The Olympics started. The advertising games started even earlier. Criticism has long been blaming the International Olympic Committee for making the Games over commercial. Fortunately, the true Olympic spirits and sportsmanship are still sparkling throughout every stadium. Even more encouraging, advertising campaigns around Olympics are finding their way to showcase the spirits in their own products, services and brands.
I'll give my full compliments to P&G without reservation. The P&G commercials feature moms supporting their children training year after year for their best. Very touching, very warm, and a very smart movement that aligns perfectly with its positioning. If there is one norm in sports sponsorship, it's that the advertisers always target male audience. It needs some courage to use Olympics as a channel to talk to moms. Apparently, P&G's courage is backed by serious market research and deepest understanding of moms. Moms are behind each and every superstar on the Olympic arena, and moms are behind each and every superstar in their hearts. The P&G tagline "official sponsor of moms" really wins moms over. More than that, sponsoring moms of Olympians and moms of everyone equally is what Olympics mean to be.
Also talking to moms, and dads as well this time, is Petro Canada. Surprisingly similar creative as P&G's. However, there is less of a connection between the message and the business. P&G has dozens of products that have been partnered with and trusted by moms for years, but Petro Canada does not have that consistancy in its brand image. RBC's Arby mascot also did a great job in being cute and waving for the Canadian Olympians, but again, from a customer's perspective, what's in it for me?
Some official sponsors are making their efforts to connect their brands with Olympics. Coke is getting to the fun part of the Olympics. Acer is exploring beyond limits through both sports and computing. Panasonic is committed to bringing the games to you on a large screen so you would not miss a single detail that the athletes have trained years for.
Unlike the sports games where you have to qualify to compete, in the advertising games, there is no lack of free riders. The shining one this time is Nike. In its series of 17 second Youtube videos, Nike shot average athletes playing all kinds of sports in places called London around the world except London UK. From London Ontario to London Nigeria, on London Ave and in London gym, boys and girls are having their own enjoyment in the sports of their favorite, and are driving towards their own greatness. The 'find greatness' campaign is so truly bearing the real Olympic flag and cheering for the spirit that Nike has positioning itself for.
Nike's smartness may bring the debate up again - do you need to be an official sponsor to have a wonderful campaign? In the days when sky high costs lead to questions around marketing ROI after almost every major sports event, Nike makes a role model of taking another way to the podium.
Monday, July 30, 2012
Wednesday, July 18, 2012
4P for Facebook Banking
After online banking, we got mobile banking. And now, Citibank is hinting it may start a Facebook app for banking. Lots of discussions have been going on, around the technical issues such as security, AML, privacy. What has not been asked is a fundamental question: why does a customer want to bank within Facebook?
At this moment when I start writing this post, I don't have a pre-set answer in my mind. What I'm going to do is to take a textbook approach and do a marketing 4P analysis, trying to understand WIIFM (what's in it for me) from a customer's perspective. Let's assume all the technical problems are resolved and the cost to build the app is not a concern.
Product
At this moment when I start writing this post, I don't have a pre-set answer in my mind. What I'm going to do is to take a textbook approach and do a marketing 4P analysis, trying to understand WIIFM (what's in it for me) from a customer's perspective. Let's assume all the technical problems are resolved and the cost to build the app is not a concern.
Product
- Is Facebook banking a cool product? Definitely. Maybe. Yeah, but... The answer depends on who you ask the question to.
- Besides feeling cool or pretending to be cool, what are some functions and features of Facebook banking? I have a Facebook friend whom I have never met and I owe him money because of a reason only he and I know. I can't do an money email transfer because I don't want to bother asking for his email. Great there is Facebook Money Transfer or FMT. Sounds too wierd a need? Any ways, there is one need for it.
- What else am I going to use Facebook banking for? Check account balance? Who cares about account balance? I'm on Facebook to hang out with my buddies. Appreciate the pretty pie chart my dear bank draws for me in the Personal Finance Management section just to remind me how much I have overspent again? The only good it does is to get me off Facebook to use my time smarter so that I could balance my budget next month.
