Over on the Nebo blog Kevin Howarth is doing a series of interviews that feature marketing thought leaders both locally and nationally. Kevin was gracious to ask me to participate and we had a fun conversation about interactive marketing. Kevin's interview, with much better graphics than FoG, is being republished here with permission.
What do you feel is the most important aspect of how interactive marketing has developed over the last few years?
Interactive marketing has transitioned from command and control to a more user-generated focus. For any online marketer to be successful, they have to embrace user-generated content and online communities. That means empowering communities to help them spread the word about a company’s products and services. This kind of focus has led to a heavier emphasis on customer service. If you don’t have happy customers, then they’re not going to talk about you. Or they’re going to say bad things. The vast majority of good marketers understand that they are no longer 100% in control. Five years ago, people really didn’t understand this lack of control but I think they understand it now.
How is search and interactive marketing impacting how companies start up their businesses today?
It’s where they start. When a company begins, all they have are themselves and some word of mouth elements. An online presence via social is the least expensive way to amplify what you’re trying to do. SEO and SEM are obviously very important as core aspects to any technology company’s marketing. For example, at Half Off Depot we’ve seen that the way local merchants used to go to market has gone away. The Yellow Pages, local magazines and newspapers are gone or in steep decline, and merchants need a way to market online. We help them with the online piece so that they stay in front of their customers face-to-face.
Companies also have to figure out where “home” resides. Home might be their webpage, or it might be a Facebook page. Either way, companies really have to integrate social from the start while building this “home” presence. Website design has really started to emerge as a competitive advantage. For example,Fab.com is a beautifully designed site, and they actually used design to demonstrate how they’re going to be different from competitors. I don’t think people talk enough about the importance of good design or take into consideration how it can really impact the customer experience. In turn, customer experience can impact word of mouth and viral marketing.
What’s your current assessment of the Atlanta marketing community?
In my opinion, Atlanta is very strong from a technology marketing perspective. But we do a bad job letting the world know about it. We have established well-known companies like MailChimp and WhatCounts, and there are a number of email service providers like Silverpop. There are also quite a few companies starting to play in the social space, and we still have a strong cluster of traditional interactive marketing companies. Atlanta marketers have such deep domain knowledge of interactive marketing that it’s inevitable that they’re starting to apply that knowledge into different verticals and new emerging areas. At its core though, Atlanta is best at B2B. Even the more well-known consumer-focused companies have a heavy B2B bent, and a lot of Atlanta’s marketing companies direct their energies toward that demand.
You’ve mentioned social quite a few times. Why is social so important in today’s marketing climate?
The opportunity for social is understated. Everything is eventually going to be that way. Today, my teenage children cannot imagine a world without the Internet, and they are part of a demographic completely immersed in social. I think marketing is eventually going to become all social, and social is going to be one of the primary marketing drivers as other traditional mediums continue to fragment.
And how does mobile play into the mix?
Social is big, but mobile is the future. Anything that you wanted to do on a computer five years ago, you can now do on a three by six inch device. Today, I think it’s still a little bit difficult to do ecommerce on a mobile device, but that’s quickly going away. Behaviorally, people are not afraid to buy things on a device. It’s just hard to do sometimes because of the initial set up and ease of use, but that’s all going to get solved. For example, Square is making it easier for phones to accept credit cards, and local Atlanta startups such asWhisper Communications are also emerging into this space to help make B2B mobile transactions easier and more secure.
What are your thoughts about how marketing measurement has changed over the years?
If you look at one of the primary drivers of why interactive marketing is growing so quickly, it’s because people are spending more and more time online. That’s half of the equation. The other half is that interactive marketing is much more efficient than traditional marketing from a structural perspective. Not only is it less expensive online versus offline, but you can very accurately measure the effectiveness of what you’re doing in real dollars and cents. More and more companies are demanding that kind of measurement, and I see that trend continuing as audiences fragment and spend more time online.
How does content strategy fall into the marketing mix?
Content is king again, but it’s not necessarily because the content is truly unique. It’s because it will drive traffic to your site. You need good, strong, consistent, and deep content in order to effectively drive traffic. You’ve got to give people the content they want, in the format they want, at the price they’re willing to pay, and when they want it. There are many different variables, but the people who are successful at putting those things together are really good at getting people to buy their products and services.
What marketing trends do you feel will have the most impact in 2012?
Marketing spend will continue to follow people. People are spending much more time on the Internet than they did in the past, and marketing dollars have yet to completely follow that trend. Marketing dollars will continue to go where the people go. Right now, people are on social and I see that trend continuing for the foreseeable future until the next “social” emerges. I often talk about how there were the PC wars, the browser wars, the search engine wars, and the social wars. We had winners in each one of those categories. I don’t know what the next war is. But there is going to be something that pops up that’s truly disruptive and that no one’s really thought about. Consumers will interact with technologies in ways that we can’t even think about right now.
This brings us to the critical success factor for all these daily deal companies. Getting repeat customers from the 5 million strong e-mail list is easy. Making your real customers, the merchants, successful with the product is the challenge....
We think a winning formula is sitting in front of anyone who has strong relationships with these local merchants — especially a firm that has a history of helping them with Web marketing and promotions. Whoever teaches the merchants to use these new techniques will own this market.
Jim and I think alike (except getting a 5 million strong email list may be a bit more challenging than he makes it out to be). I am not a pundit, I am an operator. An operator that is seeing double digit traffic and revenue growth. The deals market is a large opportunity that is not going away anytime soon. The key to success is helping merchants use online promotions to get and keep new customers while offering great deals of value to consumers.
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.
So Groupon filed its S1. The length of the document and the analysis of it is staggering. So this is a blog. A web log. Here are some of my favorite reads on Groupon's filing.
Who Will Be Left Standing Post-Groupon IPO by Erika Morphy of Forbes. An analysis of the daily deal market. Not sure if I agree with her assessment of AT&T, never really seen them as sophisticated at marketing in unregulated markets.
Groupon S-1: Mind The Ratios. A nice article by Jeff Bussgang of Flybridge Capital about deteriorating customer and merchant growth ratios. Those Boston VCs like to pound the numbers.
Groupon IPO: pass on this deal by David Heinemeir Hansson a partner at 37Signals (whose founder Jason Fried sat on the Groupon board for a few years) has a blistering attack on the use of Adjusted Consolidated Segment Operating Income or ACSOI as an accounting metric. Groupon without marketing expenses is not Groupon at all. Indeed.
My bottom line. Groupon is the leader in a huge market and its growth has been astonishing. They are going to go public and cash a lot of people out. They made the market and are going to be a market leader for some time. A $20 billion valuation seems a bit rich.
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