Byline: Edited by Holly Haber

Q: What percentage of sales would you recommend a retailer budget for advertising and promotion, and what are the most effective ways for a specialty store to spend its money?
A: Retailers spend about 4 to 7 percent of sales on promotion, according to the 1993 edition of “Financial Operating Results,” produced by the National Retail Federation. The real issue, however, is not the amount you spend, but how you spend it.
A retailer should use communication tools to (1) communicate to customers that they exist, (2) tell customers they stand for something, (3) attract customers to the store and (4) retain customers. Retailers should create a favorable attitude toward their store that’s consistent with their target customers’ tastes. Specialty stores can create a positive image by becoming known for the biggest selection in a certain product area. The Tie Shop, for example, doesn’t need promotional dollars to inform customers it sells ties, allowing it to use promotional dollars elsewhere.
Direct mail and promotional signage are two ways to motivate customers to come to the store. To be successful with direct mail, retailers follow the adage, “Promise a lot, deliver more.” In other words, when their store has five strong selling points, they only promote four, then highlight the fifth feature in the store so the customer notices it. Often, this feature clinches the sale.
Encourage sales associates to stay in touch with customers to keep them coming back. Larry’s Shoes, a retailer with stores in Texas and Colorado, has a unique way of motivating salespeople to follow up with customers: It increases their commission from 7 to 10 percent when a customer makes an additional purchase within a 12-month period.
Some merchants provide stationery, printed materials and printed mailing labels to sales associates.
Q: What sources can retailers approach to obtain targeted lists of prospective shoppers for direct mail? Is this an economical approach for independent stores?
A: Direct mail costs more per person reached than mass media, but it can be much more effective if dispatched to the right people. Retailers can assemble mailing lists by asking customers for their addresses — some stores make commissions contingent upon the sales associate recording customer data, unless the customer refuses.
Another way to build a list is partnership marketing with another retailer or manufacturer that has the same customer base but not the same merchandise mix. A third means is to purchase lists from information-service companies such as A.C. Nielson, Claritas, Strategic Mapping Inc. [formerly Donnelly] to name a few.
Once you develop a list, you can start frequent-buyer programs, and if sales are large enough, offer a private-label credit card. Database technology to store customer data is available to retailers of any size.
Q: How important is it for a retailer to link with local charities and sponsor fund-raising events?
A: Businesses of all sizes would do well to consider linking up with local charities and fund-raising events. Associating a company name with a cause that customers care about can boost store traffic and sales.
It’s important that charity activities be driven by a public-relations plan designed to improve exposure, image and customer loyalty. The biggest benefit of participation will be the ability to reach a target market.
One effective “cause marketing” activity used by Britches of Georgetown is to offer discounts on apparel purchases in exchange for the customers’ old clothes. The old clothes are then donated to the homeless.