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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.
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
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.