Package Synergistic Products/Services
Let say that a convenience store serves fresh coffee and that the average customer that buys a $.99 cup spends a total of $4.00 per visit.
Obviously getting these customers to come in more often will dramatically increase sales right? What if the store or chain of stores offered a
Coffee Card that was good for either up to 30 cups of coffee a month or even an unlimited coffee package that they sold in monthly or annual
increments at a 25%-50% discount? Would the purchaser’s have a strong tendency to go to that store instead of one down the street? Since
the cost of coffee is so cheap, the marginal profits from the additional items they purchase represents pure marginal profit.
Let me go quickly through an example. Don’t concern yourself with the calculations, I want you simply to understand the impact. Let’s return to
the Convenience Store that generates $4.00 per customer visit.
Let’s assume that anyone purchasing the 30-day Coffee Pass comes in twice as often to get his or her fresh coffee. After all they have already
paid for it in advance. So they now come in 20 times instead of 10. Let’s further assume that the Convenience Store’s marginal cost of a cup of
coffee is $.10.
The customer previously spent $10.00 per month for coffee (10 cups at $.99) and $30.00 on additional items that had a 50% margin (10 visits
* $3.00). Therefore the Convenience Store earned a profit of $9 on the coffee and $15 on the extra $30 per month they spent, totaling $24.
Let’s call this the baseline. Let’s say the Convenience Store charges $12 for the Coffee Pass. The customer now comes in 20 times and
spends $3.00 each time or $60, yielding a profit of $30. The coffee costs the Convenience Store $2, which yields them a profit of $10 – the
total profit therefore is $40 or 67% higher.
And what are your additional costs –Maybe $100 for in-store promotion signs and the coffee cards.
Now the assumptions are merely guesses at the outcome. Perhaps the customer coming in more often would not spend $3.00 extra dollars per
visit. But, the upside profitability is clearly obvious.
Convenience Store