Outside Insights | April 2013 | By Troy Smith
Planting the ‘Seeds’ of Marketing
The old adage “squeezing blood out of a turnip” may best describe how many marketers today feel when it comes to finding new ways to stretch their marketing budget dollars. Whether they slashed advertising media buys, reduced the number of new collateral materials, or scaled back on product launches, retailers were affected by the national economic pinch. And now they’re now looking to strategic vendor relationships to help maximize their marketing reach and drive out costs.
In the early 2000s, Pointsmith developed a new strategy that would help extend clients’ existing budgets and create longer-term marketing and financial benefits. The marketing concept was designed as a self-perpetuating “Seed Fund”―named by Pointsmith as a metaphor for its ability to grow into a sustainable revenue stream from a single seed investment. In its simplest form, the fund is structured to receive a one-time-only investment to cover the initial costs for developing the promotional signage necessary to support planned at-store promotions, as well as ongoing fulfillment signage.
For example, one convenience/fuel retailer’s seed investment amount was determined by estimating costs for the creative design of the various point-of-purchase materials―items like window clings, pump toppers, exterior banners, and other promotional pieces―and a best estimate of the number of franchise locations that would likely participate in ongoing promotions. Other cost considerations included materials costs, estimates for large production runs on each signage piece, kitting, and administrative and fulfillment services.
An important strategy of the Seed Fund program is to keep the pricing for each promotional element at a set cost. This enables store owners to better budget for their at-store marketing materials each year and helps foster program participation, because they always know what a pump topper or window sign is going to cost them.
Keeping it simple
What makes the Seed Fund program particularly efficient is the proprietary technology Pointsmith developed to create customized store profile databases. Among other things, these profiles contain information unique to each of the retailer’s store locations―things like the store’s interior and exterior footprint; how many windows the store has; how many gas pumps or refrigerated coolers are installed; which promotions are utilizing significant promotional real estate; and the local government restrictions that may or may not apply to that store’s location. On average, Pointsmith manages store profiles for retailers with large retail networks of 5,000 locations or more. This data also ensures that stores that participate in a given promotional program not only remain compliant, but also save money by receiving kits containing only those promotional elements that are appropriate for their store.
In most cases, clients were able to see their initial seed investment steadily offset within just a few months of announcing the initial program. One of the keys to the Seed Fund’s success is that no new point-of-purchase inventory is produced until it can be purchased with funds from additional incoming orders from retail operators. In addition, large “gang runs” allow for print overages and economies of scale on each promotional piece, thereby facilitating the production of signage inventories very quickly and efficiently.
Maximizing return on investment
The Seed Fund’s simple, turnkey structure has allowed users to grow their promotional signage inventories without new investments being infused into the program. For instance, one client made an initial investment of less than $40,000 into their Seed Fund in the early 2000s. Today, that fund has grown to a value of nearly $400,000.
Roughly a third of the Seed Fund’s cash value is allocated to keeping inventories well-stocked, with the remaining two-thirds held in a cash reserve to initiate new promotional programs throughout the year―with no additional impact to the organization’s marketing budget. Further, by owning the Seed Fund program, corporations can ensure that all promotional signage utilized by store owners is adherent to approved corporate graphic standards and legal verbiage.
Pointsmith manages each phase of the at-store promotional marketing program―from creative conception to completion―including corporate bill backs for the promotional kits shipped and providing monthly accounting reports to corporate management. Each point-of-purchase sign is then catalogued and stored at Pointsmith’s 180,000-square-foot facility in Katy, Texas, where the signage is also designed, produced, kitted, and shipped.
Over the years, several retailers have expanded their program to include nonpromotional corporate signage, spare hardware, and other miscellaneous items. Store owners see this as a value-added resource where they can access signage and corporate logo items through the convenience of online ordering―in small or large quantities as desired. In addition, they can often receive full or partial reimbursement of the program’s expenditures through co-op fund vouchers derived from other in-house programs.
Using innovation to stay competitive
In a business climate that necessitates relentless scrutiny over budget expenditures, the Seed Fund program is one example of how creative problem-solving can help relax the “squeeze” and boost marketing productivity and customer service support, without an ongoing impact on corporate budgets. Companies looking for a competitive edge must develop strategic partnerships that can bring more to the table than just favorable pricing. The must also provide creative solutions to everyday business issues while working as a collaborative partner in advancing their business goals.
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