effective coffeehouse marketing - pt1

This is a bit more of a complex topic that requires more than just a single blog posting to outline the issue.  For this reason, I'm going to break 'effective marketing' into several parts and write each part as a separate blog posting.

effective marketing - pt1

"Half the money I spend on advertising is wasted; the trouble is I don’t know which half."

- John Wanamaker (department store merchant)

To start, I want to outline what does NOT work.   This may sound counterintutitive, but it is instructive to see all the ways I was stupid and wasted my money on stuff that I should have known would not work.  Good marketing is an experimental and iterative process; you never know what will work until you try it.  Once you try it and it works a bit, you can tweak it and try it again. Or if it completely fails, you can drop it and move on to something else.  Sooooo,  I want to outline my unmitigated marketing failures and why I think they failed, so you will not waste your time and money on them.   

You see, at the beginning, I did not take marketing seriously.  I saw my job as ensuring the product was good, service was excellent, ambiance was nice, vendors were paid, the place was clean, etc., etc.  In short, I felt there were just wayyyy too many things more urgent than marketing.    As a result, I took an inconsistent shotgun approach to marketing.  When someone approached me to do advertising, I considered it, then probably took it because it was simple (didn’t take much of my time) and I could just pay and have it done.    Talk about stupid.  It would have been much smarter to hire someone to make sure the food was good, service excellent, ambiance was nice and vendors were paid, so I could spend my time and energy marketing the business.  Marketing is the owner’s job.   Marketing is what defines the business to the marketplace.  If it is done poorly or inadequately, it will starve your business.  It needs to be done well. 

IN-effective marketing

Traditional Marketing does NOT work.  At least, it does not work for a small independent coffeehouse.  Newspaper, Magazine, TV, Radio, Yellow Pages... bah.  All crap.    When you first start your business, you will get many, many, many calls from media salesmen trying to convince you how important it is that you get a good Yellowpage ad or how much exposure you will get in running an ad with a local radio station.    If you ever run across someone claiming how effective these media are for generating coffeehouse sales - run far, far away.    When I first started out, I bought newspaper ads for $500 apiece that showed up once a week in a very popular newspaper here in town.  I must've dropped a couple thousand dollars before realizing that nothing was happening.  I then got a call from a Yellowpages salesman, who sold me on a $1200 Yellowpages ad.    I don’t know of a single sale made due to that ad.  Always remember - when these salesmen are talking about the effectiveness of their advertising, they are not talking specifically about you or your coffeehouse.  They are talking in generalities; they don’t know squat about how your business works or what would constitute effective marketing to you.  

Online Advertising  The impact of online advertising (from the likes of Google, Facebook, Twitter, etc.) is virtually nil.  I find this very interesting because I've read a number of articles about marketing coffeehouses, and many of them talk about an 'internet/social media marketing strategy.' These articles outline how a coffeehouse owner should ‘tweet’ regularly and post interesting things on the company’s facebook page to draw people and to stay 'top of mind'.    After reading these articles from the 'experts,' I thought I must be insanely stupid because nothing I was doing on twitter or facebook moved my sales one iota.    I even tried a few google and facebook ads to see if it would help, but it did all of NOTHING.  

Groupon / Living Social

I'll admit - I have not done anything with any of these coupon sites.  I am skeptical about the effectiveness of these services.  When Groupon first came on the scene, and everyone was trying them out, I thought - "wow, this looks pretty cool, I should try it".  So, I contacted Groupon and asked them about the program... and it turned out to be very interesting.  In short, this is how the system works:

1) you give Groupon the option to sell say 500 coupons for *something* (in my case, it was a sandwich, drink and bag of chips) for about 50% off the normal price.   Normally that combination comes to about $10, so the 'deal' is for $5.00

2) Groupon sells the coupons, and keeps HALF the money, so they only pay me $2.50

3) But they dont pay you the full $2.50!  If there are associated credit card charges or other types of expenses associated with the coupon being sold, that comes out of my 50%!  So, I would end up with maybe $2.25.

4) BUT wait!  that's not all, they dont pay you all up front!  They give you only a small share when they sell the coupons, and then wait 30-60 days to pay you the remainder.... so essentially you are giving Groupon a free loan.

The biggest problem with this?  My cost basis for that package of food is about $3.25 - closer to $4.00 once you factor in labor.  So, that means for every sale, I'm out of pocket $1.75!!  Sell 500 of these bad boys, and that translates to almost $1000 out of pocket to do the event!

In addition, it would alienate your current customers.  Long lines, clogged seating by people eating meals that you are losing money on?  Current customers are likely to be turned off by this.

Finally, these cheap-seekers are unlikely to return.  In my experience, those people who actively seek out cheap deals are not good customers.  They come for the cheapest stuff (which is usually also the lowest margin), and dont come back.  They are loyal to low prices, not businesses.    Check out this SLATE article that goes into this.

It is better to take that $1000 and spend it elsewhere - that would have a more positive impact.  If you really want to try something like this (I generally would not recommend it), get 500 coupons printed up yourself that is 1/2 off lunch deal, then contact a list company (I use infousa.com) and get the addresses of people that live / work in close proximity to your shop.  Just send out those 1/2 off coupons to those people, and see what happens.  I'd be willing to bet you'd get as good a response as Groupon, but you dont have to share the revenue it generates.... so you dont lose money on every transaction.

