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The serious side of Gamification
April 22, 2013
A steady stream of retail innovation exists online; some effective, some less so. But most claim to centre on a perennial problem in Retail:
How to drive sales through incentives without destroying long term brand value…
Group Buying and other Daily Deals sites were built to address this issue, and they’ve done a pretty decent job if their multi-billion dollar revenues are anything to go by! Though, to some extent they are a victim of their own success in that it’s hard for a brand to discriminate on price discretely when so many of its regular customers are Daily Deals customers.
Further challenges with Daily Deals include the fact that the Brand doesn’t typically control the creative, meaning they are often a Supplier to the Daily Deals Site not a Client. And, the Daily Deals site will leave a permanent record of the Sale in their back catalogue which will appear in Search and therefore undermine brand value. Further, the Brand owner is asked to give away quite a lot, more often than not the Retail price is discounted by more than 50% and a further 20% – 30% is given to the Daily Deals site as a commission.
Clearly there are a number of scenarios where this channel works well for a business. The unit sales volume can be significant with no marketing effort from the Brand Owner hence they are appealing in a lot of ways, especially if owning the customer is unimportant.
A radical new tilt at the problem is Entertainment Shopping, where the retail price is used only to describe the Size of the Prize, but is otherwise irrelevant. One example of Entertainment Shopping is Penny Auctions, where users purchase Bids which they use to win items, theoretically being able to win and items for a single bid, which may cost less than a dollar. T
he reality though is that these Auctions are super competitive and the likelihood is that you will lose many more auctions than you win, yet the bids you used on lost auctions still cost real money – in that sense it’s more akin to gambling than shopping. For the Auction site this means the overall yield per item is greater than the retail value, thus favouring the Penny Auctions themselves more than the Brand Owners or the customers, albeit customers may choose this purchasing route for the sheer joy of the Auction!
In the Entertainment Shopping category Australian Statup Wynbox has a much more evolved solution for Brand Owners. The genius of the Wynbox solution is that they provide their Buy-to-Win platform as an integrated shopping engine for an existing website, meaning the retailer retains end to end control of the user experience.
Buy-to-Win involves the retailer setting a ratio of free items to full paid items, meaning anything from 1 in 2 to 1 in 10 or more may be free, equivalent to a direct discount if that number are purchased by a single customer, or a lucky dip if you are buying just one.This is a simple way to provide a strong purchase incentive without discounting the product, and it can be fun too, so it ticks the box for the user who plays Candy Crush between shopping missions!
There are a number of interesting scenarios that underline the power of the Wynbox platform, such as in the sale of concert tickets for instance. As sales begin to lag for a concert, the ratio is introduced. The ratio can be cranked up to 1 in 2 if necessary to drive sales, but at no point is the ticket price discounted, meaning the customers who purchased the concert tickets at full price never feel cheated and the Talent and the Promoter are happy.
In fact, Wynbox works in a number of scenarios, including Fashion where margins on Full Price products are high but the vast majority of purchases normally occur at a substantial discount, with Buy-to-Win the discount can exist without an overt discount.
All retail businesses should be thinking about the entertainment value of their shopping experience as consumers explore less boring ways to shop for discretionary items. Wynbox offers a fresh solution that can be “plugged in” to an existing site, meaning a fast track to an Entertainment Shopping experience that would otherwise be very hard to achieve.
The bigger they are…
March 13, 2013
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The mocking began almost three years ago today. Apple Fan boys & girls chorused in smug, urbane disdain of my Apple hate. How I dared question the gospel according to Jobs.
Well, I did.
In March 2010 I wrote, “Increasingly, fashion’s undesirables are adopting the iPhone as their key to cool, just as the true cool are heard to say “it’s just a phone, I’ll change it soon”. iPhone has some runway yet, there are a few hundred million people still to buy one meaning Apple have at least a couple of years of stellar revenues to look forward to from their phone division; but when the fickle face of fashion is looking the other way, what damage will have been done to the broader Apple brand?”
Right now, the Kids are buying Samsung’s range of Android powered devices, they are unmistakably cool. Parents of those same Kids are “doing Facebook” on iPhones, and there’s nothing cool about that!
The challenge for Cupertino is in the awesome strength of the Apple eco-system, the all of nothing iTunes lock-in they so clearly hoped would bind Appleites to polished metal and white doesn’t work when they have found religion elsewhere.
Losing Mobile Phone share and therefore command of the users’ Media collection undermines the entire Apple product range as well as the economic model – meaning the whole business is on very shaky ground if can’t reverse its fortunes, and fast.
I foresee a very rapid demise ahead for the once mighty Apple, truly a victim of their own incredible success.
Turning Advertisers off with visual Vomit
March 6, 2013
As a user, Facebook is frustrating, and as an advertiser, it’s downright useless.
