effective coffeehouse marketing - pt II

Now we have covered what *doesn’t* work, I want to show you what worked for me.

The first step is the hardest:  Identifying your customers. 

In 1906, Vilfredo Pareto observed that 80% of the land in Italy was owned by 20% of the population.  He went on to observe that 20% of the pea pods in his garden contained 80% of the peas.   This interesting observation has developed into the '80/20' rule popularized by business management consultant Joseph M. Juran who went on to develop some of the most famous business management tools of 'lean manufacturing', 'business process management', and Six Sigma certification.    The basic idea behind the 80/20 rule is that 80% of your business comes from 20% of customers.

In the coffeehouse trade, I have found that split to be closer to 90/10  where 90% of my business comes from just 10% of my customers.

With this in mind, it makes sense to try and figure out who these 10% are and then to target all marketing on getting JUST these 10%-ers. Because getting just ONE of these 10%-ers has the same impact on your business as getting 9 of the other type of customer. 

My average 10%-er comes into Koffee? every day (sometimes twice a day) and spends $10-15 per day.   So, if I figure out how to attract just ONE additional ultra-regular customer, it will add around $4000 per year to my revenue figures.  If my shop is doing $600k/year in revenue and I can attract 12 new ultra-regular customers to my establishment (just one per month), then my business will continue to grow at 8% per year.    So, my marketing goal is the very modest goal of adding just ONE ultra-regular customer to my place per month.  JUST ONE.   Imagine that!  How difficult can that possibly be - just add one person per month!   If that is all I need to do, why would I spend my time and energy on big, sophisticated marketing campaigns? Maybe the best kind of advertising I could do is to spend more time in the shop, sitting down and chatting with some of the less-heavy users (ones who come in just 1-2 per week) and making them feel happier and more content, so they increase their usage to 1-2 per day!  

However, before I do that, I need to gain a better understanding of just WHO my ultra regulars are and how I can best identify them.

With this target in mind, I sat down with some of my ultra-regulars and just asked them a bunch of questions about themselves.  Here are some examples of the questions:

·         where do you live?

·         what do you read?

·         what kind of car do you drive?

·         what activities do you enjoy?

·         what topics interest you?

·         what aspects of this coffeehouse do you like - what characteristics does this coffeehouse possess that others do not... what causes you to choose us over our competition?

·         what aspects of this coffeehouse do you NOT like - what could we improve or offer to make this a more attractive destination?

·         where do you go for dinner?

·         what do you like to eat for lunch?

·         what is your favorite color?

·         do you walk here, drive here or roller-blade here?

·         what path to you take to get from your house to here?

·         where do you do your shopping?

·         age / profession / marital status / kids

After interviewing about 20-30 of our ultra

-regulars, a profile began to emerge... or I should say that two profiles began to emerge.

Profile #1 - These folks tended to be people who lived in the East Rock Neighborhood of New Haven.  They were students, staff or faculty at Yale, who walked (or biked) from the East Rock Neighborhood to Yale every day.  They tended to be medium-high to high networth individuals, who were interested in healthy foods, academic topics and were generally left-leaning.  

You can see from this map: the green circle is Koffee?, the blue area is Yale, and the purple circle is the East Rock Neighborhood.  The red arrows represent where people tended to walk when getting from their homes in the East Rock Neighborhood to Yale. You can see from this picture that they tended to walk onto Orange Street, which tended to funnel them past my coffeehouse or onto one of the other roads within 1 block of my place.  This meant that there were a large number of potential customers that were walking pretty close to my place on a regular basis.

There was another characteristic of people in this neighborhood; they tended to be transitory[AH1] .  People moved into the neighborhood when starting at Yale, then (depending on the program) 2-4 years later they would move away.  This meant a surprisingly large turnover.  I discovered that this neighborhood had about an annual turnover rate of about 20%!!!  That is bad; that meant that every year I was probably losing 15-20% of my customer base!!!  And because my shop is not on a major thoroughfare (Audubon Street is a very small 2-block side street), it might take someone six months to find Koffee?!!! 

