Marketing eYe

Sneaky Way of Increasing Sales

2007-01-23T05:14:00.000-05:00

How much popcorn can you eat if its served to you in a big tub?

Two food statistics for you:

Container size influences how much we eat: Moviegoers given five-day-old stale popcorn still ate 53% more if it was served in a big bucket than a small bucket.
We eat more if the evidence is removed: In a study of chicken-wing eaters, waitresses removed the bones from half the tables while letting them stack up on the other half. The diners who still had piles of bones on their plates ate 28% less.

Action Summary:

A sneaky way of increasing your sales is by simply providing shoppers with larger shopping carts.
A huge department store near my house has a very unique policy - no shopping carts. You evaluate/try on the products and ask the salesperson that you would like to buy it. The salesperson keeps that product aside and gives you a receipt. At the end, while checking out, you get your products when you make the payment. People usually end up buying more than they would have - because they don't have to carry the products around.

(Food statistics by the Big Picture blog)

Three Rules of Product Packaging

2007-01-09T03:10:00.000-05:00

Which Deep Clean product would you buy - when they all look the same?

Branding Alchemist Steven Diebold recently made a post on his blog about his experience at the supermarket. He was looking to buy a skin care product. Came to the Neutrogena aisle and spent the next 10 minutes getting totally confused.

He ound five different Neutrogena products - but they all looked the same! He checked the ingredients on the package. But the only difference between the more expensive $6.39 product and the $4.79 less expensive one was something called - Beta Hydroxy. Like me and you, Steven had no clue what that ingredient did either!

So what did he do? He ended up buying the lower priced $4.79 product!

Who can guess how much money Neutrogena's lost because of bad packaging?! The rules for good packaging are simple, yet most companies screw it up. They spend all their time in making the product better. And lose all the clients because of poor product packaging,

Three Rules of Product Packaging

1. Make Your Product "Look" Different & Attractive.

The key idea: make good use of colours. Colours can visually diferentiate your product from others. If you have 5 different products, give them 5 different colours.

Companies like Herbal Essences have got this part right.

Another thing you could do is try some whacky visual ideas.

A sunglasses manufacturer went after the sports market by packaging his sunglasses in tennis ball cans! Seth Godin packaged his book in milk cartons!

Such outrageously different packaging can not only set your product apart from others but also help you create a buzz.

2. Use the Right Words

You'll be surprised to know how many people pick up the product and read the packaging before they decide whether they should buy it or not. And two things inluence their buying decisions:

a. What's in it for them?

Why should they buy your product? How is your product better than other products? What is your unique selling feature?

An easy way to answer this question:

i. Mention your offer / benefits
ii. Mention how you take care of the downside (if you offer any sort of guarantee)
iii. Don't mention anything else

For eg: Rejuvinate your dry hair with just 2 drops of sunflower oil

b. Ingredients / How to Use Information

Ingredients read like a whole other language. If you make it easy for people to understand why the ingredients you use are good for them, they'll buy.

Vitamin Water is a good example of explaining the ingredients to make the sale.

Click on the picture to enlarge

3. Build a Database

This is an advanced step. Use your packaging to make future sales. Note down how people can contact you and give you feedback.

Or even better, give them a website address where they can get a free report of tips and tricks. Or a coupon for future discount.

Enroll your users into a mailing list so that you can follow up with them in the future and make more sales.

Beamvertising

2007-01-02T03:22:00.000-05:00

A chewing gum company in Holland known as SportLife projected moving pictures of a skateboarder on outer walls of buildings in various cities in Netherland!

They placed the projector in a van and drove the van through the streets - while the projector showed a person skateboarding on the walls. Their campaign received a lot of attention from pedestrians and other drivers.

You can watch a 44 second video of the campaign on youtube

DVD Gift Cards

2007-01-02T03:15:00.000-05:00

New Gift Cards that turn into DVDs

This holiday season, Circuit City came up with a new generation gift cards.

