Monthly Archives: October 2011

Bowling for Business: Are Social Media Coupons Good for Business?

Could your business benefit from online group coupon offers?

(This column first appeared on RIMOFTHEWORLD.net on October 23, 2011.)

I love spending time with our daughters and their boyfriends and friends and our granddaughter. But I must admit that, on Sunday afternoons, after a weekend of preparing meals, cleaning, chauffeuring and entertaining, when I assess our checking account balance, gas tank and the condition of our home, I feel a little like a farmer surveying crop damage following a locust swarm.

One of my clients described his recent social coupon experience in much the same way. The owner of a domestic referral agency based in LaVerne, he experimented with Groupon by offering discounted housekeeping services in the Inland Empire. And, as social coupon redeemers so often do, they signed up en masse for housecleaning, drained him and his staff of their time and resources and then fled to the next available online coupon opportunity.

He is hardly alone. In 2010, the owner of a bakery and café in Portland, Oregon called Posies wrote a now infamous blog post recounting her own similar experience:

“(Using Groupon) was the single worst decision I have ever made as a business owner thus far,” she wrote, also revealing she lost $8,000 as well as the good will of many of her existing customers because of the flood of Groupon users and the exorbitant percentage required by the service provider.

How can this be? After all, theoretically, group coupons supposedly benefit everyone—the site, consumer and the business owner. Consumers are said to benefit from lower prices by way of collective bargaining. The business is supposed to gain new patrons. And the site gets a cut from all of the sales. Win/win, right? Not so fast.

I realize that there are slight differences between the many social coupon services. So please allow me to generalize in order to explain the social-couponing process:

  1. The business owner works with social coupon site representatives to craft a great deal.
  2. The sales associate recommends offering a product or service “at least a 50% off” to generate rabid consumer interest.
  3. The business owner agrees to not only deeply discount his or her product or service for the offering but also to pay the coupon site 50% of the final take. (In other words, business owners who offer specials on social coupon sites are usually agreeing to do business at approximately 25% their usual rate.)
  4. The social coupon site emails the world and posts announcements to promote the deal.
  5. Consumers pay the coupon site and rush to redeem the special.
  6. The entrepreneur struggles to meet demand.
  7. Rinse and repeat.

Groupon is arguably the best known in the business, having been declared by Forbes as: “the fastest growing company ever.” But it is certainly not the only company or even the first to come up with the concept of providing coupon savings to groups of people who purchase discount tickets for products and services in advance. Here are a handful of similar sites:

Bloomspot

BuyWithMe (which has recently absorbed several direct competitors)

CheapLocalDeals

CrowdSavings

DailyDealster

EverSave

EWinWin

FlyCoupon

GoogleOffers (coming soon)

HomeRun

LivingSocial (a major player)

SocialBuy

Twongo

YipIt

I believe the ones who benefit most from group coupon sites are the sites themselves, evidenced by the fact that new ones pop up each day. I will admit there is one exception to the rule. If you purchased 9 million more American Idol figurines that you want to unload, you might benefit from selling them through an online coupon site. Otherwise, you’re probably better off to avoid the platform altogether. Although I don’t normally share my personal prejudices about marketing tools, in this case, I feel compelled:

  1. Group coupons destroy profitability within various markets

Once you run a 50% off campaign in your local area in your industry, you will be hard-pressed to get anyone in your sector to return to previous pricing levels. So, if you are comfortable operating at 25% of your current asking prices, then just drop your fees and leave online coupon companies out of the mix entirely.

Otherwise, in effect, you destroy profitability not just for yourself, but for everyone in your field. According to a recent study of Groupon, only 25% of redeemers buy additional products beyond the ones offered through the coupon and only 15% of coupon users come back.

  1. Over time, discounts will erode service levels and undermine customer satisfaction

Even if you can withstand a one-time coupon offer where you collect just 25% of what you normally receive, sustained couponing will ultimately eat into profitability and compromise service levels. With poor service, customer satisfaction will likely decline and you could stand to lose not only unprofitable coupon users, but all of your clients.

