You Ever Been To A Hostess Bar?
Me, neither.
Popular in Asian cultures, they are very respectable sources of tax revenue, and often double as wash-and-dry facilities for cash-only “family-owned” enterprises. They share the same challenging weekly traffic pattern with bars and restaurants:
- Thursday through Saturday: busy to super-crazy
- Sunday through Wednesday: dead slow to nearly break even
So how do you make payroll during half of the week? You just can’t do Kids Night. Instead of trying to maximize total revenue by boosting traffic and making $1 or $2 per visitor, the hostess bar maximizes revenue per visitor.
The hostess bar uses several revenue models in a series of upsells that quickly separates the key accounts from the low-margin accounts:
- Wham Bam Thank You Sir: Table service for $10 a beer
- Buy Me A $50 Dwinky Winky? You’re assigned your own account manager
- Let’s Go Into the Back, I Want to Get to Know Your Bank Account Better: members-only, subscription-based, very private banking
The lesson here: Even in slow times, if you offer a product or service that some people want, a proven system will maximize revenue from each customer, and have them coming back for more, where you move them up. If the hostess bar sounds like the right business opportunity for you, just remember to outsource the work.
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So, the key is to offer the upsell in stages, each requiring a little more commitment. The first step up should be an easy hurdle that seems very reasonable, like the table service.
Yes, indeed, Tony. And if you noticed, the “private banker” sells their “client” a back-office subscription product. Tony or anyone else: Why do you want to do that?
This is a little like the service after warranty period on auto purchases. Let’s start with the touring package since it includes fog lights, leather and a sunroof…oh…ok. Then a little pitch in the finance manager’s office for pre-paid oil changes and once/year car detail packages. PLEASE! Why not just offer a menu approach…people are on to this. It may work in a strip club, but if we all got a lot more realistic about our offerings, people would appreciate it as it is up front and above board. I agree that in most cases it makes sense to gain agreement on small closes..or stages, but in the end, a more crafty pitch emphasizing benefits goes a long way to defray surprises for the unexpecting!
Roger,
You’re definitely right when you say “a more crafty pitch emphasizing benefits goes a long way to defray surprises for the unexpecting” –
customers have become more wary of blindly trusting a seller, even more so when the product or service is complex (like yours: business brokerage and advisory services). And they’re getting quicker on the draw to withdraw their trust the instant their BS meter starts going into the red.
Mapping the road ahead and its multiple stops before getting you to your final destination — like an airline flight — “we’ll have a 2-hour layover in Tulsa” — helps to keep that trust by keeping customers in the loop, instead of accidentally taking them for a ride.
The hostess bar example makes sense. I’ve had first hand experience! But, I’m not sure this concept would work with auto/home insurance. Your thoughts?
Reid,
I’m sure you visited the hostess bar for “market research purposes only” …
Your insurance business might not seem to parallel the example with a series
of upsells to get customers into the back room’s “very private insurance” services –
because private services might be their first stop, depending on how you
structured it.
However, I think you’re already doing it and just need to think of ways to expand:
You can maximize revenue from each “very private” customer by focusing on the
market segment with greatest repeat customer potential: those with more than
one house and one car.
Sounds like the Internet Guru revenue model to me. Full of one time offers and backend up-sells.
Why do they do it?
Because it works. But first you have to build your list…
Michael,
You’re right — I definitely had the Online Marketing Guru cartel in mind when penning this post — they do all you mention along with what the hostess bar has been doing centuries before them.
Main differences (IMHO):
(1) online gurus will downsell (offer you a lower priced product if you pass on a higher priced product); your hostess primarily upsells (take you from $10 to $50 drink).
(2) I think online gurus really don’t provide quality service —
perhaps because they’re a bit arrogant about the size of their lists which create cash on demand. I’ve always felt like an unappreciated suspect or prospect after making a purchase rather than a valued customer. I get better service and appreciation from the gal who cuts my hair for $10 once a month (a subscription service).
This model is the best one in the retail business… I own a small retail shop in a remote part of the world. I sell scrapbooking supplies (imported from the States) only to Anglos (my niche market) and while they all have heard of scrapbooking, it doesn’t mean that they’re doing it.
I start small — “Get yourself an album and a glue stick. Don’t worry about all the frills of fancy paper and stickers and punches. Just get those pics in a photo safe album.” Then I bring them in for “scrapbook parties” where they see others getting fancy and then I start to sell more products. It just snowballs from there.
Retail is the perfect place for this model. (In my humble opinion.)