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.
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 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:
- 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.
- 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.
- 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.
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.