My new mover mailings have been on fire-and-forget for quite a while now and I’ve been wondering about their effectiveness. I asked my PoS guy to dig into the database and see if he could provide me with some data along the lines of how many people that redeem the coupon for a Free 12" Pizza (up to a $17.30 value) go on to order again as a paying customer. This is what he came back with:
In the last two years we’ve had 703 certificates redeemed. Of those 331 got the free pizza and have not been back yet. So just over 50% of the new movers we sampled go on to order at least a 2nd, 3rd, 4th time and beyond.
If I assume that everyone who redeems the gift certificate orders the max ($17.30), then each redemption is roughly $6 in Food Cost + $6 for the mailing (assuming 67% of the mailings go unredeemed… I need to find out the exact count of what we mailed) for about $12 direct cost. In my view the redemptions aren’t enough to trigger the adding of labor to the schedule, so I’m going with the idea that these are marginal sales that don’t carry an added labor cost.
At roughly a $20 guest check average and about a 10% profit margin, that $2 pocketed on each additional order means we need 6 more orders to break even. So in the last 2 years we’ve had 116 of the 703 redemptions move into the profitability range.
Back of napkins says it’s cost us $8.4k to sample 700 people in the last 2 years. Those ordering a 2nd time or more have generated $4.6k in profits with 116 having covered the cost of their free pizza and their sales going forward will eventually cover the acquisition cost.
Looking at it in the short term, it’s definitely an expense. Looking long term those 370+ customers are in investment that ought to pay dividends.
My experience in mailing out gift certificates for free pizzas is that of the redemptions, enough of the customers order extra items with their free pizza that the food cost is close to covered on the very first order.