It’s Time To Splash The Cash!

Boosting Profits with a free gift

If we’re going to have one business life, wouldn’t it be nice if our interactions with customers went beyond being just transactional? What if I buy 10 chairs from you every year. Wouldn’t it be nice if you spent money on me at some point, just like you would with a friend or relative? Of course, the difference between the customer and the friends and relatives is, the customer is giving you money. They’re probably not. So why do we treat the non-buyers better?

You can justify this from the ethical perspective or the business perspective. Either will work.

Ethically it just seems a nice thing to do and the right thing to do. If we’re going to have one business life, wouldn’t it be nice if our interactions with customers went beyond being just transactional?

But if you run the numbers, it works from the business angle too. I’m assuming that when Laithwaites recently sent me some wine they either didn’t pay for the wine (because of the obvious benefit to the winemaker) or they paid at cost. That just leaves the postage. Whatever the total, the cost to the company compared to what I’ve paid them over the years, in addition to the increased sales this is likely to generate for them, will without a doubt make this ‘free’ for them. It’s a nice thing to do but they’re not doing it out of the goodness of their hearts. They’re doing it to make money — and so they should.

“Most Entrepreneurs won’t do something like this because of the cost. They’re wrong and daft. The ethical answer to their cost concern is ‘who cares.’ The business answer is ‘there isn’t a cost, it’s effectively free because of the money it will make you.’”

One of the beauties of this type of campaign is that if you structure it right, the perceived value to the person sending it is much higher than the actual cost. A bottle of wine has a high perceived value, much higher than the cost to the company for sending it.

So, have a think about what you can send to your customers that has high perceived value but low cost for you. It could be a product or service you sell which has high value but low fixed cost. It could be something you buy in bulk for all of your good customers with big savings. There have been several occasions where we’ve sent our best customers a great book as a gift. We’ve bought them direct from the publisher or author normally at a discount of 50% or more.

If you want to be really smart, you can also source gifts for free from unrelated businesses. This works for everyone but is particularly powerful for local businesses. Here’s how it works:

When you go to the beauty salon you get a voucher for a free meal at the local restaurant. The restaurant provides the meal for free because they know the long-term value of each new customer. So the salon owner is giving customers something of high value at zero cost to them. If you’re a customer of the restaurant, you get the gift of a free session at the beauty salon. Everyone is happy. No money is exchanging hands. But lots of new customers are being acquired. You can skyrocket a local business using this strategy.

As for sending gifts out of the blue, you can do it just because you feel like doing it. But I strongly recommend getting your customers’ birthdays and sending them birthday gifts. Nobody does it and it’s very effective.

You don’t have to send all your customers the same gift. I don’t think Laithwaites sent the free wine to all of their customers. They almost certainly sent it to their multi buyers (what can I say — lockdown was stressful!). So feel free to send different things to different customers.

“In most businesses, 5% or 10% or 20% of customers account for 80% of profits. For some, 5% of customers bring in 95% of profits. If that’s you, send those top customers expensive stuff. It’s worth it.’”

If there’s one rule underpinning all this it’s ‘don’t be tight.’ Far too many business owners are far too unwilling to invest in acquiring and keeping customers. They won’t invest in having an amazing website, they won’t invest in Google etc and then when they get the customer, they won’t invest in nurturing, keeping them and turning them into raving fans. That unwillingness to invest is actually catastrophic in the long term and there’s nothing I or anyone else can do to fix a business being driven with that approach. If you’ve learned that way in the past, now would be a very good time to knock it on the head and start splashing some cash.

One final thought on my bottle of wine that’s easy to miss. Sending it to me comes under the category of ‘Direct Mail.’ Not only should you be using Direct Mail to communicate with your customers, but when you do, there are no rules on what you can send. Get creative. You will be rewarded.