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What are Social Coupons?

This is a guest post by Slade Sherman, Founder and CEO of MyZerr.com. Slade is a successful entrepreneur, with over 15 years experience in customer loyalty and rewards industry, who has recently launched MyZerr.com in Australia, combining his own experience and expertise into the social-sphere.

 

The release of the Facebook Deals service earlier in the month follows the recent growth of a number social coupon applications that present businesses with new and exciting promotional opportunities.

Options in the social couponing space generally fall into two very different categories being ‘Deal of the Day’ sites and those that make use of ‘Network Deals’.

Deal of the Day Sites

The most well known ‘Deal of the Day’ site is Groupon. These services band thousands of users together who sign up to an email list to get bulk discount deal offers from local businesses. The users typically get one deal per day per city and well known Australian examples of companies in this space include Spreets, Scoopon, Cudo and Jump on It.

Google Image Result for http://web.appstorm.net/wp-content/uploads/2010/08/Groupon.jpg

These sites are often referred to as ‘Group Buying Sites’ but they should not be confused with Social Network Groups. A ‘group’ implies that members have a relation or connection to one another, in the case of ‘deal of the day’ sites the only connection is the fact that users have signed up to an email database and accepted to receive an email each day. Group? No. Email List? Yes.

Network Deals

Network Deal sites make use of data gathered by a social network to allow businesses to connect with and promote deals to users of the social network. The best-known examples of these sites include Foursquare and Gowalla who make use of location based check-in data to allow businesses to promote deals to users in that closed network based on their activity. Facebook Deals appears to be modelled on this approach and the move by Facebook is significant because of their network of 500 million users.

The value of the network deals sites is in the database of “check-in” activity and the ability potential advertisers will have to target promotions based on this activity. The possibilities include getting deals based on your age, sex, past buying and even your real-time location.

What’s Better for Business?

As someone who has built a business based on the Network Deals approach I should first disclose some bias. While there is merit in Deal of the Day sites, I believe the longer-term value of relationships and activity built around social networks is much better for businesses for these reasons:

  1. Good social networks are anti spam and employ algorithms to discourage advertisers to send spam deals to everyone. Deal of the Day sites promote one deal per day to ‘everyone’ in that city so while it achieves the objective of getting business, it also results in a lot of spam to those customers who do not take up the deal.
  2. Leading on from the previous point, it’s difficult for most of the Deal of the Day sites to understand their customer base because in most cases all they have is a generic email address and city. Social networks know so much more about users allowing them to tailor relevant deals.
  3. Deal-of-the-Day sites are popular because they work, but businesses need to ensure that they can afford the deal along with the fee they pay. If you are offering 50% off as your deal and then need to pay 50% of the remaining income you are giving up 75c in the dollar to get a new customer. This compares with free and results based options of ‘Network Deals’ sites that don’t force the business to cut margins so dramatically.

Deal of the Day sites will always appeal to those businesses chasing short-term sales and they are very effective for that purpose. But, business is a marathon not a sprint, and for long-term customer engagement, a strategy of connecting with customers through social networks is more sustainable.

An example of one business using the Network Deals approach is Melbourne based Planet Chocolate franchise, who recently setup a coupons tab on their Facebook page for their 4 stores. The coupons give their fans who ‘like’ Planet Chocolate additional deals and this strategy resulted in over 250 ‘likes’ in a week and 62 additional sales.

Facebook | Planet Chocolate Fun Club

The Planet Chocolate promotion doesn’t have the short-term impact of a Deal-of-the-Day promotion but over the year Planet Chocolate will continue to build their Facebook fans and at 62 additional sales per week and growing, the long term value of the promotion will be far greater to their brand.

Tips to get you started with Social Coupons

Promoting online has many benefits over traditional coupon approaches. The single biggest benefit is the fact that most coupons solutions online are ‘results-based’ meaning you only pay for the promotion when it works.

