Tag Archives: Business model

January 8, 2020 · 4:20 pm

I’m Sick Of Scammers

Another year, another scammer surfaces. I’ve written many times in this space about marketers who try to take advantage of people’s limited attention spans and fear of all things “official”. The mail delivered another example of one to my doorstep the other day and I want to tell you about them. Admittedly, part of this is venting but another part is a very real concern that many marketers have lowered their standards to a point where they’ll do just about anything to drive business. It’s even worse when the business itself is a scam.

North Carolina, like many states, requires that all businesses file an annual report with the Secretary Of State. If you’ve never done that, it’s a very easy process that can be completed online in about 3 minutes. I had to do the same thing when my LLC was registered in Connecticut and the process was equally easy. You check a few boxes and pay the fee. Easy peasy.

In the mail the other day was an official-looking document – 2020 Annual Report Instructions Form.  The blanks in the form were already pre-populated with my LLC’s information. It also contained the language from the general statutes about having to file an annual report. I thought it was something the state had sent until I gave it more than a cursory look.

In a different typeface was a sentence that said this was being sent by a third-party who would file my report for me. Just send along the $292 fee and that would be that. Of course, the filing fee is only $202 – the other $90 was what this company was scamming me for. The grift IS the business – there is very little, if any, work involved otherwise.

My first thought when I saw the form was, oh, I’ll do this online, as I do pretty much everything. My next thought was “wait, this isn’t the state, this is a scam.” The thought after that was “some percentage of business owners are going to fall for this.” It has all the right information and it’s very official-looking. Of course, anyone can get that information on the state’s website and matching the state’s form and typeface isn’t exactly rocket science.

I admit there are a couple of disclaimers that the company is not affiliated with the state but why should anyone have to read very carefully to avoid being taken advantage of? Are they providing a service? I suppose so, but why not offer the service in a clear manner instead of trying to obfuscate that you’re charging $90 to save someone a few minutes’ work?

If you market a product or service, the road to profitability isn’t made easier by misleading or scamming your customers. Let’s not do that. Even better, let’s shine some sunlight on those scammers who do.

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November 15, 2019 · 4:05 pm

Concessions

Let’s go to the movies this Foodie Friday. I did the other day. If you’ve been spending time at home streaming your entertainment and none at the theaters, you might not be aware that things have changed dramatically at the old cineplex with respect to food. I happened to go to my local Alamo Drafthouse, which features recliners as well as a large menu of food and beverage.

You are probably aware that theater owners make more money from concessions than they do from admissions. You might have noticed that most movie concessions are high-margin items such as popcorn and soda. Still, I generally didn’t spend much more than $10 on food and beverage. Boy did THAT change at the Alamo. Even factoring in the additional labor costs for the servers bringing the food to my seat, I’m pretty sure that the theater owner netted a heck of a lot more from me than they might have in the past.

The Alamo overall is an interesting model. There are fewer seats in the theater but that really only reduces the take from admissions. My guess is that the concession net more than makes up for the fact that there are fewer bodies in the seats. Of course, my Alamo also has 10 theaters under one roof, ranging from 50 to 100 seats. What I like about this from a business perspective is how they’ve rethought the business model and focused on the part of the business that makes an owner money. The concessions are a significant upgrade. There are craft beers, top-shelf cocktails, and even a vegan menu. Sure there is popcorn but it’s served with real clarified butter. It’s also a bottomless bowl. There is also an herb popcorn that is tossed with that same butter and fresh herbs. Do I give a second thought to paying $8.50 for it? Nope – it’s delicious. So are the sandwiches, pizzas, and salads. $45 on drinks and food? Even at a 20% margin, my concession purchases yield the business owner as much as my previous bill might have been in total.

Any business can learn from what the Alamo and other theaters are doing as they transform their business models in the face of unlimited streaming options. It’s the Wille Sutton Rule – go where the money is.

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October 30, 2019 · 12:42 pm

Something For Nothing

I went to one of the warehouse club stores yesterday to make some bulk purchases. If you’ve ever been in one of them – Costco, BJ’s, Sam’s Club, etc. – you know that one feature of walking around the place is that there are usually free samples. You can taste the latest and greatest in meats, cheeses, and frozen things to cook while you’re too busy to make something yourself. That got me thinking about the fact that you really don’t see a lot of sampling elsewhere.

I’m a fan of the free trial. It gets customers walking through your door and using your product. What I don’t particularly like are those “free” trials that require you to fork over your credit card. Free means without strings, right? In particular, if you’re a business that is built around what I think is the gold standard – recurring revenues – you ought to be spending a good chunk of your marketing dollars on free trials.

It’s relatively simple math, right? What’s the lifetime value of a customer? What does it cost you to offer up a free trial – a visit, a free month, whatever? What is the conversion rate of those freebies – how many of the trials become regular customers? Recurring revenues are predictable and generally pretty stable. I bet you’ve signed up for subscriptions of some sort and forgotten you’ve done so or don’t use them as often as you thought you would. For a business, that’s a customer without costs, and that’s a nice margin!

When I talk to people who are looking at franchise opportunities and who don’t have a particular brand or industry in mind, I usually talk to them about the businesses with recurring revenue models. Things like cleaning services. Not a sexy business, but very profitable and that, in part, is because of the recurring revenues. Same thing with spa businesses or some hair salons that feature memberships. Are those businesses that can offer a free trial? Maybe if you’re an out-of-the-box thinker. Giving a converted customer the ability to give away a free trial to a friend is another great way to expand your base at very little cost.

Here is the thing about free trials leading to recurring revenues. As with any business, you have to maintain a high level of customer service. After all, when someone’s credit card is getting dinged each month and your business appears on their statement, it’s an opportunity for them to reconsider.  If they walk away, no amount of free sampling will get them back most of the time. Everyone loves something for nothing. The opposite – nothing for something – is very much NOT true!

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