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US Coupons IPO signals a return of the Online Deals mojo

RetailMeNot today submitted an S-1 filing as a precursor to a $230m float in the US, a clear indication of an upswing ahead for the beleaguered Online Deals market.

Some time back I talked about the diffusion of innovations curve, how deal-hungry consumers had adopted the burgeoning Deals market like a pack of clucky Brangelinas on Safari, driving the growth of the market place to breaking point. What followed was market disillusionment as the half-baked players fell short of their customers’ expectations time and time again. Now that the chaff has been swept away, or in some cases absorbed by the leaders the market is once again satisfying a powerful demand for online deals.

In Australia I expect the market to regain momentum toward a billion dollars in revenue, and $100m or so in EBIT. As a market the EBIT pool isn’t stellar, but given the winner-takes-most nature of the sector each of the 2-3 leaders will likely hold 20% of the market and share more than 80% of total profits, meaning $200m in revenues will yield ~$30m in EBIT, not bad.

Diversification in the Deals model is also apparent, with a clearer division between servicing a basic need versus impulse and discovery. The holiday category is growing with fully packaged vacations on offer turning long-haul travel into a $1,000 impulse purchase, and the utility categories such as wine and home-wares are solid. Ironically the original purpose of Group Buying, to fill every empty seat in your local restaurant, continues to miss the mark with offers appealing more to the price conscious than the culinaraly adventurous, disappointing proprietors and their staff alike.

Although no one has yet nailed the local restaurant marketplace, the prize is huge. I expect one of the leaders will emerge with a model that works and further accelerate the Australian Deals market to $1bn in revenues between now and 2016.

A high price to pay…

After following a link suggested by a LinkedIn contact I visited Open Forum hoping to read about a recent interview with Sir Richard Branson.

When I got there I was given the option to sign in with LinkedIn, easy I thought…Open Forum

Luckily, I paused at the sign in page long enough to read the terms and realised that signing in with LinkedIn meant I would have to pimp out my beloved LinkedIn contacts… WHAT?

In exchange for access to this interview I have to provide Open Forum access to my LinkedIn contacts, worse still, let Open Forum communicate with my contacts as me! AS ME!(Just like my contact obviously had!)

This doesn’t seem like a fair exchange to me, not by any stretch. Unbridled access to over 1,600 contacts that I know personally and getting to masquerade to those contacts as me to spruik your company message, that would surely be worth many thousands of dollars, way more than the value of the content I suspect.

Time to look for another source of inspiration!

The serious side of Gamification

A steady stream of retail innovation exists online; some effective, some less so. But most claim to centre on a perennial problem in Retail:

How to drive sales through incentives without destroying long term brand value…

Group Buying and other Daily Deals sites were built to address this issue, and they’ve done a pretty decent job if their multi-billion dollar revenues are anything to go by! Though, to some extent they are a victim of their own success in that it’s hard for a brand to discriminate on price discretely when so many of its regular customers are Daily Deals customers.

Further challenges with Daily Deals include the fact that the Brand doesn’t typically control the creative, meaning they are often a Supplier to the Daily Deals Site not a Client. And, the Daily Deals site will leave a permanent record of the Sale in their back catalogue which will appear in Search and therefore undermine brand value. Further, the Brand owner is asked to give away quite a lot, more often than not the Retail price is discounted by more than 50% and a further 20% – 30% is given to the Daily Deals site as a commission.

Clearly there are a number of scenarios where this channel works well for a business. The unit sales volume can be significant with no marketing effort from the Brand Owner hence they are appealing in a lot of ways, especially if owning the customer is unimportant.

A radical new tilt at the problem is Entertainment Shopping, where the retail price is used only to describe the Size of the Prize, but is otherwise irrelevant. One example of Entertainment Shopping is Penny Auctions, where users purchase Bids which they use to win items, theoretically being able to win and items for a single bid, which may cost less than a dollar. TPlay for Winhe reality though is that these Auctions are super competitive and the likelihood is that you will lose many more auctions than you win, yet the bids you used on lost auctions still cost real money – in that sense it’s more akin to gambling than shopping. For the Auction site this means the overall yield per item is greater than the retail value, thus favouring the Penny Auctions themselves more than the Brand Owners or the customers, albeit customers may choose this purchasing route for the sheer joy of the Auction!