- Is my bank giving me a discount on my credit card annual fee, a better mortgage rate or a bonus reward on the investment in my registered retirement plan just because I use Facebook banking app? Taking transactional behaviors to lower cost channels makes sense for banks, but is Facebook banking engaging a lower cost than is online or mobile banking? Or banks give incentive to attract Facebook bankers because they are higher value clients to banks?
- Banks watch my behavior on Facebook with their social media listening software and then feed what I post on my Facebook walls into a mathematical model that I will never understand just to guess what kind of person I am. And then they tailor a banking offer to me based on their guess. Pretend that I don't care my Facebook posts being watched and analyzed. Pretend that I behave the same way on Facebook as I would in the real world. Even though, why would the bank have to send that offer to me through Facebook banking app but not through one of their multiple channels that already exist?
- They said Facebook is where people give and seek information? Oh yeah you got it. But what social media means is that I now do not have to listen to what my bank tells me about its products and services. I am looking for information on Facebook from my buddies and from the folks who look like me. I don't even want to go to a bank's official Facebook page to hear they tell me how great they are. What makes them think I want to log into a Facebook banking app to get the message they push to me?
- ATM was a great innovation because it added convenience to banking. Telephone banking was a great innovation because it added convenience to banking. Online banking was a great innovation because convenience became no longer complete unless I can get it online. Mobile banking was a great innovation because convenience was brought into a new time and space dimension. Every single channel innovation in the banking history added a new piece of convenience to the banking experience. What is that piece in Facebook banking? What is the new level of convenience that online banking or mobile banking does not have but Facebook banking is going to bring to customers?
Monday, March 5, 2012
How could Loblaw potentially fail or succeed to get ethnic customers?
Loblaw takes Target as a potential competitor, at least as hinted by its president in a recent interview with analysts. Yes it is true competition in the retail space gets tougher, but I still can't picture Target and Loblaw fight side by side.
In the same interview, Loblaw talked about getting new Canadians as a strategic priority for the long term. It sounds good, but there are a few things they need to watch in the execution.
First of all, offering ethnic food is not the same as getting ethnic customers. The T&T acquisition a couple of years back did add some ethnic flavor to Loblaw's shelf. However, T&T itself is becoming more of a destination for the non-Asians to shop for Asian fares than a grocer of choice for Chinese Canadians, particularly when you look at the shopper mix at T&T's downtown Toronto and newest Yonge & 16th locations. It is fair if Loblaw means to offer more diverse flavors to their mainstream customer base. However, if their goal is to get more ethnic customers, they need to think about their execution strategy again.
Second, when you talk about competing for ethnic customers, you can not limit your sights to the large national chains. I won't hesitate to bet that all the mainstream grocery stores will cumulatively lose market share to the fast growing ethnic food stores, if their change stops at comparing the ethnic food offerings in their stores only with their traditional competition. This took me back to an irrelevant research I looked at a while ago. Between 2000 and 2006, all the Canadian banks together gave up market share in the small business lending sector, especially lending to small agricutural businesses, to the non-banking finance companies and international banks, by a significant percentage, partially due to oversight. Echoing to that point, a 2010 industry report from a CIBC World Markets analyst revealed that the ethnic grocery stores have been imposing a meaningful impact to the mainstream grocery stores in geographies like Greater Toronto Area. The new competitive landscape makes direct competition against ethnic grocers inevitable for the mainstream chains.
Third, how would Loblaw fight against the authentic ethnic grocery stores such as Foody Mart? My answer is capital. Needless to say, the ethnic stores have competitive advantage in customer insights (even though Loblaw has T&T intelligence) and cost (think about the overhead and labour costs for a freelance photographer vs a full blown studio). Loblaw's strength is that it could afford opening more stores more quickly. Since I moved from the Markham/Scarborough border to Thornhill, I keep going back to that area for grocery shopping, because Foody Mart, Oriental and the other Chinese grocery stores have larger and better product selections at more appealing prices, comparing to T&T. However, T&T still gets a decent share of my wallet, only because its new Richmond Hill store is close to my home.