The card has a traditional rectangle shape - but drop it in the computer's disk drive tray and it works as a DVD.

"It includes a snowball-fight video game in which your character gives up and makes snow angels when it loses, as well as an offer for 50 free downloads from eMusic, holiday screensavers, wallpaper and printable gift labels."

photo by Circuit City

Scentvertising

2006-12-15T04:57:00.000-05:00

New Technology is finally allowing marketes use the power of smell to sell more products.

1. Scent in an ice cream shop

Emack & Bolio's - an ice cream chain - experimented by using the scent of waffle-cones in one of their outlets. Their sales jumped by 33%!

They used ScentAir.com's $100 a month equipment to spread the scent all around their shop.

2. Scent at the bus stop

Via TrendHunter: "Familiar with the “Got Milk?” ads? The people at Arcade Marketing just took the ad campaign to a new level. Using a new technology called “Magniscent” they made scented bus shelters. “what goes better with chocolate chip cookies than a big glass of cold milk?” The idea was to attract people’s attention using the scent which is emitted from a special adhesive strips that has the aroma of chocolate chip cookies. Great smelling bus shelters are the new trend!"

Voyeur Ads

2006-12-15T04:39:00.000-05:00

Instead of dropping off fliers and leaflets that get discarded, marketers are starting to stick "peep hole" voyeur ads.

Papa Johns attaches a sticker over the peep hole that shows a pizza delivery guy with their phone number!

German catalog company Otto uses a sticker with a model holding their catalog. They however showcase their phone numbers at the back of the sticker instead of the front side.

(The back side reads "The new Otto Catalogue has arrived. Order now xxxx-xxx xx")

Via: Adverblog

Guerilla Promotion with Props

2006-08-14T08:55:00.000-04:00

A friend sent me an email with the above picture. Those are handles in the bus that people catch onto so that they don't fall. Ain't it a great promotion idea?

Use props and make a big impact.

Further reading: Marketing with Props

Passion: Do you need it?

2006-06-25T06:43:00.000-04:00

Passion Personified - Crazy Soccer Fans

I've heard it a 1001 times. All the entrepreneurial "start-a-business" books talk about it.

"Start your own business by identifying your passion in life."
"You'll only succeed if you are passionate about your business and its purpose."
"Don't start a business on a topic you are not passionate about, or you'll never be happy. "

My view? I think people have it upside down.

Passion shouldn't be the cause of your business. It should be the effect.

Let me explain.

People don't get passionate about a sport or a team and then start watching it. No. They first start watching the sport and then they get passionate about it.

I remember going to my first football game in America a few years back. I didn't go to watch the game because I was passionate about it. Heck - I didn't even know all the rules of the game. But you should have seen me cheering and shouting in the stadium. I was as excited in the crowd as everyone else. Because I went to see the game, I got passionate.

Passion stems from commitment.

Ask any writer.

If a writer waited for passion and inspiration to come before she starts writing, she'll never finish her book.

But once she sits down and commits herself to write, passion and inspiration comes on its own.

If you wait for passion to show up before you act, you'll never move far. If you are committed enough to a business or a cause, passion will come automatically.

Hand Stamp Advertising

2006-06-12T03:17:00.000-04:00

Hand stamps at Enigma, Bombay

Enigma, a nightclub in Bombay stamps people's hands with a social service message before they enter. The message: "Don't drink and drive. Call a cab. [phone number]."

Master researcher and my friend Phil says that there is a company which actually facilitates hand stamp advertising in Australia. Check out their website:

Passout Marketing (Flash required)

Its an idea you can steal if you sell to the young crowd. Approach the local disc. And ask them if they'll allow you to change their hand stamps with your ad for a fee. All you'll need is a special rubber stamp with your message on it and ink - and the first thing people will see after a hard night of partying is your ad.

Darwin's Secret to Success

2006-06-06T16:11:00.000-04:00

Charles Darwin: evolved out of a monkey.

