Do you know about the RED envelope?

So, do you?  Do you know about the red envelope?  I didn’t, until today.

Every once in a while I come across a marketing strategy that makes me say, wow.  Why are more businesses not doing this? Today, at Cafe 50’s in West LA, I came across something I would like to share with you all.  It’s called the Red Envelope.

xfaCafe 50s is an amazing little 50s-style diner hidden in plain sight on Santa Monica Blvd., in West Los Angeles. Despite its distinct look, it’s easy to pass by without realizing it. The interior is exactly what you’d expect from a 50’s Diner – chrome plated walls, neon signs, soda fountains, over-sized shake machines a juke box spinning Elvis and Buddy Holly. Some 50s diners look generic, but this one was spot-on down to the details.

We were there for breakfast. I’m sucker for good eggs benedict, and they had a variation that included avocado that did not disappoint. Hot black coffee and pulp fiction style posters did the trick to wake me up this bright Sunday morning on a Thanksgiving weekend.

Before I knew it, my plate was empty and it was time for us to pay. We were delivered our check, our waitress asked us, “Do you know about the red envelope?”  Confused, we responded with a quiet, “no.” Placed on our table was a bright red envelope. The waitress’ words rang out, “take this, and DO NOT open it.”  Of course, I immediately felt like tearing into the forbidden envelope.

The Red Envelope Strategy

On the outside, very clearly, it instructed us not to open the envelope until our next visit in January or we would give up the chance to win one of many different prizes.  Had we opened it, we would throw away the chance to take home a $200 gift certificate, 10% off our meal, a free (amazing) shake, or other great prizes. We safely stored the envelope in my sister’s purse because when she returns in January to open the bright red envelop in front of a smiling waitress, she just might win an entire case of her favorite beer.  (seriously.)

It’s said that it takes 6 times more effort, time and money to attract new customers than it does to do business with someone that has already purchased from your business.  The red envelope strategy is a great way to encourage your current customers transform into repeat customers.  Let’s break down the math of how this strategy can work.

Let’s say that 100 of your customers currently buy from you once every three months and spend $35 on each visit. That’s $14K per year. What if you could take each of those 100 customers and have them show up once per month instead? That’s $42K per year, a 300% increase!

Now, will the red envelope encourage 100% of your existing customers to visit you 12x per year instead of 4x? Of course not. But, you can bet that the red envelope strategy is playing an important role in encouraging more current Cafe 50s customers to return than would have otherwise. This strategy ALONE is making a bottom line impact on this business that relies on customers to come in every day and spend their hard earned money on the amazing food and entertainment found at Cafe 50s.

How can you use the Red Envelope strategy in your business? What can you give away so that you encourage more of your customers to come buy from you again and again? How can you get your website visitors to visit again and again?

Now, you might not run a restaurant, and you might not even be able to physically hand an envelope to your website visitor but think long and hard about how this strategy might make a big impact on your bottom line.

Have a business strategy that you’d like to share? Have any ideas about how you can use or improve upon the Red Envelope strategy? Leave us some comments below.

Anchor Wave

8 comments on “Do you know about the RED envelope?

  1. Mike Kalil on

    This is a phenomenal idea executed well. As an accountant always trying to help my clients’ bottom lines, I’ll be sure to share this with some of them today. But I’m wondering what other types of businesses beyond restaurant and retail you could imagine this strategy being deployed for?
    Thanks, and I’m enjoying the blog.
    Mike Kalil

    • Mike Schmidt on

      I think it applies to some industries outside of restaurants. But, It lends itself very well to retail – especially while the holiday traffic is high. Retail stores are attracting shoppers who might only visit once per year. Why not try to get those people back when the holiday is over? Service businesses could use it as a way to provide discounts or special offers on repeat service for work performed in the future.

  2. Rey Erisman on

    Your website came up in my research and I’m taken by what you have composed on this topic. I am presently widening my enquiry and thus cannot contribute further, nonetheless, I have bookmarked your internet site and will be returning to keep up with any future updates. Just Now love it and thanks for allowing my remark.

  3. anchorwave on

    Thanks for the comment. A lot of “mom and pop” restaurants that I've talked to tend to be worried about bigger national chains that move into a market. These smaller shops can be more agile and creative in their marketing which is something that's hard for a bigger operation to compete with.

  4. Paul Krizman on

    Great article. We, as business owners, are always trying to attract new customers to our buisnesses. Now, that is very important for the future growth of our organizations. However, we should remember those that brought us to the dance! What a great idea for rewarding and inviting back our dance partners! And remember, whatever it costs – it’s less than getting that new customer.

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