Humans are skilled at ignoring the visual vomit around them, and these are skills that have been perfected over many years of increasingly desperate advertising techniques – from the subliminal to the ridiculous.
Stealing 5 minutes to get critical updates on the latest cat meme is what Facebook is all about, and monetising that experience has mostly been limited to targeted advertising (selling your personal details to advertisers so that they can craft ads most likely to drive a response). But with just $10 of annual revenues from each of its 600m or so engaged users Facebook has a long way to go to satisfy its many Shareholders’ many expectations!
The real challenge for Facebook though is that economically it’s still a One Trick Pony with 8 out of every 10 dollars of revenue coming from advertising. So how does Facebook outgrow the rebounding economy in order to drive up shareholder returns?
I think they have three pillars of advertising growth ahead of them, each of which will likely trade off user experience for advertiser revenue:
More advertising inventory – as the rate of subscriber growth slows more inventory is required to avoid an overall slide in the supply of advertising space – meaning more of the Facebook page will be dedicated to paid media resulting in a poorer user experience
More personal advertising – Facebook will give as much data as it can to advertisers to make the advertising product more effective – meaning Facebook will go even further to leverage their users’ personal data
More interruptive advertising – as consumers get better at ignoring the Advertising Vomit, Facebook will push its products to become more interruptive, meaning you have to wait for them to finish or actively “push” them out of the way. A poorer experience but one that is likely to yield more clicks for the advertiser.
And yet, the real challenge here for Facebook is that it just isn’t a great place to advertise for most businesses. It’s neither a great Brand advertising platform, nor is it a great Performance advertising platform – and in this analytically informed world of Marketing, the investment required to evaluate the effectiveness of an advertising platform is lower than ever before – meaning most big advertising dollars have already come and gone.
Spreets goes Hybrid in a desperate move that might just work.
December 13, 2012
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Spreets recently announced their plan to include offers from competitors alongside their own, making spreets.com.au the first major player to launch a hybrid Group Buying/Super Affiliate offering in the Australian market.
I imagine the evolution of their model went something like this:
Early 2010: Spreets is formed and is among the very early entrants into the Australian marketplace, their model closely echoes the fast growing US originator, GroupOn.
Middle 2010: Spreets finds early success with a single deal each day, deals are sold at 40-50% revenue share to Spreets and consumers are excited about the new model, each offer sells many hundreds of vouchers, competition is light and shareholders are happy!
Late 2010: A number of new entrants intensify competition, including well-funded overseas players GroupOn and LivingSocial, local Catch group player Scoopon and of course Cudo who brought TV advertising to bear for the first time. Spreets immediately lose marketshare to these new upstarts, unsettling shareholders and peaking the interest of Yahoo!7, the natural rival of Cudo shareholder ninemsn. A second “side deal” is now commonplace on Group Buying sites, providing an alternative to the main offer of the day. Revenue shares of 35% are also now common as competition intensifies and daily deals businesses battle to win the best merchants.
Early 2011: Spreets is bought by Yahoo!7 for just over 22m, an incredible outcome for the Spreets’ co-founders and investors. Interestingly, a higher purchase price was touted ($40m) as the new owners congratulate themselves at having managed to jump on the fastest of bandwagons (myspace anyone?). The model has evolved to include 5 or more daily offers, vacation offers and longer running offers. Revenue shares of 30% are common.
Late 2011: Some 80 competitors exist in the market and Spreets market-share has flattened to 12-14%, products offers become frequent often at under 15% revenue share for the Group Buying business, customer discontent is at an all-time high due to shoddy product suppliers failing to deliver and 20+ daily offers are now common resembling a deal marketplace and requiring an increasingly large and expensive sales force to meet that demand.
2012: 2012 was make or break for many group buying businesses with a large percentage falling away in the second half of the year. Average revenue shares of 25% are typical and with 50+ daily offers on each of the larger group buying sites the average voucher sales per offer has declined significantly making it hard to fund the sales force required to meet the demands of a deal marketplace.
December 2012: Spreets calls it quits on the Group Buying model deciding to give the Hybrid model a go instead.
For many, the economics of a deal marketplace don’t stack up, which seems to be the case for Spreets. Meeting the demands of a marketplace without the overhead of a large sales force is possible though if competitor deals are surfaced alongside those deals originated in-house as a Hybrid affiliate/group buying business. Doing so can be profitable too, Affiliates are commonly paid 10% of gross revenue when a new customer is introduced, or almost half of the revenue retained by the group buying company, which is a good bounty given no sales effort, customer support or refunds and no exposure to shoddy merchants!
Assuming their Group Buying competitors sign up to having their offers surfaced on Spreets.com.au deal choice on the site will grow and no doubt customers will thank them for it. But what is the long term outlook for this Hybrid model?
