Today I went to get my car washed and decided to ditch the usual spot in favor of risking something new, and a little closer to home. When I pulled out my phone for yelp (to start a review) I caught a comment about how the competition for deals with GroupOn / Foursquare / the Internet was hurting sales, making it impossible to turn a profit. News flash, it’s not the Internet, it’s you. Continue reading
6 months ago everyone was a fool for not being in daily deals, today you’re a fool for using them, or so says loads of commentary and research that have come out as Groupon reportedly nears its IPO.
While I’ve expressed my concerns on deal sites many times, I can’t help but wonder if the SMBs businesses buying into deals themselves are getting a free pass in the equation. Today I’m asking a simple question: After the deal gets signed and the customer influx starts up, are daily deal businesses doing anything to insure their own success or merely blaming their marketing partner for a bad deal?
When a customer self selects a business there’s an interest and a good experience may be enough for them to reselect, come back and build loyalty – motivation builds affinity. But when you offer 50% off, the bets are off, people are “discovering” but they’re not discovering new passions, they’re discovering deals and if they’re smart, hoping around in a 50% off world from experience to experience.
With few exceptions, the deal I see all share a common problem — there’s no basis for a relationship. Everything is a onetime purchases wrapped up in the justification that customers will “discover” something, fall in love with it and return time and time again. Businesses are buying into a long term customer model but not doing anything to get the customer back.
When a business complains about a daily deal we shouldn’t let them off on the excuse that the economics, sales people or backend payment sucked. Those are probably all true but more often than not, it wouldn’t make a bit of difference if they were good.
Instead we need to ask them where their program was to segment the non-tippers from the chatty customer raving about the wine. We need to ask why they’re giving 5 free ice creams at once instead of over 5 visits. Why is the climbing gym giving a one day lesson instead of a month long membership. Where’s the guest card to encourage a yelp review so others find the business? If there’s no hook, no loyalty building and no engagement it’s no wonder a hundred new customers aren’t all coming back.
The lesson from daily deals has been spelled out well: SMBs, stop believing in miracles and start creating your own. Whether it’s a coupon, a daily deal, a facebook page, tweets or any other hyped up marketing tactic it’s not about making people walk in the door, it’s about what you’re going to do when they step in to get them to come back.
Daily deals are this year’s hot thing in social. Problem is they aren’t social.
When daily deals first launched, hitting the minimum participants to “activate” the deal wasn’t a given and that made them social as people would have to bring friends in to get things going. Years later Groupon, LivingSocial and other leaders have too many users to have to worry about “qualifying” thus the social aspect is gone & deals have become glorified coupons that you just buy into.
Now don’t get me wrong. I may have critiqued the relevancy of daily deals in the past and am now joining others in questioning their business viability but I don’t doubt the potential of deals as a gateway for discovery, and value service to consumers – they just need a little network power to get to exciting. So as we watch Facebook prepare to roll out its deal offering, Google move into social & deals and Groupon and LivingSocial battle for control of the current market, I thought I’d take a crack at what the future could look like.
Deals are better when they’re done together [rhyming not intended]
Late one evening, a few weeks back I got a text from a friend (let’s call her “Sally”) asking if I wanted to jump in on a LivingSocial deal for White Water Rafting. Sally, knowing I raft frequently, wanted to put together a group trip and saw the deal as as great opportunity. To me that’s exactly what daily deals are for: great offers on services that people were considering, and now have a tipping point to take action on — together.
Problem is, it was 10pm, the deal expired in 2 hours and we all had to commit to make it work – no one wanted to take the first plunge and the deal was missed.
Risk stops purchases; but what if you could remove it?
What if, rather than a mass text, followed by a lot of hoping and messaging back, my friend, had been able to set the whole thing up as a group deal contingent on her network participating:
- Sally decides this deal is for her, looks at the calendar, picks an available date, creates an event and invites 20 people who she’d like to have show up… It hits their email, sms, facebook wall or twitter handle, their call.
-The threshold on the deal is also set based on the offer type. For white water rafting its one full boat – 6 heads. More can join but without 6 the deal is not on. Other services could have a threshold as low as 2 for a spa day or 4 for dinner out, but always a group.
-Sally’s friends get an alert that there’s a deal expiring in a few hours with the right details – the time, the place and the cost. Since they already have accounts they can confirm it right from their iphones but there’s no risk, the deal only goes if the threshold is hit.
-5 people are excited to try out rafting and convince #6 to join via a Facebook group message. The deal is on. Go Sally!
Whether it’s white water rafting, learning to rock climb, or a spa day, deals are overwhelmingly for services people do together but the current systems drive individual purchase and does nothing to address the fear of being the only one to go in.
By flipping the model back to its roots and enforcing a commitment minimum, not from all participants, but from a network of friends the risk is gone and there’s a whole new motivation for people to buy.
Update: as of 8/26/2011 Facebook has announced they are closing down their deal service. In my opinion they had the best shot at truly creating a discovery tool by leveraging what no other deal site really has: relationships. But ultimately it’s a peripheral service and without enough attention, likely never got the legs to have a fair shot.