Hotcake lovers, rejoice! In Hail-Mary effort to perk up its latest record-low sales slump, McDonald's is finally offering a limited all-day breakfast menu. The hope is that the shift will help the restaurant connect with millennials and cater to its already loyal base. But as Fortune adeptly points out, that move isn't without its risks.
Fortune writes that…
- Removing the scarcity aspect of the popular breakfast items may initially lead to a bump in sales, but the impact may not be sustainable over the long term.
- Expanding an already bloated menu may cause even more problems for the ailing chain, especially when it comes to cutting down drive-thru wait times.
That conundrum isn't unique to McDonald's, though. Promotions are always a gamble – they have the ability to drive up sales in the short term, but long-term sales growth may require more significant changes.
The most reliable form of risk management isn't always to count on insurance to address every risk – sometimes you just need to do what it takes to keep your business financially healthy. But if you're at a crossroads and wondering if a big promotional move is the right way to go, ask yourself the following questions.
1. How will the sale or ongoing deal fit into your big-picture goals?
At the end of the day, the discounts you offer and the services or products you add must be in line with:
- The expectations and demands of your market base.
- The ethos of your brand.
You'll notice that high-end businesses rarely offer blowout sales and bottom-dollar clearances. Their clientele isn't looking for what is cheap and readily accessible – they are buying for intangible benefits (e.g., status symbols). On the other hand, offering the occasional promotion can help attract new buyers, and as Forbes notes, it can keep retailers from going the route of everyday low prices.
Think about how you want the market to view your business, and make sure your promotional efforts are in step with that vision.
2. Can you handle an influx of business if the promotion really takes off?
If you can't keep up with the demand, a successful promotion can tank all the same. Make a contingency plan for handling increased demand, which may mean…
- Hiring more staff (e.g., temp workers – but make sure you classify them properly!).
- Increasing your website's data capacity.
A sudden spike in web traffic can make your ecommerce site crash, leaving a trail of frustrated customers in its wake. If that's the first impression a customer has of your business, chances are they won't be back, and that can hurt your long-term growth goals. Read "Have a Website? Make Sure It Doesn't Crash" to learn about how content delivery networks (CDNs) automatically optimize content delivery to match the surge of traffic.
3. Will it lessen the impact of shorter-term bonuses and discounts?
The last thing you want a long-term promotion to do is to condition customers to expect more and pay less. This is also true if you have sales too often. Customers may never buy your products or services full price and simply opt to wait until you drop the prices again.
You also don't want your long-term promotion to overshadow every other promotional initiative you make (e.g., marketing for holiday sales). See if you can find a way to make sure your deals complement each other by appealing to different sectors of your base.
4. Is the trend or movement you're trying to capitalize on likely to last long enough to make your promotion worthwhile?
Do your research, and when in doubt, hire some marketing help. You don't want to go all-in for a trend that will fizzle out in mere weeks.
For more tips on planning promotions, read Entrepreneur's article "Three Steps to Effective Sales Promotions."