That post the other day about room to grow in the mobile coupon space. From the Groupon Q1 earnings call this is what it looks like today for them, one of the leaders in local couponing. Sales via mobile have risen to 45%. There's gold in them devices.
VentureBeat reported today that Fab just closed a $40 million round led by Andreessen Horowitz. Fab is an oft talked about company in the halls of Half Off Depot. Before today I do not know about the company's pivot from a social network for gay men. Interesting.
(1) A laser-like focus on design. From the design aesthetic of Fab.com’s website and mobile applications, to the products that are featured for sale, to the end-to-end customer experience, Fab.com is all about good design. (2) Social commerce. More than 50% of Fab.com’s 1.2 million members have come from social sharing. (3) Innovation. Fab.com builds all of its own technology and is the world’s pioneer in integrating social and commerce features to enhance the product discovery process.
20 percent of deal users are returning for full-price purchases at restaurants, bars, salons, and other retailers
36 percent of deals users spend more than the voucher value when visiting a merchant
22 percent of them never redeem the vouchers they've paid for
55 percent of businesses reported making money on their promotions, 27 percent lost money, and 18 percent broke even
48 percent of businesses planned to run another daily deal promotion, 20 percent indicated they would not, and 32 percent didn't know for sure
70 percent of marketers in special events, health, and services made money on their promotion.
44 percent of the restaurants surveyed financially profited from the promotion, and only 36 percent of them intend to run another daily deal
The was been a lot of chatter about how there is no way a business can make money with a discounted deal. This study shows what I have been hearing from merchants, properly structured deals work. With 73 percent making money or breaking even on their promotions deals are an online marketing method that works.
Yesterday I wrote an article about deals not being evil in response to a series of articles that are appearing on TechCrunch. At about the same time the Wall Street Journal published an article entitled Daily Deals Rescue Local-Ad Market that was a bit more balanced then the stories coming out of TechCruch. It includes a great chart that shows the fall of newpaper and yellow pages spend and the growth of digital and deals. Merchants are shifting their marketing spend.
They are doing this because digital and deals are effective.
Rodney Fong, president of San Francisco's Wax Museum at Fisherman's Wharf, for one, is a convert to the daily-deals model. Just three years ago, he said the museum spent a quarter of its marketing budget on newspaper ads. Now it spends almost nothing on print ads, shifting its focus to daily-deal sites. "I'm sold on it," Mr. Fong said.
The specific article above seems somewhat akin to a certain president wanting to attack a certain country to take out a certain leader. I don't really understand why as Rocky seems to be a pretty rational strategic thoughtful deal industry guy. As an example he has a great article on Best Practices for Businesses Considering Daily Deals. Here's the first section.
Before you agree to a deal
Make sure deals is right for you. The marketing around daily deals implies that it’s an honor to be selected and that you should be thankful for the opportunity. It’s the “Who’s Who” model — flattery works. It’s not an honor. You should analyze the numbers and make sure that the deals work for your business. Talk to other similar businesses about their experiences. Some of the key questions to ask: How many of the customers were your existing customers? How big was the initial demand? Did you have to staff up extra? Did people buy more than the deal value? Did new deal customers come back? If the deals were redeemed mostly by existing customers or new customers didn’t come back, those are bad signs. Only run a deal because you have done analysis and realized that it’s good for your business, not because everyone is excited about Groupon. I talked to one merchant who ran a Groupon because a restaurant across the street was full after it ran a Groupon. She ended up losing $10,000 on her deal.
Don’t believe statistics from your sales rep. The reality is that none of the deal companies have the technology to accurately track the most important metrics to the business. You’ll hear stats like 95% of merchants are satisfied. 98% spend more than the deal voucher. You should ignore them. 95% of people wouldn’t agree that the Pope is Catholic. On a $20 Groupon, they might spend $20.05. Yes, it’s more than the voucher, but that extra nickel doesn’t help you.
Stick to your guns. Your sales rep might tell you that in order for your deal to be selected to run that you must make your offer more generous. By, for example, increasing the cap or raising the value of your voucher or increasing the share to the deal company or removing restrictions on a deal. This is akin to the car salesman telling you that his manager won’t let him do the deal. If you’ve worked out your numbers and know what your comfortable with, stick with them. “Losing” the opportunity to be featured is better than making a bad business decision.
Make sure you understand the terms. The daily deal is not some Internet magic; it’s a complex financial instrument. The dynamics are very different from buying a newspaper or magazine ad. Give it the same amount of thought as if you were taking a $15,000 loan. See my analysis of the Groupon merchant agreement.
While much of Agrawai's writing is thoughtful like the as the above demonstrates major points are either overlooked or ignored in the TechCrunch rant.
Despite some high pressure sales techniques by some companies in the space no one is forcing merchants to sign up for online local commerce deals.
Many merchants love deals and are signing up for annual contracts with specific providers.
There is no concept of consumer frequency in his analysis.
Daily and weekly alternative newspapers are dead or dying. Deal companies are one of the few alternatives that local merchants have to market themselves.
Deal companies are performance based with real metrics.
Agrawai refers to Google Offers as "pretty close to evil." I signed up for my current gig at Half Off Depot to do good not evil. We are providing real value to both merchants and consumers. If anyone wants to know of hundreds of businesses that are thriving as a result of online local deal marketing drop me a line, I would be more than happy to connect you with a few of them.
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