In the same interview, Loblaw talked about getting new Canadians as a strategic priority for the long term. It sounds good, but there are a few things they need to watch in the execution.
First of all, offering ethnic food is not the same as getting ethnic customers. The T&T acquisition a couple of years back did add some ethnic flavor to Loblaw's shelf. However, T&T itself is becoming more of a destination for the non-Asians to shop for Asian fares than a grocer of choice for Chinese Canadians, particularly when you look at the shopper mix at T&T's downtown Toronto and newest Yonge & 16th locations. It is fair if Loblaw means to offer more diverse flavors to their mainstream customer base. However, if their goal is to get more ethnic customers, they need to think about their execution strategy again.
Second, when you talk about competing for ethnic customers, you can not limit your sights to the large national chains. I won't hesitate to bet that all the mainstream grocery stores will cumulatively lose market share to the fast growing ethnic food stores, if their change stops at comparing the ethnic food offerings in their stores only with their traditional competition. This took me back to an irrelevant research I looked at a while ago. Between 2000 and 2006, all the Canadian banks together gave up market share in the small business lending sector, especially lending to small agricutural businesses, to the non-banking finance companies and international banks, by a significant percentage, partially due to oversight. Echoing to that point, a 2010 industry report from a CIBC World Markets analyst revealed that the ethnic grocery stores have been imposing a meaningful impact to the mainstream grocery stores in geographies like Greater Toronto Area. The new competitive landscape makes direct competition against ethnic grocers inevitable for the mainstream chains.
Third, how would Loblaw fight against the authentic ethnic grocery stores such as Foody Mart? My answer is capital. Needless to say, the ethnic stores have competitive advantage in customer insights (even though Loblaw has T&T intelligence) and cost (think about the overhead and labour costs for a freelance photographer vs a full blown studio). Loblaw's strength is that it could afford opening more stores more quickly. Since I moved from the Markham/Scarborough border to Thornhill, I keep going back to that area for grocery shopping, because Foody Mart, Oriental and the other Chinese grocery stores have larger and better product selections at more appealing prices, comparing to T&T. However, T&T still gets a decent share of my wallet, only because its new Richmond Hill store is close to my home.
Sunday, March 4, 2012
She deserves it
Finally watched "The Iron Lady" and Meryl Streep really deserves the Oscar, even though she does not really need it to prove herself after so many nominations and two previous Acadamy Awards. I have always been believing Meryl Streep is gifted and is born to be an actress. The contemporary history of movie would dim significantly without her. For so many years she has given us one suprise after another. Meryl was really shining a few years back in "Devil Wears Prada". That was a simply Hollywood cliche that had been reproduced into many versions. The only difference here was Meryl Streep. Her performance made this movie a masterpiece.
Before I watched this movie, I forecast The Iron Lady would win the Oscar for make-up. My reason was based on a word of a master artist of China from 0ver 1,300 years ago. When the emporor asked him whether it was wasier to paint a ghost or to paint a human being. He answered human being, because he could paint a ghost whatever way he liked to as nobody had seen a ghost, while on the opposite side anyone could comment on his painting of a human being as all knew what a person looked like. The other two nominations, Albert Nobbs and Harry Potter both fall under the 'painting a ghost' category, but the Iron Lady is a real person, which makes the make-up much more challenging.
The same logic applies to acting. That's why I say Meryl deserves it. Plus, she really really did a great job showing us the ex British prime minister deeply into her brain and her heart.
Before I watched this movie, I forecast The Iron Lady would win the Oscar for make-up. My reason was based on a word of a master artist of China from 0ver 1,300 years ago. When the emporor asked him whether it was wasier to paint a ghost or to paint a human being. He answered human being, because he could paint a ghost whatever way he liked to as nobody had seen a ghost, while on the opposite side anyone could comment on his painting of a human being as all knew what a person looked like. The other two nominations, Albert Nobbs and Harry Potter both fall under the 'painting a ghost' category, but the Iron Lady is a real person, which makes the make-up much more challenging.
