Paul Chaney - Internet Marketing, Social Media Consulting

Effective Retention Strategy Necessary to Ensure Group Coupon Success

ClickZ reported on a denim jeans company that that sold 2,000 Groupons in the New York City area by 5 p.m., with seven hours still left in the campaign. They hailed it as a success.

The discount was set at 60 percent, which equated to $75 off the retail price. $75 X 2,000 = $150,000 in lost revenue. Tack on another $50,000, which is the amount Groupon made from the total sales, and the loss comes to $200,000. 

As I pay more attention to this burgeoning industry, group coupon buying, the more push back I'm hearing from small businesses who decided that the deals offered by Groupon and similar services aren't worth the effort. 

In my last post on the topic, I talked about Posies Cafe in Boulder, CO. The owner, Jessie Burke, called it the "worst decision ever." 

New York smoothie shop Xoom used Groupon to sell 1,300 deals. Problem is,  the "effort failed to produce repeat customers," according to the owner Jennifer London.

Groupon founder and CEO, Andrew Mason, defended his company and the business model in a recent blog post.

"There have been a handful of stories lately documenting the struggles of cupcake shops running out of batter or sushi restaurants who don’t have enough rice to meet the demand brought on by their Groupon feature. We haven’t written about those stories here because it’s not a common experience – the vast majority of businesses we feature, while certainly busy, do just fine. 97% of the businesses we feature ask to be featured again, including many of the businesses mentioned in the stories."

I think Mason did an eloquent job of addressing the issue, while at the same time making his case for Groupon.

Of the many readers who left comments in response to the post, this one stood out:

Andrew,

How do you know that Groupon is really good for small businesses?

While I appreciate your openness, the argument you’ve made here is largely anecdotal. Have you really looked at the profitability of running a Groupon for small businesses?

In my mind, there are two key questions that Groupon cannot answer (or has yet to):

1) How many new customers from a Groupon return to an small business for make a repeat purchase, and how often?

2) What is the profitability of those repeat purchases, ie. the lifetime value of a Groupon customer?

I suspect most small businesses run Groupons at breakeven or a loss on a unit basis, in order to bring new customers in the door.

Most small businesses lack the ability to answer these two questions for themselves, so we may even see a wave of small businesses go out of business in the next 6 months to a year, because they ran a Groupon.

Unless you can provide data to support these two critical questions, I have a tough time believing the blanket claim that Groupon is “great for small businesses.”

Alex

I think I've established the argument that group coupon buying deals are not great for every small business. What, then, should a small business who is considering using this tactic consider before biting the apple?

Determine how much money they can afford to lose. 
This is a form of advertising and it's a given that the deal will be a lost leader.

Create a customer retention strategy. The key to profitability is in getting these new customers to return. That is going to be an additional investment, so factor that in as well. At the very least, get the new customers email and mailing address, so you can follow-up. Once they walk out the door, they may never come back. 

Have a product or service worth returning for. If your's is a commodity product that customers could get just as easily in their own neighborhood, what would motivate them to return? Even if your business is unusual, once the customer has had the experience what guarantees they will want to experience it again?

This young business model is growing more quickly than the maturity needed to make it work effectively can keep up with, which explains the reason for "casualties" like Posies.

One question comes to mind: Should Groupon and others assume responsibility for helping businesses create an effective follow-up strategy? 

Typepad, SayMedia: Final Thoughts and Where Do We Go From Here?

A Collection of Final Thoughts

In this video with SAY Media CEO Matt Sanchez and President Troy Young, along with Mena Trot, Typepad is never mentioned. 

VideoEgg/SAYMedia did not just buy a blogging technology, it bought the voices and influence of those who use the technology with a view toward attracting advertisers to monetize them.  

SAYMedia is explicitly interested in those who want to position themselves as important emerging media personalities. Amateur and hobby bloggers need not apply. 

The era of Typepad as a tool for small business is over. The platform may remain, but the emphasis on it as a small business tool will cease. 

Those of us who care about Typepad as a platform need to get over it. Typepad is no longer an end in itself, but a means to an end, that of garnering advertising revenue. Its future lies in how it can best suit that purpose. 