Spreets customers will be absorbed by the competition over time, Spreets will already be losing 4-8% of Subscribers each month though natural churn and may not have the funds to replace them so a customer exodus to the competition will hurt greatly. The more successful the Hybrid model is at generating Affiliate fees the more quickly the exodus will occur and unless they can make their marketplace a great destination through the curation of compelling deal content and email targeting/personalisation they won’t come back either.
Alternatively this may be Spreets way of simply “milking the asset” until they close the doors on the business given this model will lead very quickly to some much needed profits, given their original investment it would be nice to see some return!
Related articles
- Group Buying fortunes on the up? (57signals.com)
- Group buying market ‘is in a pickle’ (mumbrella.com.au)
- Google Would Be Nuts To Buy Groupon, Even At A Huge Discount (GOOG, GRPN) (businessinsider.com)
Click Frenzy, in spite of the massive failure it was an unprecedented success!
November 26, 2012
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Sneeze and you may have missed it.
The Click Frenzy frenzy came and went in a matter of days, yet in that time it managed to reach the consciousness of some 20% of online Australians! That’s quite an achievement.
Their PR machine had triggered something in Australia’s uber-price-sensitive media which led to an incredible amount of coverage in the days leading up to the sale – it really did become a frenzy.
Even before the site ran into capacity issues on their woefully inadequate servers, their business model meant they would only ever make moderate returns. Choosing an all-up-front fixed-fee suggested they doubted the results they could yield for their retail partners preferring instead to cover their costs and hope for a modest return.
All in all, they clearly had no idea how ready the Australian market was for Click Frenzy!
Click Frenzy founder Grant Arnott explained in a rare and touching mia culpa that 300k visitors was their top traffic estimate, so the 1.6m visitors they actually saw blew their infrastructure wide open. To be fair, I think only a handful of sites around the world would cope gracefully with 1.6m concurrent users! The fact is the 7pm launch time was a big part of the problem, internet infrastructure hates concurrency!
Aside from the access issues suffered by many hundreds of thousands of bargain hungry shoppers, many found their way to the registered retailers and boy did they spend!
One retailer example I was shown paid less than $3,000 to participate but yielded over $80,000 in sales. An equivalent Group Buying offer would have cost the business $24 – 30k in commissions! A pretty good outcome for the retailer!
The chart below from Quantium shows the direct impact on participating retailers versus non-participating retailers.
160 retailers of varying sizes participated, and Click Frenzy probably netted an average of 3 – 5k upfront from each, meaning 480 – 800k in Gross Revenue. Not bad, however had they chosen to take a booking fee plus a moderate trailing commission, they would have netted anywhere from $800k ($1k upfront, 5% commission on $80k Average) to $2.4m ($1k upfront, 15% commission on $100k average)!
All credit is due to the Click Frenzy team, they were swept along by a frenzy of their own making albeit they we flattened in the stampede. Better luck next year.
Related articles
- Click Frenzy a big success, says Myer (news.theage.com.au)
Group Buying fortunes on the up?
November 15, 2012
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After bottoming out during the past few months, the fortunes of some Group Buying businesses seem to be on the up, albeit a significant number have collapsed or been acquired in the past six months and the outlook remains grave for many more!
The fact that the sector’s nose is slightly up is in part due to the weeding out of weaker and often less scrupulous competitors who often served only to undermine the reputation of the sector as a whole.
In fact out of the 50 largest Group Buying businesses assessed in April, only 29 remain intact just 6 months on. And given only 10% (5) of those businesses were acquired that supports the view that smaller Group Buying businesses are of limited real value. In such a crowded and undifferentiated market lifesaving investment is tricky too given a lack of brand equity, good will or asset strength (off the shelf web sites are common and subscriber base overlap with top-tier competitors is often well over 70%) resulting in the collapse of underperforming and debt laden Group Buying businesses.
A quick browse through the sites of the 29 still standing uncovered indicators of pending doom for some.
Here are the choking canaries of the Group Buying world:
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A high degree of niche product deals, such as robotic vacuum cleaners or iPad accessories
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No sign of “number purchased”, an essential component of Group Buying that is quickly discarded when numbers are low
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Extended Deal deadlines, this industry was founded on deal a day for good reason!
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A smorgasbord of deals on one page, suggesting desperate recycling of old offers
Group Buying remains a $1bn future industry in Australia, regardless if that industry seemed to lose its way and stall when it was only half way there. Regaining lost momentum will be down to the leading players showing the way once again with a combination of brilliant marketing and a commitment to helping consumers discover great business products.
The strongest already have their playbook (Living Social, Cudo and Ourdeal) and will extend their positions in the coming 6 months through a focus on back-to-basics Group Buying offers like quality restaurants, high value vacation offers and utility products such as Cudo’s Meat Merchant.
Although I suspect another 15 from April’s top 50 will be gone by April 2013, leaving only a dozen or so standing, I think I already know who they are, I wonder if they do?
