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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. The 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.
Some businesses will never get it, never.
I couldn’t be more passionate about great service, my adult life has been peppered by the pursuit of the perfect service experience, delivering it or it being delivered. So far I’ve found that it’s massively hard to give, and sadly rare to get.
A key milestone in that pursuit happened two weeks ago when Yabbit.com launched, Yabbit is the new feedback platform in partnership with American Express [Amex have made it available free and exclusive for American Express merchants in Australia]. Each day the Yabbit team are talking with businesses about the chance to hear from their customers, directly and one to one-ly about their service experience, the good and the bad, the great and the sad. Awesome, sounds good, they say. But they don’t always mean it. Like, really mean it.
And it struck me.
It’s not about service, it’s about love.
What’s love got to do with it?
Love is – Doing things you don’t have to do, but want to do, just because. Smiling because you can’t help it. A spring in your step. Caring about everything you do. Keeping things fresh and new. Doing what you say you will do. Surprising and delighting. Being spontaneous, early, eager, attentive, gracious, careful, thoughtful, even thankful. Just like great service.
Service isn’t about being fast or efficient, it’s about love. Giving your customers a little slice of you, showing how much they mean to you, and finding a team that will behave the same way, not because they are following a blueprint but because they also love to love. Did you show your customers any love today?
Some businesses will just never get it. Never.
On a recent trip I discovered that Virgin Atlantic aircrew behave like they’re between parties, parties I’m not on the guest list for. To be fair, old dags like me with four kids in tow are made to feel about as welcome as a recently discovered STI.
After three painful flights and a comedy of errors it struck me though, maybe all that cooler than thou jet-set party people bullshit is actually as God himself intended (Sir Richard that is).
My theory emerged when I spotted a peculiar magazine selection in the rack. Wallpaper and Style Street were propped at a jaunty angle, albeit they remained so for the entire 14 hour flight. Hardly surprising they didn’t find a reader I thought given the Virgin customers around me were less likely to want to read them than the Virgin staff. Yet those magazines were carefully positioned to enhance the Virgin Atlantic lifestyle and most likely described in nauseating marketing speak in some operations manual back at Party Town, aka Virgin HQ. I suspect somewhere in the depths of the Virgin Marketing Strategy is a view that there are enough <insert B-list celebrity here> wannabees to build them an airline that makes them feel like they’ve cracked the code of cool.
But here’s the rub. The party’s exclusive and customers are there to fill out the numbers. Virgin have recruited staff who look like the customers they wish they had, i.e. the low disposable income high spending b-grade party-set, and have missed the unfortunate side effect, those people aren’t interested in much beyond themselves – and it shows. The smallest request is met with a gnash of veneers, and eyebrows are ever so slightly raised (I think) at the suggestion of a problem.
What I don’t get, though, it why Virgin Atlantic ads suggest they are something that they are not? Am I to believe from the TVC below that the airline who suggested you may just get into the Mile High Club on one of their planes is trying to be something different? Because it isn’t obvious yet. And until the service rhetoric has become service reality I’d dial back the messaging slightly.
All in all I’d say the biggest disservice Virgin Atlantic has done, to me and to other Virgin virgins, is to set the expectation too high. They have allowed their marketing message to get ahead of the organisation’s ability to execute which has led to a jarring customer experience. I have no intention of flying Virgin Atlantic again, or any of the Virgin branded airlines for that matter. Qantas just invited me to a BBQ.
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.
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.
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.
American Express recently published a report into the impact of Service on Customers, focusing on how the new socially connected consumer behaves versus their less connected counterparts, the findings are startling.
One data point out of the report that should provide cause for concern is that an unhappy Social Media Savvy customer will voice their complaint to 53 of their friends, often through Facebook and other channels.
Amex also report that more than 80% of Online Savvy consumers say they’ve bailed on a purchase because of a poor service experience, compared to 55% overall.
It isn’t all bad news though, customers reported that they would be willing to pay an average of up to 13% more for products and services if the business provided excellent customer service – that’s a healthy return for showing you care.
The report concludes with tips for better service:
1) Great service starts with the people who deliver it – Motivate and enable your employees to go above and beyond for your customers.
2) It’s all about relationships – Good service comes down to forming relationships with customers. Look at customer service as an opportunity to deepen your connection with your customers, not just as a transaction to be completed.
3) Make it easy for customers to do business with you – Listen to your customers and use their feedback to improve your product and service.
4) Exceeding expectations is easier than you think – Customers aren’t unreasonable and don’t except every problem to be solved instantly. They simply want to be treated like individuals, know that you genuinely care about their issue, and are working hard to address it.
5) Listen to your employees – They are closest to your customers and understand the most about what customers want and need. Don’t miss out on their incredibly valuable insight.
6) Seek opportunities to make an impression – Understand and act on the notion that every customer interaction is an opportunity to create a connection and to drive customer loyalty and engagement
What’s clear is that the service expectation is increasing and consumers expect more than ever to be able engage with businesses directly or via social media when they have a gripe – sadly though, the number of businesses that can engage in this way is relatively flat.
