Whilst researching the relative costs and market share of UK price comparison websites for a client I used Google Trends for Websites (log in to your Google account to get actual numbers on the Y axis) to compare some of the big players.
The graph below tells a sorry tale. Even before March’s first Panda update, squarely aimed at aggregators, scrapers and middlemen, Google clearly had the long knives out for price comparison sites, demoting them in the search results, ousting them in place of their own Google Products/Shopping results.
If these numbers are to be believed, then the traffic to price comparison sites has dropped off a cliff. Whether price comparison websites are relevant or not depends on how much you’re paying per click (the usual way you’re charged for traffic from such site) and what your conversion rate is. If you’re still making money and it’s worth the effort of setting up and managing product feeds, paying the invoices and monitoring whether the traffic you do get is worth it, then yes. If you were looking at being listed on a price comparison site as a way to buy a boatload of traffic, then you may need to look elsewhere. And it’s no surprise that the elsewhere in question is Google’s own Adwords program.
Businesses are falling over themselves to get featured on Groupon and its clones.
Prague alone, a city of just over a million people, has a double-digits number of group buying deals sites. I’ve taken the opportunity to buy a number of deals myself from several different sites. The curse of the marketer is to evaluate every experience they have as a customer from the other side. So this is the “here’s how I’d do it” post.
Even if the site you’re looking at working with doesn’t take 50% (or 100% if the deal has a sticker price of less than $10 – yes seriously!!) as Groupon does, you’re looking at drastically reduced revenue, so you’d better do your sums and be trying damn hard to make the deal worth your while long term, because short term it’s very likely to be in the red. If you’re not sure, don’t jump into it because everyone else is, there are plenty of cautionary tales out there. Still set on it? Here’s my take on what a business should do when they run a Groupon…
Be smart about the deal
The last thing you want to do with a deal is lose money or damage your business’s long term viability by attracting bargain hunters that won’t come back or training customers to buy only when there’s a special. Think about what you could offer very carefully. Consider offering something that by its nature is likely to lead to return business. It might not even be part of your regular offering, it could be an introductory class if you teach something or provide a service, restaurants can make their deals exclusive of drinks (usually the highest profit area anyway), or for a special event (tasting evenings perhaps) rather than offer a discount that can be used anytime within three months. Retailers should consider long and hard what they’re offering – half off $50 worth of any goods means you’re left with $10 or so to pay for the product. The best option for retail would be to offer a single product or range of products which normally have enormous margins (maybe talk to the supplier about running the promotion), to make sure they cover their costs, and that they put into action the rest of these suggestions.
Do your sums. I know I’ve said that already but this is the fundamental ‘no money, no business’ part. If you’re losing money on every sale you’re not going to be in business for long. Work out how much you need to make extra from each customer. What extra products or services can you sell? Deals that can only be used one at a time, for a partial amount of a bill give you the best chance of making full ticket price revenue on the rest of the order. Most of all, don’t try and sell more than you can handle. If you’re a service provider (say a fitness instructor) don’t try and sell 3000 hours of your time for a tiny sum, you’ll end up resenting the customers.
Keep it quiet (publicly) – you’re about to run an offer at a dramatically cheaper price, don’t damage your revenues in the days leading up to it by tipping anyone off.
Tell your team. Make sure everyone who works for you is aware (but sworn to secrecy) of the impending deal. Explain the conditions so everyone is clear.
Get a commitment from the site for how long the expired deal will be published for, at a well keyworded URL – but not including your business name. Make sure the links to your site on the page are not nofollowed and if possible, use valuable keywords, not ‘click here’ or ‘website’.
If you can, find out if the site will let you follow up with buyers of the deal by email, and if you can identify redeemed and unredeemed deals.