Good commercial sense underpins sustainable philanthropy
October 29, 2012
In 1999 the ever cheery Brits (of which I’m one) were flabbergasted when their #1 Son Richard Branson lost a bid for the National Lottery. His manifesto for the People’s Lottery was based on it being run as a Not for Profit meaning that profits would be provided as donations to the lottery commission over and above the standard fun-raising efforts of the National Lottery. Even though these additional donations would exceed $1bn each year the Lottery Commission said no, instead they chose Camelot who had no such altruism in mind.
Surely something’s afoot, why would the Purpose driven Lottery Commission choose greedy toes Camelot over goody two shoes Branson? Isn’t that Greed before Good?
Not that simple.
The Lottery Commission figured that without the benefit of a Profit Engine behind Lottery Ticket sales, they’d be worse off taking the $1bn contribution from the Virgin effort. That their interests would be misaligned and the overall donation pool would be smaller as a result. A decision that has since been vindicated several times over.
If the collective interests are balanced, doing good doesn’t have to be unprofitable.
Recently I co-founded a business called BeyondCover. On one hand BeyondCover is an Insurance reseller for Global Underwriter QBE, selling CTP (The mandatory Motor cover in Australia), General Motor and Travel Insurance, on the other hand it raises money for causes by rewarding Cause partners when they introduce a new Insurance Customer.
The key to having the right incentives in place lies within the nature of Philanthropists. People who regularly support Good Causes are good people, they take fewer risks, cause fewer accidents and pay their bills on time. They make pretty good Insurance customers too!
Big companies can’t win, time to get down and dirty!
September 25, 2012
Reinvention is bloody hard, rarely has a big business managed to pivot wholesale to a new them without causing a catastrophic collapse of their core along the way. History is littered by once great corporations hollowed by their failure to recognise the need for reinvention.
But this isn’t a cautionary tale featuring Kodak and their resistance to the Digital age, although that is a good story! This cautionary tale concerns those businesses that recognise the need for change but fail, fail because their big company DNA rejects the wide eyed organism growing within.
Clayton Christiansen describes the issue as the Innovators Dilemma. The central theme of his argument is that big businesses innovate within the constraints of their own expectations. Big business’ expectations demand an aggressive and predictable return on capital as well as a degree of polish that small businesses and startup entrepreneurs happily live without.
Those expectations limit their ability to innovate to the Sustaining kind only, meaning incremental improvements that result in incremental bottom line impacts. The new breed of competitor, i.e. startups, don’t live with those constraints and can therefore galvanise their new business around an untested way forward.
Innovation favours the brave and startups are certainly brave. Entrepreneurs often leave themselves with little to lose and can afford to turn existing models on their head in a effort to break through. And breakthrough they do.
In the past big corporate goliaths still won though, regardless how stilted their innovation; barriers to entry and scale benefits afforded them a defendable lead against newer foes. But today’s David is better equipped. They have the triple whammy benefits of low cost of capital, cheap scalable technology and affordable access to a large audience; also, this new wave of Disruptive Innovation is easily embraced by customers so should be feared by slow to move businesses and their shareholders alike. Boardrooms have too much as stake to stay ignorant to the Breakthrough Innovation occuring around them, so breaking through the innovators dilemma will have to happen eventually. But there is a great risk of too little too late.
Corporate leaders have to do more to embrace breakthrough thinking and create structures to do so. Establishing a mini startup fund and incubator for internal entrepreneurs and staff incentives to encourage broader thinking are essential steps. Communicating to the broader business the importance of supporting those innovations by accepting the quick and dirty necessity of breakthrough thinking is also essential if rejection of the new organism is to be avoided.
Related articles
- Workshop: The Lean Entrepreneur with Brant Cooper & Patrick Vlaskovits (startuplessonslearned.com)
Is your business gearing up for in-car Internet?
September 21, 2012
ABI Research are forecasting a significant growth in Internet Enabled cars, with 50m vehicles sold by 2017 with native Internet connectivity.
In car connectivity is already broadly available with smartphone-dependent products like HondaLink available in most markets today. However like any new technology, the real breakthrough comes when new applications are developed by a broader ecosystem, which, as far as we can tell, is yet to happen.
It’s quite possible that 30 – 40% of new cars sold in Australia will be Internet Enabled with 5 years, yet few business have connected cars in their 3 year plan.
Is Privacy dead, or just too hard?
September 19, 2012
Lorrie Faith Cranor and Aleecia McDonald from Carnegie Mellon conducted a study recently which repositioned the lack of online privacy as a time issue.
They reported “To read every [online] privacy policy you encountered in a single year would take 76 work days……”
So we all want our time online to be a more private affair, but find it impossible to wade through the policies and figure out what’s what? Further, even if you had the time to read them, would anyone but a Privacy Specialist understand them, and worse, be willing to forgo the benefits brought by Facebook and Google in an effort to maintain some sort of online anonymity? I suspect not in each case.
