Gift Giving for Patronage

The other day, we received a door tag advertisement from a roofing company. We had a bad hailstorm recently, and the roofers are out in full force vying for roofing business. What was interesting about this particular door tag was that, with purchase, they would give you a free gift: a Yeti cooler.

As a consumer, this might be considered a nice little gift; a nudge, if you will, to go with them for your roof repair or installation. However, it might raise a question about quality or reliability. If a company is trying to entice you with a gift, what does that say about their reputation? It could be construed as shifting the focus from their ability to install a quality roof to their ability to attract new customers.

You might be thinking, “well, isn’t attracting new customers a good thing?” Yes, of course. However, what is the cost of this strategy? In many industries, including roofing, word of mouth rules the day. Word spreads quickly among consumers about both good and bad experiences, companies, etc. So, if your customer acquisition strategy is more important than your ability to do quality work, your work is probably going to suffer and stimulate negative word of mouth.

Now, I’m not saying this particular roofing company does poor quality work. I don’t really know anything about them. They may be fantastic. However, on its face, it looks like their focus is doing whatever possible to get new business, which may be taking away from their perceived competence.

There is another problem with giving gifts in exchange for patronage: it’s not good for building a loyal customer base that leads to repeat business. Repeat business is generally great to have: it allows you to cut down on the time devoted to cold calling. Repeat customers are happy with you and are also more apt to tell others and spend more, etc. However, those who patronize you because of incentives are generally not going to be loyal. The next time a need arises for your product, they’re going to shop around to see who has the best incentive at that time. This leads to significant customer churn, which is problematic.

So, overall, it’s generally better to focus on providing good value to consumers, which includes a good product, solid customer service and support, empathy, and appreciation for their business. All these things help lead to loyalty, repeat business, and other benefits. I’m not saying you should NEVER give things away to attract customers. Rather, just be careful, as it is a double edged sword.

Social Recommendations

How good is your social media presence? And what are your goals for social media? An obvious goal is to increase business. Duh. However, you should have a number of “upstream” goals that, over time, should lead to increased business. One such goal should be to increase social recommendations. According to Nielsen’s Global Trust in Advertising Report, consumers trust the recommendations of others compared to communications that come straight from the company itself. This doesn’t mean promoting your business online isn’t important….it is. But it should only be one part of what you do in this domain.

We get bombarded by all kinds of messages requesting us to “like” a company on Facebook, follow them on Twitter, review them on Yelp, etc. Though it may seem on its face a little silly, it is actually very valuable to build this base. Other consumers see this attention as a positive and it improves their perceptions of the company.

So, if you are not encouraging your customers and potential customers to do or say something positive for you, you are behind the curve. But all is not lost…it’s not too late to initiate a program to do just that.

The Tax Benefits of Marketing

Marketing is great, right? Of course it is. It can drive sales, increase awareness, and stimulate word of mouth, among other things. However, there is another benefit of marketing that people may not know: many marketing expenses are tax deductible. That’s right! You can write off your marketing expenses. So not only does it pay to do marketing to attract business, but it also affects your bottom line by reducing your taxable income.

So what is deductible? Basically, 100% of your advertising expenses, be it advertisements on TV, radio, billboards, social media, as well as any direct mail campaigns.

Are there any caveats? Well, yes. The expenses must be directly related to normal business activities. This means basically donations and sponsorships are not deductible.

For more information, contact a CPA professional or the IRS.

Source: https://www.irs.gov/publications/p535#en_US_2017_publink1000209178