A Strategic Plan For A Little Start-Up Donut Shop To Take Down Krispy Kreme.

And Hope For Little Guys Everywhere.

By Rich Harshaw

Nothing brings joy to a Saturday morning in the Harshaw household more than a couple dozen Krispy Kreme donuts—fresh, hot, and ready to dunk in a cup of cold milk. My six locust-wannabe children can devour two dozen in approximately thirteen seconds—sprinkles and all.

So one Saturday morning when my oldest daughter reminded me she had to be at school for a band competition at 8:30, it was a perfect chance to make a run. My oldest son jumped at the chance to come with me and get the hottest of the hot right after they go through that glaze waterfall thingy. There’s nothing like father-son bonding at 240 calories and eight grams of fat per donut. Homer would be proud.

After we hastily dispatched of the flute player (more for the rest of us!), it was on to donut Shangri La. As we turned right onto Highway 26, my donut radar efficiently picked out a daring new player in the local donut scene. A new shop bearing the generic white letter sign “DONUTS” was a dead giveaway that this was a Korean-owned store. And judging by the parking lot, they weren’t experiencing the typical traffic control problems associated with Krispy Kreme grand openings. In fact, there wasn’t a single car in the lot.

My son was already locked and loaded: “Dad—check it out! A new donut shop! Let’s go there instead of Krispy Kreme. I hate Krispy Kreme. We always go to Krispy Kreme. I like the big donuts from the little shops better.”

The glaze waterfall thingy would have to wait for another day. The Koreans had just won a new customer.

No small feat considering that at approximately three miles from my house, this was the ONLY locally-owned shop in existence. Krispy Kreme had decimated the rest when they opened their mega store three or four years prior.

As we walked in, I was not surprised to see that indeed, this was a Korean shop. “Just opened?” I inquired as I approached the eager employee standing behind the counter ready to serve what appeared to be an endless and yet-untouched supply of donuts. “Three weeks open now,” came the broken-English reply. Amazing—three weeks and already the place had the look and feel of a crusty little donut shop that had been there twenty-five years.

It wasn’t dirty—but there was absolutely nothing remarkable in the entire place. The walls were all painted pale yellow, and on the left wall was the standard-issue donut shop drink cooler with sliding glass doors and an assortment of juices, milks, and energy drinks. Just past the cooler was the huge Jesus picture—the one that’s always there in these kinds of shops, unless they have the more traditional Buddha-type statues. Just below that was the seventeen-year old CD boombox playing random light rock hits from the 80s. The back wall featured a bulletin board where you could leave your business card, which caused me to think—do you really want to hire an accountant, plumber, or personal trainer you found on the bulletin board at the donut shop? A half-dozen of those flimsy little donut shop tables and chairs were in the middle of the shop for those who preferred to dine on their donuts while reading the Korean newspaper that was conveniently available. The glass cases under the counter featured a wide assortment of nice looking donuts—plus those creepy hot dog things wrapped in a bun that I’ve never really seen anyone buy.

Six dollars a dozen was the asking price on the menu board above the clerk’s head—it was the generic kind with lines on it that you can stick letters on to form whatever words and prices you want. Fancies and cream-filled would cost extra—but for regular old donuts, their price was a full dollar less than the Evil Empire was charging less than a mile down the road.

We bought my standard cache—a dozen glazed and a dozen chocolate sprinkles—plus three chocolate milks for the kiddos back home. Then, to my surprise, the lady threw in a dozen donut holes for free—a nice touch. We got out of there for just under seventeen bucks. Not too shabby.

As we drove home I couldn’t help but think that this brave little startup was doomed to be crushed by the venerable Krispy Kreme—it was only a matter of time. But it didn’t have to be this way! A savvy marketing Korean shop could take a substantial chunk out of KK’s hide if they would just employ a few simple strategies. Four strategies to be precise—detailed here for you reading pleasure, so you may be able to use them in your construction, plumber, or HVAC marketing efforts. Think of me as the holographic Princess Leah R2-D2 kept showing Luke in the original Star Wars.

