A Simple Promotion That Pays Off In Extra Sales

What happens when you tell customers they can have fifty percent off one item in? US correspondent Bob Vereen reports…

As retailers everywhere search for ways to rejuvenate sales and get customers spending again in the face of less consumer spending, several retailers in the United States have successfully used a promotional concept developed some years ago by a retailer named Dick Beal. These stores have all enjoyed considerable success with this promotion which means it may very well work for stores in other countries.

Retailers who have used this promotion have enjoyed extra sales and in-store excitement for nearly two decades, not least because it is easy to implement and does not require special signage or displays. The promotion lasts one day and increases the average sale by encouraging existing customers to browse an entire store while often bringing in new customers. It routinely doubles daily sales.

A powerful promotion

A Beal promotion is simply a newspaper or direct mail coupon that offers fifty percent off any one product in a store costing up to $25 or $50 (you decide) for one day only. In the US, some retailers have run the promotion on the day after Thanksgiving, a day in which Americans traditionally begin their Christmas shopping, although it has been run at other times as well.

Although many retailers might worry about the margin losses resulting from selling products at a 50 percent discount, those who have run the sale report gross margin dollars are so great that any percentage shrink in margins is offset by the fact that most customers end up purchasing other items in addition to the one item that they get at such a reduced price.

Another advantage is the way such a sale clears out a lot of extra merchandise to improve one’s cash position. One retailer who conducted a Beal sale was Rob Gardiner of Damariscotta Hardware in Damariscotta, Maine, a 12,000 square foot (3,657 square metres) store doing nearly $4 million in annual sales. There are less than 2,500 people in his town yet his competition includes two lumberyards within half a mile, a small home centre two miles away, and big-box competitors 30 miles away in three directions.

One the day of his sale, 972 customers redeemed the coupon with an average sale of $28.98. Overall sales for the day were up 260 percent as he more than tripled the sales of the same Saturday the previous year. His gross margin did decline because of the discount but he found that gross margin for the entire month was down only two percent, while sales were substantially up.

Rob Gardiner says that it is important for retailers to understand the overall benefits of a Beal sale. “Some retailers worry that they are actually selling some items below cost but if they look at the bigger picture, be it the whole day or whole month, it is just a blip on the screen,” he said. “It is a great way to turn a portion of your inventory into much-needed cash.”

Rob had advertised 50 percent off any one item up to the value of $50. If a product sold for more than $50, the coupon value was limited to $25. What impressed Rob the most, however, was the fact that customers tended to walk through the entire store, diligently hunting for the perfect item on which to use the discount coupon. He said that later ongoing sales benefited because more people also knew more about what he stocked. Some customers spent as much an hour browsing, with the best selling departments being housewares, power tools, lawn & garden and sporting goods. Rob feels that he and his employees need to improve their value added selling during the next sale, like extra vac bags for customers who buy vacuum cleaners or extra keys with any locksets. He feels that he missed many such opportunities this year and he plans to have a second coupon to pass on to customers that will encourage them to return to the store, although for a much smaller discount or special offer.

Further tips

Dick Beal, the man who came up with the idea, first offered 50 percent off on any single item in his store up to the value of $25. He says he didn’t have the courage to offer it on items up to $50. He says that he usually did two and a half to three times more sales during the one-day sale with a gross margin decrease of about ten percent. Gross margin dollars, however, usually doubled. He says that the sale moves out a lot of stagnant or left-over merchandise from earlier sales and that this frees up the extra cash that Rob Gardiner mentioned previously.

Dick emphasises that the sale should run no more than once or twice a year. This is to discourage customers from actively waiting for it. Correct timing throughout the year is also important. Dick is located in Florida and he says that the promotion did not work as well as it should have when he tried it once during the summer.

Other points to remember include the need to emphasise that the sale applies to one item only (this avoids bulk sales like half a dozen bags of fertilizer), that there are no rain checks, and that it applies only to items in stock.

Dick said he also provided his customers with free coffee and donuts early during the day and free popcorn in the afternoon to make it a more festive occasion. When he’d finished there was only one complaint: his cashiers were tired because they were so busy!