Furniture store owner loses $7 millon - calls it "building the brand"

Did you get your company on the front page of Yahoo? Did your company get mentioned on Twitter, Facebook, VK, Sina Weibo, Tenant Weibo?
HIS DID.

Are you being discussed on WF?
HE IS.

Was your store written about in EVERY MAJOR news paper in the US, and many OUTSIDE of it? Reported by EVERY MAJOR, and many minor, CABLE news outlets? talked about on most of the top 50 radio shows in the world?
HIS IS.

If you search for your latest marketing effort, will you return 230 news items on ANY search engine?
HE IS.

So what do you think? Did he get his money’s worth?

YES.

Possibly. However considering how much “free” advertising he is getting, and will continue to get, it’s probably worth it.

You're talking about it, aren't you?

Internet marketers have a tendency to measure results based on MER (Media Expense Ratio ... Income as a direct result of dollars spent). We do the same thing on TV when promoting a product.

But when you reach a certain level, your advertising tactics shift away from promoting the product to promoting the brand. Name recognition and relevance become more important than measurable direct response to an ad.

Take Pepsi and Coke for example. Have you ever seen a Pepsi ad that made you think "Wow, I really want to buy a Pepsi!"? Probably not. And they don't look for an uptick in their sales as a result of their advertising either. You reach a point where running advertisements only serve the purpose of maintaining the status quo - keeping your brand memorable and your distributors buying it.

Remember, there used to be a "big 3" in the cola industry... Coke, Pepsi, and RC, but as Pepsi stepped up their marketing they started chipping away at RC's marketshare. Now everyone knows Pepsi, but when was the last time you heard someone ask for an RC Cola? Most stores don't even carry it. This is 100% attributable to brand marketing.

Take that down a notch to furniture sales... when people living and working in his service area are ready for new furniture, what store's name are they going to remember? The model works over and over.

Yeah, I was thinking he probably had insurance.

If he did, it was probably only on his cost of goods sold.

So between the insurance premium and the lost gross profit on sales, he still took quite a hit.

Alex

I apologize if I was wrong.

I had heard of stories like this before, like the one I mentioned where he had insurance. On the story I mentioned, it wasn't his first promotion. On T.V. he was joking how he got a text from the insurance company saying they were going to have to drop him. They were just kidding.

Either way it's a great thing he's doing.

Furniture often has a 300% markup, so while the sticker price may be $7 million, it's probably closer to $2.5-$3 million out of pocket for him. He's likely making more than that in an average month.

As for the "why", the deal-seekers are never the people you make money on, they're your messengers. Companies give away product all the time, and they do it because people who win free stuff talk about what they won and how they won it. Except around the Holidays, most people don't price shop and don't wait for sales - they buy what they need either right when they need it, or as soon as they can afford it, and any sales/savings are just a "bonus" they didn't have to spend.

Financing also comes into play here. Furniture retailers dangle that "no payments for a year" carrot in front of buyers and spread a large transaction out over several years. Most people don't shop by price, they shop by payment.

Another great example of this behavior is auto sales. You know every year right in the fall the price of a brand new current model year vehicle will drop (and drop more each week it sits on the lot) to make room for the next model year vehicles. Lots of people flock to car dealers and buy specifically at this time of year, but many more people wait for the newest model year and buy it at the highest price point. Mathematically that's the WORST possible time to buy a new car (getting the new model year right when it comes out vs buying a new last-year's model for thousands less).

But they want it, and they sign the papers without thinking about it, because a couple thousand dollars more only affects their PAYMENT by a small amount of money.

I stopped financing cars a long time ago, so for me I actually have to think about these things. There's a big difference between buying a $37,000 car and a $43,000 car - I feel that extra $6,000 leaving my pocket when I write a check. If I was financing, that $6K would only affect my payment by what, $20-$30 per month? Chump change, I'd sign without thinking about it. And that's exactly what happens.