Citizens, we have a plan to destroy the Evil Empire.

Episode 1: Use The Force Of The Brand

Remember back in the 1970’s when generic grocery items were all the rage? The packaging was stark white with black lettering revealing the contents of the package. I was just a kid back then, and I had a very extensive beer can collection (yes, my mother was thrilled). I remember finally getting my hands on one of those white cans that simply said “BEER” on the front and thinking in my ten-year old brain, “This is the dumbest thing I’ve ever seen. Who on earth would even want to buy this stupid stuff?” There’s a reason generic products went away.

If a ten-year-old knows that generic products are dumb, why can’t full grown adults who own donut shops figure it out!? You never see a restaurant just called “Restaurant” or a hotel just called “Hotel.” Yet thousands of donut shop owners across the country have dug deep into their collective creativity and only mustered “DONUTS” for the name of their shops.

How about coming up with an actual name for a donut shop for starter? And preferably, a name that either suggests an excellent tasting donut, or has some sort of local flair. Here’s a quick list I came up with:

Killer Donuts

Best Darn Donut Shop

Guaranteed GREAT Donuts

Delightful Donuts

Texas’ Best Donuts

Dragon Donuts (in honor of the local high school mascot)

Southlake Pride Donuts (local community name)

Yes, I know that the sign out front will cost more money that the plain vanilla DONUTS one, but remember, we’re trying to take Krispy Kreme down! Spend a little extra dough on the sign.

For sake of argument, let’s call our Donut shop Texas’ Best Donuts. This way we can cater to not just Southlake (and their Dragon constituency), but also neighboring Grapevine and their Mustang faithful.

Since our theme is Texas, let’s go ahead and decorate the place with some Texas flair. Decorating advice should be taken from Starbucks, not from the local snow cone shack. Let’s get some bright colors that make the place look lively, energetic, and fun. Built in bar-type seating around part of the perimeter of the store would be a nice touch. Make the tables and chairs a bit more substantial. Whatever tables and chairs Starbucks has, buy those. And while you’re at it, buy the Starbucks CD collection and play it over built-in-to-the-ceiling speakers. I know it’s just a donut shop, but it’s not illegal to give the place some ambiance.

Next, let’s hire a graphic designer to create a Texas’ Best Donuts logo and color scheme. This is important, because we’re going to use the logo and color scheme to actually (gasp) start to brand our donut shop! Instead of using the generic white box to put the donuts in (or even worse, the generic white box with the word DONUTS and the address stamped on the front), let’s instead get boxes printed with the name, logo, and slogan printed on them. Oh yes—the slogan. How about “Not Just The Best Donuts On Highway 26—The Best Donuts In Texas.” Don’t you like the not-so-subtle dig on the neighboring giant!?

Next up for branding—signature donuts. Because we’re a local shop, we have lots of flexibility to do whatever the heck we want. For starters, how about a donut that’s roughly TWICE as big as normal donuts that have red, white, and blue glaze (or sprinkles) on them in the pattern of the Texas flag? We could call it the “Texas Giant” and sell them by the half dozen instead of the dozen because they’re so stinking big. Now there’s a donut people would go out of their way to buy—and remember.

The next signature donuts would need to be for the local high schools—how about a “Mighty Mustang” in red and blue and a green and black “Delectable Dragon” donut? They could come in “Texas Giant” size, regular size, and minis. I promise you, people would go absolutely insane to buy these.

Then we could produce special occasion donuts—Valentine’s Day, Thanksgiving, St. Patrick’s Day—you name it. Has anyone ever looked into making donuts in the shape of letters? How about each day of the month they could create a donut with the letter that corresponds to that day of the month (A=1, B=2, etc.) and anyone who can prove their name starts with that letter can come in for a free letter donut that day. It’s worth a try. And don’t tell me it’s impossible to make a donut shaped like a letter. If you think so, email me and I’ll email you a great quote from Claude Hopkins.

