The Learning Curve

New tricks for an old dog.

Deal or no deal? What’s the deal?

Looking at internet marketing for local business – LivingSocial.com, Groupon.com, and eWinWin.com. Preliminary observations and questions.

1. Businesses must be counting on the gift card effect, where a certain percentage of gift certificates and coupons are never used.  Betsy’s Hot Yoga in Louisville recently sold 1072 yoga class packages for $20 each through LivingSocial.com.  It was a good deal with an 82% discount off  the normal price for ten 90-minute yoga classes, but impossible to deliver if all 1072 discounted enrolments show up at the same time.   

2. What’s the deal for businesses to participate?  Although the deal for buyers is spelled out online, the cost to the business for these  programs is a big secret.  It is impossible for a small business owner to evaluate the potential benefits of the programs without having some clue what the cost is.  I is necessary for a business to go through the screening process to find out.  This makes sense only if the deal is negotiated separately for each business applicant. 

3.  There seems to be an imbalance between buyers and sellers.  LivingSocial.com has offered seven deals in Louisville, Kentucky during the last two months, and Groupon.com has offered two during the same time period.  More than 1000 buyers for each of those deals is fairly common.  The task is to recruit more businesses to participate.

 4. Both LivingSocial.com and Groupon.com have referral programs where consumer-users can earn rewards by referring new consumer-users to the program.  There does not seem to be any comparable referral program aimed toward recruiting businesses.

5. Recruiting local businesses to participate in these programs might be more effective if it incorporated off-line solicitations.  Many of the small local business owners I know don’t spend a lot of time  online researching the latest thing in local social media marketing.  It needs to be explained to them, but given 2 and 4 above, that isn’t going to happen.

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Written by Tom Fox

08/22/2010 at 12:04 pm

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