Web-based Sales Platforms – Part 3

First, let me say that this picture of the Prince William and his new bride has absolutely nothing to do with today’s blog post on web-based sales platforms. Although having been awoken at 3 AM to watch the ceremony live, I probably look and feel like the little girl on the left; cranky, tired and a little out of sorts!

On Wednesday, I discussed Groupon, the largest and most popular “deal of the day” company. Like eBay, Groupon also has its detractors. If the economics or mechanics of Groupon simply do not work for your business, you are not alone. However, you may have cost effective alternatives readily available. Groupon is quickly gaining new competition. An article in the April 25, 2011 edition of Forbes Focus by Brendan Coffey estimated Groupon has 425 “me-too” competitors, and suggested that future competition may include Facebook and Google. Groupon rejected a $6 billion buy-out offer from Google in December of 2010.

While I have not evaluated specific vendors, here are several options you may wish to explore on your own.

  • Some cities and regions are creating websites to distribute coupons and advertise specials to promote local businesses, and typically at a lower net cost than the big-name national sites. I was pleased to see several such sites advertise on television during a visit to the Central Coast region of California. As an example, look at www.slocoupons.com. It promotes commerce in San Luis Obispo County. Search the Internet and ask your network contacts for comparable programs in your area.
  • Socialdish.com is scheduled to launch in March 2011, so its ultimate success has yet to be determined as of this writing. However, what makes it worth watching is that it is structured as a multilevel marketing program. It will distribute 30% of its fees through 10 levels of “downlines” as people recruit their friends and family. The limited information available at this time indicates Socialdish’s charges to advertisers will be less than Groupon.
  • LivingSocial.com is another “deal-of-the-day” type competitor to Groupon. This company was partially financed by the online retail juggernaut Amazon.

On Monday, I will discuss several more Internet websites that allow you to promote your services or locate potential clients at little or no cost.

In the meantime, best wishes to the Royal couple. If you are ever in North Texas, stop over. We’ll throw some red meat on the grill and I’ll tell you all about the War of 1812. And if you have any questions on┬ámarketing, I can tackle those too. Kate, I understand you family runs a small business. Who handles your finances?

Web-based Sales Platforms – Groupon

Today I continue the discussion of web-based sales platforms as low-cost marketing opportunities. I introduced this topic on Monday with a short post about eBay. While eBay has become phenomenally successful, it does have its detractors. Fortunately for today’s small business owner, it now has a wide variety of competition to accommodate your marketing efforts.

National websites that distribute coupons and advertise specials are interesting and growing promotional vehicles. Perhaps the best know of these so-called “deal of the day” enterprises is Groupon. It was the subject of an August 30, 2010 Forbes Magazine article called Meet the Fastest Growing Company Ever by Christopher Steiner. Its name is a play on the words “group” and “coupon,” a misnomer since customers purchase discounted vouchers, not coupons. If your specified minimum number of customers is achieved, you are paid immediately. It costs nothing unless the offer is completed.

Groupon’s compensation is a healthy portion of the offering proceeds, plus credit card fees. Customer discounts of at least 50% seem to be the norm. Groupon is therefore a viable platform to distribute gift cards and to introduce customers to high margin products or services, especially where additional full-price sales are anticipated during the initial or repeat sales.

  • The most obvious risk of incorporating Groupon into your marketing plan is attracting customers who will only buy at a substantial discount. If your Groupon pricing strategy is contingent on support from full-price repeat sales, this venue could become a textbook example of a strategy that increases sales while decreasing net income. Monitor results closely and be prepared to run away if necessary.
  • Another possible concern is that your promotion will be announced as part of a daily email distribution scheduled by Groupon; you have no control over its timing.
  • Finally, it is possible to become a victim of your own success with Groupon if you do not place an upper limit on how many discount vouchers you are willing to sell. This can happen in at least two ways. First, if your offer is attractive enough, placing limits on it (experiment as you would with any new promotion) will avoid the risk of having more customers than you can accommodate. A line of unhappy customer wannbes standing outside your store with Groupon vouchers in hand is not good public relations. Secondly, you are likely to lose money on every Groupon sale. For example, a $100 gift card offered for $50 will only generate about $23 in your pocket. Further assume the cost of providing that $100 of goods or service is $80. You will therefore lose about $57 on every Groupon voucher. Know your numbers and factor the expected gross loss into your marketing budget.

On Friday, I will discuss several “deal of the day” alternatives to Groupon.

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