Merritt's Bakery owner Larry Merritt talks about the inspiration behind the now-ubiquitous red envelope promotion and the benefits of sharing good ideas.
Sometimes the best ideas come from the unlikeliest of places. For Larry Merritt, CMB and owner of Merritt’s Bakery in Tulsa, Okla., inspiration for the now ubiquitous “red envelope” promotion struck three years ago while he was having dinner at a local Mexican restaurant chain.
“It wasn’t my idea. I stole it,” Merritt says. “Sometimes we’ve got to look outside our industry for inspiration.”
Immediately afterward, he emailed fellow RPIA Group members to tell them about the idea and how they could use it in their bakeries. He presented the red envelope promotion again, along with several other marketing ideas, at Baking for Beginners last year.
“I like promotions so I always throw out a lot of ideas,” he says.
To do the promotion, the bakery first comes up with a prize, which can be as small as a free cupcake or cookie or as big as an iPad. Employees stuff coupons for the prize into colored envelopes and hand them out at the counter. Customers are instructed to come back on a specified date with the envelope, which will then be opened to reveal their prize. The promotion helps ensure an additional two customer visits at a low cost to the bakery.
Merritt suggests running the promotion once or twice a year during especially slow periods to revive slumping sales. “To get an increase in January or July, that’s almost unheard of. Most of us are bleeding during those months,” he says.
Aside from being inexpensive, Merritt extols the unusually high return the promotion typically garners, since customers are eager to find out what they’ve won. “Usually in a promotion, if you get a 10 percent return that’s fabulous; the industry standard is typically 5 percent or less,” he says. “But everybody doing this has been getting a 15, 20, up to 30 percent increase.”
Piggybacking the red envelope promotion on a community-based effort also is a great way to build on your bakery’s positive local image. “We support the public library system in Tulsa. They do a reading program each summer, and we use the promotion to give away products to kids who finish it,” Merritt says. “We get a 70 percent return on that. It’s also PR for us and continues the idea that bakeries are family friendly.”
While some bakery owners give away huge prizes like laptops and vacations, Merritt prefers to stick with baked products. “When they come back to claim their prize, which is usually a cinnamon roll or cookies, they are already in the store and they almost always buy something else. But that’s what’s so great about this promotion. Everybody spins it the way they think it should be.”
Although he came up with–er, stole–the idea, Merritt didn’t even test it out himself until he’d been sharing it with his peers for several months. “That first year I didn’t even do it,” he says. “But our little group is really good about sharing. You put out a request for a formula and you’ll get 10 or 20 responses right away. I’m always thinking about new ways to promote, and I thought this was neat but never got around to it. Until I presented it a few times, I didn’t think much about it.”