Buzz Builder

Giddy About Groupon: Are Online Coupons a Good Way to Grow Business?

My brilliant wife and business partner Ellen Galvin is the author of this month's Buzz Bulletin about Groupon and the value of online coupons. You can read her article below and sign up here for our free monthly newsletter on how to build business with buzz.

From the July editon of the Buzz Bulletin:

On my desk is a coupon, or rather a “Groupon,” for a local restaurant that I purchased from Groupon.com. It entitles me to $25 worth of food, for which I paid only $12. The problem is, I ordered two of these Groupons and discovered after using the first one that I don’t like this restaurant very much. The food is mediocre and the atmosphere is worse. So why did I shell out $24 for not just one, but two, of these coupons in the first place? I guess the idea of a good deal was just too hard to resist. Plus, how could hundreds of other people in Portland be wrong?

For those of you who haven’t yet succumbed to the Groupon frenzy, this popular website offers heavily discounted deals from local businesses, like restaurants, gyms and spas (who would’ve guessed that there were so many people looking to save money on hair removal?). There is only one deal per day, and the deal only becomes available if a certain number of coupons are sold within a 24-hour period. Naturally, Groupon encourages its users to “tell their friends.” This has resulted in some pretty good word of mouth for Groupon (it is currently valued at more than $1 billion), and spawned dozens of competing daily deal sites like LivingSocial, Zozi, and YipIt.

But what kind of word of mouth does it generate for the businesses who are offering the discounts?

That’s the question I asked of our server recently, on a night that Patrick and I used a Groupon at the French restaurant Chez Machin. We figured that the 50% we saved off the price of dinner would pay for a few hours of our babysitter’s time. Although the restaurant isn’t far from our house, we had never tried it and we were delighted with the good food and friendly service. The Groupon strategy worked: it brought two new customers in the door of a local business (two new customers who talk and write about the businesses they like, I might add). Our server said that the online coupon had brought in several new faces that week, although it was still too early to tell if they’d become repeat customers.

On the flip side, getting too many customers in the door can backfire. In San Francisco, a bakery that specializes in mini cupcakes got more than it bargained for, selling 72,000 cupcake orders in a single 24-hour period (3,000 people purchased the coupon, which offered two-dozen cupcakes for $11 instead of the usual $24). Suddenly, frazzled bakers were shopping twice a day to replenish milk, butter and oil, and several employees threatened to quit. Customers were angry, too, especially those who make a sport of buying Groupons in batches and driving around town to cash them in. One customer who was disappointed at missing the cupcake deal said that he plans his dates around Groupons.

You don’t have to be in the food service business to jump on the “daily deal” phenomenon. Online deals include everything from rock climbing lessons to tax preparation services. So what’s the secret to making these sites work for you?

·         Understand the math

Groupon subscribers expect to see a discount of 50% or more. Of that, Groupon takes another 50%. Ask yourself whether you are getting the right customers through the door and whether they are worth the additional costs, like food, labor and extra equipment.

·         Narrow your targets

For owners of highly specialized businesses, in which the likelihood of getting incremental or repeat business is small, the challenge is to attract new customers without over-investing in them. For example, our client OCSC SAILING used Groupon to sell nearly 2,000 Introduction to Sailing Lessons. Instead of offering a discount applicable to any of its classes, it chose a manageable, two hour lesson tailored to newcomers (versus people who are already OCSC clients or part of the larger sailing community).

·         Be prepared

The cupcake example illustrates why it’s important to control the terms when working with Groupon. Set a limit for the number of coupons you wish to sell, and consider the other factors that could cause headaches for your business if you are not adequately prepared. Remember, it doesn’t take long for one cranky cupcake customer to circulate bad buzz through cyberspace. In addition, many business owners recommend having a separate phone number, email or website to deal with the barrage of questions from Groupon customers.

