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Doing More With Less

Low-cost promotions; inventory management tips

By Carol L. Schroeder -- Gifts and Dec, 6/1/2009 12:00:00 AM

Carol L. Schroeder

Q: In an effort to cut expenses, we're trimming our advertising budget down to a bare minimum. But we still need to bring shoppers into the store — any ideas for low-cost promotion?

A: Jay Conrad Levinson, author of Guerilla Advertising, said that not advertising when things aren't going well is like stopping your watch to save time. With sales declining due to the economy, it is tempting to curtail advertising expenses. Think of this as an opportunity to retool your regular advertising plans to make sure you are getting as much mileage as possible from each expenditure.

In a previous column, I discussed the efficiency of permission-based e-mail marketing as a low-cost way to reach out regularly to your existing customers. Facebook and Twitter are new tools to keep in touch at a low cost. Hosting special events for your top shoppers is another way to bring regular customers in frequently. But these efforts don't address the necessity of bringing in new shoppers.

Cooperation with other retailers, those who share your geographic location or the bond of being fellow independents, is one cost-efficient way to advertise to new customers. In Madison (WI), we and other participating Monroe Street retailers are putting together a set of coupons aimed at the bridal market. We also cooperate to create an annual shopping guide for visitors. In addition, many Monroe Street stores are part of our area's Buy Local campaign.

Another great way to build your customer base is through cause marketing. When consumers are cautious about spending, they are more reassured when they they know that their purchase does some good. I'd suggest that you join forces with a local non-profit organization to create a special event.

This economy has hit social service and arts organizations hard, so your help will most likely be welcomed. If you promise to make a significant donation to a non-profit, you can expect them to make use of the same inexpensive technology mentioned above — email, Twitter and Facebook — to promote your event to their supporters.

We are about to do a benefit event for the Madison Children's Museum. The museum will not only list the event on its web site, it will send a message to its subscribers. And our city council members are sending an email to their constituents, and each participating business will send an evite to its customer list. All this outreach is at no cost!

We will also send out press releases to try to attract free media coverage because of the charity tie-in. In addition to drawing new customers the day of the event, we know that aligning ourselves with the museum will generate ongoing goodwill.

Select any non-profit group that you like to support, as long as your promotion meets their approval. Try to do something that ties in with the cause, for example: donating a percentage of sales of food items to the local food pantry, or hosting a silent auction of stuffed animals to benefit the zoo. Invite representatives of the non-profit to attend to help promote the cause. Even when the donation you make is considered a marketing cost, it is a win-win proposition.

Managing Inventory

Q: We don't have enough capital to get us through the rest of the year unless we cut back on our inventory. How can we do that without our sales taking a dive?

A: In response to the downturn in the economy, many retailers have been letting their inventory sell down by simply not replacing stock as it goes out the door. This arbitrary means of inventory reduction could have a drastic effect on your sales, and is not the most efficient way to make use of your funds.

You are probably familiar with the Pareto Principal, which states that 80 percent of your sales probably comes from 20 percent of your inventory. While that may not be precisely true, a large portion of your sales undoubtedly comes from key categories of inventory. All merchandise does not sell equally.

There are certain types of merchandise that are known as "bread and butter" items (from when people ate bread and butter at every meal). These items will vary depending on the type of store. For a florist, bread and butter items would include fresh flowers, potted plants, and gift cards, although they might also carry candles, jewelry and candy to round out their merchandise mix.

What would the bread and butter items be for your store? It depends on how you define your shop, and how others perceive it. Think about what is essential to your store, and make a list of the key items that represents that vision. These are the items you should try to always have in stock.

Customer requests and input from staff will also help you focus your inventory. Keep a notebook at the counter to track how often someone asks for something you don't have.

Another way to determine what merchandise is most important is to look at what categories are at the top of your sales figures. If you are not tracking sales by category (i.e. cards, toys, picture frames, soaps), it's time to start. The categories that sell the most should get the most inventory dollars. Take into account the fact that the categories that currently have the most inventory will have a natural lead, so you should consider the ratio between sales and inventory instead of just the sales totals.

The final factor that should help determine where to spend your inventory budget is the quality of the service you receive from each vendor and sales rep. Reward those that earn your business by doing everything they can to make you successful.

Author Information

Carol L. Schroederis the author of Specialty Shop Retailing: Everything You Need to Know to Run Your Own Store, published by John Wiley & Sons. Send questions toorangetreeimports@mac.com.

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