Money Report #5 By Jay Abraham ‘Copyright 1996 by Venture Marketing Society, L.C. All rights reserved. Reproduction or copying of this report is not permitted without written consent of the publisher. ‘This report is intended to outline a specific business concept thatthe Society believes is potentially profitable and worth further investigation, but its profitability cannot be guaranteed. Readers are hereby ‘cautioned that any business, especially a small or new business, involves a significant risk of failure. This is not a business plan. Iti the opinion ofthe publisher thatthe information coniained herein is not ‘sulficient to start a business and it will be necessary forthe reader to do further research on the ‘opportunity described. Venture Marketing Society. L.C. is an information provider only. It does not provide any training, back-up, or personal consultation on the implementation or execution of this of any ‘thier idea, The information provided is believed to be accurate, but its accuracy cannot be guaranteed, In ‘some instances the Society may have relied on information provided to it by thitd parties and the Society tay not have tested the concept in practice, Finally, while the report may speak of investing capital, the ‘concepts described are not passive investments, They require active management, Name of Concept Fund the Mark-Down Bandit Type of Concept ‘Short-term point-of-purchase promotions for retail facilities Qyeryiew of Concept Everyone knows about K-Mart and their blue light specials, Iwas in Australia and ‘was reminded of how powerful these are. I was at a Target store in Australia. I was visiting it to see how they transacted retail business. All of a sudden, this charming older woman walked through the section I was in pushing a cart with a blue light on it. ‘The light was flashing and making a “ding” sound. She had a portable microphone in her hand, saying, “Blue light special, blue light special in women’s coats on sale for the next hour, 20% off” | watched about 50 people flock to that department and buy the coats. I subsequently interviewed a prominent retail consultant who gets al his retailers to have ‘what he’s called the Mark-Down Bandit. The concept is that at key times in the store --sometimes it’s intermittent, sometimes it’s every Friday, sometimes it’s the end of the month, it depends on the retail store — he gets them to have a Mark-Down bandit. It can ‘be a man or woman in black, tight clothes with a mask and a painted-on mustache and a black marker and signage. He or she goes through the store and marks down various selected merchandise for various periods of time, Sometimes it’s for an hour, sometimes it’s for the day, sometimes it’s for the first 50 or 100 transactions. It varies. Every time the consultant hhas used this, it has worked very powerfully, he claims, I can’t promise that, but it makes sense. So the concept here is for you to finance the whole promotion of a Mark-Down ‘Bandit for vatious retail facilities in your city, or in a particular industry category around the country, That means you can choose local, regional or generic industries. There are no rules except for what you want to do. Head/Trial Strategy ‘You go to a retail facility, preferably one that has a wide variety of merchandise, and you agree to do the following: (1) Pay the cost of a man or woman dressed up in costume, (2) pay the cost of a sign externally and intemally that promotes the bandit either that day or for the days or the period of time he or she will be there, (3) ifthe retail facility runs advertisements, pay the pro rata cost of adding or tagging to the end or in the middle of their advertisement a reference to the fact that whatever you do, be in the store on such-and-such a date, because the Mark-Down Bandit will be there creating extraordinary values for (you fll in the blank) two hours only or this weekend only or whatever. ‘Your offer to fund 100% of the cost of the person or people. The bandit can do it in multiple facilities. You fund the additional cost of the tag at the end of the ad, which should be very little. Tt could be at the end of a broadcast advertisement, like a radio commercial. It can be a little box you put inside a newspaper advertisement. It can be a postcard you fund to send to their mailing list. It can be any combination of the above ‘You negotiate with them what products or services or merchandise they will mark down, what the prices will be, and what their gross margin will be on those items, You should be paid the whole gross margin above their cost of the items until you've recovered. all your costs. Ifthe Venture Marketing Society had a motto in Latin, it would be “FIRST MONIES BACK.” You get first monies back for your expenses plus whatever share of the margin you can negotiate above your cost-recovery, for as long as the Bandit program lasts ‘You may discover the Bandit program increases overall traffic and sales that day or that weekend, when it’s in full swing. Ideally, you should be entitled to a commission or some considertion