  1. You stand to destroy customer loyalty

Offering one-time customers the best deals rewards them instead of your existing clientele. Instead, why not tender loyalty incentives to keep good clients coming back? Besides, do you really want to be known as the cheapest game in town? Is that the best you have to offer?

Instead of focusing on price alone, provide superior customer service and build a reputation based on trust, loyalty and the uniqueness of your brand. If you go that route, you’ll generate plenty of buzz without having to resort to online coupon sites. And that should keep locust swarms and crop damage to a minimum.

Until next time, I’ll be Bowling for Business.

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Bowling for Business: Party on with Pay Per Click

Improve sales by using pay per click.

(This column first appeared on RIMOFTHEWORLD.net on October 9, 2011.)

I enjoy hosting parties. But I have to be honest. It isn’t so much that I like to prepare food, decorate the house and entertain guests as it is I love having an excuse to get my family on board with cleanup before everyone arrives. Intuitively, my usually clutter-prone kids and husband understand that we should put our best feet forward where visitors are concerned. So, pre-party, no one argues with me about embarking on an archaeological dig to remove dirty laundry so we can rediscover whose room is whose. When company is due, everyone is on board.

Are you careful to put your best foot forward where advertising is concerned? I pose the question because, left to their own devices, it’s common for entrepreneurs to make the mistake of creating marketing campaigns from their own points of view instead of from the perspectives of their target markets.

In a recessed economy, where budgets are tight and maximum return on investment is critical, you don’t necessarily have to hire a professional to manage your marketing efforts. But if you go it alone, you’ll need to find a way to make sure the money you decide to spend is actually reaching the people who are most likely to purchase your products or services.

One of the most popular promotional avenues of late is pay per click (PPC). So, although I’ve written previous posts about it, I think the topic is worthy of additional attention. Depending on the way it is used, PPC can either quickly suck your bank account dry without delivering a single paying customer or effectively direct scores of sales to your online or physical store.

Since there are dozens of ways to use PPC campaigns, how can you be sure to use the right platform in the right way to produce the right results?

Here are a few PPC providers. (But the list is by no means exhaustive):

So which platform should you use? Since most PPC campaigns operate in much the same way, the trick is to advertise where your prospects go instead of where you do. Clients often tell me they don’t want to use one platform or another because they “never visit that website.” Unless you fit into your own target market, that isn’t the parameter you should use.

Instead, research to determine where your best potential customers are spending their time. Then, use that place to put your best foot forward. For instance, if you provide a service, consider advertising on review sites. According to a survey conducted by eMarketer: “Consumer reviews are significantly more trusted—nearly 12 times more—than descriptions that come from manufacturers.”

Another survey, done by Econsultancy, showed that 90% of consumers online trust recommendations from people they know and 70% trust opinions of unknown users. So, if you provide a service that can be reviewed, consider advertising on a review site. Since you can’t legally solicit positive reviews, the best way to take advantage of review site traffic to promote your own product is to purchase PPC on review sites. Here are a few to consider:

For Free—

Although you won’t likely be able to employ someone to do market research for you without spending any money, you can always do research on your own. To find out which websites your customers rely on, ask them. And take advantage of the free listings available on virtually every review site.

On a Limited Budget—

If money is tight, you might want to use the resources you have to hire a research firm to determine which PPC site to try. These firms can determine where you would find the most bang for your buck. Another option is to experiment on several sites at once to determine which sites provide the highest click-through rates.

The Sky’s the Limit—

In a perfect world, you should find a company to research your target market and manage your campaign. Pay per click is time intensive. The Facebook ad team advises running at least10 campaigns concurrently to experiment with different combinations of messages and images. Imagine the potential time drain of managing multiple campaigns on several sites at once. If you can swing it, getting as many people on board as possible is a party.

Until next time, I’ll be Bowling for Business.