On the day
Tell your network – tweet it, post it on your Facebook wall, your blog and website. Consider emailing it to your list. You might think this contradicts point 2 above, and goes against the whole ‘group buying deals are about getting new customers’ line but as Joseph Jaffe teaches us in Flip The Funnel, your existing customers deserve to be treated at least as well as new customers. If you don’t tell your existing customers it’s like you’re hiding it from them. And hiding the truth is like lying, and lying is bad (see, I learnt everything I needed to know about marketing in kindergarten). Plus if you’re running this offer, you want it to ‘tip’ (become valid) and you want it to spread. Your existing customers are the most likely to share the deal with friends because they already know you.
Be staffed well enough to handle the enquiries. Even if the deal doesn’t start till the next day, expect phone calls, emails and personal visits.
When the deal is being redeemed
Schedule demand, if you can – if you’re a service provider, try and spread out the bookings so that you can be available for full-price paying clients.
Stand by the conditions, but don’t be a stickler – in the story of the cafe owner, she was prompted to write the blog post to tell her story because she refused a longtime customer’s Groupon because it had expired. It would take a really understanding customer not to feel mistreated. Most customers aren’t. Saying ‘we have to stick by the rules because other people took advantage’ doesn’t cut it. The cafe had received the money (what little there was) from that customer’s Groupon, expired or not.
Get something out of the interaction – assuming most of the buyers of the deal are new to your business, take the opportunity to grow your email list (tag it if you can, that information is going to be useful), Twitter followers or likes on Facebook. Print up some fliers to hand people when they present their deal coupon – taking a ‘what next’ approach. Suggest places they can write reviews, or connect with you further. Consider that these are value-conscious consumers and for many any loyalty they have is to the deal site, but if there’s something you can do to capture future business, now’s your chance. Have a loyalty programme? Tell them about it. High-tech with plastic cards? Give them a form to fill. Low-tech with paper cards and stamps for each visit? Hand them their card with the first stamp on.
After the deal has expired
Go for the final squeeze – if you segmented your mailing list with new signups from the deal now is a perfect time to go for a final squeeze – what action would you like these people to take? Remember this group aren’t quite like your organically grown list of existing customers, so tailor the ask to that. If the deal site allow it, write to deal buyers through them.
Measure – if you planned well, you had metrics that you would judge against. Now’s the time to do that – take the scores for whatever you were pushing for – revenue? Facebook likes? Email signups? Repeat visits?
Evaluate – take the numbers from the last step – did it make sense for you to do it? What could have been done better? What did you learn? Would you do it again?
I’m pretty sure I’ve missed several nuances. If you agree, let me know in the comments.
Merchant approaches/is approached by deal site to be featured for a day. Merchant sets a price for their deal they want to charge, compared to the original price, and a minimum (and optionally a maximum) quantity of the deal to be sold. The customer is motivated to get the deal to ‘tip’ so that they get it, so they are very likely to share the deal with friends on social networks. Once enough people have pledged the cash, the deal site takes the payments, sends the purchasers their coupon/voucher and tells the merchant how many were sold.
How much the featured merchant gets from the total varies from site to site and even based on product or service category. Numbers reported from Groupon are as much as 50%, so if a deal is offering $150 worth of service for $75, the merchant can be making as little as $37.50.
If you’re considering using a deal site to promote your business or product, here’s a short list of the pros and cons:
Reach a lot of potential new customers
Business when you might otherwise be quiet, especially if bookings are required and you’ve set the expectation that your busy times are excluded from the offer
Search engine link juice – a link from a fairly high pagerank site – the previous deals pages hang around for a while
Able to set minimum and maximum quantity, overall and per person
No initial cost outlay
Unless you can turn those customers into repeat business you may be losing money on each one
Need to give a large discount to capture attention
Deal site may keep a large percentage of the sticker price
Might have to wait a while to receive payment from deal site
Can’t be overdone or you risk undermining your revenue permanently
Questions to ask
What’s the revenue split?
How soon is the money transferred to me?
Do I get the customer’s email addresses (or have to acquire them myself)?
Do you have any data on whether deal customers become regular customers?