It’s hard to see how to solve this issue.
At a minimum it would seem appropriate to provide a simplified privacy policy, which would at least encourage consumers to become familiar with the terms they are signing up to. Controlling what your cookies are used for may also be key, Personalisation, yes, targeted advertising, no.
Over time I worry that the role of government will be to reign in on the issue if left unsolved, which would be a bad outcome for all.
Google Analytics – Top 3 Features for Ecommerce; A Digest
September 14, 2012
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This post was written by Boris Gefter – freelance Acquisition Guru and consultant to 57 Signals.
Google analytics (GA) is rubbished more often than not by Omniture diehards and hardcore data analysts. They bleat persistently about their inability to feed GA with non-standard data (outside the scope of what the javascript captures) and readily extract the data (in the way you can with a data cube). But these guys are locked in time, probably still awaiting the arrival of the iPhone 3!GA has evolved in a fantastic way over the past 3 years! In its evolution it has made available rich data to those that care to harness it. But what is more impressive, is how easy and intuitive it is to use the interface and find answers to questions a sophisticated online store owner may ask. But, let me curb my Google appraisals for the time being, lest this blog post be censored by the powers that be. 
Jumping right in, here are my three favourite GA features (and there are many!)
A humble servant of GA’s ability to capture and store url parameters. It is surprising how many people do not know that this functionality exists! The standard user will be used to viewing the “Traffic Sources Overview” report, but when you want to know what campaign, keyword, ad or placement on which network and partner has resulted in a sale, coding your own unique URLs could not be easier. Then, when it comes to retrieving this information, you can rely on your friend ‘Custom Reporting’….
2. Custom Reporting:
The humble tab that sits atop the interface is the key to unlocking analytics glory. For those that know and love pivot tables and data cubes, GA has a gift for you. For those that are new to looking at dimensions and metrics, they key is not to be intimidated by the blank canvas. Start playing around, adding metrics (things that are measurable) such as time on page or conversion rate (if you have ecommerce tracking enabled) is really easy. Dimensions (what describes the data) can be configured to retrieve information that you coded into the Google URL builder in step two, by adding “Source” and “medium” alongside the metrics you are interested in.
As an example, say you wanted to find out how successful your google adwords campaigns are (which you had already coded with the url tool, as seen above), you can simply add source as one of your dimensions and the relevant metrics such as visits and number of transactions as shown in this example. Then, you can filter by the source code which you coded in your URL tool.
The key, is figuring out what question you want to answer first, and then what sort of information will help you answer that question, then validating any data using common sense!
3. Conversion Segments/The Repunzel Report:
What if I told you that you were potentially losing out on more than 50% of your revenue by under-investing in a particular form of advertising. Wouldn’t that be valuable? This is where the “Conversion Segments” or “The Repunzel Report” as I have dubbed it (due to the fact that it is hidden in the top left corner of the analytics tower) becomes extremely valuable.
First let me assist the budding princes willing to use this report. You need to have ecommerce tracking enabled and implemented correctly on your site, then you can make your way into the conversions tab>multi-channel funnels>top conversion paths, then navigate to the top left section of the page to find conversion segments. Simple, right?
Now that you have found it, you can filter the potential traffic sources by first and last interaction. Whilst, the philosophy of attribution can be a prickly one, I like to refer to reports such as these to understand where advertising money is going and how much impact it is having.
What you can see from the example below is that paid advertising on a “last touch” basis, is reporting $140k+ worth of revenue, whereas on a “first touch” basis (where the value of the transaction is attributed to the first channel that brought the customer to the site in a default 30 day window) there is over $220K+ worth of revenue to be had. Now imagine that you are only spending $100K on advertising, thinking that it is only bringing in $140K, when, if you look at your conversions through the “first touch” lens, you can see that there is potentially more value to be had from your advertising dollar!
I often like using first touch attribution to model the efficacy of acquisition channels because it is simple, and usually rather effective. This model can become complicated by things like remarketing and more diverse marketing channel portfolios. But, hopefully, this report will, at the very least get you thinking about the complexity of multichannel advertising interactions and spark a discussion about what is the right approach for your company in modelling and tracking conversions.
As much as I love diving into data and exploring new features of GA, I am always weary of tempering my enthusiasm to extract findings with solid statistics, common sense and other analytics tools (where possible). Having noted this, it is very easy to become intimidated with analytics tools and software. Which is why, often there is no substitute for simply getting your hands dirty with what tools like GA have to offer. I hope this post helps to make some of the less accessible features of GA more manageable.
What’s a great product without great service?
August 7, 2012
It’s rare that a great product would win without the support of great service, so why then are the two so quick to grow apart?