From a recent article in Psychology Today...

"For two decades, Charles Darwin suffered crippling anxiety whenever he so much as imagined publishing his theory of natural selection. The quiet naturalist agonized about how his true beliefs on speciation would affect his standing among his Victorian peers and super pious wife: "It is like confessing a murder," he wrote to a friend.

Only when the young scientist Alfred Russel Wallace nipped at his heels with a nearly identical theory did Darwin set aside his work on barnacles and publish On the Origin of Species, securing his place in history with the slenderest of leads.

The greatest thinker of the 19th century came close to being remembered as a footnote in the study of arthropods, solely because he feared disapproval."

Wow. Isn't that scary? How many times have you though: "what will my friends and family think of me if I do this?" How many times have you allowed the fear of your social standing stop you from taking action?

If you let fear control you, you'll remain mediocre (sic).

The solution, as Darwin forcefully found out, is simple: Benchmarking.

By observing someone who is actually taking action, your fears will wither away - and you'll start taking action too. Because nothing is better in inspiring you to take action than seeing a competitor getting ahead while you lag behind.

Question: How did Toyota become one of the biggest car manufacturers today? Answer: a few years back, their entire mission statement was 2 words long: "Beat GM."

What is your get-off-your-ass-and-take-action mission statement?
Beat _______

Action Summary:

Mark out a competitor. Observe her. Learn her ways. And then decide to be better than her in "everything" she does.

Marketing for a Marketing Firm

2006-01-21T04:55:00.000-05:00

Some of you know it. Some don't. I've moved countries. I'm back in my home town - Bombay, India.

Am opening a new marketing agency over here. And am blogging about how I'm going to market my marketing agency!

First post from my new blog:

How does a marketer market his new marketing agency?

If you would like to know the answer to that, stick around with me. I'll be narrating my experiences of opening a marketing agency in Mumbai, India - where many small businesses don't think marketing is necessary - that if the product is good, the public will come!

You'll read about my frustations, breakthroughs, eureka moments, $%^& curses (edited to keep this blog clean) and just about everything I do to market my own marketing agency.

As the saying goes "Fools learn from experience. Sages learn from history."

Here is your chance to learn from my experiences of starting and marketing a new firm on a shoestring budget!

kind regards from warm Bombay,
- Ankesh Kothari

Go over to that blog to read a new post about "Business Plans."

Reflections 2005

2006-01-02T03:20:00.000-05:00

"The further backward you look, the further forward you can see." - Winston Churchill

This post is a reflection of what I learnt in 2005.

1. "Rich people have large libraries, poor people have large TV's" - Dan S. Kennedy

This year, I did the unthinkable. I got rid of my TV! Well, it worked for 2 weeks and then the football season started.

Even though the TV is back, the amount of time it stays on is down drastically. No soaps. No news. No reality TV. The only time its on now is during games, if some wicked show is on on history or pbs channel, a good movie on weekends or during the late night TV infomercials. A guilty pleasure is watching Comedy Central too sometimes.

But how did a regular TV "crap" watcher change his habits and start watching good TV? Simple: lose the remote. Hide your remote and you too will start watching less and good TV. So much of nothing comes on TV that you won't go through the trouble of getting up, walking to your TV and switching channels every 3 minutes.

No TV has improved my productivity a lot! It gave me more reading time. So what did I actually read?

2. "If I show up at your house 10 years from now, and find nothing in your living room but Reader's Digests, nothing in your bedroom but the latest Dan Brown novel... I will chase you down to the end of your driveway and back shouting 'Where are the damn books?... Why are you living the mental equivalent of a Kraft Macaroni & Cheese life?'" - Stephen King

The year started off with a lot of junk reading. But midway through 2005, I kicked off many of my poor reading habits.

No news. I stopped reading newspapers totally. And haven't missed a thing. The papers cover things which will never affect you - and you can never affect them news either. How a celebrity was caught cheating is worthless for you to know.

