Socially Inept Math
Jim Sterne | Contact Jim | Comment | Print version
My wife, my sister, my brother-in-law, and I walk into hotel a bar.
No joke. We are there for dinner. On the cocktail table is a tent card extolling the virtues of the hotel's iPhone app (Android coming soon!). The idea that we would actually bother to download an app that lists local events and activities, includes photos of the rooms, and allows us to book a room isn't really worth a full eye roll, but we smirk mildly. Then we spot the flyer. Nice paper. Glossy. Simple. Even elegant. "25% Off your first drink..." 
The smirk is replaced with four sets of eyes rolling, two snorts, and a "Pfttt!" The conversation continues unabated but the marketing faux pas gnaws at me until I finally, here and now, get the chance to exorcise it: Bath Math [Interior, marketing meeting with coffee and sports drinks. Four young, stylish, bright-eyed marketing types and one tie-wearing, budget manager representing the adult supervision.] "We should have an app!" "Yeah!" "An app?" "We should do something social media!" "Social?" "Yeah!" "Oh - wait. Let's have a social app!" "Yeah!" "So the app can do cool stuff so people will blog and tweet about it!" "It'll go viral!" "Yeah!" "What will it do?" "You know, all the stuff you'd want if you had a concierge in your pocket. Maps, events, restaurants, meet-up, check-in - all micro local to the hotel because people are here from out of town." "Yeah!" "OK. But how do we get them to download it in the first place? I mean, they come in and have to register and find their room and unpack. What's going to get them to take action?" "Room discount?" "Free movie?" "A free visit to the health club next door?" "What about locals who aren't staying here?" "Free drinks!" "Yeah!" "They'll go into the bar and then we have the chance to get 'em to buy dinner. #Winner!" "Wait a minute - a free drink is nice, sure, but how do you give somebody only one? I mean, even if they can get an electronic ticket punched, they just have to delete the app and download it again for another free drink." "The waitress makes a note on their order pad?" "But then every time somebody comes into the bar, they get a free drink. An average drink is $10. Are we really gonna get $10 back out? And if four people come in, we just dropped $40." "Make them register so we have their email address on file and they can't double-dip." "Yeah! Then we can email market to them with dinner specials." "Getting them into our bar instead of wandering down the street is worth a lot. Let's say four people get one free drink and we have a 20 percent chance of them buying another drink and a 5 percent chance they'll stay for dinner if they hadn't planned to already. Then we subtract the 80 percent of those who came in and would have hit the bar and stayed for dinner anyway. Given our margins on well drinks, we can go about $2 and still cover the cost. And if we spin that to 25 percent off it sounds like a significant discount." "We're gonna have a social app!" "Yeah!" The logic may appear sound but the process stopped short. A 25 percent discount is indeed an eye catcher. But as soon as you realize the cash value, it's not so exciting. And when you calculate in the negative social value, things get much darker much faster. Negative Social Value "John! I haven't seen you for ages. Let me buy you a quarter of a drink!"
"You're getting married? That's terrific! First quarter of a round is on me!" There is something so disingenuous going on here that the insult stings before the affront registers. Is this sarcasm? A response to something I once said about his fiancé? A quarter of a drink? Really? Imagine doing the math from a social perspective rather than an accounting reference. An offer for a free drink is great, but one can rightly get nervous about the cost. You get to be known as the free drink place and profitability melts like ice in a scotch on the rocks. Bump it up to half a drink? You're still not over the WWTT? (what were they thinking?) response. But if you offered half of two drinks, you can start making friends and growing a business. "First Drink on Us - two drink minimum" Yes, we will buy you a free drink, if you buy another one. We want to be your friend! Which brings us to the two most important axioms this establishment would do well to remember: - Social media is a lot more about social than it is about media.
- The customer buys the first drink, the friend buys the second drink, and the drink buys the third drink.
Be a friend, not an accountant. | 
