By M. L. “Rick” Natelson, Chairman and CEO of Natelsons, Inc., a leading consultant for apparel stores in extreme situations. Rick is an affiliate of Management One. His email address is: mlnate at natelsonsInc dot com.

                Promotional sales events are essential retail tools used by every retailer to convert inventory into cash. Some stores utilize sales events only during seasonal clearance times; others tend to run sales more frequently throughout the year. Some sales events, however, fall outside the normal course of business and generate extra revenues over and above the norm. How and when these opportunities arise is best described as the process of monetizing goodwill.

                The intangible asset of goodwill is typically defined as what a willing buyer would pay for a business in excess of its book value. By definition, its monetary worth is subjective. The seller sets a high value on it; the prospective buyer discounts it entirely. But the seller is in a better position to judge. He or she earned it, after all, during the life of the business.

                Even without a willing buyer, a store owner can tap into the value of its goodwill, under a variety of circumstances, by conducting an extraordinary promotional event.  All things being equal, customers will prefer to buy at their store of choice. Unless the customer’s need arises, however, there is no sense of urgency. Initiative on the part of management is required to recognize the opportunity, define it and send that message to the community of prospects.

Changes in the major components of the business — whether an owner is retiring, a lease expiring, a store is moving to a new location or there is a shortage of cash to pay creditors — create unique cash raising possibilities by motivating present and potential customers with a distinct sales pitch yielding unusual benefits.

                The size and quality of the store customer list enhances the value of goodwill because it provides the most efficient access to an audience that already has a favorable bias toward the store.  If the message is compelling, the customer will plan a visit as soon as possible.  He or she may phone a friend before or after the visit.  Ideally a buzz will filter through the community with a ripple effect beyond the core customer population.

                The message conveyed must be credible in both substance and tone. Honesty is a virtue; whatever the scenario, the stated facts must ring true. A personal telephone call, a First Class letter in a sealed envelope, an email message to an inbox all have the potential to convey sincerity and urgency from a familiar source. These media have the advantage of exclusivity and intimacy. Not everyone receives the information and someone cares enough to tell this particular person.

                The storehouse of goodwill, of course, can be depleted inadvertently. Whenever a customer is disappointed – something about the offering was either overplayed or otherwise appeared less than expected – store credibility and likewise goodwill will have been damaged. If the merchandise on hand, for example, is not up to standard, expectations will have been dashed and goodwill dissipated. The most damaging of all disappointments is the event that turns out to be a sham.

                Appraising the goodwill of the store is necessary for an accurate forecast of the sales potential of the event. From the forecast flows the budget for merchandise, advertising and other expenses. From the initial concept and themed message flow the window and banner signs, the point-of-sale signs, the newspaper publicity and the more strident media advertising.

                The amount of cash realized from these out-of-the-ordinary promotional sales events is directly related to accumulated store goodwill. The concept of the event is the occasion for realizing value out of the store’s goodwill; and the resulting sales, insofar as they generate cash in excess of normal, constitute the monetization of goodwill.