The problem, I think, is success.
Scale and its associated economies support the development of a product but rarely do they support the development of the accompanying services. There are exceptions, of course, but not many; McDonalds is one, Apple another, Sadly I’m at a loss to think of a third.
It’s worth noting of course that Apple and McDonalds are are notable exceptions to the rule, albeit for vastly different reasons. McDonalds is a very, very large franchisor, and the “product” being sold does not come in a bun, the product is the Franchise. The Franchisee buys a proven recipe for fast food and efficient service. If McDonalds didn’t have control of the entire McD’s ecosystem through a tightly wound Franchise Agreement it would be impossible to maintain its brand of high-margin consistency that allows it to continue selling to franchisees at a premium.
Apple, on the other hand, is all about brand, and that brand extends through the product supply chain to the lifestyle, which includes the process of purchasing and ownership. Prior to Apple seizing control of its supply chain the service part was delivered by 3rd parties, now it is a powerful pillar in the house of Apple.
When a typical business grows, investment is poured into improvements in the production process, reducing the cost of goods and improving margins. The same can’t be said for service, great service at scale is costly, and returns to scale are minimal. In addition, training great service to new staff takes time, so the gap between product uptake and service delivery can grow rapidly if the growth was sudden and unforseen.
Improved margins are seductive, investments in service are not, and so the conflict begins.
As a business owner, you can get ahead. At a minimum there should be a record kept of a consistent service KPI such as Net Promoter that can serve as an early indicator of customer sentiment taking a turn for the worst. Where growth is happening at the expense of service the growth should be arrested until the issue is identified and resolved, hard as it may be to do so.
Positioning your entire business as a product is smart, have a McDonalds-like operating manual with detailed descriptions of service procedures and quality standards, or emulate Apple by asserting service as a key part of your brand, then live it with every touch-point!
To favour growth at the expense of service is a short term win, the positive sentiment that propelled growth in the first place is already evaporating, allow that to continue and chances are your brand will never recover.
Is your business suffering a Group Buying Hangover?
August 1, 2012
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Group Buying helped good businesses access revenues that had previously eluded them, improving utilisation, buoying their P&L and promising a sustainable new revenue stream from this exciting new consumer channel.
But now that the sector has waned and desperate Group Buying businesses have become fixated on stack ‘em high sell ‘em low product chuff – those once buoyed businesses are left feeling a little queasy.
Just one of the problems they face stems from prepayment, one of the headline benefits touted by most group buying companies (including me).
Although quick access to cash is manna from heaven for most business owners, prepayment has left behind a tequila-like side effect.
The problem is this. A top priority for all online businesses should be around Funnel Conversion, i.e. the ability for the business to convert leads into dollars, however in a world of prepayment, conversion becomes somewhat unimportant. In fact, if breakage (unused vouchers) is a profitable exercise for the merchant, higher conversion may actually mean lower short term profits.
Now that Group Buying is providing an ever declining proportion of revenues, many online businesses that signed up to breakeven or lossmaking campaigns in order to grow their subscriber base, now find they are unable to monetize that base due to poor site performance, especially in the area of conversion.
Faced with lower than expected revenues, these companies often head back to Group Buying to find that like-for-like offers work only half as well as they did before. Now the business is in a pickle, the drug is half as effective, risk its brand by doing twice as much? Surely you know your drug dealer is never your friend?
The key is to get the fundamentals of your businesses working right before looking to Group Buying or any type of Marketing for that matter. Ensure that the purchase funnel is converting 60% or more of the people who hit “Buy Now”, that your Subscription Channel is effective, and your email strategy is delivering appropriate Open, Click and Purchase rates.
When cloaked by the shiny veneer of Group Buying dollars your site performance will look a whole lot better than it really is. Time to sober up, shake off that hangover and see if your bedfellow looks as good as you remember.
Related articles
- Laurel Papworth: Where to next for group buying? (brw.com.au)
The seismic shift toward Online
July 4, 2012
I met with Business Spectator’s Alan Kohler and recorded an interview for Qantas inflight Radio in June. I was flattered to be invited to the show, the interview is now available below.
A link to the file is here.
Alan was particularly interested in a topic I have spoken about on a number of occasions, the slow but steady adoption of the internet by all but the most tech-resistant and the impact that shift is having on traditional commerce.
Now that over 3/4 of the Australian population have a connection to the web, businesses of all types are finding that their typical customer is spending an increasing amount of time online and can be reached there quite cheaply for Brand building as well as ecommerce.
Two other significant factors beyond the amount of people online are – the nature of connectivity, i.e. fast connection speeds are no longer the preserve of early adopters – and that almost all internet users are willing to shop online, with only 5% of internet users showing concern about online security.