·         Use discounts with care

It’s easy to catch Groupon fever. It’s exciting to see hundreds of people snap up your offer as you envision hordes of new customers who’ll not only help you recoup your expenses but will also buy additional services. But are these people interested in what you have to offer, or are they just reacting to the thrill of the deal? Don’t expect to email them to find out, either. Groupon does not share addresses. Also, issue too many coupons and you’ll set yourself up as a permanent discounter. For example, do you buy anything at Macy’s that is full price? Enough said.

·         Underpromise and overdeliver

At the end of the day, discount sites like Groupon are running software programs that aggregate deals, send out e-mails and charge your credit cards. The real work begins when a customer walks into your business for the first time, holding a Groupon in his or her hand. You are responsible for making sure the experience is great from start to finish, and that’s where the real word of mouth starts.

So, did Chez Machin make any money on us that evening? Probably not, when you consider the cost of our crepes and the wages of its staff. Yet we would have been happy with the experience had we paid full price, which we will gladly do in the future. And, we’ve already recommended it to our friends.

As for that other restaurant, I’ll go back and order carefully just to use up the $12 Groupon that I already paid for. I’ll probably never return, but it’s been a good reminder that not even the hottest social media tools will help your business if you can’t get the fundamentals right.

Rory Sutherland's Brilliant TED Speech Illustrating the Triumph of Perception over Actual Change

In this entertaining TED presentation, ad guru Rory Sutherland of Ogilvy shares some hilarious examples that illustrate how it is often much easier to improve the success of a product or service with the creative use of language than trying to implement expensive changes. Sutherland reinforces my longstanding belief that more companies fail not because they're selling the wrong things but they're telling stories that fail to engage customers.

Why Isn't ReputationDefender Defending Its Reputation and Faceboook App on Facebook?

Yesterday, I heard a sponsorship plug on NPR for a company called ReputationDefender which claims on its website to be "the world's first comprehensive online reputation management and privacy company." I visited the company's website and was intrigued with its offerings. I found this statement on the company's product page particularly enticing: "You can’t manage your online identity unless you know what others can see about you online. Looking on the first page of Google is not enough. Our Reputation Advisors perform a custom search of the far corners of the Deep Web for every reference to you, including over 40 of the biggest social networks. We then monitor the Web every month for additional references to you and deliver them in an easy-to-read update."

I proceeded to download a free ReputationDefender app on Facebook that individuals can use to monitor their Facebook privacy settings. After repeated attempts to get the app to work, I gave up in frustration. Then I visited the app's review page on Facebook and discovered that others have also struggled to make it work. While I realize that Facebook might have changed its site in a way that causes problems for ReputationDefender's app, I was floored that a company that prides itself on defending online reputations has not used its Facebook page to let people who downloaded the app know how to get it to work correctly - especially since the first complaint surfaced on its Facebook page on June 2.

I'll be curious to see whether ReputationDefender notices this blog post in its own online reputation monitoring efforts and swings into action to address the complaints of people frustrated with its Facebook app.

Vocus Builds Buzz with Generous Offer & Squelches It With No Trial Opportunity

A few months ago, I received an offer from Vocus, an on-demand software provider for PR professionals, to try one of their products which competed with something I was using on a regular basis. Usually, I throw offers like this away without giving them much thought since I get so many and simply don't have the time to switch service providers. However, I was intrigued to read that Vocus was offering a $50 Barnes & Noble gift certificate for just sitting through a one-on-one online demonstration so I signed up. The sales rep did a good showing off the product but I opted not to give it serious consideration because Vocus wouldn't give me a free time-limited trial like I'm accustomed to getting from software providers.

My Vocus experience is a good lesson on a couple of levels. If you want to stand apart from the competition and get people buzzing, give them an incentive to try your product like the $50 Barnes & Noble gift certificate that Vocus offered to me. However, if you don't people to test out your product on a limited basis at no obligation, you're limiting the numbers of people who will actually make the switch.

