So Why Would Any Major Retailer Want To Lower Their Gross Net Profit Margin?
Ever heard the saying; “less is more?” Well, at least in terms of strategically running your very own business, there are quite literally some times when you can make a whole lot more (over time), with a little less initially up front, correct?
Sounds a little counter intuitive, but it’s really not. Because most of you are familiar enough with term “back end” correct? That’s kind of sort of what we’re referring to here, but not exactly.Here we’re more interested in your initial front end gross net profit margin.
For ex: let’s take one of my absolute favorite hypothetical marketing illustrations and use good ole Kmart as our hypothetical retailer, to convey these particular marketing concepts.
As you may or may not notice, Kmart just always seems to find it’s way into my hypothetical examples: And there are basically two very good reasons for this.
A.) First; they are literally the epitome of a once mighty retailer, desperately struggling to reinvent itself! In order to survive!
B.) Two; they’ve still got immediate access to more than enough available cash in their allotted monthly advertising budget, to really make a giant (positive) word of mouth splash! Simply by pro-actively marketing to both their new and current repeat customer base a little more creatively. As you’ll see in just a moment…
So Why Would Any Major Retailer Want To Purposely Lower Their Net Profit Margin?
You do realize most major players like Walmart depend on (literally) doing tons and tons of gross sales annually, (billions), in order to maintain and manage their razor thin front end gross profit margins of a meager one to three percent, correct?
That being said; why then would a far less solvent major retailer like Kmart want to actively pursue any type of long range marketing strategy, that would almost certainly jeopardize their current razor thin gross profit margins?
Because in the long run, (provided of course) they implement properly, less up front initially (overtime), will most certainly equal more! Huh? For ex: ever notice what the (real) interest rate is on one of the major big box retailers credit cards are?
Not the (first six month) low introductory teaser rate! Because after that initial honey moon period is over, guess what? Your low introductory rate of 5-6.5%, ( or X!) suddenly reverts back to it’s previous standard rate of anywhere from 14-19% per year! Hello!
So what if Kmart (or major retailer X) did the following. Have their normal in house credit card rate of 14-19% per year. However, for their active opt in email and mobile subscribers only!
You get a “guaranteed lifetime locked in rate” of just 5% (or X!) As long as you remain (either) an active email and or mobile subscriber! Think about that one potential benefit for a second. No “bait and switch” out rates coming ever!
Plus, now instead of Kmart (or major retailer X) constantly flushing that $50-$100,000 dollars per month down the modest result generating institutional advertising toilet! Instead they can now get really creative!
It Only Takes One Small Seed To Eventually Create A Mighty Acorn!
And do at least the following four things to start generating huge on and offline positive word of mouth buzz!
1.) Think outside the box marketing strategy #one:First (especially for the ladies!) Kmart should start immediately sending weekly special VIP email and or text messages, alerting their female subscribers to come to the store to enter their weekly raffles! For the chance to win a state of the art 75 inch flat screen TV (which would normally retail for $2,300 plus dollars!)
The female VIP subscribers pay just $300 dollars for the chance to win! And Kmart will also reward three second prize winners with $200 dollars worth of Kmart gift certificates and one $50 dollar gas card each.
Now remember, part of this money comes from not having to spend $50-$100,000 every month on outrageously expensive traditional advertising mediums such as local radio, TV and or newspaper ads etc.
2.) Think outside the box marketing strategy # two: Next, every (male and female) VIP subscriber is invited to come to the store and on their birthday, buy any one item (irregardless of the cost) and pay Kmart’s actual cost!(With absolutely no minimum purchase requirements!)
So let’s say they decide to buy that state of the art home entertainment system, that normally retails $8,700 dollars! But since Kmart’s true hard cost is only $4,695! That’s all you pay!(Plus any and all applicable taxes & fees etc.
Now do you really think anybody that gets $8,700 dollars worth of retail stuff, and only pays $4,695 dollars and some change for it, isn’t going to spread the word high and low like freaking crazy!Both on and off social media! Yep! And they’ll also be sure and tell practically every body they come in contact with from now on! For sure!
And after several months of this type creative marketing, will other curious consumers start to flock to Kmart and opt in to their list as well? (You got that right!)
How To Create Massive Positive Word Of Mouth Buzz!
3.)Think outside the box marketing strategy # three: Here’s the other thing they’ll do: Kmart will create a monthly “happy Anniversary club!” What the heck is that you ask?
It’s simple, every month one lucky couple (on Kmart’s opt in and or mobile marketing list) will be selected as that particular month’s happy anniversary couple of the month! And the benefits include dinner for two at any local restaurant of the couples choice! And Kmart will foot the bill up to $300 dollars!
The evening also includes full limo service to and from! Plus a dozen roses, a box of candy and one seven foot teddy bear! Are people talking right about now or what?
Plus, round trip air fare to any of four exotic locations in the world! Compliments of Kmart! Another $5,500 dollar value!
4.) Think outside the box marketing strategy # four: Since Kmart is all in, and desperately trying to rebuild their faded customer base. Once a month they will also award prizes every hour while their open during the weekend!
The prizes will include instant cash give away’s of $1,000-$5,000 dollars in cash! One thousand dollars worth of universal gas cards! Tablets, notebooks, free movie passes for two for the next two years! Five hundred dollars worth of local grocery store gift certificates! Two free tickets to the Super Bowl, includes first class round trip air fare and five star hotel accommodations too! And on and on!
Win your current car, rent and or mortgage being paid for the next six months to one year etc! You just submit the necessary paper work for verification purposes.But remember, only VIP email subscribers and or mobile subscribers are eligible for any of these additional free goodies!
So here’s the $64,000 dollar question: Do yo really believe these type of proven positive word of mouth (think outside the box) marketing strategies are less effective than simply using your traditional spray and pray mass advertising approach?
And if you were going to be a repeat customer of there’s anyway, would you turn up your nose to these types of opportunities? Or would you get with the program and join their opt in email and or mobile list already? You got that right!
So hopefully, after all this, you can see and appreciate why any major retailer (Kmart) not withstanding) would be more than willing to initially lower their front end gross net profit margin(s), in order to score really big later on down the line on the incredibly lucrative of back end sales funnel! Agreed? Any questions?
Please list at least two simple spin off concepts (in the comments section below) that you can apply to your business, product or service in the next 30 days or less!
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