When promoting online I recommend the following:

  • Do the sums – Make sure you can afford the coupon promotion. You don’t want to be locked into offering a deal your business cannot afford.
  • Limit your promotion – Always place limits on your deal. This may be limiting the number of users, the time in which the deal is valid or the days of the week that the deal is available. For example, if you run a restaurant that is busy on a Saturday night you should limit deals to other quieter nights.
  • Deal insights – One of the best things about online coupons is there is no guesswork. Good online coupon applications will give you statistics to measure performance so use online coupons to set shorter expiry dates and measure.
  • Don’t lock yourself in – There is no need to be locked into one supplier so steer clear of providers that require exclusivity.
  • Location, Location – If given the option link your deals to a physical address because the number of people accessing deals on portable computing devices, like iPhones, will soon outnumber those accessing deals on desktop computers. If your business is on the map, people can find you!
  • Link users to your database – Try to engage with users of your coupons by getting them to ‘like’ your Facebook page, join your birthday club and reward them for their loyalty.

Social Coupons, whilst new, are here for the long term so if you run a bricks and mortar business, now is the time to start exploring the options.

Slade Sherman is CEO of Myzerr.com, a Social Network for Rewards that promotes coupons from local and online businesses to ‘groups’ like chambers of commerce, associations and loyalty programs.
Website: www.myzerr.com
Blog: www.sladesherman.com
Twitter: http://twitter.com/sladesherman
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  • http://twitter.com/hollingsworth Tony Hollingsworth

    Great post Slade, this is quite new to me as I have no personal experience of social coupons. Being based here in Sydney, Australia and quite active on Twitter, Facebook and blogs, I have yet to see any promotions come across my smartphone/desktop. I agree that although new, social coupons will become increasingly popular as businesses explore their online options.

    I do enjoy using Foursquare from my mobile, and have taken advantage of specials offered there. I seem to be in the minority as many peers say is it is not worth the effort “checking-in” This presents an opportunity for Facebook Places as I see friends already checking-in.

    Being an Android smartphone user I have yet to try this myself, as my applications dont support it yet.

    Location-based social networks are of great interest to me, and I would be happy to receive “offers” based on my location. I look forward to watching this evolve here in Australia.

    Cheers,
    Tony

    • http://www.myzerr.com Slade Sherman

      Hi Tony, Your comment about Foursquare and your peers not using the platform reminds me of a question I put to Tristan Walker, Head of Business Development at Foursquare, when I saw him speak earlier this year. I told Tristan that as a 37 year old, most of my peers did not check-in or understand Foursquare and when I asked if this was a concern to them his response was that their focus was more on the youth market, the under 25s. In the last few months I have now also noticed many more of my friends using Facebook Places but think this may be a reflection of the age of my friends.

      The location based market is only in it’s infancy but it wont be too long before location aware deals start appearing. Watch this space:)

      • http://hollingsworth.posterous.com/ Tony Hollingsworth

        Thanks for the reply Slade – I’ve just updated the applications on my Android smartphone and am pleased to report both Facebook Places and a much-improved Foursquare application are available. I am going to blog about this soon.

        I am also reminded about a blog post of mine about a year ago when we were all seeing the Foursquare updates appear on Twitter and Facebook (and many considered this spam) The comments from my community validate your point about the age of users (most of my readers are older than “youth market” and I am seeing them use Places now)

        Here is the that post for you and readers to enjoy:
        http://hollingsworth.posterous.com/foursquaretwitterfacebooklinkedin-cross-post

        Cheers,
        Tony

  • http://mysocialmedialawyer.wordpress.com/ Vivienne Storey

    What a great analysis – I hadn’t considered the difference between Deal of the Day sites and Network Deals.

    I have actually just this week purchased from Jump On It – but only because someone who knows me well sent me a deal they knew I would be interested in. I would never subscribe to such a site because I know that the majority of the deals wouldn’t interest me and I don’t want to “deal” with the additional daily email.

    I do use Foursquare quite a bit and one of the functionalities I really like about it is the user-posted recommendations that I can read when I’m in an area I don’t know well.

    For example, I was recently in Singapore and I used Foursquare extensively (and successfully!) to eat and shop. Social coupons are a natural extension of this activity and as it can be highly targeted could be really successful for a business if cleverly used.

    I would much prefer to receive offers based on my location, or preferences, rather than just randomly. The only limit I see to this is that it takes out the random purchase – are we ensuring that we never purchase outside our comfort zone as determined by our location and social media settings/interractions??