So how much would all this branding cost? Certainly a bit more for the sign and furnishings. The logo wouldn’t be too much. And signature donuts? Come on—they don’t cost anything extra—they’re still just donuts! But now we have an identity that people would be interested in. People would remember these donuts—and this donut shop. And we’re just getting started.

Episode 2: The Marketing Wars

Now that we’ve got some branding in place and are open for business, it’s time to get some customers.

But in building our donut business for the long term, what’s even more important than getting customers is building a database of customers that we can continue to market to for years to come. This is the downfall of almost every local business on the planet—they allow customers to haphazardly wander in and spend five or ten bucks… but they never attempt to capture those customers’ contact information so they can proactively woo them back later. They’re perpetual “one shot” sellers. For our plan to defeat Krispy Kreme to have half a prayer of working, we have to immediately begin gathering names, emails, and cell phone numbers (for text messaging) and social media followers of as many people as possible—customers and prospects alike.

Gathering Customer Contact Information: The first thing should be obvious, but nobody does it. We’re going to ask the walk-in customers to give us their contact information. Here’s how the plan works:

First, we’ll print up some professional-looking cards with a space for each customer to write his name, address, cellphone number and email address. The cards, of course, are branded with our donut shop name, colors and logo, and the top of the card should read:

FREE DONUT HOLES FOR LIFE!

This is a little trick that plays on human nature… which is… people love to get free stuff. So instead of just giving away the free dozen donut holes to any Tom, Dick, or Harry that wanders through the door… let’s NOT give them to anyone unless they fork over their contact information first.

If we were going to give the darn donut holes away anyway, let’s get something in return—a veritable pot of gold in the form of a customer list. The card should also ask a few questions, such as “My home is approximately ____ miles from here.” And “My work is approximately ____ miles from here.” Get the addresses, too.

When each customer places his order, we’ll have the clerk hand each person one of the cards to fill out. We don’t want a stack of them sitting out so it looks like any schlep can fill it out as many times as they want. The cashier should pull it out from behind the counter. The customer should be informed that they’ll get a free dozen donut holes today for filling out the card, and a free dozen donut holes every time they buy at least a dozen in the future. The clerk should also let the customer know that we’ll be emailing and texting (and tweeting) free donut offers periodically—and the notices will only go out to people who fill out this card. Offer to give TWO DOZEN free donut holes right now if they’ll whip out their phone and Like us on Facebook or follow us on Twitter. We should have a cash incentive to the clerks to make sure that they are proactively helping us build the most important asset our donut shop will own—the customer list.

The next step is hopefully obvious too… we need to put the customers into a database so we can start to systematically contact them. Use a program like Aweber that allows us put new customers into an “email track” which means that each customer will get the same set of offers at the same intervals.

For instance, we want to send them an immediate email with an offer for something like “buy one dozen get one dozen free” as long as they return to the store within seven days. This is important, because we want to get them back into the store as soon as possible to begin to develop a buying habit. We’ll give up a bit of gross profit now and again to get them into the store. We won’t always offer a free dozen with a purchase of one, but to get them back in quickly, this is a no brainer. Then we would set out a specific chain of emails to be delivered at specific intervals to each new customer. We’ll talk more about what to send the customers via text and email later.

The 5 x 5 x 50 Plan: But first, let’s look at some more ways to get more new customers. One good thing about running a donut shop is that if our advertising budget is low, we can print our own currency in the form of donuts. The hard cost of creating a $6.00 dozen of donuts is about a dollar (if you don’t count sunk costs like the equipment and store lease only count the cost of the donut ingredients and labor). This means that instead of spending several hundred dollars on a goofy ad in the local paper that won’t bring in nearly enough customers to pay for itself, we should invest our marketing dollars into free product distribution.