In the eyes of SAYMedia those of us disinterested in becoming media businesses are now second-class citizens. The president Troy Young as much as said so. If we want to leave, the door is open. It was he who opened it with his insulting comments to Adweek.

Possible Alternatives to Typepad 

So, where does that leave the small businessperson who wants a hosted, stable, reliable, easy to use no-frills platform? 

Blogger. I have never recommended Blogger for business use. It's fine for personal or hobby use, but for business it is marginal at best.

Wordpress.com. There is no question Wordpress is king of the blogging hill and I expect many who transition from Typepad will end up here. However, Wordpress can be overkill for some. 

Melody. A former SixApart staffer has developed an open source solution built on the Movable Type platform, called Melody. It has to be downloaded and installed on a server, so that doesn't fit the criteria for Typepad users.

Square Space. Anthony Casalena's Square Space may be an option. The company launched a Twitter campaign to capitalize on the SixApart announcement. As much as I respect and admire Anthony, I've never been able to get my arms around the platform. But, that's just me.

Posterous. A viable alternative to Typepad is Posterous. You can skin it to create a unique look and feel and a number of templates have been developed if that's all you want. In terms of features, it's streamlined by comparison, but very easy to use. 

I've always thought of Posterous as blogging "middle earth," situated somewhere between long-form blogging and micro-blogs. Still, it might be a good fit for many.

NOTE: Posterous is also offering a special deal for those who want to switch.

Tumblr. I put Tumblr in the same category as Posterous, but a shade closer to micro-blogging. 

If a gun was put to my head and I had to choose the best of the alternatives, I'd go with Wordpress.com.  If you would like to suggest others, please do so in a comment.

If you choose to transition away from Typepad to Wordpress.com, Wordpress.org, or Posterous, I'm happy to help  for a nominal fee. Let me know if you're interested. 

Transition Your Typepad Blog to Wordpress.com or Posterous

I'm reading a number of comments where people have said they are transitioning from Typepad to Wordpress or Posterous. 

I'm going to do a couple of blog posts that step you through the process of porting your content, but if you'd like someone to save you the hassle, I'm happy to help. While I can't do it for free, I will do it for a very reasonable fee (how does $97 sound?).

Let me know if you're interested.  

What Will Happen to Typepad?

By now, you've heard the news regarding Typepad and SixApart being acquired by VideoEgg to form a new company, SAYMedia. 

On the one hand, Natalie, a product manager from Typepad, assures me that the platform will be maintained and "stay the stable, lovable blogging platform that it has always been."

In a post that expresses SAY Media/SixApart's undying love for bloggers there is this quote, "[W]e will continue to support TypePad and evolve it to meet the needs of the market." 

Then this..."We firmly believe that you can't build a modern media company without having a platform, and TypePad is our platform for doing that." 

And from AdAge this..."[Typepad] gives us access to a content platform that we can evolve into a media platform."

Sorry, but you can't have it both ways. You can't keep it the way it has "always been" and "evolve it" into something new.

Here's my prediction...

Now that Typepad is the platform used to support a media company, coming upgrades will be those that support its initiatives, not the needs of bloggers who use the platform.

My prediction pales in comparison to what Mashable said...

"From what we’ve seen before, we bet it won’t take long for resources to be allocated towards the advertising network and away from Movable Type. It will be the beginning of the degradation of a platform that has already lost much of its relevance, despite hosting The Huffington Post and major blogs from ABC, the BBC and others.

"Advertising is where the money is for this new organization. While we don’t expect Movable Type or TypePad to go anywhere for a long time, we doubt anything new or innovative will come out of them, either."

If you see it differently, feel free to opine.  

 

Say Hello to Say Media and Say Goodbye to Typepad as We Knew It

Ben and Mena Trott, founders of Six Apart, the company that makes Typepad (and Moveable Type) yesterday announced a merger with advertising company Videoegg to form a new company, Say SAY Media. 

Here's an excerpt of the announcement I received via email:

"Today we announced our intention to join forces with VideoEgg to form a new, modern media company called SAY Media. This new company will continue Six Apart's mission to make creators like you more successful. It will continue to help you create powerful and engaging content, and grow and monetize your audience. And it will continue to leave you in control.