Based on the first customer profile and these specific characteristics, I developed two marketing tools to attract the attention of these customers and draw them into the shop. 

Method #1 - Welcome to East Rock!

I wrote a 12-page introduction to East Rock (above is just the first page) that included all kinds of useful information about the neighborhood.  Everything from where to get your bike fixed, which shops carried the best booze, where to get a good steak, get your car fixed, good running trails, the best priced gym in the area, and how to avoid getting towed during a snow storm... and much more.   Baked into this welcome letter was gratuitous promotion of my own coffeehouse, catering business and Koffee Afterdark.... but I wrote it in a way that people could connect to.  It was not some faceless advertising put out by the city; it was me, my experiences and my recommendations.   This worked well with the overall gestalt or niche of Koffee? (Koffee subtitle "Your Local Coffeehouse"); it clearly telegraphed that I was not some big Starbucks knockoff, but a small local business that wanted to welcome them to the neighborhood and help them transition to their new place.

I contracted with a list-producing company (infoUSA.com) to send me a list of every person (and their address) that moves into the East Rock neighborhood every month.  So, every month I receive an excel file of between 30-120 people and addresses, and  I then send the 'Welcome to East Rock" letter. 

The second strategy was postering.  If you look at the map again, you can see that people going from their houses walking to Yale follow fairly set paths.  If you set up a bunch of posters (on telephone poles and at corners) along the way, people will see that they are walking pretty close past your business on their way to class. This will likely improve the chances they will stop in along the way.   The first round of posters was a complete flop. 

We postered with this poster for about three months and saw almost no increase to sales.   I was perplexed; this should have been working.   The planning, research and strategy were fine, but I was falling down on the execution.  The poster was not doing the job then I realized that the poster was sending mixed messages. The text signaled that we were cool, laid back, mellow local coffeehouse people, but the visual structure of the poster was stark and jarring and more 'corporate' looking.  In short, I realized that I was a sucky visual designer, so I needed to find someone else to design my posters for me. 

I had a guy working for me who was a talented artist, so I asked him to make me some cool posters.  I just told him that I wanted the name and address of Koffee?, but then I gave him complete artistic freedom to make whatever he deemed appropriate.  This is what he came up 

with.

Sales started increasing almost immediately.  That was two years ago, and sales have continued increasing 10-12% per year.

Profile #2 - At the beginning of this posting, I indicated there were two profiles of people I found.  The second profile was the parents of kids who were dropped off next door.  Koffee? is located in the 'artsy' district of New Haven.  Right next door is the Neighborhood Music School, and beyond that is the Creative Arts Workshop.  Both provide classes or private tutoring for kids to learn everything from piano or violin to painting and wood working.  The key thing here is that classes usually last about an hour.  For the mothers or nannies that take their kids to these lessons, one hour is not enough time to go home and come back or really do anything productive.  Thus, they tend to drop their kids off at the class, then saunter over to my coffeehouse and hang out there until the class is done.  For these customers, I don’t need to do any advertising.  We are next door to their actual destination; they see us and will use us if they feel so inclined.  So I didn’t bother coming up with any good plan for them.

Well, that is a brief summary of some of my more effective marketing methods.  In the next segment of the effective marketing series, I'll go into the lessons I've drawn from these successes (and failures) and generalized principles of how to put together a good marketing plan that would work for your coffeehouse.

Best of luck - and until next time, I'd LOVE to hear what you think about these postings.  Please feel free to give me some feedback!

Duncan

Coffeehouse Guy

On a final note: as you may know, I'm in the process of writing a series of guides to show people how to move from a corporate job to owning a coffeehouse.  Unfortunately, they are not going to be ready for a little while.  However, If you are REALLY serious about starting your own coffeehouse, and you cant wait for my guides to come out, I also offer a 2-day, one-on-one intensive boot camp on starting a coffeehouse.  You come up to New Haven for these two days, and we spend two intensive days going through all the intricacies of starting, owning and operating a successful coffeehouse.  If you are interested, send me an email and we'll get it set up: coffeehouseguy1@gmail.com

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 [AH1]I think transitional may be a better word