Every couple of years, our friends in Washington, DC decide it's time to increase minimum wage by fifty cents an hour.  With a stroke of a pen I lost approximately fifteen thousand dollars a year.

Here's the math:  my annual payroll was about one hundred and fifty thousand dollar  s a year.  My average wage was 5.25 an hour.  Half my crew are full time, old grizzlies, and the other half are rookies, still learning the ropes.  If I give a rookie two bumps in wages, as required by law, I must raise my veterans' wages to keep parity.  Payroll would increase roughly 10% over the previous year.  After the hidden costs of matching social security, unemployment and workmen's compensation insurance, I would have to generate at least $15,000 in net profit in the upcoming year just to break even with the prior year.  Otherwise, the shortfall would come from my personal income.  This was not an option.  I've spent well over two hundred days with a close friend of mine, Jim Hancock, doing pizza seminars all over the country.  He's from North Carolina and talks with that slow southern drawl that commands attention.  He has a very true saying that goes like this, "If ya'always do what ya'always done, ya'always get what ya'always got."  Translation from southern:  "How can you expect your situation to change if you don't change something?"

This challenge turned out to be a formidable one.  If you've ever been to one of my seminars you have heard me give the job description of a restaurateur.  What we do for a living is solve problem.  Sure we'll step in during rush and show them our stuff, but our foremost responsibility simply is fixing every single problem that arises, short term as well as long term.

FIVE WAYS TO GENERATE MORE LINE PROFITS

1. Raise prices across the menu.
   

2. Reduce food cost.  Use less food, or purchase inferior, less costly products.
   
3. Reduce overhead, operating costs.
   
4. Create a larger customer base, at your competitor's expense.
   
5. Get your existing customer base to purchase more frequently.

I scrutinized the first three items and didn't discover any major areas of savings.  My market is very price sensitive so item one is out.  Since I refuse to degrade my pizza, item two is also out.  My supplier operates on a low margin, in turn for my loyalty, and we run a very tight ship, so there goes item three.  Item five is ongoing and never ending.  It was slightly promising, but probably wouldn't be the silver bullet solution we needed immediately.  Being a Streetfighter and Guerrilla Marketer, I focused on item four.  This allowed me to unleash my creative marketing juices, focusing on my competition.  I needed a low cost, high impact, quick solution.  I decided to get pro-active, rather than reactive to the pending crisis.

I know a lot of people in my town; however, my employees know a lot more and I'm not above asking my crew for help.  It empowers them and gives them a sense of pride when we pull off a marketing coup together, and after all, their paychecks were on the line too.  I announced my plans at the next voluntary, mandatory staff meeting.  It lasts exactly one hour and employees punch the time clock.  After the normal stuff, employee of the month, POP (pick on people) stories, how we did in the prior month, etc., etc., the stage was almost set.  I asked them to raise their hand if they wanted a raise.  Almost everybody raised his or her hand; some thought it was a trick question.  Either they were slightly skeptical, since they know me, or the Mountain Dew hadn't kicked in yet.  I informed them that they all were getting a raise in a couple of weeks, compliments of the government.  They cheered!  I then asked them if they wanted another raise in the fall.  This time everyone raised their hands.  The caffeine was kicking in.  I then preached my sermon on the limited options.  I flatly told them that we would not be able to afford the mandated raise, let alone another one in six months.  I felt like Scrooge.  They thought I was Scrooge.  Then I dropped the magic words.  Unless you can help me get past this problem.  I had their full attention and it was time to hand out the magical Employee Bounce Back Certificates.  Everyone was given a packet of ten cards.

These credit-card sized, heavy stock cards allow any employee to give a friend or acquaintance a 50% discount off their next pizza purchase.  This is a high liability promotion.  Half off gets a lot of attention.  I left one blank line for the name of the customer and one for the name of the employee.  I urged them to pass out as many of these cards as humanly in the next thirty days.  I informed them that these cards were not designed or meant for existing customers.  I asked them to only pass them out to non-customers.  I knew they were asking themselves the question, "What's in it for me?"  A hundred dollar bill got their attention and answered all of their questions.  I passed it around the table , and announced that one of them would be the proud owner of this baby in a mere thirty days.  I told them, "I'm going to thumbtack it to the wall of my office, and the employee whose name is on the most of the redeemed coupons in the next month wins it."