This is where the 5 x 5 x 50 plan comes into place. We’re going to give away two boxes of free donuts to five COMPANIES a day, five days a week, for fifty weeks in a year. It’s a very simple plan to execute—all it requires is a few simple tools:

• List of Companies: Easily available from any list broker. Just ask for a list of all the companies/offices within a certain radius of the store—say two miles. To last a year, we’ll need a list of 625 companies. That allows us to hit each company twice during the year.
• Calendars: Get a nice looking calendar printed up on 11 x 17 paper… we’d want to spend a little money on graphic design to make it look nice with our company colors and logo, and we’d want the calendar to be updated each month so it started with the current month. These can be printed from a digital printer for less than a dollar each.
• Free Donut Holes For Life Cards: The same cards we already talked about previously.
• Cool Looking Van: If we have any budget, let’s get one of those cool-looking vans that has all the cool graphics on it. Naturally, the graphics would have our colors and logo and such on it. This van would be perfect to park outside our shop on the main road to attract attention while we weren’t out delivering donuts.
• The Donuts: This is critical—we want to make sure we are giving our signature donuts. One of the boxes should be a plain dozen, and the other should contain three Texas Giants and three each of the Mighty Mustang and Delectable Dragon donuts.

To execute the plan, we’d need to choose twenty-five companies a week to visit, preferably geographically close together to minimize travel time. Each morning at about 8:30 send an employee to the five designated offices with the two boxes of donuts under one arm and a few calendars under the other and use this script:

“Good morning, my name is Tom from Texas’ Best Donuts… we’re right over on Highway 26… have you seen us there before? I’m here this morning on a goodwill mission bearing free donuts for your office. Who would be the appropriate person for me to give our great tasting specialty donuts to?”

Once the proper person in the office was identified, the script would continue:

“With great pride I would like to present your office with these Texas’ Best Donuts. As you can see here (opening the dozen regular box) I have here a dozen of our Texas’ Best Glazed. I’m sure you’ll find them to not only be delicious, but far more delicious than say, Krispy Kreme. And in this box, we have a sampling of our specialty donuts. This is our Texas Giant—no need to explain how it got its name. And here we have our Mighty Mustang and Delectable Dragon donuts—all three are available daily in our shop on Highway 26. You will also be excited to know that we can make donuts to match the colors of any school, team, or company—what are your colors? (prospect says the colors; make a note!). As I leave these donuts with you, I only ask two small favors. First, I ask that you hang these calendars on your walls to remind you all year long of delicious Texas’ Best Donuts. Second, I ask that you give me your business card so we can communicate our specials to you via email and text message. Anyone who gives me a card will be eligible for free donut holes for life. If you don’t have a card, you can simply fill this out.”

Who’s not going to want free donuts for crying out loud!?!? We could go on to explain how we can deliver donuts to their office by simply going to our website and filling out an online order. We’re not only building up a nice corporate prospect and customer list, we’re also going to reap the rewards of reciprocity—the immutable marketing principle that says when we give something to people (like free donuts) they’re going to feel obligated to do something for us (like buy donuts from us instead of KK).

Lock In Long-Term Sales: The problem with donuts is that people only buy them when they “feel like it,” which isn’t often enough. Instead of waiting for somebody to get the urge, why not put them on a subscription plan? We could do this with both individual customers and corporate customers. We could deliver two dozen donuts every other Saturday to a home or three dozen to an office every Tuesday morning. We could offer a discount on the subscription plan or free delivery in our cool van. Think about it this way—if we put effort into this program and ultimately had 500 or 1,000 dozen donuts sold every month before we ever started, how would that affect our planning and sales?

Joint Ventures: Here’s a good idea for any local retail business—and particularly our donut shop. Let’s leverage the customers of other companies to push our donuts. For example, we could approach the local banks and offer to deliver ten dozen donuts to them every Thursday morning so they could offer “FREE Donut Thursday” to their customers. Naturally, they’d want to promote this to their customers, which would require them to spend their time and money to promote our product. We’d want to provide some signage and maybe even some advertisements they could use—let’s make it as easy as possible. They’d pay us for the donuts and garner the goodwill of their customers—who would in turn become familiar with our product. What a deal! In addition to banks, we could do this with the auto repair place, the car washes, oil change places, salons, retail stores of all kinds, and basically anywhere that people have to wait or anywhere that has good foot traffic.