The full report including a nice Infographic is here
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"
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"
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!).
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.
Gartner describes the adoption of Technology (where there has been clear market Hype) using the Hype Cycle diagram. The same diagram can be usefully adapted to describe the current challenges facing the Group Buying industry given it was built on a platform of extraordinary hype and has since suffered its own decline. Also, much like how the Technology Hype Cycle describes the organic adoption of the technology over time once the Hype has dissipated and the useful nature of the innovation emerges, Collective Buying does add real value to Merchants and Consumers, and beyond the hype and the noise of Group Buying, that value add still exists – which then begs an interesting question, what is required to ensure an enduring future for Group Buying?
The key phases of the Gartner Hype Cycle are on the left of the table, an equivalent stage in the Group Buying evolution is on the right:
I believe that to get through the Trough of Disillusionment and onto the Slope of Enlightenment, the players in the industry need to follow the 4 tenets of Effective Group Buying:
Dan Sullivan’s 2005 book, How the Best get Better, contained some simple tips around improving your referability – I thought it would be useful to repeat here.
Four simple rules:
What struck me most about this framework is the absolution simplicity of its guidelines, and the no-brainer nature of the points.
So if the rules of the game are this simple, why publish them here? Tragically these behaviours are atypical – especially rules 1 and 4!
I spoke at a great business breakfast recently about the impact of social on commerce in Australia and was struck by how traditional businesses can find sound reasoning not to engage in social conversation.
The key objection I heard was around Risk, which is interesting given how big business currently thinks about the notion of Risk.
Risk Management is defined as the identification, assessment and prioritization of risks, coupled with coordinated and economical application of resources to minimize, monitor and control the probability and/or impact of unfortunate events.
Commercial exposure from unfortunate events is inevitable, and in a world of Twitter and Facebook the pace of at which that Risk manifests is astonishing. The viral nature of Social therefore undermines the traditional view of Risk mitigation and damage control – so the first thing big business has to do is acknowledge that the world has already changed, they just haven’t caught up yet.
We know that people have an inherent desire to share, regardless of the sentiment. If a business has no means to monitor/control the conversation, that’s where the risk exists. And establishing a social platforms early is the only answer.
If your customers are worried, give them a platform to share their concerns, make them feel like they are heard, while you monitor and moderate the conversation. Take some control of the discussion. If they are angry, frustrated or even delighted, give them a platform to engage and share.
There is no reason why the conversation platform you provide can’t operate with strict rules of engagement and therefore the existing risk framework. Sure there are NEW RISKS attached to social engagement, but they exist already, start mitigating these new risks before the unfortunate event you fear most.
Five key truths about Social engagement:
•Your customers will find very effective ways to broadcast “feedback” about you online whether you like it or not
•Monitor and moderate the conversation, but never astrosurf
•Social brings New Risk to business, get used to it!
•It’s prudent to provide a platform BEFORE the event you fear the most happens
The issue I describe here around the inevitability of social engagement is told well by the history of a UK Cable company NTL (now Virgin) and its relationship with a consumer lobby group nthellworld in 2000, worth a read.
Pricing alone will never lead to a long term strategic advantage, only service quality and inspiration can.
I’m saddened by today’s retail landscape in Australia. Shop windows shout lowest price, when what I really need are inspirational gift ideas, good sales advice and the comfort that my dicky gift choices can be returned when they turn out to be just that, dicky!
Pricing is a consideration for sure but only in so much as the chosen item is inside or outside my budget, at which point the role of a retail assistant is to upsell upsell upsell!
At this time of year, the vast majority of retail spending is focused on gift buying. But in this world of consumerism on steroids, friends and family are increasingly hard to buy for – combine this with the paradox of choice we feel and no wonder the shelves remain stacked and the gifts received remain, er, dicky. Pricing, though, is rarely the issue.
The solution is probably right in front of me, a personal shopper! But who knows how to use one of those? In the world of online, a Personal Shopper is only a few clicks away. Punch in my budget, a broad description of the loved ones I’m buying for and bam, inspiration is at hand. Maybe my better-half gets an email with options to choose from that will better narrow the items presented back to the buyer, Buble or Gaga, Block colours or print, ebook or paper? Now I have items to choose from that make me look like the hero I am, and I can pick up in store to boot (time for that all-important upsell and gift wrapping service!)
Clearly these are difficult times, and Christmas is an expensive business, so the price conscious shopper with a gift in mind is looking for the best price available. But I don’t believe that is the whole story. By focusing on lowest price retail I worry that our biggest Branded retailers are on a race to zero, yet they’ll remain unable to compete with online – this is a lose lose for all. Online is the key to harvesting Signals for that personal experience, it’s the opportunity for Big Retail to take “personal retailing” to the next level; training consumers to think Online is all about Lowest price and best discount is to underwrite the death of Big Retail.