In the Entertainment Shopping category Australian Statup Wynbox has a much more evolved solution for Brand Owners. The genius of the Wynbox solution is that they provide their Buy-to-Win platform as an integrated shopping engine for an existing website, meaning the retailer retains end to end control of the user experience.

Buy-to-Win involves the retailer setting a ratio of free items to full paid items, meaning anything from 1 in 2 to 1 in 10 or more may be free, equivalent to a direct discount if that number are purchased by a single customer, or a lucky dip if you are buying just one.This is a simple way to provide a strong purchase incentive without discounting the product, and it can be fun too, so it ticks the box for the user who plays Candy Crush between shopping missions!

There are a number of interesting scenarios that underline the power of the Wynbox platform, such as in the sale of concert tickets for instance. As sales begin to lag for a concert, the ratio is introduced. The ratio can be cranked up to 1 in 2 if necessary to drive sales, but at no point is the ticket price discounted, meaning the customers who purchased the concert tickets at full price never feel cheated and the Talent and the Promoter are happy.

In fact, Wynbox works in a number of scenarios, including Fashion where margins on Full Price products are high but the vast majority of purchases normally occur at a substantial discount, with Buy-to-Win the discount can exist without an overt discount.

All retail businesses should be thinking about the entertainment value of their shopping experience as consumers explore less boring ways to shop for discretionary items. Wynbox offers a fresh solution that can be “plugged in” to an existing site, meaning a fast track to an Entertainment Shopping experience that would otherwise be very hard to achieve.

The pursuit of great service begins and ends with love.

Service begins with love

Some businesses will never get it, never.

I couldn’t be more passionate about great service, my adult life has been peppered by the pursuit of the perfect service experience, delivering it or it being delivered. So far I’ve found that it’s massively hard to give, and sadly rare to get.

A key milestone in that pursuit happened two weeks ago when Yabbit.com launched, Yabbit is the new feedback platform in partnership with American Express [Amex have made it available free and exclusive for American Express merchants in Australia]. Each day the Yabbit team are talking with businesses about the chance to hear from their customers, directly and one to one-ly about their service experience, the good and the bad, the great and the sad. Awesome, sounds good, they say. But they don’t always mean it. Like, really mean it.

And it struck me.

It’s not about service, it’s about love.

What’s love got to do with it?

Love is – Doing things you don’t have to do, but want to do, just because. Smiling because you can’t help it. A spring in your step. Caring about everything you do. Keeping things fresh and new. Doing what you say you will do. Surprising and delighting. Being spontaneous, early, eager, attentive, gracious, careful, thoughtful, even thankful. Just like great service.

Service isn’t about being fast or efficient, it’s about love. Giving your customers a little slice of you, showing how much they mean to you, and finding a team that will behave the same way, not because they are following a blueprint but because they also love to love. Did you show your customers any love today?

Some businesses will just never get it. Never.

The bigger they are…

Apple has a long way to fall

The mocking began almost three years ago today. Apple Fan boys & girls chorused in smug, urbane disdain of my Apple hate. How I dared question the gospel according to Jobs.

Well, I did.

In March 2010 I wrote, “Increasingly, fashion’s undesirables are adopting the iPhone as their key to cool, just as the true cool are heard to say “it’s just a phone, I’ll change it soon”. iPhone has some runway yet, there are a few hundred million people still to buy one meaning Apple have at least a couple of years of stellar revenues to look forward to from their phone division; but when the fickle face of fashion is looking the other way, what damage will have been done to the broader Apple brand?”

Right now, the Kids are buying Samsung’s range of Android powered devices, they are unmistakably cool. Parents of those same Kids are “doing Facebook” on iPhones, and there’s nothing cool about that!

The challenge for Cupertino is in the awesome strength of the Apple eco-system, the all of nothing iTunes lock-in they so clearly hoped would bind Appleites to polished metal and white doesn’t work when they have found religion elsewhere.