LinkedIn and Networking in the Digital Age

The article below is from the March 2010 edition of my Buzz Bulletin eNewsletter (free signup on my website):

“Networking is getting what you want by helping others get what they want.” - Zig Ziglar

I’m surprised to meet so many savvy business people who either aren’t on LinkedIn, the most popular networking website for professionals with more than 60 million active users, or fail to leverage its powerful features. When I ask people why, I hear things like “I just don’t see the value.” It’s an unfortunate point of view because LinkedIn provides tremendous advantages:

Staying Connected

LinkedIn is an ideal complement for real world networking activities. Before LinkedIn, I would meet interesting people and not have a simple way to keep in touch. Now, when I meet someone with a LinkedIn profile it’s simple to follow up with an email or personal card saying how much I enjoyed meeting them and how I hope to stay connected via LinkedIn. For former clients and people I see rarely yet with whom I want to maintain ties, I’ve discovered that LinkedIn is an easy way to share my activities and learn about what they’re doing since LinkedIn sends me regular updates of what’s going on with my network. Also, LinkedIn is the primary way I stay in touch with folks from my high school, college, graduate school and professional organizations. All have LinkedIn groups which I’ve joined and use to reconnect with old friends.

Building Relationships

It takes me less than a minute to write testimonials for people in my LinkedIn network. After I write a recommendation, the recipient gets to approve it before posting it to his or her profile page. Whenever I’ve recommended somebody via LinkedIn, I’ve always gotten an enthusiastic “thank you” in return. And, I’ve discovered that many people who have received recommendations from me will provide me with a testimonial even though I haven’t requested one.

Leveraging Relationships

My favorite LinkedIn feature is the “Network Statistics” section found in the pull-down menu below “Contacts” on the home page. Currently, I have 248 friends and colleagues in my LinkedIn network. Two degrees away (friends of friends and colleagues), I have approximately 62,000 contacts. Three degrees away (people I can reach through my contacts or one of their contacts), my network expands to about 4.5 million people. If I want to target a specific company, I type it into the search bar on the top of any page. This provides me with my personal list of first to third degree contacts who either work or worked for the targeted company. Now, instead of having to make a cold call, I can get a warm introduction into the company or I can use my network to gain insight into what’s going on behind the scenes.

Providing Insight

Now that my LinkedIn profile is 100% complete, it provides anybody interested in my services with the best insight into my background and qualifications. Furthermore, it contains material about me which can’t be found elsewhere like personal recommendations. Just recently, on my LinkedIn profile page, I posted a high-definition YouTube video demonstrating my expertise in a speech that I gave on “Marketing Without Advertising” (easy to do using the plug-in for Google Documents available on LinkedIn). My LinkedIn profile is so complete that I’ve posted a link to it in the signature section of my outbound email messages so people can learn more about me and my services.

If you’ve found an interesting way to use LinkedIn, please share it with others by posting a comment below. Good luck in all your networking activities and I hope to see you on LinkedIn or at a networking event soon!

Back to Eden Bakery in Portland Cultivates Organic Word of Mouth

A couple of days, an urge for something sweet drove me into Back to Eden, a four-month-old bakery in Portland, Oregon. I've been monitoring rave reviews for the bakery on Yelp so I was curious to to give it a try. When one of the owners told me that all items on the menu were vegan, I was leery since I just couldn't imagine baked goods without any dairy product tasting good. But, the baker must have a degree in alchemy because everything looked delicious and tasted even better. The rich and dense pumpkin whoopie pie on its own changed my perception of veganism. That one item alone is worth a trip. Cap it off with hot chocolate made from hazelnut milk for something completely different and delicious.

John Blomgren, one of the owners of Back to Eden, told me that the business is doing well thanks to positive word of mouth. Many people have found the bakery thanks to the rave reviews on Yelp. When customers sample the goods, meet the nice owners, and visit the beautifully-appointed store, it's not surprising that they come back, refer their friends, friend the bakery on Facebook, and follow it on Twitter. It's awesome to see a small business firing on all cylinders when it comes to generating positive word of mouth.