on the store’s filll increase in business compared to a comparablebase period when it wasn’t using the Bandit promotion. By testing the concept on a small scale, at a small retailer who is honorable and will share the numbers with you, you should aim to get a handle on the traffic increase. Ifa retailer balks at sharing the full increase, you may reasonably negotiate a large share of the gross margin on the items specifically marked down, on the grounds that the retailer will sell alot merchandise in which you have no participation, just by virtue of the fact that more people are in the store. ‘You can do a one-time test with the retailer, limiting yourself to a share of the ‘gross margin only on specific items, and hold open the possibility of a better deal for yourselfif the retailer wants to repeat the promotion. Once it’s validated, and if't’s as hot as I think, your negotiating position for second, third and later usages should be very strong. This requires, of course, that you absolutely tie up the rights to the idea so that you collect a fee whether it’s an ongoing program every Friday forever or a one-time program. If it’s a one-time promotion, get that retail store to guarantee and warrant with a simple letter agreement prepared by your attorney that if they only use it one time, they will never use it again unless they will pay you a fee equivalent to 50% of what they paid ‘you on the first usage every time they use it thereafter, or, alternatively they will buy it out for a lump sum, or some better formula, As I repeatedly point out to Society members, the biggest hazard in many of the things I recommend (other than the fact that they just may not work), is that you may validate the idea for the other party who will then steal it from you if you aren’t protected by a written agreement entitling you to payments in perpetuity. So be very, very careful Another hazard is that the other party may not represent the numbers honestly ie may understate the sales your promotion acheived ~ or just may drag his feet about paying you. Try to deal with reputable people, and have a written agreement, but be cognizant that at least where business is concerned there are very few “nice guys.” This is a very simple, easy program, but I have heard reports that the Mark-Down Bandit has generated as much as $200,000 worth of increased sales in one large retail facility in one day and that it is not at all uncommon for a Mark-Down bandit to improve the yield of certain kinds of high variety retail stores by 20% or 30% in a single day. As aan ongoing project, you could make a lot of money (potentially) by syndicating your Mark-Down Bandit to 2 lot of different stores and a lot of different locations or to a lot of different kinds of businesses in different parts of town so that you could employ a person ‘or persons full-time (as an independent contractor, if you can legally structure it that way). All you are doing is conceptualizing it, funding it and keeping track of the results, dealing with honorable people and getting first monies back. Obviously, you test it first Enlist an attorney to help you prepare a simple letter agreement, then deal with a small organization first, as an experiment, to see where it works best. It would obviouslywork great in a big retail environment, but most large chains probably won't give you the time of day. You can do it in car dealerships, private specialty clothing stores Important point: ‘The Mark-Down Bandit doesn’t have to necessarily be the Mark-Down Bandit. He or she can also be the Bonus Bandit where you do the opposite. If cutting prices is too unappealing to the retail store, you can add other values. You find other products or services in the store that have higher than normal margins and you add those to the transaction or you go out and locate products or services that could be added to the transaction and you build them into the costs that you recover -- FIRST — before the merchant sees a dime of profit. You get first monies back for the transaction and the bonuses, then ater you recoup all your expenses, you get your share of the revenues Itis a great concept and I strongly urge you to try it, Don’t test it big, test it small, You can advertise and find someone who can pose as an actor, you can rent a ‘costume, or you can have somebody bring their own. You can work with the store owner. There are a lot of opportunities and possibilities once you perfect this. If you do it well in one type of store, you can license or syndicate this to all kinds of similar stores within and outside of your city or your community. For example, let’s say it works great with privately-owned women’s shoe stores. Maybe you get a list of 2,000 women’s shoe stores and you make a deal with all of them to do it one day a month, and you make that an incredible sale. Maybe you do it at a shopping center, sell the concept to the merchants” association, and have the Mark-Down, Bandit go throughout the center. Think about it. There are all kinds of possibilities here and J encourage you to try it