“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”
Two stories in today’s SMH caught my eye, one announcing that Australia’s Retail legend Myer was launching it’s Boxing day sale today to online customers, and the other covering the Neiman Marcus Christmas catalogue (which has been available since 1926 and growing from strength to strength each year!) interesting contrast between growing retail and contracting retail.
What’s wrong with the picture below?
The clue is in the row of heads above the shelves of candy.
This discount retailer has positioned hundreds of impulse items along two sides of this isle designed to tempt shoppers while they queue for a checkout.
By my reckoning, the shopper you can see at the top of the picture has a 15 minute wait ahead of them, providing lots of opportunity for the retailer to maximise Basket size.
The longer the queue, the greater the likelihood folks will be upsold. This retailer has knowingly implemented a strategy to reward themselves for poor service. That is broken.
Regardless of their EDLP strategy, poor service shouldn’t be part of it. Institutionalising crappy service is outrageous, deriving benefit has to be the shortest of short term views.
A Targeted Voucher Program (like Group Buying) does more than simply increase brand awareness and consumer demand, it smooths demand to make best use of the available Supply, combine this will upsell opportunities and future loyalty and the returns will continue to flow well beyond the life of the promotion.
Running an above the line Brand promotion will make the target business top of mind for a new set of potential customers, hopefully creating lots of new Demand albeit the profile of that demand is likely to look a lot like existing demand, just more of it! For restaurants, that means what little availability there is on a Friday or Saturday will go first, and once they are gone, customers will be unlikely to settle for a midweek or Sunday slot instead, squandering the marketing investment and the opportunity to introduce your business to a new audience.
A Targeted Voucher Program is fundamentally different. Why? Typically, when a someone calls a restaurant to book a table they are planning an evening out, they have an evening in mind and are looking for a suitable restaurant to meet their needs, if their preferred night is full, they’ll call the next restaurant on their list; however when they call with a Voucher, they already have a restaurant in mind, they just need to find a suitable evening to redeem it, they have already made a commitment to your business after all (and paid upfront too!)! Voucher holders are willing to book well in advance to redeem their voucher, something an average patron is unlikely to do and upselling your Voucher holder to a weeknight at this point is the first step toward smoothing Demand.
At Cudo, we hear often from business owners that occupancy is significantly improved on Thursdays and Sundays as a direct result of running a promotion on cudo.com.au. The more popular the offer, the greater the impact is on weekday trade, yielding a significant gain in efficiency for the business overall.
Making the most of this type of promotion is the role of the featured business, they have to embrace the promotion and the new interest generated, train their staff to upsell and make the most of customer loyalty.
But irrespective of how small the gap is between supply and demand, combine a Targeted Voucher Program with a booking system and you have a very powerful way to improve short to medium term occupancy – make the most of the Program and it will have a lasting impact on your business.
Group Buying is all about hard bargains on great experiences, the web sites (and there are a few) trade exposure to a large audience for a discounted offer and a share of the revenue gathered. Check out most of these sites and you’ll see they are typically focused on the discounts they can negotiate on behalf of their members, crowd-power put to work! These same companies often regale in the millions of dollars they have “saved” on their Members’ behalf, reflecting the margin businesses have given up in an effort to attract a new audience.
But businesses tell us at Cudo that they are being pushed too far by aggressive Group Buying reps, and that they are disappointed by the quality of customers they attract, often finding they are seasoned voucher buyers rather than reflecting their typical audience.
And regardless of their intentions prior to running an offer, a business that has been pushed to its limits will have no choice but to minimise its losses during the process, especially when faced with a lower value customer who is less likely to come back once the vouchers is spent.
Minimising losses means one of two things to these businesses, delivering the service more cheaply to preserve some margin, or hoping the Voucher buyer never shows at all, also known as Breakage!
In fact, some Competitors’ commercial agreements even include a clause intended to maximise the value of Breakage, where a higher percentage of unredeemed vouchers is good for the Group Buying business.
But this is hurting the industry as a whole.
The Group Buying company typically controls contact with the end user, meaning they alone can communicate with the purchasers and encourage them to redeem their unused vouchers, however they are not incentivised to do so, the featured business should be focused on maximising the number of new customers they touch but may be hurting so badly after loosing the battle to preserve some margin that they hope no one ever shows! That said, they are not in a position to talk to voucher buyers even if they wanted to!
Group Buying cannot be about discounts alone, it has to be about incentivising customers to try new things. This is a sampling exercise, not a fire sale. Screwing a business in the name of growing your Member base is counter intuitive, because over time the best of the businesses we want to work with will want nothing to do with the Group Buying category as a whole, hurting the more reputable business out there.
And Consumers know that owning unredeemed vouchers is a lot like having a wardrobe full of clothes with Sale tags on, at some point someone will say “enough” and the buying will grind to a halt no matter how good the discounts are. We are focused on Experiences at Cudo, offered at a no-brainer discount, and we get that the future of the industry is hinged on our customers actually participating in those experiences, not just for the growth of the businesses we feature, but for the future of Cudo and for the industry as a whole. We will continue to focus on redemption at Cudo, and never encourage Breakage.