But what about news that can really affect you? Like natural disaster warnings? If its a news story that will affect you, you will hear about it from your friends. Sometimes even before the newspapers cover them.

I cut down on my blog reading too. Its a lot of bs to read to get through a few golden gems.

Instead, I read more magazines. Business 2.0 is my current favourite biz magazine. Sciam Mind is my fav non-biz magazine. And then I read more research papers (especially on topics of "attention" and "discipline"). They are very hard to read - a lot of big boring words (covering interesting topics). But hardly anyone reads them, so I get an edge over other people - arming myself with powerful information that no one else knows about.

3.a. "It takes as much energy to wish as it does to plan." - Eleanor Roosevelt

3.b. "Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan." - Tom Landry

This year saw me finding a lot of discipline in getting things done. I might be the most disorganized person out there... my desks always a mess. I read 3-4 books together. And I pile up work.

This year, I strived to change all that. Curiousity took me to venture into learning about other peoples systems of planning and organizing. Most of what I came across is junk. Using expensive softwares is no way to go.

My planning is done on a piece of paper. Using mind maps. Following it with a detailed list that covers finance, production and marketing. I might tell you about my simple planning process sometime later.

And then I spent a lot of time finding hacks and simple systems that force me to get my plans implemented. Reading research on self-discipline and the human mind gave me insights that hardly any of those self help gurus know.

Here are some of the simple hacks.

Action Summary:

Sit down for an evening and make a rough plan. Nothing fancy. Pick up a pen and paper and write what you'll have to do to improve your health, wisdom, wealth and happiness in the coming year.
Watch less TV. Get rid of your remote.
Instead, read more books. Read things that others don't.

Read my 2004 reflections (This could turn into a cool tradition!)

Packaging Trick

2005-12-24T02:35:00.000-05:00

Can you guess if people drink more from
tall glasses or the fat glasses?

Brian Wansink of Cornell University runs a behavioral experiment on 198 adults and 86 bartenders. Both group of people are given two glasses: one fat tumbler glass and one tall highball glass. Both these glasses - though differ in shape - can hold the same amount of liquid of 11 ounces.

Brian then asks both the groups of people to pour in 1.5 ounce of liquid from a vodka bottle into both the glasses without using shot glasses or any other sort of measurement tools. And he finds an interesting quirk:

People fill in 20-30% more liquid in the fat glasses than the tall ones! (198 adults pour 2 ounces in the fat tumblers and right about 1.5 ounces in the tall highballs. The more experienced bartenders don't do much better - pouring 1.8 ounces in fat glasses and 1.5 ounces in tall ones.)

So whats this research got to do with marketing?

If you are in the liquid selling business (perfumes, shampoos, soft & hard drinks) you can earn more money by simply making your bottles longer.

If you don't sell any liquids, this research still helps a lot. It shows that peoples perception is a very important factor in getting them to buy and use your products. And perception lies in details.

The size of glass or bottles can affect peoples perception of the value of a product. You might have the same quantity of exactly same tasting vodka in both the bottles, yet people will opt to buy the taller bottles - because they think that it contains more vodka than the fatter bottle!

Similarly, the length of your store aisles, the colour of your paper or plastic bags, the smell at your door step or any other detail can change peoples perception of your actual product.

Pay attention to the details! Mystery shop at your stores to see how it feels like to be one of your clients. Experience the details your clients will experience buying from you.

Here is a small list that can get you started in fixing your details to change peoples perception of your product:

Size
Shape
Colour
Font
Weight
Height
Smell
Feel-to-touch
Music
Taste
Temperature of your store
Cleanliness
Proximity of other products

Happy Thanksgiving

2005-11-24T03:38:00.000-05:00

Thank You for reading this blog and enjoying it!

If it weren't for you, this blog wouldn't be worth writing.