The same logic applies to acting. That's why I say Meryl deserves it. Plus, she really really did a great job showing us the ex British prime minister deeply into her brain and her heart.
Sunday, February 26, 2012
Banking can be this sexy, .... in China
"Designed in a stylish vertical layout. Hot red or calm blue, the bright colours are to decorate every youthful heart.""Dots scatter on the card ... and the two cards make a perfect heart shape." "The red card carries a speacial fragrance and makes it a must for a charming girl."
When you read these exerpts, what do you think the product is being marketed? A lady's accessory from a trendy fashion brand? An executive membership card? It's actually a credit card.
RenRen is the Facebook equivalent of China. By end of June 2011, it had 124 million active uers, or a quarter of Chinese netizens, and the number grows by 2 million a month. Although not so clear about its revenue drivers, fairly clear is its user segment - young generation. Renamed to RenRen, meaning everyone, it started in 2005 as XiaoNei, meaning on campus, which apparently links to its focus on college students.
As young as RenRen's users is the credit card industry in China. Even though Bank of China issued the first credit card back in 1980s, the sector did not really kick start until early - mid 2000s. According to a 2009 Mickensey study, credit card has only 6% share in personal expenditure by payment method, and penetration to the population is a nominal 5%, comparing to 60% in US. On the flip side, growth is phenomenal. Between 2004 and 2008, total cards issued soared at an average annual rate of 84% and spending growth was at 63%.
Young and educated consumers form the common base for the proliferation of both social network and credit cards, which makes it logical for marketers in both sectors to partner with each other.
The credit card shown on top of the page is the "RenRen Card" issued by China Merchant Bank, which could be linked to the RenRen social network account and the reward program of which gives you RenRen points to be redeemed for VIP services in the virtual community.
For quite a few years I have observed that any business offering functionality features in China can barely make a sound profit. Two ways to stand out are either making yourself a premium brand, e.g. Pizza Hut as a luxury restaurant brand offering high end Chinese consumers a large variety of pizzas unheard of in North America at a price level that easily doubles what it charges in US, or making your business fun. Now it is quite interesting to observe the 'fun' business model has been forwarded that much to get even banks on board.
Relatively loose regulatory environment leaves so much room for marketers in China. Customers there have to be excited by businesses not every month or not even every day, but every moment they are awake. When Canadian businesses in almost every sector believe that immigrants, a lot from China, are going to be the new source of their customer base, are they really making efforts to understand and excite their new customers?
RenRen is the Facebook equivalent of China. By end of June 2011, it had 124 million active uers, or a quarter of Chinese netizens, and the number grows by 2 million a month. Although not so clear about its revenue drivers, fairly clear is its user segment - young generation. Renamed to RenRen, meaning everyone, it started in 2005 as XiaoNei, meaning on campus, which apparently links to its focus on college students.
As young as RenRen's users is the credit card industry in China. Even though Bank of China issued the first credit card back in 1980s, the sector did not really kick start until early - mid 2000s. According to a 2009 Mickensey study, credit card has only 6% share in personal expenditure by payment method, and penetration to the population is a nominal 5%, comparing to 60% in US. On the flip side, growth is phenomenal. Between 2004 and 2008, total cards issued soared at an average annual rate of 84% and spending growth was at 63%.
Young and educated consumers form the common base for the proliferation of both social network and credit cards, which makes it logical for marketers in both sectors to partner with each other.
The credit card shown on top of the page is the "RenRen Card" issued by China Merchant Bank, which could be linked to the RenRen social network account and the reward program of which gives you RenRen points to be redeemed for VIP services in the virtual community.
For quite a few years I have observed that any business offering functionality features in China can barely make a sound profit. Two ways to stand out are either making yourself a premium brand, e.g. Pizza Hut as a luxury restaurant brand offering high end Chinese consumers a large variety of pizzas unheard of in North America at a price level that easily doubles what it charges in US, or making your business fun. Now it is quite interesting to observe the 'fun' business model has been forwarded that much to get even banks on board.