John also told me something that many business owners should take to heart. He said that he and his partner decided to start the business without any fanfare like opening parties or aggressive media outreach. He figured that they could do these once the business had established itself. Furthermore, he knew that many kinks needed to be worked out before he could ensure people would be so pleased that they would come back and refer their friends. 

I'm glad that the business approach Back to Eden is taking is so sound since I want my source for great baked goods to last for years!

Moonstruck Chocolatier's Behind-the-Scenes Website Video Demonstrates the Power of Authenticity

To often companies forget that many people choose to buy from those they like as much as making decisions strictly based on the features and benefits of a particular product or service. My wife just sent me a link to the below video from Portland, Oregon-based Moonstruck Chocolatier. Aside from making you want to get away from your computer to find a great piece of chocolate, it demonstrates the power of authenticity in web-based video. I love that the only voice in the video is that of one of the company's chocolatiers. He stumbles a few times while talking but you can really hear his enthusiasm for the company and the quality of its chocolates. No actor or actress is as convincing as an enthusiastic person sharing what they love to do.  Enjoy!

Why I've Been AWOL and 2010 Business & Blogging Outlook

Since I started this blog in 2005, I've never gone nearly so long (nearly two months) between posts. But, my life has taken a marvelous turn for the better which was so all-consuming that I decided to take a break from blogging to fully enjoy the moment. Now, with life settling back into a more normal pattern, I'm returning to this blog with a new perspective and enthusiasm.

In November 2009, I traveled to Shanghai, China to visit a former client (DressMonkey) as well as a great business prospect. I did not have great expectations for Shanghai. From press accounts, I imagined that I would discover a gritty industrial city with little of interest to see or do. However, I discovered a sophisticated, dynamic place with an impressive infrastructure, friendly residents, amazing restaurants, lovely parks, and interesting sights. As for pollution, it was not nearly as bad as I anticipated, and locals told me that it has improved a lot in the past decade due to tighter environmental controls.

After leaving Shanghai, I met my wife Ellen in Beijing where we went through the final training in an adoption process that has taken more than three years to complete. On 12/7/09, we flew to Changsha, the capital of China's Hunan Province, to complete our family when we picked up Anya Yuzi Galvin, a healthy, happy, and energetic 21-month-old girl. We can't believe our good fortune in having Anya. It has been a joy to discover her unique attributes over the past month such as her love of spicy food. We never thought that we would need to ask a pediatrician whether it's okay to put Tabasco sauce on a toddler's meals so she will eat them (yes, it's fine). We've also learned that our daughter has an incredible affinity for music and dances whenever she hears it (particularly ballads from female singers but today she heard Rick James' "Super Freak" on the radio and couldn't stop bobbing her head in tune to the song). We've also gained a profound appreciation for all parents as we've learned the incredible effort it takes to mind a toddler who has no sense of physical danger.

As we kick off the eighth year of Galvin Communications, our word of mouth marketing and PR firm in Portland, OR, I'm excited about the possibilities that lie ahead. Even though 2009 was a challenging year for many companies, we had one of our best years as many of our clients looked to our services as a way to retain their existing customers and attract new ones at a fraction of the cost of traditional advertising. We expect that this trend will continue in 2010.

I also remain committed to this blog for five reasons which I share now in the hopes that they might convince you to start blogging or renew a lapsed blog:

1. Blogging is "Googlelicious."

My blog is much easier to find on Google and other leading search engines than our company website. Search engines continue to rank well trafficked blogs with strong inbound links much higher than most websites.

2. Blogging helps me stand apart from my competitors.

I live in the 23rd largest metropolitan market in the United States (Portland, OR/Vancouver, WA) but I'm the only one I know of who blogs regularly about word of mouth marketing. I've attracted clients both locally and nationally because I'm perceived to be more knowledgeable than many equally or more competent colleagues who simply don't blog. Most professional categories are similar to mine in that you can quickly raise your profile through blogging because few are doing this.

3. Blogging builds my credibility.

By writing regularly about word of mouth marketing over the past four years, I've been invited to speak at conferences and meetings around the country which has enhanced my reputation leading to more speaking opportunities and the acquisition of new clients.

