Maximizing Marketing Expenses

By Ken Arp | 1 comment

If you are a business that is interested in maximizing marketing expenses you might want to consider one of the newest forms of marketing that has only been around since 2009.  What other form of marketing offers guaranteed results or you don’t pay?  There are many companies that have had great success building new clientele by using daily deal websites to offer discount vouchers.  These are typically the companies that get it, they understand that it’s a marketing expense and not an erosion of margins.

Comparing Daily Deal Discounts to Traditional Marketing

An exercise I like to go through is to compare how a company is currently spending their marketing dollars versus utilizing a Daily Deals website like Smart Betty.  Here is an example of a comparison;

A restaurant spends $2,000 to print and deliver a flyer.  To make the flyer effective they’ve offered a deal of $10 off with the purchase of 2 entrees (which would cost a minimum of $30).  If we assume a food cost of 40% that means that the $30 of food costs the restaurant $12, and since they are collecting $20 plus the voucher to pay for it they make $8 per table.

Now let’s say that same restaurant does a Smart Betty daily deal offering the $30 voucher online and they only get back $7 for it.  Since the cost is still $12 then it appears that they actually LOSE $5 per table, much worse that making $8 per table with the flyer.

The difference is that we haven’t accounted for the initial $2,000 flyer cost.  How many of the flyers will get redeemed?  If they had 50 flyers brought in with the $10 off deal that works out to $40 flyer cost per table ($2,000 cost divided by 50 flyers redeemed).  That means that instead of being plus $8 per table they are actually minus $32 per table.  In fact they would have to redeem 167 flyers before the traditional marketing method was more cost effective than the Smart Betty daily deal.

Customer Acquisition Cost

Both are marketing expenses, it’s all about looking at the cost of acquiring customers.  With traditional marketing methods you typically can’t predict how successful they’ll be so it’s impossible to predict what your acquisition cost will be.  Daily deals with a company like Smart Betty give a business acquisition cost certainty whether you sell 1 voucher or 1,000.

Published by Ken Arp