Relatively loose regulatory environment leaves so much room for marketers in China. Customers there have to be excited by businesses not every month or not even every day, but every moment they are awake. When Canadian businesses in almost every sector believe that immigrants, a lot from China, are going to be the new source of their customer base, are they really making efforts to understand and excite their new customers?
Thursday, February 16, 2012
Is China going to be LinkedIn?
Yesterday and today LinkedIn stock price went up significantly and more than recovered from the drop earlier this week following an analyst comment that claimed its newly boosted price had already priced in growth for the next couple of years. The reason, if there is one, that drives this round of increase, is the vague combo of news + guess of "possible deal to enter China". I said it's news + guess, and actually it is more guess than news. News gave only very limited information. LinkedIn founder Reid Hoffman met with a bunch of .com executives of China. That's the news, completely irrelevant to its entry to China market. None of those people would have a say about the "deal". Even if LinkedIn entered China, these folks are more of its competitors than partners.
Okay. Let's just assume LinkedIn already stepped into this 'potential' market. Then what? I could almost see its failure in China. The rationale can not be any simpler - In the business world in China, people link to each other in pubs and at dinner tables, not through internet.
I did a quick experiment. CIBC, ranked fifth in the big five Canadian banks, has "more than 42,000 employees". In LinkedIn, I typed "CIBC" in the people search box and got 41,727 results. On the equivalent side, wealink.com, the largest Chinese professional social networking site, gave me 226 results for the search “工商银行”, or ICBC, the largest bank in the world with 386,723 employees as of 2009. Nortel, the bankrupted telecom giant, returned 149,946 results in LinkedIn, while "华为" or Huawei, the fastest growing manufacturer in this sector, with 65,179 employees, gave me only 109 users on wealink.com.
TREFIS did a breakdown of LinkedIn stock price. Nearly half (45.2%) comes from job postings and recruitment services. Strong local brands have built their reputation and huge network in the mass recruiting market, while headhunters have taken their shares in the specialized segments. The other two components of LinkedIn revenue, premium subcriptions and ads, apparently relies on the popularity of the site. The depth of relationship it could build with its ad clients is a function of the depth of relationship its members could build with each other, through this network.
Having said that, I believe LinkedIn is going to be a tremendous success in the next decade. But not in China.
During the past 20~30 years, so many multinationals entered China betting on its adorable market size. Some succeeded, some failed, some still try to survive. How successfuly they could be simply depends on the level of its localization. Not just wrapping itself with a successful translation, but the deepest localization from the core of its corporate culture. I'll have more on this topic.
Okay. Let's just assume LinkedIn already stepped into this 'potential' market. Then what? I could almost see its failure in China. The rationale can not be any simpler - In the business world in China, people link to each other in pubs and at dinner tables, not through internet.
I did a quick experiment. CIBC, ranked fifth in the big five Canadian banks, has "more than 42,000 employees". In LinkedIn, I typed "CIBC" in the people search box and got 41,727 results. On the equivalent side, wealink.com, the largest Chinese professional social networking site, gave me 226 results for the search “工商银行”, or ICBC, the largest bank in the world with 386,723 employees as of 2009. Nortel, the bankrupted telecom giant, returned 149,946 results in LinkedIn, while "华为" or Huawei, the fastest growing manufacturer in this sector, with 65,179 employees, gave me only 109 users on wealink.com.
TREFIS did a breakdown of LinkedIn stock price. Nearly half (45.2%) comes from job postings and recruitment services. Strong local brands have built their reputation and huge network in the mass recruiting market, while headhunters have taken their shares in the specialized segments. The other two components of LinkedIn revenue, premium subcriptions and ads, apparently relies on the popularity of the site. The depth of relationship it could build with its ad clients is a function of the depth of relationship its members could build with each other, through this network.
Having said that, I believe LinkedIn is going to be a tremendous success in the next decade. But not in China.
During the past 20~30 years, so many multinationals entered China betting on its adorable market size. Some succeeded, some failed, some still try to survive. How successfuly they could be simply depends on the level of its localization. Not just wrapping itself with a successful translation, but the deepest localization from the core of its corporate culture. I'll have more on this topic.
