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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.
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!).
It is common for consumers to react negatively to a deep discount where they don’t understand the reason for the sale. Often customers will assume there is a hidden catch, something they can’t see that others can, reasons they will look foolish and regret the purchase – in each case they will walk away from a discount rather than risk being exposed… to prevent these barriers emerging is it critical that consumers are provided with a sound rationale for the sale. This is a fundamental principle behind Group Buying, providing sound explanations for the discount, i.e. group discount, time limited offer, discount in exchange for promotion etc.
Consumers are a savvy bunch, without a clear explanation for the discount, the customer will assume there is a catch and walk away.
The second mechanism employed in Group Buying to illicit maximum discounts from Merchants (and ensure impulse behaviour from consumers) is by making the offer “Fleeting”, i.e. limiting the time an offer is available in order to drive customer action through our basic fear of missing out!
“Fleeting” is a critical function of Group Buying and Flash Sale sites and is incredibly effective at driving action. Fleeting is also used to great effect in the real world through “stock take sale”, “this weekend only” and “closing down sale”.
By time-limiting offers and proving game mechanics to generate excitement and drive action a lift in sales is guaranteed.
Much like the other tactics covered here, though, the use of a timer has to be genuine, like the Rug Store with its perpetual “closing down” sale, savvy consumers will quickly see through a fake deadline.
Group Buying works for a reason, regardless of the service woes plaguing the industry (which have been driven by a combination of greed and inexperience, not the model itself) the principles behind Group Buying are sound. Over the next few posts, I will explain the key mechanics and position them in a series of non-Group Buying contexts.
This is the first of six posts I will write that describe those mechanics.
FOCUS ATTENTION ON ONLY A FEW OFFERS
Limiting promotional efforts to only 1 – 3 featured offers enhances the perception of those offers and likely uptake, minimising “noise” around those offers will further spotlight the chosen few. Featuring multiple offers on the other hand dilutes the “WOW” and runs the risk of Paradox of Choice effects.
Most email platforms will support controlled tests, such as sending one control group an EDM with multiple offers, one with the three best offers and one EDM with only a single “hero” offer.
Assuming the control conditions are sound, the likely outcome is that the Hero and “three best offers” EDMs will each provide a click through rate that is greater than the “multiple offers” EDM even though the multiple offers email included the featured offers from the other tests.
The average age of an Australian internet user is growing fast; catering for this shift is increasingly important.
According to the Australian Bureau of Statistics, 79% of Australians over the age of 15 are online – meaning adoption is way past the Early Adopter phase (According to the Diffusion of Innovations curve) and well into the Late Majority – at 84% adoption only the Laggards are yet to join!
In terms of age profile, 96% of 18 – 24 Year Olds are already online, so new audience growth will mostly come from older age segments in the coming years. In the past two years, 55 – 64’s joined the web at almost twice the rate of their younger counterparts.
This new older audience presents an interesting opportunity, by nature they are more considered and loyal (and/or resistant to change), and have an appealing cash pile at their disposal.
Winning the over 55’s is hard though, often they rely on personal recommendations and will Trial only after careful consideration, but they are worth the effort.
So here are six tips for appealing to an older user:
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.