Bad Location? Look at Rent as Marketing Expense

Location, Location, Location seems to be part of business 101. This premise is based on the notion that the locaiton of a business (specially one’s catering directly to the consumer) is one of the most important factors contributing to success. Most landlords subscribe to this theory and there is typically a direct correlation between the location of a storefront (i.e. restaurant, pizza parlor, ice cream parlor) and the rent. The better the location, the higher the rent. As an example, a highly visible locaiton is seen by more customers and therefore has a higher probability of pulling in customers. Therefore the business has to pay more rent since the locaiton is being naturally advertised by its locaiton.
If you are looking at opening a store or are in a place that you consider a bad locaiton, a more fundamental approach may assist in One-Stop-Point-of-Sale-Sintel-Systemschoosing your next locaiton or seeing if you can improve your location that is considered sub-prime. First, start thinking of rent as a cost of marketing so what you pay for rent and all the marketing costs (i.e. advertising) should be summed up in one category and rent being a subcategory. Why? Let’s assume that a very high traffic area location demands $2,500 in rent while a middle locaiton goes for $1,700 and a poor locaiton goes for $1,000. Effectively the difference between them is their ability to attract customers. Marketing and advertising are intended to pull more customers in. So the poor locaiton pays less for rent, but has to pay more for marketing to attract new customers. Here is where the poor locaiton can actually win if its product and customer service is great. How? Marketing brings in customers, but the customer service and product quality bring them back. So while a good locaiton cannot decrease its rent as time goes on, a poor locaiton can decrease its marketing cost if it build loyalty. A good example of this is Gelato Paradiso ( located 448 South Coast Hwy in Laguna Beach.) It is the last store in an a narrow alley way type of stores, but manages to keep lines.
Here are some tips if you are in a poor locaiton:
1. Make sure the issue is the locaiton and not the product. If you are selling a product that is no longer in demand, then it is not the locaiton.
2. How is your customer service when you are not there? Send in secret shoppers and find out.
3. Find out how much a good locaiton would cost and find the differential. As an example, if your location is $1,000 per month and a good locaiton would be $2,500, the differential would be $1,500.
4. Decide on a marketing plan. Need help? Contact Affiliated Research Economics.
5. Try reducing your rent temporarily. Talk to your landlord and tell him about your challenges. Most landlords will work with you if 1) they know you have a plan and 2) they know that the reduction is temporary.
Long term business success is based on the ability to navigate challenges because there are an endless array of factors that can effect an operation. Did you know that some of the best companies in the United States have come out from the most challenging times from the Great Depression of the 1930’s to the most recent “Great Recession?”
As you POS partner in any operation ranging from restaurant to pizza shops and bakeries, Sintel Systems offers much more that point of sale systems (HardwareSoftwareSupport) to bring you help. Resources such as business consulting services provided by our partners at Affiliated Research Economics are intended to assist you from the beginning. If you are planning on opening a business (franchise or star up), talk to us first.
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