Monday, February 13, 2012
Coffee War, or something else ...
There are two segments of coffee drinkers in my office, the Starbucks segment and the Tim Hortons segment. Not by value to price, not by demographics, and apparently not by how much time they are willing to spend waiting (as everyone could see waiting in front of either counter is equally time consuming :), these two groups are simply defined by how strong they prefer the coffee to taste (or to be). Shelley only goes to Starbucks once a while when she decides to reward herself with a latte or cappuccino. But never the regular coffee, as it's going to keep her up at night. A few seats away, Chris goes to Starbucks every morning. If she had to brew a cup from the coffee maker in the office kitchen, her compaint never changes - it's too light.
No overlap between the two segments, ever.
But it does not mean a coffee shop can not capture both segments. At least that's what Starbucks is trying to do. "If you haven’t tried our lighter roast yet, now’s the time."
Where does the growth come from? It's a serious question, particularly when you are the only or one of a handful of leaders in your segment. The most straight forward answer is crossing the fence and getting into a neighbor's backyard.
Believe it or not, Timmy's is doing the same thing. If you saw the Starbucks Blonde commercial, I bet you have seen the Tim Hortons latte commercial as well, because they almost run hand in hand.
Beyond coffee, this eating someone else's lunch game has been all over the places during the past couple of years. MacDonald's can't get more aggressive in pushing its coffee, while Tim Hortons strives to expand its lunch menu (btw, personally I like its Chili combo). While Wal-Mart has a larger home improvement section now than a few years ago, Rona has put gums and the like at cashier lines betting on impulse purchase.
Even in the regulated sectors. Although banks are not allowed to sell insurance products (other than creditor protection plans) in the bank, nothing stops RBC from opening insurance offices a (glass) wall away from its banking branches. On the other hand, when I selected that I need advice on "banking" on its website, Manulife gave me 15 Financial Advisors within 5KM of my post code.
While waiting to see RBC setting up its bank machines in Shoppers Drug Mart stores, I won't be surprised if I go to a Rogers store tomorrow and see a sales rep handing me a brochure of Rogers Bank mobile credit card app which I can use right on site to buy a cup of coke flavored tea from a Second Cup kiosk sharing store space.
No overlap between the two segments, ever.
But it does not mean a coffee shop can not capture both segments. At least that's what Starbucks is trying to do. "If you haven’t tried our lighter roast yet, now’s the time."
Where does the growth come from? It's a serious question, particularly when you are the only or one of a handful of leaders in your segment. The most straight forward answer is crossing the fence and getting into a neighbor's backyard.
Believe it or not, Timmy's is doing the same thing. If you saw the Starbucks Blonde commercial, I bet you have seen the Tim Hortons latte commercial as well, because they almost run hand in hand.
Beyond coffee, this eating someone else's lunch game has been all over the places during the past couple of years. MacDonald's can't get more aggressive in pushing its coffee, while Tim Hortons strives to expand its lunch menu (btw, personally I like its Chili combo). While Wal-Mart has a larger home improvement section now than a few years ago, Rona has put gums and the like at cashier lines betting on impulse purchase.
Even in the regulated sectors. Although banks are not allowed to sell insurance products (other than creditor protection plans) in the bank, nothing stops RBC from opening insurance offices a (glass) wall away from its banking branches. On the other hand, when I selected that I need advice on "banking" on its website, Manulife gave me 15 Financial Advisors within 5KM of my post code.
While waiting to see RBC setting up its bank machines in Shoppers Drug Mart stores, I won't be surprised if I go to a Rogers store tomorrow and see a sales rep handing me a brochure of Rogers Bank mobile credit card app which I can use right on site to buy a cup of coke flavored tea from a Second Cup kiosk sharing store space.
Thursday, February 9, 2012
Groupon: To be or not to be
Today is really an interesting day in the history of the ... emerging and proliferating and maturing and consolidating and ... someone probably arguing dimishing or even demolishing ... industry. I mean, the daily deal industry.