Cat Classified Ad

2005-11-12T20:49:00.000-05:00

The Power of Contrast

2005-11-04T18:09:00.000-05:00

The deer nicely camouflages itself against its background. To catch it, humans had to evolve their powers of catching contrast.

Do you know how humans used to find food 5000 years ago? They would go into jungles to hunt. And they would keep a look out for any kind of movement. If they saw a difference in colour, a few arrows would shoot out in that direction. They were successful in catching food only because evolution had honed their powers of assessing Contrast.

The times have changed and people no longer go into jungles to hunt. But heres a dirty little secret: the human brain doesn’t know that. It is still living in the prehistoric days. And that’s why contrast is still the most powerful tool you can have to win people’s complete attention.

The scarcest thing today is attention span. Lets face it: in today's highly crowded world where an average person is bombarded with 3000 brands a day, winning people's attention is really hard. And thats where you can use contrast and stand out to win attention.

So how to use the power of contrast?

Contrast simply means comparing and emphasizing differences. First thing to do is observing your competition and your marketplace. Second step is doing what they aren't doing in a bold manner. There are only 2 steps - that's it.

If you are running classified ads, use white text on black background to make your ad stand out in a page full of black text on white background ads. If you go to a seminar that is attended by 500 other people, then wear jeans and a cow-boy hat while others wear formals and semi-formarls. If your competitors have made up their minds to compete on the basis of price, give them a run for their money by coming up with a exhorbitantly priced product of yours. Price it so high that no one in their right minds would buy it!

I had a little example about good contrast and bad contrast out here... but blogger erased it out because it had some html errors... ah well. I'll write about it in detail later.

How One Man Sparked Sales in a Slump

2005-11-03T20:01:00.000-05:00

by Dien Rice, phd.

How would you sell 47 of these puppies?

Sometimes, a little creativity is what's needed to turn a "loser" into a "winner"!

In the 1950s, a man named Warren Lordly and his wife raised boxers - you know, the breed of dog - in the New York metropolitan area.

However, a business slump in 1952 caused sales to drop. His boxer pups weren't selling! In fact, he was left with 47 unsold puppies.

Then - Warren Lordly got creative. He tried an idea he'd seen with other products, but which he'd never seen with puppies!

He ran an ad in the local newspaper -

"Boxer pups, $10 down, $5 a week.
Free obedience training."

He sold out of his dogs in 2 weeks!

Since then, he sold out litter after litter of pups - using his innovative installment plan!

What ideas from other industries can you adapt to help you with your business?

(Dien Rice is a quantum scientist turned serial entrepreneur and runs one of the best free forums on entrepreneurship. He has posted his magnificently profitable insights on this blog before - here and here)

Action Summary:
(by Ankesh Kothari)

Reduce risk by having an "pay-in-installments" plan.
Give away a bonus for free like Warren gave away free training sessions. Many a times, people will buy because they want the bonus more than they want the product itself!
Ask the question Dien asks: What ideas from other industries can you adapt to help you with your business?

Value of an Idea

2005-10-31T16:37:00.000-05:00

Yummm... Apples!

Quick, which apple stands out in the above picture? The green one you said?

This is so simple to understand with fruits. Yet so difficult with ideas. The rarer the idea, the valuable it is. There is a reason why a tiny diamond is more valuable than a ton of rock. Diamonds are R _ _ _

Click here to read more

How to Promote a Crime Bookstore

2005-10-29T23:31:00.000-04:00

One of my most fav blogs (from whom I steal a lot of ideas) is... Adverblog run by the talented Martina Zavagno.

Why do I love it? Because it shares a lot of low-cost-high-impact marketing examples. Like this one by a Noir and Crime Bookstore in Spain:

Dead Dummies on Streets

Perfect scandal for Halloween, don't you think?

Holographic Ads

2005-10-29T23:06:00.000-04:00

The rarest thing today is attention span.