If you are a brand new coffee bar, then I can see how something like this might be helpful.  It can get your name out there, and quickly get people to at least *try* your place.  Likewise, if your business is in a location that has alot of customer turnover (such as a college town with students graduating and leaving, and students showing up every year), then sending such half-off coupons to new customers may well make sense.  But besides this, I'd avoid coupons - they tend to bring in the wrong kind of customers. 

Yelp

Yelp makes me uneasy.  It seems like it would be a good place to go to promote yourself - because many people look for food establishments on Yelp.   However, all the stuff I've read about Yelp makes me wonder about how honest they are.  Check out some of these articles I found about them:

Yelp needs to stop filtering out honest positive reviews of businesses
SF Restaurant calls for Yelp boycott
FTC Complaints about Yelp allege extortion, libel and more:

"Restaurants filed complaints accusing the company of filtering out positive reviews (thus skewing their ratings), of harassing them to buy advertising, of refusing to pull libelous reviews, and a whole lot more."

I have gotten multiple calls from a Yelp representative asking if I would like to advertise with Yelp.  One representative coyly suggested that companies who advertise with Yelp tend to get higher ratings (due to the increased visibility of course).    I politely declined the invitation... and strangely enough, about a week later I noticed that I got two 1-star ratings back-to-back.  Very strange indeed considering that I had been getting 4-5 star ratings for several years now.

At first I was incensed, but then I just shrugged it off... and I have not responded to any Yelp inquiries since then.  In short, it is best to simply not engage the Yelp people.  If they have a chance to talk with you and you turn them down, they may feel the need to retaliate.  If they are never able to contact you, then you could always be a potential source of business, so they will likely leave you alone for now.

Frankly, I'm not sure Yelp makes a single iota of difference to my business.   Coffeehouses like mine are not destinations in their own right.  People do not drive across town to come to my coffeehouse.  Coffeehouses are convenience destinations - if you happen to drive past, walk past, work or live in close proximity to a coffeehouse, you are prone to use it.   Most people wont look up a coffeehouse on Yelp to see if they want to visit it, they will work nearby and just go and try it out.  The cost of experimentation is low ($4-5) so there is little risk involved in trying it out.



When researching the whole internet-advertising industry to figure out the best way to promote my business, I read an article written by Justin Kownacki, who interviewed a bunch of coffeehouse owners about different experiences they've had in opening coffeehouses.  Rich Westerfield (owner of Aldo Coffee - another small, independent coffeehouse) had something interesting to say about Facebook and Twitter: "Other than some laptop warriors and a handful of certified coffee geeks, NO ONE really pays attention to Twitter or Facebook for coffeehouses."  Yep, pretty much my experience as well.   

There were a couple other types of marketing that were recommended  in other books on 'starting a coffeehouse' and articles written by 'experts' that I found to be completely worthless.    But, before I go on, I just need to come clean about something. I am becoming more and more skeptical about much of the stuff I read in books and articles about how to run, operate and market coffeehouses.  I am constantly looking for new and interesting ways of doing things to make my coffeehouse more efficient and better run,  so I read as much material on the topic as I can get my hands on.   Some of the material I've encountered has been fine and corresponds with my experiences; some even gives me some ideas of how I can do things better.  Unfortunately, much of it is just crap.   

Okay, back to the examples of worthless advice. I recently read an article by a marketing professional who wanted to dip her toes in the coffeehouse trade.  She went on to talk at length about how hosting live events such as live music, poetry slams, storytelling, and pecha kucha was a great way to market your coffeehouse.   As someone who as actually had poetry slams, live music and storytelling events at my place, this is not necessarily true and can actually be harmful.

We have a pretty decent crowd on most evenings.  We serve beer and wine in the evenings (Koffee Afterdark), so we will have some small groups of friends hanging out and sipping wine or some students studying away with a beer.   

When you have live music, you must plan and organize the music... then market the music.  This takes quite a bit of time and effort.   If we are lucky, we'll get an additional 30-50 people in the place for the live event.  While that may sound like a lot, they don’t seem to purchase much.  On the live-music days, we'd get maybe $150 in additional revenue.   While we make a bit of extra money, we alienate those our 'regulars' -  people who come to Koffee Afterdark to sit and converse with friends... and those regular customers may not come back.  Furthermore, the increase in customers due to the music is usually once-off.  The people who come to the event are usually not people who will become regulars at your place.  They just come for the music and that's it.    

That said, setting your cafe up as a music venue *can* work under some circumstances.    A friend of mine recently set up his cafe with the specific goal of having a live-music venue that could take large numbers of people.  (You can see his place here: http://www.bestvideo.com/).  He did a good job with it, and it seems to work for him, but it is an intentional part of his business and design.  If you design your business with live performance as a part of your business strategy and plan around that, then you can be successful at it.  However, do not try to just bolt this one post-facto; you'll just alienate your current customers.

Is there a specific type of marketing you think might work - something you'd like me to sound off on?  send it my way - I'd be happy to consider it!

Thanks again,

Duncan