Early in the morning, Ipsos Reid released results of its most recent Canadian study with a title that would catch any marketer's eyes, "Ipsos Study Shows Online Group Coupons Can Help Build Brand Loyalty". The numbers found in the survey are quite encouraging. However, unfortunately, investors don't seem quite encouraged. In response to Groupon's Q4 results released late yesterday, its stock price today dropped as much as stockholders' heartbeats speed up. Question being asked is not just where Groupon heads, but whether daily deal is marketer's new weapon or another money burning firepit.
How do they make money? Consumers buy vouchers from Groupon at 50% off. The price they are paying is shared between Groupon and the merchant, usually at 50-50 split.
What are the costs? Not reading from the annual report, but understanding from the business model, Groupon relies on a large sales force everywhere they have 'local' deals. Someone has to negotiate those deals with the neighborhood restaurants and mom and pop stores.
Are they making money? Apparently, no. People invest in Groupon because they believe in its future.
Is there a future? Ipsos Reid says yes, or maybe, while Forrester sort of disagree. If merchants give up deep discounts to buy customer loyalty, Canadian businesses must be luckier than their counterparts south of the border. Ipsos Canadian research says 62% of those who had bought an online coupon have then gone back to make a full priced purchase. In US, a Nov 2011 Forrester research shows that consumers have been trained to search for deals before purchasing and become not willing to buy at full price. In addition, 82% in Ipsos survey said they bought coupons to try something that they would not have otherwise. Foresster shows over half people said they would have bought any ways even without the discount.
How should marketers action? No matter if marketers are achieving the client acquisition and loyalty goals they set, online daily deals are becoming a consumer routine, at least for a consumer segment. It's not a question about whether to use it or not, but more of how to leverage it as a new marketing tool. One thing nobody could question is that this is a pay per performance tool. If 75% off is too big a cost for small merchants, it is much more affordable for larger retailers, as this could be just a very insignificant portion of their marketing budget that they are already considering how to reallocate from traditional media to more measurable vehicles.
Early in the morning, Ipsos Reid released results of its most recent Canadian study with a title that would catch any marketer's eyes, "Ipsos Study Shows Online Group Coupons Can Help Build Brand Loyalty". The numbers found in the survey are quite encouraging. However, unfortunately, investors don't seem quite encouraged. In response to Groupon's Q4 results released late yesterday, its stock price today dropped as much as stockholders' heartbeats speed up. Question being asked is not just where Groupon heads, but whether daily deal is marketer's new weapon or another money burning firepit.
How do they make money? Consumers buy vouchers from Groupon at 50% off. The price they are paying is shared between Groupon and the merchant, usually at 50-50 split.
What are the costs? Not reading from the annual report, but understanding from the business model, Groupon relies on a large sales force everywhere they have 'local' deals. Someone has to negotiate those deals with the neighborhood restaurants and mom and pop stores.
Are they making money? Apparently, no. People invest in Groupon because they believe in its future.
Is there a future? Ipsos Reid says yes, or maybe, while Forrester sort of disagree. If merchants give up deep discounts to buy customer loyalty, Canadian businesses must be luckier than their counterparts south of the border. Ipsos Canadian research says 62% of those who had bought an online coupon have then gone back to make a full priced purchase. In US, a Nov 2011 Forrester research shows that consumers have been trained to search for deals before purchasing and become not willing to buy at full price. In addition, 82% in Ipsos survey said they bought coupons to try something that they would not have otherwise. Foresster shows over half people said they would have bought any ways even without the discount.
How should marketers action? No matter if marketers are achieving the client acquisition and loyalty goals they set, online daily deals are becoming a consumer routine, at least for a consumer segment. It's not a question about whether to use it or not, but more of how to leverage it as a new marketing tool. One thing nobody could question is that this is a pay per performance tool. If 75% off is too big a cost for small merchants, it is much more affordable for larger retailers, as this could be just a very insignificant portion of their marketing budget that they are already considering how to reallocate from traditional media to more measurable vehicles.
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