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The Economics of Free

Monday, May 17, 2010 by Neil Berman

Neil BermanIn my last post "High Return Email Marketing" I described the triggered birthday coupon El Torito restaurant sent to my email box. Last week a friend and I redeemed the coupon.

Below is the bill.

$15.95  Entree 1
$12.95  Entree 2
$8.95   Appetizer
$8.95   Beverage 1
$4.75   Beverage 2
$51.55  Subtotal
$12.95  Less: free entree
$38.60  Total + tax and tip

Assuming labor and facility costs are fixed whether we ate or not, a food/beverage cost of 30% or $15.47 appears to be the variable cost of our visit to El Torito.

That leaves a profit of $23.13 for the restaurant + the waiter got a tip.

As we were enjoying our appetizer we heard the chant of "happy birthday" to a nearby table from the service staff.

There were plenty of seats available on that Wednesday evening. I wonder how many guests celebrated their birthday at El Torito that would not otherwise be dining without an email coupon incentive?

Inteligente de marketing

Neil Berman | President & CEO

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