The shift towards fast access speeds has been so rapid that in 5 short years the issue of access for all has all but disappeared. Mobile internet use has also accelerated with many online businesses signalling that 10% or more of page impressions are from mobile devices and mobile transactions are catching up fast.
Where the online activities of the older demographics were once limited to banking and email, this is no longer the case. Over 20% of the discount shopping audience is 60+ suggesting that older folks enjoy the process of shopping online even if they don’t have to.
I think it’s fair to say that not being online in 2012 is akin to not having a mobile phone, at some point it looks a bit weird!
Meanwhile, as the Internet population has swelled to include your parents and most their friends, technology has evolved that enables Advertisers to single out their target customer and provide a customised offer on the fly – further extending the economic advantage of online commerce.
For the first ten years of the web the economic engine that powered its growth was display advertising (And subscription Porn but that’s another post!), publishers funded their growth by making money from page impressions – a refit of the existing TV and Magazine advertising model. In 2000 Google started selling ads in a new way – through search keywords which provided advertisers with a way to talk to customers based on what they were looking for, rather than what they had already found.
Now the model is shifting again, more people and more data means that publishers are now making an increasing portion of revenues from who you are, rather than just your location on the web. publishers can connect advertisers with their target Market with reasonable precision using browser tags. No longer are marketers confused about which half of their dollars are wasted, in the new world of the Internet, they spend half as much and almost none is wasted.
The rapid shift towards a more personal web has occurred in the past couple of years and the pace of change is accelerating. It was only 5 years ago that Facebook emerged as a public service, touching a Billion or so lives since.
The amount of change we see in the next 5 years will be as dramatic as the last 5, with an even greater emphasis on devices, mobility, personalisation and online commerce, bring on 2017!
Does Microsoft’s Surface announcement mean the Courier is still possible?
June 19, 2012
— 1 Comment
As a design study the Courier was a tremendous success back in 2010, but as a PR exercise it was something far more sinister.
I heard when I was visiting Microsoft HQ in Redmond that Microsoft had made the Courier concept public to demonstrate what could be built on the Windows platform and had provided the build specs to at least one OEM, however the Courier quickly turned from an innovative design exercise into an unfortunate metaphor for their inability to compete with Apple.
It made no real sense to me at the time that Microsoft was actually going to build the Courier, however with the announcement of their Surface Tablet, I clearly don’t know shit.
Regardless that Microsoft obsesses about competing with Apple (And Google for that matter) the fact is Microsoft doesn’t compete head to head with Apple, their OEM partners do, such as DELL, Sony and HP. Those same OEMs are are on the Android bandwaggon as a fashonable and low cost alternative to Windows. Faced with flagging consumer relevance and an uncomfortable 3-way with Google, Microsoft clearly had two options, try to woo the channel and win them back from Google, or go head to head, Google style!
Google led the way in Partner-shafting when they formed the Open Handset Alliance to build Andriod powered phones whilst building its own Nexus device to compete with it! But then, Google always seem to struggle with the notion of boundaries. Microsoft, on the other hand, seemed to take a Partner-first approach.
Microsoft is in a sticky spot for sure. I mentioned before that Microsoft could hold its breath for a long time, meaning that it could afford to make short term sacrifices for the long term good, but those old lungs are not what they used to be, which, combined with an astonishing run for Apple, has clearly led to new thinking in Redmond. I can’t see how this is winning.
Study finds Facebook Fan Pages are a poor source of consumer engagement
June 13, 2012
The Ehrenberg-Bass Institute for Marketing Science released a study showing the relationship between Facebook fan pages brand engagement – concluding that Brands should lower their expectations of Fan Page performance.
Facebook Fan Pages include Facebook’s own PTAT (People Talking About This) metric, and that metric was the basis for the study. PTAT as stated is somewhat misleading though given the act of Liking a Brand is included in PTAT.
Once the researchers had removed the impact of the initial Like, they found that only 0.5% of Fans actually engaged with the brand via Facebook on a weekly basis*
In isolation, this seems like an extraordinarily low number, and should cause the majority of Brands investing time and money growing their fan base to rethink. In fact, only 10% of the brands sampled reached 1% engagement, and this was consistent across all categories and included a number of “Passion Brands”.
The engagement value of 0.5% weekly engagement should be used as the baseline when evaluating the return of investment in building a Facebook Fan page, chances are the size of a Brand’s Facebook Fan Page does more for the ego of the Brand stewards than it does for the bottom line!
*Data reproduced from Admap with permission.
Small Businesses beware, Google is poaching your customers!
June 8, 2012
— 6 Comments
While pondering the implications of the Contextual Ads in Gmail I put myself in the position of an unsuspecting small business owner, and was amazed to learn just how focused Google was on introducing my customers to my competitors!
