The Dark Side of Groupon

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Is this a business killer?

First, it’s important to understand that this article is not actually focusing on Groupon specifically. Groupon just happens to be the most popular of the “daily deal” sites. Additionally, “The Dark Side of Groupon” is a better title than “The Dark Side of Daily Deal Sites.”

How These Sites Work

They offer a special deal which is generally a package with a discount of at least 50%. To the retailer they offer the opportunity to sell an amazing amount of goods or services within a short period of time. So far, so good, right?

Example:
Taking a quick look at Living Social (another daily deal site), I found the following offer for an Orlando carpet cleaner…

$39 for 3 Rooms of Carpet Cleaning, a $150 value.
They’ve already sold 82 in just a couple days. That’s about $3200 worth of sales in less than a week. Depending on the size of this business, that could be an amazing amount of work.

Of course, Living Social will take their cut. Surprisingly, this can be as much as 50%. Imagine that you’re this carpet cleaner – good news, you just got 82 new jobs, bad news; you’re doing them for $20 a pop.

Where’s the Value?

So why do daily deal sites work for those who are successful with them? The answer can be explained in two words – “repeat business.” This is the main selling point for using this kind of marketing tool. It can be very successful, but only if you have a few things together.

The Plan

First, you need to have a plan to deal with the influx of business, and handle it well. Your goal is to get positive word of mouth and repeat business from these customers. You are likely losing money on each ‘deal’ sold, therefore the whole value is in referrals and repeat business.

Second, you need to make plans for how to convert these bargain hunters into lifelong customers. Some of this goes to service; however, making sure you have a solid plan to keep in touch with your clients – new and old – is key.

Third, have a second special offer for them, right after they take advantage of the first. This can take some of the bite out of the first package, and will certainly lead to more repeat business.

Fourth, you need a plan for getting referrals from these new customers. You could run a promo such as this –

“You were smart enough to take advantage of this special through Groupon, now we’re going to give you a chance to share the same discount with you friends/family. Just send them the code 123, and we’ll give them the same deal you got.”

Just use your imagination as to how you can turn each new customer into more referrals. Additionally, you will get more referrals if you have a customer list where you deliver good information on a regular basis. This helps with top of mind awareness about your business.

Business Killer

It would be surprising if a few businesses have not closed their doors as a result of running one of these daily deal coupon offers. I imagine it goes something like this…

1) The business gets 100’s of sales for an offer they don’t have the capacity to fill in a timely fashion
2) The employees get overworked and start providing poor customer service
3) Instead of 100’s of new customers the business has 100’s of new people who have had a negative experience and are telling other people

It would be hard for any business to recover from a scenario like this.

It’s Just Marketing

It’s important to understand that this is just another form of marketing. It’s a simple business truth, marketing is an investment. It’s either a good investment or bad investment, depending on how well it works.

It’s easy to look at the daily deal offers and get the idea that this is different because you get money up front. It is different, but you still need to evaluate it based on the potential ROI. The difference is due to it being “event based.” You can’t ease into a daily deal promotion. Once you start, you’re stuck with the results. That’s why I feel it requires a lot of planning to make sure it’s a success for you.

Regarding the investment, remember that the discount is part of your investment. The carpet cleaner mentioned above is providing $150 worth of carpet cleaning for $39. This means each package carries an investment of $111 in services.

Note About Usage

A certain percentage of people who buy gift certificates won’t use them. In other words, some of the people who buy the $39 package above will take no action, yet you’ll still receive the $20 (after fees) without having to do anything. Of course, these people won’t become repeat customers, so it’s hardly the best case scenario. This can, however, offset the fees.

Opportunity Cost

With the information in this article, it’s easy to see how a daily deal for your business is likely to cost you $1000’s (as well as a large amount of time) in the short run with the goal of building repeat and referral business. This means the opportunity cost is represented by the other marketing efforts you could undertake using the same amount of time and money.

Recommendations

If you are considering using a daily deal site to promote your business, you’ll want to create a plan as discussed earlier. It’s also a great idea to contact other people in your industry who have used this tactic and see how it worked for them. If you don’t think your local competition would be honest with you, you could just check with people in other locations of comparable market size.

This strategy doesn’t need to be a business killer, however you should certainly consider it carefully.

UPDATE: I was speaking to a client about about this and he mentioned that he’d written an article all about these daily deal sites. It’s very interesting to get the perspective from a merchant who has used this promotional tool multiple times. Below is the link to his article.

Should you feature your business with Groupon? Advice from an experienced business owner.

Get Rid of Negative Feedback from Online Review Sites (REVISED)

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(Revision Notes: I added a couple of TripAdvisor videos to this article. While they talk about TripAdvisor, they contain good information for handling any online review site.)

The bad news is, you generally can’t get the feedback removed. The good news is that you can use the strategies below to neutralize and in some cases even benefit from a few negative reviews.

Tip #1: Dilute Negative Reviews

The best strategy to counter bad reviews is to dilute them. If you do a good job within your business, and most people are happy, encouraging more people to create reviews is a good idea.