4. Blogging creates PR opportunities.

Some of the readers who come to this blog are journalists which has resulted in getting my quotes featured in newspapers and magazine around the country. For instance, a 7/8/09 publicity stunt that Greenpeace did on Mt. Rushmore on which I commented in this blog resulted in some great mainstream attention for me which I detailed in this post.

5. Traditional blogging is on the upswing.

An insightful post with a surprising graph appeared on TechCrunch on 11/24/09 showing how traditional blogs are growing in popularity while the microblogging phenom Twitter is waning. I've certainly noticed this trend in the analytics of this blog as my traffic picked up significantly in the second half of 2009.

Whether you decide to commit (or recommit) to blogging in 2010 or pursue other endeavors, I wish you the very best as your pursue your goals. Thanks for your continued interest in this blog despite the long hiatus without explanation.

Hyundai Canada Leverages Buzz from the "World's Worst Parking Job Ever"

Thanks to a tip from Janet Clesse Hager at Tinfish Initiatives, a marketing firm in Portland, Oregon, I just watched a savvy YouTube video (see below) that Hyundai in Canada posted in response to a one-minute video about a Hyundai car that was crushed in "the world's worst parking job ever." The original video featuring the parking accident in Canada went viral and has been seen by 2.4 million times in its first two weeks online.

Kudos to the marketers at Hyundai Canada for seizing a great opportunity to to generate positive goodwill for the their brand by offering the owner of the trashed Hyundai a sweet replacement ride. Hyundai of Canada's video, which  has been watched 193,000 times in just the week since it has been posted, is a great example of the value of monitoring social media as it relates to one's brand and reacting quickly to an opportunity for creating positive buzz (or doing damage control for widespread negative word of mouth).

Wall Street Journal Story about the Demise of Email Misses the Mark

In a fascinating Wall Street Journal article titled "Why Email No Longer Rules... And what that means for the way we commmunicate," Reporter Jessica Vascellaro writes, "Email has had a good run as king of communications. But its reign is over. In its place, a new generation of services is starting to take hold—services like Twitter and Facebook and countless others vying for a piece of the new world. And just as email did more than a decade ago, this shift promises to profoundly rewrite the way we communicate—in ways we can only begin to imagine.

In August 2009, 276.9 million people used email across the U.S., several European countries, Australia and Brazil, according to Nielsen Co., up 21% from 229.2 million in August 2008. But the number of users on social-networking and other community sites jumped 31% to 301.5 million people.

Without question, social media website like Twitter, Facebook and LinkedIn have received a lot of press coverage this year and have demonstrated phenomenal growth rates. However, the article, which implies that email has lost much of its relevancy, clearly misses the mark. Here are just a few of my reasons why email will continue to thrive:

1) Many people prefer email to social media.

I've tried to discontinue my monthly ezine twice over the last four years figuring my readers would find it easier and more timely to get information via this blog. I heard comments like "I like getting your stuff via email because it's more convenient" and "Sure I could subscribe to your blog via an RSS feed but I don't have the time to do this or don't want to set up an RSS reader."

2) Many check their email more than their social media platforms.

Ok, be honest... how often do you check your Facebook account? In contrast, if you have a corporate email address,you most likely look at it various times throughout the day. The frequency in which people check their email means that it is still a highly-effective way to get in front of them with your messages.

3) Email is easier to screen than social media.

A couple of years ago, I was getting increasingly frustrated with email since so much junk was cluttering my inbox. Then, I downloaded Cloudmark, a robust spam blocking system, and nearly all my junk email was directed to spam folder. More recently, my ISP added an excellent spam blocking filter that works even better than Cloudmark. In contrast, I find that Facebook, Twitter and LinkedIn have become so popular that I'm constantly being invited to connect with people and events which don't interest me.

Other compelling reasons for the continued importance of email were aptly pointed out in the Vertical Response blog. What do you think about the future of email as social media usage increases?