"Nothing in TypePad changes today, and SAY Media will continue to provide support to TypePad subscribers, and evolve the TypePad platform. You can choose to take advantage of our strong relationships with marketers to monetize your blogs, or you can keep your blog ad-free."

The announcement has caused some degree of confusion and no small amount of concern among Typepad bloggers, for this reason: Say Media is a "media" company, not a software platform company, which is what SixApart is (was) at its core.

Even though 6A developed an advertising arm, I suspect most Typepad users didn't take advantage of it. We just wanted a simple to use blog that was ad-free. We didn't need all the bells and whistles offered by Wordpress, just a place to share our experiences, express our passions, and build our small businesses. 

Now, that has changed.

Common sense says, if you're a "media" company, you're no longer a "software platform" company. You may have a platform, but you're intent has changed. Thus, the business model changes along with it. Let's put it this way, I will be hard pressed to believe you can do both well. While I didn't see it coming, looking back, I guess this has been part of Ben and Mena's vision for some time. 

To my point, the Say SAY Media site tells the story. They want "passionate, independent media creators." 

How many of you qualify? I know I don't, unless I misunderstand the meaning of the term, which I don't think I do based on this quote these quotes from an Adweek article reporting the merger... 

"Say Media expects to lose some subscribers to the Six Apart blogging platform. Its main focus, Young said, is in those that hope to build media businesses, rather than regular people who write a blog for fun."

And this...

"The absorption of Six Apart gives the company the added reach of the latter's Movable Type and TypePad blogging software. Say Media plans to use those ties with content creators to foster the growth of independent media properties it can package to advertisers."

And this...

"The kinds of people we want to work with are emerging media personalities."

You know I have always focused on how Typepad can be used as an easy to use publishing tool for small business. It became that too. Now, not so much. 

With the advent of Wordpress, maybe the handwriting was on the wall. Maybe Ben and Mena are to be commended, not only for their extraordinary vision in creating one of the world's first blogging tools to be used by the populace, but for seeing that to contend against WP strictly on a blog-to-blog, component-by-component standpoint was fruitless. There was too much at stake to lose by playing that game. So, they changed the game. 

But, what may be good for Ben and Mena may not be good for the thousands of Typepad users who have no intention of becoming media moguls. Time will tell. 

I will say this...I bet Matt Mullenweg is smiling. 

PS: The Adweek article compared SAY Media to Federated Media and Glam Media. That puts things in perspective. It is what they are, but with its own blogging platform. 

Is Groupon a Good Deal for Small Business?

It seems everyone is raving over this new merchandising phenomena called group coupon buying from sites like Groupon and its many clones. Groupon, considered by Forbes to be the fastest growing business ever, raised some $170 million in venture capital and is valued as in excess of $1 billion. Not bad for a company only about three years old. 

I can see the upside to using this approach. It's a promised land of new foot traffic through a retailer's door, and the approach has its share of advocates. But, is all that glitters gold? I think not. There is, in fact, a forboding underbelly of liability, and small businesses better be forewarned.

LOSE MONEY WITH EVERY SALE

In order to stimulate interest, businesses are told they have to discount goods and services by at least 50 percent. Even deeper discounts of up to 80 percent are encouraged. On top of that, the group buying site keeps as much as 50 percent (more perhaps?) of the amount the merchant brings in. 

You do the math. If you offer a deal of $20 for $40 worth of goods or services, then the group site keeps as much as 50 percent of the amount sold, does that make sense? 

Oh, but it's advertising. Right, I get that. And if you're advertising budget is big enough, or the margins on your products are high enough, it makes sense. You don't lose your shirt with every sale. But, not every small business is the Gap. Quite to the contrary, most of us work on minimal ad budgets and thin margins. 

One small business, Poises Cafe, lost so much money the owners had to dip into their personal savings to cover what they claim was an $8,000 loss! The owner called it a "terrible decision," one that was made at the objection of her husband. Consider not only the strain this placed on their business, but their personal lives as well. 

SMALL BUSINESSES OVERWHELMED BY DEAL BUYERS

Unless a deal can be capped, something a number of these deal sites are doing now, a small business takes a huge risk that they will be overwhelmed by deal buyers. Take the case of Philz Coffee in San Franciso. According to an article at Walletpop, the owner said, "I nowhere near projected the amount of people that showed up. We just weren't prepared for it." 

