then.

Of all people who buy pizza...

... 40 percent buy three times per month.

... 27 percent buy twice a month.

... and 33 percent buy once a month.

Seventy-six percent of these people maintain their buying habits, meaning, if they buy twice a month, they most always buy twice a month.

Unfortunately, about 40 percent of all pizza buyers are not loyal to any one place.

So, guess what? If people maintain their buying habits, and they order at least once a month, it's a pretty good guess that if you don't see a customer for more than 30 days, he's gone! He's joined that 40 percent group of people who skip around.

Not lost forever

But, don't look at this as a negative, rather view it as a huge opportunity for you and your business. Why? Because most business owners never ever contact their existing customers -- let alone their lost customers.

The good news is getting "lazy" customers to come back is easy. Here's why.

It can easily cost you $20 to generate one new customer. But it will only cost you 25 cents to reactivate a "lazy" one. In fact, you can mail a postcard to each customer you have, every month of the year for only $4 each. And research proves that marketing to your own customers yields the absolute highest return-on-marketing dollars you will ever make.

Think about it: You've already cultivated a relationship with them, put in the time and money to get their attention, established credibility and closed that first sale. So the most difficult part by far -- not to mention the most expensive -- is over. Think of all the planning, advertising and promotional activity that goes into getting those initial sales, and then realize it's behind you.

Anyway, back to recapturing those lazy customers. Let's say you bring back just seven lapsed customers a month. And let's say each customer is worth $270 a year  to you (or $22.50 a month, which basically puts them in the "buys twice a month" group). That means bringing back 84 customers per year will bring an additional $22,680 in to your business on an annualized basis.

And how much does this $22,000 windfall cost you? Just $210 bucks! Mail 840 postcards at a cost of 25 cents each and you're out a whopping $210 for the year. That's a paltry $17.50 a month! And, if you only get a 10 percent response, you'll generate a stunning 11-fold -- 1080 percent -- return on your investment.

Put it to work

You must start doing this now! Right now!

If you have a POS, it's easy. Find out which customers are slipping away (remember, if you haven't seen them in 30 days, they're gone).

Let's say you run a query and find out that 45 customers who have ordered at least six times from you in the last three months, have not ordered from you in the last 30 days.

This should disturb you, right? Good customers who ordered twice a month have vanished from your radar screen. This means they moved, died or are getting pizza from somebody else -- none of which is good.

So you've got to act by sending 30-, 60- and 90-day postcards with the purpose of reactivating "lazy" customers.

Here's an example: Send a postcard for free cheese bread to anyone who hasn't ordered for 30 days. Then an offer a buy one, get one free deal to anyone who hasn't ordered for 60 days. And to anyone who hasn't ordered in 90 days, send an offer for a large three-topping pizza for $7.99, plus free breadsticks.

What's important to note here is you're giving discounts to a targeted, small percentage of customers to provide an incentive to order, and not just sending blanket discounts to everyone. Your "regulars" keep paying full price while you give your "lazy" customers a fair incentive to return.

Consider it: all this from mailing a postcard to one customer every month for an entire year for less than $4. Not bad at all.

45-Day postcard

Tired of licking stamps and peeling labels? Instead of the 30/60/90 program, you could mail a "very aggressive" offer -- basically the 90-day desperation offer -- at 45 days.

Here's a practical example of what can happen with such a program. You mail 100 postcards at a cost of $25. Twenty customers come back and spend average of $12 per order. You've generated $240 in business and it cost you 25 bucks and some free cheese bread. Based on a food cost of 28 percent, you clear about $173.

Now compare this to the 30-day deal a couple of paragraphs before: Mail 100 postcards with the "$7.99 free cheese bread" offer at a cost of $25. Thirty customers return and bring you gross sales of $239.70. After subtracting mailing costs of $25, and factoring in a 32 percent food cost, you net $165.

Now, while you would make $8 bucks less with the 45-day offer than the 30-day deal, the point is you've reactivated 50 percent more customers!

And, that's what these postcard offer programs are really all about -- getting customers back in the habit of buying from you.

Truth be known, the 45-day program is much less hassle than the 30/60/90 program -- but they both work well.

Case Study:

Tooele, Utah (population, 25,000) has one of the highest unemployment rates in the state. Yet, Chris Loomis, manager of the local Domino's Pizza there tells me sales there are booming! A few years ago sales hovered near $13,500 a week, but now they're pumping out $17,000 weeks. And this is against stiff competition from Pizza Hut and Papa John's, who have both started delivering into a Domino's stronghold.

What's the secret? They mail 30/60/90 day postcards every week. Most offers on the cards are "FREE," add-on items, such as a two-liter soft drink or an order of Cinna Stix with a pizza purchase. The cards simply say, "Haven't heard from you in a while ..." and have the offer on the back.

Start multiplying the number of times your customers buy from you. And in the process, you'll make them more loyal to you -- and more resistant to your competitors -- with every sale!

Working your existing customer base is the lowest-cost, highest-return marketing investment you can ever make.

* MARKETING: Upselling is both an art and a mind game
* MARKETING: How to make your advertising 2,400% more profitable

Topics: Financial Management , Marketing , Operations Management

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