The Google ad platform does an incredible job of identifying an email’s context and finding the highest paying, or most clickable ad to match that context. In a setting like Gmail that means digitally reading the email from the Subject Line to the Body of the email to the Sender’s Signature, using that collected data to identify the email’s context and then finding the most suitable set of advertisers to display when the Gmail-using recipient is reading the email.
Here’s an example, check out the ads on the right (Also note that clicking on “More about…” will open a page with multiple Landscaping ads):
Gmail’s advertising engine is devastatingly effective here having served ads that are not only relevant to the subject of the email, but also to the geography of the recipient, making the ads a very potent way for those advertisers to “poach” the sender’s customers. But where does that leave poor Grassy Bass Landscaping? By sending a quote to a potential customer I have inadvertently surfaced a number of competitors, hardly seems fair! One way to minimise the impact of Google’s poaching prowess is to avoid building context through the subject line or body of the email, right now it doesn’t look like attachments are read so use the attachment to describe the work instead. That’s not ideal, but it may just avoid Gmail surfacing your most aggressive competitors right next to your mail.
Any small business that thinks Gmail is just another harmless, free webmail product should think again, it’s your competitors’ dream ticket to finding your customers after you have done all the hard work, adopt it as your own email provider at your peril.
UPDATE : In the Virtual Revolution, broadcast in the UK on the 15th February, the presenter raises these same concerns about Google’s approach to Privacy and Advertising Everywhere, some interesting perspectives here – Gmail is discussed at 1:44sec. [Note that this link will be broken if this video has not been authorised by the publisher]
Australian Retailers are frozen in time, what they need is Online support.
May 24, 2012
— 2 Comments
In a previous post I said that "Pricing alone will never lead to a long term strategic advantage, only service quality and inspiration can" – something similar to a quote today from CEO of Masters, the challenger hardware-retail brand from Woolworths.
Don Stallings commented: "more than half the people shopping for whitegoods at Masters hardware stores use smartphones to check competitors’ prices… to get those sales over the line in a traditional store, customer service and the personal touch had to be of the highest quality. [at] Masters [we have] spent as much on training staff to deliver customer service as on the rest of the business"
Meanwhile, across town at Myer, Bernie Brooks laments that "[the] customers’ propensity to purchase is not improving" so they are "pinning hopes on their midyear stocktake sale"
Sadly, I suspect a slash and burn approach will not be the answer long term, unless Myer fancy jumping onto JC Penny’s EveryDayLowPrices strategy? (The downside of which I blogged about earlier).
Myer + Myer One Loyalty club have the bones of a very defensible Retail strategy when Multichannel is fully embraced; where Lifetime Value, upsell and cross sell are key and are driven by what is already known about each customer segment, customer cohort or even, individual customer. But each retail touchpoint has to be aligned to the vision of "lifetime customer value is king", something that may be easier to achieve when the business is built from the ground up with no technical or cultural legacy, sadly Mr Brooks doesn’t have that luxury.
"Discount heavily and I will love you right now, inspire me with insights and ideas and great service and I will love you for ever"
Profiting from the fundamentals of Group Buying: Part 5… Instant gratification
May 23, 2012
Group Buying is a compelling online purchase for the same reason that Music and Porn have been eCommerce stalwarts since the dawn of the Internet, because the purchase is instantly satisfying.
Unlike typical Online shopping, making a purchase through a Group Buying site means you are rewarded instantly with a Voucher or Coupon. Suddenly the customer has something real; the voucher guarantees access to the product or service and locks in the discount they have been savvy enough to secure.
Online discount shopping usually means trading off the available discount for the wait the customer will have to endure, versus paying a bit more to pick it up in store – in some categories customers are willing to pay significantly more if that means getting instant access, think Apple.
But more can be done to close the gap and make online shopping more satisfying. A voucher is a great start, something glossy and celebratory that serves to remind them how savvy they are. Game mechanics also have a part to play, with regular email updates documenting the journey of their purchase, building anticipation and a sense of fun. Lastly, why not allow pickup? If your business has physical infrastructure where the voucher can be exchanged, this is a tremendous opportunity to cross-sell (like a physical Thank You Page!).
yabbit.com–a feedback platform for business owners who care about great service…
May 22, 2012
Things don’t always go well, no matter how passionate you are as a business owner. What’s important, is what you do next.
yabbit will help you to connect with your customers, on premise and off. Providing a platform to gather feedback about your business, and giving you a critical opportunity to respond when things have not gone well – before your highly connected and passionate customers turn to social media and their favourite ratings and reviews site to share their disappointment.
At no cost to you or your business, yabbit will provide an easy to use feedback platform that will encourage your customers to “tell it like it is” – simple, discreet feedback, straight to you, the one who cares the most, the business owner.
yabbit is looking for 100 passionate business-owners to get involved in a pre-launch Beta, to provide us with invaluable feedback that will help us shape this business into a game-changer for your business.
Go to www.yabbit.com to register.