And light and sound at unusual places and time always win people's attention. (That is why magicians use laser, lights and music. Its main purpose is not entertainment, but rather distracting you from their trick.)

a. Because attention is so hard to win and maintain these days and
b. Light and music are the best tools in winning attention
c. We are going to see more unusual musical and viewable ads pop up everywhere.

Like these holographic ads used by Lexus at Times Square, New York:

Click to see the holographic ad on video

Long time readers will remember, I'd pointed the company that creates these holographic videos more than a year back in a post titled Future of Advertising

It'll be fun to see the market place overcrowding to use these holographic ads in the next few years.

Story of the Little Blue Books

2005-10-26T00:13:00.000-04:00

Do you know how many
little blue books did Emanuel sell?

Once upon a time, in 1919 to be exact, 30 year old Emanuel thought of an idea. Why not repackage classic literature and sell it to the masses in cheap paperback format?

And so, with his wife Marcet, Emanuel started a printing house in Girard, Kansas. And started printing "People's Pocket Series" books on cheap pulp paper. These classics were printed in little 3.5 by 5 inch books bounded with blue covers. And were sold at 5 cents a book.

Later on, Emanuel also started publishing socialist and radical thought books. And changed the name of series to "Little Blue Books" to match their covers.

You know how many copies of these little blue books did Emanuel sell?

A Hundred Million!

Even though each book was just sold at 5 cents, a 100 million 5 cents do add up! So how did Emanuel sell so many books? He made it a condition that people had to buy at least 20 books with every order. (This had a sneaky advantage of people ordering 1-2 taboo books with 18 others.)

Emanuel advertised the books through newspapers. But he only used the book titles in advertisements. No copy. No benefits. Just the titles of dozens of his books that people could buy in bundles of 20. Which meant that the title of his books had to be top notch.

If a book didn't pull in enough orders, Emanuel would send it to "the hospital" and change its title. And a change in title would sometimes triple and quadruple the sales.

Some examples:

When Oscar Wilde's "Pen, Pencil and Poison" was changed to "The Story of a Notorious Criminal", it tripled the sales.
When "Fleece of Gold" was changed to "The Quest for a Blonde Mistress" - sales increased 8-fold!
Sales of "Patent Medicine" were troublesome. But "The Truth about Patent Medicine" revived that book by more than tripling the sales!

Emanuel, who is better known as E. Haldeman-Julius (taking his wifes name "Haldeman" after marriage), recorded his entire journey of selling a hundred million copies in a book. The book's name unsurprisingly is "First hundred Million."

Its a classic. And every direct marketer would give an arm and a leg for a copy of that book.

(Read what legendary copywriter Gary Halbert has to say about the book: "Read a copy of The First Hundred Million! It is where I learned my magic words... the ones that make copy SIZZLE and my headlines impossible to ignore.")

I checked onto amazon.com and found that a used copy is going for $1600 <gasp> !

Click to enlarge
or go to amazon.com

Did some googline and came upon someone selling the book for $49.95. If you want to buy the book, head over to Marketing Classics.

For more book recommendations that can improve your marketing skills - especially direct marketing skills, read this post by my friend and marketing headhunter Harry Joiner.

Action Summary:

If a product doesn't sell well, try changing its name. A good name can easily double the response rate.
Read "First Hundred Million" by E. Haldeman-Julius to learn to write better headlines.

Music Player Promotion

2005-10-21T03:46:00.000-04:00

iRiver U10 - a music player like iPod - started a cool contest in Honk Kong to launch their new music player.

Anyone can win a free iRiver player if they meet 10 conditions:

1. Born in October
2. Born at 10th day of the month
3. Sum of date of birth is 10
4. Name consisted of 10 alphabets
5. 10cm long finger
6. Wear shoes sized of 10
7. Parent of 10-year-old kid
8. Own 10 pieces of HK$10 note
9. 10 pierces in the earlobes
10. Work/Stay at 10th floor

Each condition met gives 10% off. Thus, if all 10 conditions are met (highly unlikely), its a free iRiver player! If only 5 conditions are met, its 50% off.