What percentage of businesses have expressed an interest in running another deal?
You either search by product name or barcode, but the pitch for them all is the same: you’re out shopping, in a bricks & mortar retail store when you see a product you want. You take out your iPhone, scan the barcode or type in a product name and check the price, either directly with online stores like Amazon or using Google Products.
The developers of the apps sell them cheaply, the real revenue is in the affiliate commissions to be earned.
Whenever a technology comes that tips the balance unfairly (away from the bricks and mortar store which are being turned into a free showroom for online merchants) there are a number of ways for the ‘wronged party’ to handle the threat.
This is probably what most b&m stores will do – this is a technical threat that they’ve not planned for, places like Borders and Waterstones have been haemorrhaging market share to Amazon for years.
Fight dirty – mobile signal jammers in stores.
Great way to come across as the bad guy, a technical roadblock that is likely to inconvenience more people than necessary.
Fight fair – Treat a price comparison as the buying signal it really is
Given that these apps can (and some do already) know your location when you send that request, the fact that you’re looking for a lower price could be signalled to the retailer you’re standing in. A simple query to their systems could return ‘our best possible price’, not necessarily beating everyone – there’s some value to immediacy and not paying a shipping charge after all. Then just take your phone to the counter to get the item at the reduced price.
I understand there are technical issues with this – not every price comparison app or bricks & mortar retailer would want to take part, but the larger stores stand to lose the most from doing nothing.
Image credit timailius via Creative Commons on Fickr
There’s something about this ad that strikes me as just plain wrong.
It’s a billboard at Prague airport, in English, offering up to 49% off local Czech prices if you’re in the military, a diplomat or just an expat working abroad. Quite how your average Czech Volvo customer feels about what appears to be some pretty extreme price discrimination I couldn’t say. Wouldn’t amuse me much though.
Here’s the tip: if you’re putting something in small type because you think it might offend some people, perhaps it’s time for a rethink.
I came across these signs a couple of days ago and it brought to mind one of my persistent bêtes noires: confusion pricing as a marketing tactic. Anything from presenting your lowest possible price, after quantity discount, or of the least popular option (online retailers and market traders do this all the time), or making your pricing structure so confusing that customers can’t make an apples-to-apples comparison (mobile phone companies).
I don’t recall a section in The Strategy and Tactics of Pricing that said you should aim to bamboozle and confound your customers, yet this must work simply because if it didn’t, companies wouldn’t do it.
Dealing first with bait-and-switch pricing – see the first image – with the ‘from’ in small print. There’s one colour available for 99p (yellow), everything else is £1.99. They could advertise a price of 99p to £1.99 – literally the least and most you will pay for a scarf. In fact this sign was an improvement on another store, they didn’t have the helpful information as to which colour you could have for 99p, surely leading to frustrated shoppers hunting for the promised bargain. The same store also had this large sign advertising 89 colours available inside. All the other signs mention price, the large numeral ’89’ looks at first glance like a price. When there are multiple places selling the same things along the street, the 89 might stand out, bring someone in, then an aggressive salesperson can close the pitch. I guess this isn’t really any worse than the case quoted in Reality Check of the independent hardware store owner who dealt with the opening of a massive competitor next door by changing his store sign to ‘Main Entrance’. It makes me question how this sort of approach makes the shopper feel, is ‘misled’ a good feeling to inspire?
As for confusion pricing, that practice so beloved of mobile phone companies and energy providers, I can understand that there are various nuances to the services they offer, different costs for different things to be taken into consideration, what bugs me is that they create a smorgasbord of price plans, expect the customer to choose one, and fail to tell them if they’ve chosen wrong. I would give massive props to the mobile co that simplifies their tariff offerings AND pledges to always charge you at the optimal tariff for you, not them.
Clear and fair pricing is what we should aim for confusion leads to doubt, doubt leads to fear, fear leads to anger, and we all know what happens next 😉