LOYAL TO THE DEAL, NOT THE BUSINESS

I've come to the conclusion that many deal buyers are more loyal to the deal site itself than to the businesses offering them. These sites can become addictive, almost like a candy machine handing out a free daily confection. 

The pay-off for most small businesses is in the repeat business that comes from acquiring these new customers. There are many who testify to the positive effect Groupon and sites like it have. But, still, I wonder if there is substantial evidence to prove that new customers return once the deal is gone. 

Not only that, many of the deal buyers are already customers. For example, I had a business lunch recently at a local Thai restaurant I had visited a few times. The appointment had been made weeks in advance. A couple of days prior to the meeting, I saw a group deal for 50 percent off at the restaurant. Naturally, I bought it. The net effect to the business was they lost half of what I would have paid them otherwise. 

DEVALUE THE BRAND    

The last liability I see is that group buying has the potential to not only devalue the goods and services being offered, but cheapens the brand itself. 

For example, a local specialty foods gift business, Classic Golden Pecans, says they won't use group buying deals because they sell gourmet products. The owners do not see that it is in their best interest to offer them at a reduced rate. 

ADVICE FOR SMALL BUSINESS

I'm not opposed to a small business trying this marketing approach. For many, it has proven lucrative. To a business owner considering it, I would say this:

Do your homework. Don't be allured by the fact that "everyone is doing it" or that a competitor may have tried it and succeeded. Count the cost. How deeply can you afford to discount? How many deals can you afford to offer? What's the worse case scenario? What's the price of success? 

Determine ways to get return customers. As I said, repeat business is the real key to success. How can you guarantee that someone who came in your store thanks to a great deal will return once that deal is gone? Better have some follow-up mechanism in place to stay top of mind with these folks, or offer such a great product or service that they would be crazy not to return. 

Decide on the value of your brand. Do you want to run the risk of being thought of as a discounter? Do you want discount-oriented customers? 

ARE THERE BETTER ALTERNATIVES?

I want to mention a possible alternative that, in my view, holds promise. It's a Boulder-based start-up called Loyal2.me, that offers a unique twist on customer loyalty programs. They refer to what they offer as as "Personal Loyalty Program." Instead of the customer being loyal to the business, the business is loyal to the customer. 

(Visit the site to read more about it. The value proposition is unique...and it won't run a business onto financial rocky shoals either.)

If you are a small business in need of sound advice on how to navigate the sometimes unchartered waters of the social media sea, please contact me. 

Custom Facebook Fan Pages and Emall Marketing

I get a number of email "circulars" from companies like Best Buy, Macy's and others. Their width resembles the new size restrictions now in place for Facebook tab pages. What if, when companies create an email piece, they were to replicate it as a custom tab on their fan page? Think of the advantages:

• Technology - From a technical standpoint, it would be relatively easy to deploy, as the CSS/HTML would likely translate very well without recoding being called for (minimal amount if so).  The biggest issue is one of width. Email versions are wider than the 520px allotment by Facebook.
• Marketing - From a marketing standpoint, it's certainly worth experimentation. Links would need to be tagged appropriately as to source, of course. 
• Design - The design of email campaigns are often very apropos for use in Facebook.
• Content - It's repurposing content that has already been created. Create once, publish twice. 

Regarding the last point, whoever said custom Facebook fan pages should remain static. My friend Pat Kitano put it this way, "Facebook fan pages are the new Sunday circular." Why not routinely update them with fresh content? If your company regularly produces email campaigns with regularity, using them for your fan page only makes sense. 

How about email sending platforms like Constant Contact, Vertical Response, Exact Target, Mail Chimp and others tackling this from an app development standpoint. All of them are clamoring to stake a claim inside social media, but most of what I've seen from their efforts include little more than social sharing options or subscription forms. To take an actual email campaign and plunk it down inside a Facebook Page, now that's something really useful. 

Look at these examples of email marketing pieces, re-imagine them as Facebook tab pages sitting inside a fan page, and tell me what you think of the idea. (In fact, I copied the source code, did some minor tweaking, and created a couple of Facebook versions which you can link to below. Mind you, they are not perfect, but there just to help you get the picture.)

(See Facebook version)

(See Facebook version)