    • http://www.myzerr.com Slade Sherman

      Hi Vivienne, As long as there is emotion, there will be the random purchase…I’m not sure that technology will ever get in the way of buying that ‘must have accessory’ in the shop window that until seconds before you didn’t realise you needed. The promise of technology, if done well, will just enhance the shopping experience by giving the shopper more value. Cheers…Slade

  • http://twitter.com/#!/katydaniells Katy

    Great post – we’ve been talking in the office today about the important of sales incentives for online communities, especially in the world on retail. The social space has the unique advantage of being trackable which lends itself perfectly to the coupon style offer.

  • http://www.iggypintado.com.au Iggy Pintado

    Interesting post and thanks for sharing. Also, interesting that Apple just ran their Black Friday one day sale last week, all through their iTunes “network” via email campaign.

    Cheers, Iggy

    • http://www.myzerr.com Slade Sherman

      Yes Iggy, not a bad network that Apple have demonstrating the effectiveness of traditional opt-in email marketing with a trusted brand. Another very interesting play is by Dell with a site I saw on Friday called ‘Dell Swarm’ promoting their own Groupon style deals. As an example, DellSwarm promoted a Flip Mino II at $129 if 100 buyers committed to the deal (amazing price but this deal is no longer active, sorry!).

  • francis berthomieu

    Hi slade,
    thank you for this discussion about coupons.
    Could you tell me what are the types of businnesses you are targeting , SOHO, SMEs, large ? and in which verticals ?
    Thnaks.
    FBe

    • http://www.myzerr.com Slade Sherman

      Hi FBe,

      Thanks for the question. Our solutions cater mostly for B2C businesses and suit those businesses with a retail shopfront or web store. This could be a single store operation to a nationwide franchise. As we focus on the Network Deals style of rewards, we work on giving participating businesses tools to connect with their network and this may cut across traditional verticals.

      Cheers…Slade

  • http://www.magnoliasolutions.com.au Nancy Georges

    Thanks Slade and Raz, great info and really timely.
    I have long been an observer of the coupon-mentality in the USA and its affect on sales and buying behaviour.

    In my research for seminars and client work, I have been watching Groupon et al with much interest. Infact, I was speaking with an Australian friend who now lives in the USA last week about coupons and Groupon and his use. He could not speak highly enough of them and said that although most Americans still cut out coupons the online integration was great for him. This got me thinking about how valuable this would be for Aussie retailers – who are really struggling.

    Last week I received a newsletter from Henri Bendel, with their first ever ‘Happy Hour’ only for newsletter recipients. I thought this was very interesting as they are now targeting the offers as opposed to a broadcast approach on their website.

    As we move to integrate online and offline Social Coupons are just a natural progression of retail marketing and social media activity. Your point is so right, they must be executed properly with thought and planning.

    Coupons, Spot Deals and Social Coupons have an enormous potential in Australia, Social Coupons make more sense than any other as they are not only effective selling tools but also work to strengthen the relationship with the customer.

    Cheers
    Nancy

  • Angelo Ziaziaris

    Thanks Raz and Slade – I enjoyed the thought provoking post.

    There is no doubt that merit exists in both models and the lines will become blurred as the two merge into a great solution for consumers.

    I have been surprised at how many people are not actually aware of the wide spread avaialability of Social Coupons in Australia currently. So it appears we are far from ‘burn-out’ on daily deals. The proliferation of Groupon copycats in the States alone suggests that there is a continued appetite for receiving deals without considering it spam enough to unsubscribe.

    I agree with the fact that businesses should be clear on the quality of the customer they are attracting before discounting their prices. This is where effective target marketing will seperate the Deal Makers in terms of commitment to the businesses.

    It also introduces a potential limitation in the Network Deals Model which some could argue is promoting your business to price chasers that happen to be passing by. The question in this scenario is – where will the consumer’s loyalty lie after the experience – with the new business or with the Network of cheap deals?

    • http://www.myzerr.com Slade Sherman

      Thanks Angelo, It’s an interesting question in relation to loyalty. My view is that the Loyalty of the customer will be based on their experience with both the business and the network offering the deal.

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