Action Summary:

A contest is a splendid idea to launch a product. You can use it if you are not launching a product too.
Have a few conditions. And if people meet those conditions, they get your product for free. (Make sure that your conditions are a bit hard - but not impossible to be met.)
Send press releases about your contest. Send a note to your client database. Promote the contest. And the contest will do all your product promotion for you.

Forbidden

2005-10-20T04:02:00.000-04:00

Don't click on this link

Selecting the Right Words

2005-10-15T02:06:00.000-04:00

"Collin Street Bakery, headquartered in Texas, was struggling to generate sales for its fruitcake.

The cakes are delicious. But “fruitcake” has a negative image.

One of the reasons Collin Street fruitcakes taste so good is they are made with pecans grown on the Texas river banks.

So Collin Street Bakery repositioned their fruitcake, calling it a “Native Texas Pecan Cake.”

The results: response rates to direct mail selling the cakes increased 60% … and the promotion was so successful, the bakery mailed 12 million pieces of mail."

- From master copywriter Bob Bly's blog

Like it or not, words make a huge difference in sales. A slight change of word can lead to a very unfair change in response rates. That is why, most copywriters spend twice the amount of time in editing then they do in writing. They spend time choosing the right words and making sure that the copy flows in the right order.

Action Summary:

Listen to the words your prospects are using. And then use them.
Make a list of unusual words and verbs. And use them in moderation to make your copy un-boring and spell-binding.

Selling CDs in the iPod-era

2005-10-14T03:30:00.000-04:00

The sales are decreasing. No one buys CDs anymore. Its the iPod era. People just download individual songs online - either buying them for 99 cents or pirating them for free. But no one buys entire albums and CDs these days.

Like all other stores that sells music CDs, sales at Scotti's record shops in New Jersey were declining too. But unlike most other music shops, Scotti's did something about the situation. Something rather brilliant to get people to buy the CDs and keep coming back to the shops again and again.

What did Scotti's do to increase CD sales?

They came up with ""Buy It, Burn It, Return It" policy. Customers can buy a used or new CD, take it home, listen and, if they want, burn a copy to a computer. Within 10 days, they can return the CD for 70% store credit."

Isn't that a cool idea? Sales increase because people can now rip entire CDs for 30% cost. They could even buy second hand CDs at a lower cost. And because they only get store credit, they have to come back again and again to the same store for music.

Scotti's did get in some trouble with RIAA because of their "Buy it, Burn it, Return it" policy. They are in discussions with RIAA as this post is being written. I'm not sure if they'll be allowed to continue this policy or not.

The startup journal reports more...

I'm no lawyer, but could there be a simple solution for Scotti's? Like just removing the words "burn it" from the policy? Buying back CDs is not illegal. And selling second hand CDs is not illegal either. At least as far as I know...

(btw, as previously covered in Marketing Hotsheet # 22, Paradise bookstore - a chain of bookstores found in many airports across America - does the same thing with books. If you buy a book from paradise bookstores, they would staple a receipt with it. You could return that book with the receipt within 6 months for 50% store credit to any other Paradise bookstores in any airport in America. Paradise bookstores also gives away free bookmarks with all their books. These bookmarks note the airports and the terminals where you could find other Paradise stores.)

Action Summary (taken from Paradise Bookstores case study in Marketing Hotsheet # 22):

If your products have good demand in the second hand market, why not start purchasing them from your clients who want to trade up?
You could buy them back at a lower price if the client saves his receipt, and thus make sure that your clients come to you instead of going to your competition when they make their next purchase.
You could also attract a whole new target market: people who wouldn’t mind paying less money for a second hand product.
Make sure you give away your brochures with every product you sell. Brochures are not as useful as bookmarks, and will be thrown away many a times. But many people might also save them, and remember you the next time they need to buy something.