Before the meeting was adjourned, I restated the purpose of the promotion:  to sample as many NEW people as possible in the next thirty days, allowing them to compare our pizza with any other pizza at a huge price reduction.

I also provided them with a few pick-up lines:  Do you like?  Where do you buy pizza?  You know, I've worked for Big Dave's for three years.  If you come in next Friday night, I'll personally make your pizza.  It will knock your socks off.  Could you use a card like this?  Marketing is very similar to getting first dates.  Candlelight, wine and roses impress your sweetheart.  After the relationship has been established and reality sets in, it may be a beer and burger.  I know from experience that most contests and promotions start on fire and lose momentum in a few weeks.  To get around this natural law of behavior, I sweetened the pot, "I have four twenty dollar bills.  I'll be tracking the certificates on a weekly basis.  If you are the weekly leader, I'll give you one.  That's five ways to win.  Plus, if you have a measly three turned in, your name will go in the hat for another twenty from the non-grand prize winners."

I promised to give the traditional fall raise if we pulled this off as a team, and reached the rest of our goals.

We adjourned the meeting promptly at 11 a.m.  We took in our first coupon at 11:10.  Big Dave's Platoon had hit the streets running!  My lips curled in a twisted smile.  I had created a band of Guerrilla Pizza Mercenaries, wrecking havoc on the enemy and creating friends and customers for life.  I savored the thought of doing the body count every night at closing.

Rules of the Game

1. You may not pass them out while you are on the clock, or on restaurant property.  
   

2. This will be done on your time.  You may not give them to an ex-employee or relative.
   
3. You may pass them out only to non-customers (defined as not having ordered in six months), one per household
   
4. When the card is redeemed, the person will be asked to print their name, address and phone number on the back of the card, for tracking and to send future coupons.
   
5. You must personally hand out the certificates, one at a time.  Hopefully with a testimonial, lauding the qualities of Big Dave's, and promising them they will be impressed with the service and taste.  For example, do not give a stack of signed cards to your Grandmother to hand out at the senior center.
   
6. If you forget any of the above mentioned rules, and are found out, five of your cards will be ripped up.

The final body count surprised even me!  356 Bounce Back Certificates had been redeemed in thirty days.  The fifty-percent we charged the new customer covered my food and labor cost.  I didn't make any money, but didn't lose any money either.  I broke even.  Any yo-yo can give way food at half price, including me.  The true test would be how many of them would return to pay full price in the future?  187 did!  We tracked the new customers, by name and phone number for six weeks.  If they returned to purchase from us more than four times in six weeks, we counted them as a regular, loyal customer.

On average, a loyal regular customer must pass the Return on Investment Acid Test.  I hope all of your promotions are analyzed in a similar fashion.  All marketing promotions must be measurable and goals set out in advance.  Remember my goal was increasing sales $90,000 in the next twelve months.

We have run this very successful promotion twice a year for the last six years.  We have modified the prizes from cash to things like concert tickets, paid days off, CD collections, and a neon Pepsi clock.  We kept these all in budget.  According to the newspapers, we're in for another minimum wage increase in the near future.  What are you going to do about it?

By the way, our sales went up an additional $25,000 that year.  I'll share that strategy next time.  Till then.

The Math

Associated costs:
Printing of cards	$40
Cash employees	$200
Thank-You Mailers	$112
Total Costs	$362
New Income:
187 new customers x $500 = $93,500
This promotion had a 250/1 return of investment.

If this article has not answered all of you questions and you want to discuss it further please visit my web site at www.bigdaveostrander.com and post a question. No one ever makes a bad decision in his or her life. Folks simply make brand new decisions, based on brand new information. PMQ 

Copyright © 2001 Dave Ostrander, all rights reserved.