Can Bums Be Loyal Customers? Or, Should You Give Your Product Away? Three Principles and the Strategic Question
by Vince Skolny via @GrowDemand
When the new Steak N Shake opened on Third Street Promenade in Santa Monica last year, it did so with a promotion: The first 100 customers in the door would get free hamburgers for a year!
You can almost hear the conversation behind that decision, can’t you?
“Think about it! These people will want to have lunch at Steak and Shake all the time because they get it for free! And you know they will bring their families and co-workers with them! It will be packed in here all year!”
It is packed, but that’s not why.
Too often, big marketing ideas sound great to those coming up with them but have nothing to do with your market, your customers, or reality.
Who Are Your Customers?
Third Street Promenade is primarily a tourist spot, not a local spot. Appropriately, tourists, not locals, are going to comprise the vast majority of Steak N Shake’s business.
That raises an obvious question: Does it even make sense to run a free burgers all year promotion?
Furthermore, Santa Monica is an affluent place.
The actual local shopping areas have things like gourmet food stores and restaurants, boutique clothing shops and art galleries, and high end salons and eyelash spas. Really. They do nothing but eyelash jobs (whatever those entail) and they thrive.
Now consider whether typical Santa Monicans are going to venture from those areas into a tourist destination to claim free hamburgers from Steak N Shake? Highly unlikely. It’s even less likely that tourists would do so.
The promotion was ill conceived from the get go because Steak and Shake did not consider who its customers were and who they were not.
Who Are You Actually Attracting?
The next question to ask, as I discussed last week, is who are you actually going to attract? It is vital to think through the unintended consequences of giving your product away. Steak N Shake apparently did not.
If you’re at all familiar with Santa Monica culture, you probably have a pretty good idea what happened: Bums camped out overnight and swarmed the grand opening to get the free stuff.
Really, they should have seen that coming. But they did not. So, instead of a grand opening success story making news, Steak and Shake was left with something closer to a PR fiasco, answering local reporters questions about the turnout of bums to claim their free food: The promotion is for everybody, they assured.
Of course, we know that it wasn’t.
It doesn’t matter what are your moral or political positions on homelessness, panhandling, and vagrancy. That’s just bad marketing.
The First Principle
That brings us to the first principle: In general, giving your product away destroys the perceived value of your product.
The wrong notion is that, “If we can just get them in the door, they’ll be back!” That might be true — it’s certainly not true of every business that thinks so — but it’s certainly not when you lured them in by devaluing your product.
On the low end (Steak N Shake), nobody who can afford a fast food lunch values it enough to go out of their way to get it for free. It’s just not worth it. “Free!” only reinforces that.
On the high end (Rolex), nobody who can afford and owns it will appreciate you giving it away to those who cannot. That defies the experience of owning it.
The continuum between fills out naturally.
On the other hand…
A Papa John’s store opened in a small Ohio town several years ago by giving away 104 free pizzas. And it did so with great acclaim.
The place was packed.
And not with bums looking for a free pie, but with actual people who were potential future customers.
How did they do it?
With a radio promotion. The local station’s frequency was 104, so it naturally gave away 104 free pizzas. You won a pizza by listening and calling in when the DJs gave the word. A classic radio promotion, it aimed at the right customers via the station’s demographics and attracted only those customers via the on air promotion.
The Second Principle
That brings us to the second principle: If you do choose to give your product away, you must do it in a way that enhances (or at least protects) its perceived value.
The Papa John’s promotion illustrates that: Papa John was not just willy nilly giving them away. The radio station was taking credit for providing the pizzas. That’s how people think of their radio station, getting them cool stuff that they want.
The pizzas were free to winners, not free to all.
That message was reinforced by the contest. A giveaway would amount to the station having handed out 104 free pizza vouchers. In fact, the pizza wasn’t even free to the winners. There was a cost of competition.
You had to earn the pizza by competing for it. Contests are different than giveaways simply because they imply value in the prize and the effort necessary to win it. And you had to claim the pizza in one two hour window. Not just “whenever.” That’s another cost.
The station had set up a remote and was broadcasting live during that window. I was there through most of it (because of an affiliation with the station) and Papa John’s was hopping the entire time. People were pouring in to claim their prizes and customers were coming in to buy pizzas.
It was as successful a radio promo as I have ever seen.
But Consider…
Having said that, consider whether there are people going to Papa John’s today at the exclusion of all other pizza places because of that promotion?
I tend to doubt it.
Something you should know about northeast Ohio: It has a staggering number of pizza places per capita. I suspect — and it is only supposition — that in the long run that promotion did little to lift that Papa’s above the point it would be through its regular national and local advertising.
Here’s why: There is nothing special enough about Papa John’s product or experience to make it any more than another option for round chain pizza.
That is compounded by the fact that in Northeast Ohio, with its abundance of pizza stores (which the northeast Ohioans call “pizza shops”), many are fiercely loyal to a local one local shop, differentiated by taste and experience.
That is compounded by the fact that in Northeast Ohio, with its abundance of pizza stores (which the northeast Ohioans call “pizza shops”), many are fiercely loyal to a local one local shop,
Buzz Is Not Loyalty
The thing about Papa John’s is that it was not introducing a brand, just the new location of a brand. It was the first in that town but certainly not the first the residents had heard of it.
In fact, that was likely much of the excitement and buzz around the promotion. And while it was likely the first time many of the 104 winners had tried it, it is not likely they all, or even most, became loyal, or even repeat, customers.
But what if a differentiated brand introduced itself that way? It would almost certainly lack some of the buzz but a good radio station can create excitement among its listeners even without a buzz factor. Could it translate that to loyal customers?
Much more likely than Papa John’s.
The Third Principle
Jump back to Steak and Shake. As I admitted above, the place teems with customers — tourists, not the target of the horrible grand opening promotion.
What if an unknown brand was swamped by bums for its grand opening, then had them coming back daily for free food all year? It’s unlikely the new local brand would ever recover from the fiasco. What if it was your brand?
That brings us to the third principle: Giving your product away can potentially destroy a brand and loyalty can never be earned by giving your product away.
So Should You Give Your Product Away?
Probably not. But if you decide that you will, you damn sure need to think through not only how, but why you are doing it. The germane question is not “how do we get customers in the door?” but “who will come through the door and why?”
The strategical question is this: How do we locate potential loyal members of our brand community? We will begin answering it next week. In the meantime, let’s talk about this.
Do you have questions or comments about giving your product away? Feel free to leave them here or to tweet at me.