Consignments: Notice in the above scenarios we didn’t list any places that sell food—convenience stores, grocery stores, restaurants. That’s because these places wouldn’t want to give out free donuts since it would take away from the stuff they’re already trying to sell. With these food-related businesses, we’d want to create a consignment deal where they actually SELL our product to their customers. Naturally, we’ll have to sell at wholesale so they can make a good profit on our goods, but what a great way to get our product in front of thousands of additional customers every day? Krispy Kreme already does this—we’d just need to go in with a better pitch about being a local company… and you can bet that our signature donuts would give us a leg up. Consider limiting the inventory you’re willing to sell them to create a sense of urgency to both the wholesale buyer and their retail customers.

Mailings To Businesses: Get a list of certain types of people or professions. It could be accountants or lawyers or retail stores. We can rent a list of CPA’s in our area for just a few cents per name. Then we’ll write them a letter that goes something like this:

Dear David,

I’m writing you this letter because you’re a CPA.

My name is Bob Jones, owner of Texas’ Best Donuts here in Grapevine. Every day for the rest of this month, I’m going to give two dozen free donuts to any CPA who brings this letter into my shop.

My reason for being nice to CPAs is actually pretty weird; ask me about it when you come in. Make sure you bring this letter with you.

I hope to see you soon!

Sincerely,

Bob Jones,
Owner

It’s a great letter that will get people into the shop. My reason for being so nice to CPA’s could be anything. My accountant saved me a lot of money last year, my best friend from college is a CPA. It could be anything. Who cares about the reason, just get them in there! After all the CPAs have taken me up on my offer, then I’d write the same letter to lawyers or executives or sales managers or anyone I could think of that might like donuts. Then of course we get them to fill out our card so we can start to hit them with emails and text messages.

Email And Text Messages: Okay, so we’ve been gathering up all these contacts—now what? Get them back into the store (or to order delivery or a subscription) by continually communicating with them! We want to give them all “donut brain” where they are constantly reminded of donuts. The idea is to keep them involved and entertained… A few examples of email/text messages might include:

• Name Game: Free donuts each day of the month for people with initials that match certain days. For instance, if your last name starts with A, you get a free donut on the 1^st day of the month; B on the 2^nd, etc.
• Special Donuts: For holidays, seasons, events, and so forth. For instance, we could make pink and red donuts for Valentine’s Day and email a picture to our database.
• Peripheral FREE: Offer a free coffee or other drink when they come in and buy a certain amount of donuts.
• Riddles & Puzzles: Create riddles and offer free donuts for anyone who can solve them. You could also offer Sudokus, crosswords, or other kinds of puzzles. This would get people engaged—and give them a reward. You could post the riddles or puzzles on the website or on the Facebook page.
• Contests: Have people write “why they hate their boss” or “why they love their boss” or “why I love Grapevine” or anything else topical and relevant.
• I Spy: In that calendar you gave them, put a few hidden objects. Then email your database and ask them to find the object—and they’ll win a free prize. Admit it, that’s pretty cool.
• Celebrity Gossip: This will get the women involved big time—have a celebrity quiz on your website that people can take to earn “donut points”. People already waste seven hours a day on the Internet while they’re supposed to be working; you might as well have them waste time on your site.
• Sports IQ: The same thing for the sports fans out there. Remember, the key is to keep sending stuff to people that they’ll actually take time to get involved with. Not just “hey we’re the donut shop bugging you again.”

Okay, so now we have a plan to get new customers and build and nurture our database. Now it’s time to go for the big blow to Krispy Kreme.

Come back Thursday for Episode 3, The Kill Shot.

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© 2015 – 2016, Rich Harshaw. All rights reserved.