“Discount Marketing” Done Right

In last week’s post, I told the story of one local small business owner who has been frustrated by his poor attempts to build his business with a strategy of attracting new customers at a discount.

I’ve received a lot of feedback and questions about how to execute such a strategy properly, so here goes…

First, let me repeat that offering a deep discount – or even taking a slight loss – in order to attract a new customer can be a very smart and profitable way to build a business. And it’s a strategy that can work in virtually every kind of business.

But let me also repeat: There are a few very specific “rules” that must be followed for the business owner to avoid the frustration and financial failure of doing it wrong.

Rule #1: Know Your Math

Before you do a deep-discount offer – or any advertising or marketing, for that matter – you absolutely MUST know “the numbers” of your business. And the most important number you need to know is your average Lifetime Customer Value. That will tell you how much you can happily invest to get a customer (*HINT: The higher that number, the easier it will be for you to trounce your competition in the all-important battle for new customers).

Rule #2: Target Only New Customers

Deep discount offers, such as Groupons, should only be targeted to prospects – and not current customers. Yes, of course some of your current customers are going to find your deep discount offers, but you shouldn’t make it easy for them to do so by drawing attention to them in your emails or newsletters that go to your current customers.

Rule #3: Have A Strong “Back-End” System In Place

Sadly, about 98% of small business owners concentrate the vast majority of their time, energy and money trying to profit from the very first sale they make to a new customer, but then failing to execute a long-term plan to maximize the revenue and profit from every customer they get. They believe that the purpose of getting a customer is to make a sale.

But the sharpest, most successful, small minority of business owners knows that the purpose of making a sale is to gain a customer. Then, once the new customer is acquired, multiple systems are put into motion in order to maximize the long-term value of each and every customer acquired by building life-long relationships with them.

Rule #4: Have The Right Mindset

Instead of viewing your deep discount new customer acquisition campaign as an income generator, look at it as if you’re “getting paid to advertise.”

Let’s use Groupon as an example (and not just because we’re proud that one of the fastest-growing companies in the world is a product of our great city of Chicago!)…

Whenever you do a Groupon, you will have to (a) craft an irresistible, no-brainer, deep discount offer; and then (b) settle for only about 40-45% of the revenue your new customers pay to get it (with Groupon keeping the rest).

In other words, while you will get some cash in return for selling your Groupons, you cannot for one second consider that the reason to do the Groupon. Instead, view your Groupon as a fantastic way to build brand awareness and acquire a lot of prospects in a VERY short time, without having to invest hard-earned out-of-pocket dollars as you would if you did a yellow pages, newspaper, radio or other “traditional” ad instead.

Then, some of these new customers will stick with you for the long-term (especially if you’ve followed Rule #3 above), thereby making your deep discount campaign a big winner.

(*NOTE: That is a very healthy way to view ALL of your marketing and advertising to prospects!)

Rule #5: Promote Your Deep Discount Offer Like Crazy!

Whether you do a Groupon, or use any other medium for your deep discount new customer acquisition offer, don’t just stop there and put all the pressure and responsibility on that one medium to make or break your success. Instead, make sure you ramp up a strong supporting multi-media promotional campaign.

*NOTE: Remember, as discussed in Rule #2 above, NOT to promote it to your current customers by using email or your newsletter.

Here are just a few of the ways you SHOULD promote your offer:

• Post it to your business’ Facebook Fanpage
• Have all of your employees post it to their Facebook pages
• Leverage your relationships with other business owners and entrepreneurs to have them promote your offer to their lists and/or in their places of business

Rule #6: Have A Well-Rounded Marketing System

You can’t put all your eggs in one basket by depending only on a Groupon – or any other single new customer acquisition strategy – to be a miracle-worker for your business. The smart business owner looks at this as just one weapon in his or her arsenal of business-building strategies, and is constantly implementing new customer-acquisition methods.

Bottom-line: Follow these six Rules for a successful “deep discount” new customer acquisition campaign, and you’ll be raving about the results of using such a strategy – instead of being just another cautionary tale of failure and frustration!