Getting a lot of reviews to dilute the bad ones is an important strategy because the first thing people look at is the number stars you have. They may not even read the reviews if you don’t have enough.

Quick Tip: Use QR codes in your business that point to a review site you are trying to increase reviews for.

Don’t Discount Bad Reviews too Quickly – It’s important to take a step back and honestly evaluate if there is even a little grain of truth in a review, if so it gives you an area to get even better at. It’s an awesome opportunity when you find one of your blind spots.

Quick Tip 2: Reply to every review, good and bad. When you reply to a good review you are able to reinforce it as well as incorporate some keywords. Additionally, you want to use “social proof” language when replying to a positive review. By that I just mean language that emphasizes how other people like your business too.

Example: We are so pleased that you enjoyed the. It’s one of our most popular.

You could replace “it’s our most popular” with “everyone loves our…” or “we get a lot of complements on our…” I think you get the idea.

Assuming a business listing (yelp, google places, etc.) has a link to your website on it, the more search engine friendly it is the better. It will actually give your website a little search engine juice, besides being more likely to come up with someone is looking for restaurants with specific foods.

Tip #2: Reply to Reviews

Replying to negative reviews represents another great way to neutralize them. This is especially true when there is a point of logic you can share that makes it clear the customer isn’t being reasonable in the complaint. That said, you never want your reply to sound defensive. It needs to be fact based, apologetic where appropriate, and above all must not attach the person.

If the person is especially negative/emotional, you may want to write your review as if you are speaking to everyone else. Instead of talking directly to the emotional person. You could give some general information that explains the review to the readers. Example: “This review isn’t by an actual customer. She asked to use our restrooms and became very upset when she found out they are only for patrons.” You can see how it takes the teeth out of the review.

Note: Even a reply like, “I agree, we made a mistake, and we’ll work hard not to let it happen again,” is much better than not having a reply.

Last point, I promise…

I should note that I’m writing this not only as a “marketing guy” but also as an end user who uses reviews to make a lot of decisions. My wife and I are traveling across the country this year, and almost always use popular review sites to help us make our dining, entertainment, and lodging decisions. I can tell you from personal experience the difference between a negative review, with a well reasoned response and one left alone is like night and day.

Top of Google for $100 a Month

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On several occasions I’ve had clients tell me that a telemarketer has called with this promise. “Pay us ($40, $100, 200, etc) per month and we’ll put your website at the top of Google. We have a special relationship with Google. ”

Is this a scam?

It’s generally not a scam in the strictest sense. They aren’t lying, but they do leave out a lot of important facts. Most of these places are using Adwords to promote your business. Adwords allows you to bid on a keyword (choose an amount are willing to pay per person who clicks through to your site) and therefore is called Pay Per Click advertising. Using this system, you can be at the top of Google (the sponsored listings show at the top and on the right), by just paying enough money.

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Creating Multiple FaceBook Accounts

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Is FaceBook an effective tool for a business person? I believe it is, and it’s also a great way to connect with family and friends. One FaceBook account isn’t a great tool for doing both. My solution is to break my FaceBook account into two accounts. One is for Personal and one is for business.

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The Repetition Myth

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If you’ve read many marketing books you know the huge number of times a potential prospect needs to be exposed to a marketing message before actually purchasing the advertised product or service. I was reading one of Jay Levinson’s books recently and he said that it takes 9 impressions before someone takes action. Furthermore he says only one in three attempts at making an impression are successful. This means you need to put your message in front of your prospect 27 times.

This got me thinking. Why does it seem like some people just instantly buy? Here’s my BFO (Blinding Flash of the Obvious). The repetition has already taken place before you get there. In other words, through various sources that prospect has already heard many times how much they need what you’re offering.

The trick is tapping into an internal dialog that someone is having. Let me give you a totally self-serving example:

Fred the business owner knows he needs a website. His clients keep asking him if he has one, and everywhere he turns he sees evidence that this is a must. At the same time, he keeps having the same discussion in his head, “Yeah I know I need a website, but I can’t afford it.” Now I come along with a simple marketing message, “Basic Websites Under $500” This instantly presents a potential solution (a scratch for an itch) that he has had for a long time.

If you can craft the right marketing message, the repetition has already been done. You only need to delve into what your customers really need and want, and tap into that inner dialog.

Tip for Processing Email

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A few months ago, I set a goal to empty my inbox. It all relates to Getting Things Done by David Allen and Inbox Zero.

To make a long story short, I had to process 10’s of thousands of emails. During this exciting work, I figured out something. When you are processing email it’s much easier if you sort by “from” instead of the default of sorting by date. This puts all of the messages from the same people together. This makes it easy to delete a block of spam all from one person (click on the first message, hold down shift, click on the last message, press delete). Additionally, it makes it much easier for reply’s because if someone has sent you multiple questions, you can read all and reply to all in one email.

To sort by from you simply click on the Column Name (in Thunderbird that’s ‘sender’, but I believe in Outlook Express it’s ‘from’).

Using this method I’m often able to process a couple hundred emails within 20-30 minutes, including answering several.