Monday, June 20, 2011

The art of the "daily deal"

"The art of the daily deal" appears in the latest issue of Social Media Marketing magazine. Check it out at

I was never a dedicated coupon clipper – at least not when coupons came in the daily newspaper or an overstuffed envelope in my mailbox.  As my favorite retailers became web-savvy, they started sending me coupons by email…posting specials on their websites…tempting me with offers on their Facebook pages.  The object for the retailer, as any Marketing 101 student knows, was to drive top-line sales by reducing price (and margins) slightly in order to generate a sufficient transaction increase.  
It’s a notion that today seems almost quaint.  Welcome to the age of the daily deal.
Daily deals companies have been proliferating at a dizzying rate.  Groupon, the 2,000-lb. gorilla of the market, is said to be the fastest growing company in history, according to Mashable.
And if a daily deal isn’t enough,  there’s Groupon Now,  a smartphone app that will allow users to click an “I’m hungry” or “I’m bored” button to open up a list of time-specific daily deals, based on his or her location.  LivingSocial is testing a similar concept InstantDeals.   AT&T is testing  ShopAlert, a mobile service that notifies consumers of nearby deals from HP, Kmart, JetBlue and others.  Facebook, too, is entering the space, joining the roughly 500 group buying sites that, according to Wharton marketing professor David Reibstein,  have emerged worldwide.   And scaring the bejeepers out of the entire industry, Google Offers is in test. 
Exciting, yes.  Sustainable, no.
It’s destined to become a downhill spiral, for three key reasons: trade down, one-and-out customers, and diminishing supply of offers.
First, trade-down.   I subscribe to six different sites -- which is kid-stuff to those consumers who actively play – so as I manage the barrage of offers, I do exactly what that Marketing 101 student would tell you is the inherent flaw in the system: I skim for deals on stuff I was going to buy anyway.  If I subscribed to one daily-deal service, I might be tempted to visit a retailer I hadn’t tried before…buy a new product…try a new service.  I might become a new customer, a new transaction.  But what I do instead is “trade down.”
Wharton’s Reibstein talks about the second issue, the one-and-out customer.  “Unfortunately, the people Groupon is attracting are those who are referred to as ‘deal prone customers.’   These customers tend not to be the most loyal of customers. And because you have attracted them with a low price, you are more likely to lose them because somebody else offers a lower price. The merchant might say, ‘Well I am not making money on these customers, but hopefully I am building some future business.’ But there is the challenge of whether they are really building future business, because what they really getting is a fickle customer. Merchants are going to discover that the Groupon customer is not where you build your future business.”
Reibstein points out the third cloud on the daily-deals horizon.  As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down. The business proposition to the customer will be less attractive if [the item or service being offered] doesn't have the same deep discount.
How long  will it last?   In a recent report from CNN Money,  “Traffic to flash sales and daily deal sites has been dropping over the past few months, according to online traffic monitor comScore. Gilt is down 22% since the start of 2011, and Groupon has fallen off 13% during the same time period.”
For the consumer – particularly the cash-strapped consumer -- it’s been a great ride.  For new businesses aiming to generate trial among a large pool of consumers, it’s been an effective – albeit expensive – tactic to do so.  But for the established retailer who feels the pressure to play in the daily deals arena, as one retailer I know put it, shaking his head, “You’re damned if you do and damned if you don’t.”

Thursday, March 24, 2011

Brand Marketers: Listen When the Consumer Says, "Enough is Enough!"

Brand Marketers: Listen When the Consumer Says, "Enough is Enough!" appears in the latest issue of Social Media Marketing magazine. Check it out at

New research from ExactTarget has proven what we already suspected: too much of a good thing is, well, too much. The study concluded that if marketers use social media to barrage customers with self-serving, non-engaging messages, they're likely to be "unliked" faster than you can say buh-bye.

The conclusions may not be surprising, but what is surprising is the number of brands choosing to simply ignore the data, forging ahead with the great barrage. Sayeth the consumer, "We're talking about YOU!"

According to the study, when a consumer quits following a brand on Facebook, for example, it's because the company posts too much (44 percent), its pages are cluttered with marketing messages (43 percent), the messages are repetitive and uninteresting (38 percent), the messages are overly promotional (24 percent), and the content is irrelevant (19 percent).

Let's talk about frequency of messaging. While I've seen only anecdotal information about the optimum number of posts from a brand—and relevancy will always impact that optimal number anyway—I'm fairly confident that most consumers do not wish to receive brand messages every day. Yet the vast majority of brands that I personally/professionally follow are compelled to post messages five or six days per week.

None of the brands I follow ever posts on Sunday. While I will allow that social media usage is comparatively lower on Sunday—see Mashable's excellent article on Facebook usage—I could argue that the less-cluttered environment might be a good trade for the slightly lower usage. And if a broader audience was the goal, why would brands post on weekdays between 9:00 a.m. and 5:00 p.m., knowing that 65 percent of users access the site when they're not at work or school, typically early morning or evening? According to Mashable's Adam Ostrow, "That means that if you're making social media only a part of a 9-to-5 workday, you might be missing out on connecting with consumers during the times they're likely to be online."

I'm going to pick on Best Buy for a moment, a brand that often uses social media very well, but sometimes makes me crazy. Today, I received nothing fewer than four messages from Best Buy. Message number two was a repost of message number one. I have additionally received six messages from Best Buy over the past two weeks about their buy-back program. This is precisely why I have hidden posts from Best Buy and go to its Facebook page only when I'm seeking specific information.

What is unfortunate about that is that buried in the clutter are some genuinely interesting posts. For instance, while most brands seem compelled to post their latest commercials—what may be the best example of the overt marketing message that survey respondents said they did not want to see—Best Buy has done it right. To create additional interest in its Super Bowl commercial, Best Buy invited Facebook friends to vote between four different endings for the spot. In the second part of its one-two punch, Best Buy auctioned off the autographed costumes worn by Justin Beiber and Ozzy Osbourne in the spot, donating proceeds to charity. Great stuff. But Best Buy, please lighten up!

Many brands still fight the urge to use friend and follower counts as a measure of success. What brands would do well to consider, though, would be the number of friends and followers who decide that enough is enough. Optimum frequency and the value of the posts' content will become clear.