Breakage is the enemy of Group Buying

Posted on by Billy Tucker

Group Buying is all about hard bargains on great experiences, the web sites (and there are a few) trade exposure to a large audience for a discounted offer and a share of the revenue gathered. Check out most of these sites and you’ll see they are typically focused on the discounts they can negotiate on behalf of their members, crowd-power put to work! These same companies often regale in the millions of dollars they have “saved” on their Members’ behalf, reflecting the margin businesses have given up in an effort to attract a new audience.

But businesses tell us at Cudo that they are being pushed too far by aggressive Group Buying reps, and that they are disappointed by the quality of customers they attract, often finding they are seasoned voucher buyers rather than reflecting their typical audience.

And regardless of their intentions prior to running an offer, a business that has been pushed to its limits will have no choice but to minimise its losses during the process, especially when faced with a lower value customer who is less likely to come back once the vouchers is spent.

Minimising losses means one of two things to these businesses, delivering the service more cheaply to preserve some margin, or hoping the Voucher buyer never shows at all, also known as Breakage!

In fact, some Competitors’ commercial agreements even include a clause intended to maximise the value of Breakage, where a higher percentage of unredeemed vouchers is good for the Group Buying business.

But this is hurting the industry as a whole.

The Group Buying company typically controls contact with the end user, meaning they alone can communicate with the purchasers and encourage them to redeem their unused vouchers, however they are not incentivised to do so, the featured business should be focused on maximising the number of new customers they touch but may be hurting so badly after loosing the battle to preserve some margin that they hope no one ever shows! That said, they are not in a position to talk to voucher buyers even if they wanted to!

Group Buying cannot be about discounts alone, it has to be about incentivising customers to try new things. This is a sampling exercise, not a fire sale. Screwing a business in the name of growing your Member base is counter intuitive, because over time the best of the businesses we want to work with will want nothing to do with the Group Buying category as a whole, hurting the more reputable business out there.

And Consumers know that owning unredeemed vouchers is a lot like having a wardrobe full of clothes with Sale tags on, at some point someone will say “enough” and the buying will grind to a halt no matter how good the discounts are. We are focused on Experiences at Cudo, offered at a no-brainer discount, and we get that the future of the industry is hinged on our customers actually participating in those experiences, not just for the growth of the businesses we feature, but for the future of Cudo  and for the industry as a whole. We will continue to focus on redemption at Cudo, and never encourage Breakage.

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Running cudo.com.au – a Group-Buying startup

Posted on by Billy Tucker

After almost four months of building, launching and now growing Cudo I feel that I have sufficient headspace to return to my blog.

Of course the irony of my last post is not lost on me, albeit I knew at the time of writing it that I was about to begin developing “yet another” Group Buying competitor.

I wrote, “Chances are a number of poorly funded Group Buying pretenders will come and go over the coming months, it will no doubt be fascinating to watch!”, and since then I have joined the fray with Cudo.com.au, a rather well funded effort jointly supported by my new masters PBLm and Microsoft. And it has been fascinating to watch!

11 or so months in, and none of the Australian Group Buying companies appear to have failed just yet. And like any fragmented marketplace the aggregators are in the mix too, capitalising on the lack of loyalty or differentiation. I expect they will start to lose interest at some point too having failed to build a decent living out of their thin affiliation! But for now, there still seems to be some room in the market as the shoppers keep shopping, and the Merchants keep signing up to their new found one-day wonder-spruik.

Even with all this new competition there’s no obvious downside to Cudo either as enthusiastic new entrants pour oodles more money into Google in an effort to harvest a precious click or two, while educating Consumers and Merchants alike for the greater good.

I still expect to we’ll see some consolidation soon, but for now, it’s 1pm on a Saturday, back to work I guess… Start-up life!

Gerald, who the F**k is Gerald?

Posted on by Billy Tucker

I was delighted to discover that I have a deceased relative called Gerald Tucker, albeit he sadly passed away it seems! But what’s this? He has an estate? wowser! Well, I didn’t know him, and, well, have never heard of him, but sure, why not? I may be his rightful heir! But he did contact me via Facebook, so it’s pucker for sure.

Please don’t suggest this might be a Nigerian scam, non! The gentlemen handling the estate is in Hong Kong, a Mister Shang Lee Esq.! I happen to know that HK is a long way from Abuja. May be worth pursuing after all, could be bucks in it for me! Even if I do have to shell out a small admin fee, say, a few hundred dollars.

Here’s the email:

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Bastards.

New name, new “location”, new channel. Same old crap.

If you get this. Ignore it. 419 in disguise.