Losing Mobile Phone share and therefore command of the users’ Media collection undermines the entire Apple product range as well as the economic model – meaning the whole business is on very shaky ground if can’t reverse its fortunes, and fast.

I foresee a very rapid demise ahead for the once mighty Apple, truly a victim of their own incredible success.

Turning Advertisers off with visual Vomit

As a user, Facebook is frustrating, and as an advertiser, it’s downright useless.

Humans are skilled at ignoring the visual vomit around them, and these are skills that have been perfected over many years of increasingly desperate advertising techniques – from the subliminal to the ridiculous.

Stealing 5 minutes to get critical updates on the latest cat meme is what Facebook is all about, and monetising that experience has mostly been limited to targeted advertising (selling your personal details to advertisers so that they can craft ads most likely to drive a response). But with just $10 of annual revenues from each of its 600m or so engaged users Facebook has a long way to go to satisfy its many Shareholders’ many expectations!

The real challenge for Facebook though is that economically it’s still a One Trick Pony with 8 out of every 10 dollars of revenue coming from advertising. So how does Facebook outgrow the rebounding economy in order to drive up shareholder returns?

I think they have three pillars of advertising growth ahead of them, each of which will likely trade off user experience for advertiser revenue:

More advertising inventory – as the rate of subscriber growth slows more inventory is required to avoid an overall slide in the supply of advertising space – meaning more of the Facebook page will be dedicated to paid media resulting in a poorer user experience

More personal advertising – Facebook will give as much data as it can to advertisers to make the advertising product more effective – meaning Facebook will go even further to leverage their users’ personal data

More interruptive advertising – as consumers get better at ignoring the Advertising Vomit, Facebook will push its products to become more interruptive, meaning you have to wait for them to finish or actively “push” them out of the way. A poorer experience but one that is likely to yield more clicks for the advertiser.

And yet, the real challenge here for Facebook is that it just isn’t a great place to advertise for most businesses. It’s neither a great Brand advertising platform, nor is it a great Performance advertising platform – and in this analytically informed world of Marketing, the investment required to evaluate the effectiveness of an advertising platform is lower than ever before – meaning most big advertising dollars have already come and gone.

When brand is not enough

Great (british) service

On a recent trip I discovered that Virgin Atlantic aircrew behave like they’re between parties, parties I’m not on the guest list for. To be fair, old dags like me with four kids in tow are made to feel about as welcome as a recently discovered STI.

After three painful flights and a comedy of errors it struck me though, maybe all that cooler than thou jet-set party people bullshit is actually as God himself intended (Sir Richard that is).

My theory emerged when I spotted a peculiar magazine selection in the rack. Wallpaper and Style Street were propped at a jaunty angle, albeit they remained so for the entire 14 hour flight. Hardly surprising they didn’t find a reader I thought given the Virgin customers around me were less likely to want to read them than the Virgin staff. Yet those magazines were carefully positioned to enhance the Virgin Atlantic lifestyle and most likely described in nauseating marketing speak in some operations manual back at Party Town, aka Virgin HQ. I suspect somewhere in the depths of the Virgin Marketing Strategy is a view that there are enough <insert B-list celebrity here> wannabees to build them an airline that makes them feel like they’ve cracked the code of cool.

But here’s the rub. The party’s exclusive and customers are there to fill out the numbers. Virgin have recruited staff who look like the customers they wish they had, i.e. the low disposable income high spending b-grade party-set, and have missed the unfortunate side effect, those people aren’t interested in much beyond themselves – and it shows.  The smallest request is met with a gnash of veneers, and eyebrows are ever so slightly raised (I think) at the suggestion of a problem.

What I don’t get, though, it why Virgin Atlantic ads suggest they are something that they are not? Am I to believe from the TVC below that the airline who suggested you may just get into the Mile High Club on one of their planes is trying to be something different? Because it isn’t obvious yet. And until the service rhetoric has become service reality I’d dial back the messaging slightly.

All in all I’d say the biggest disservice Virgin Atlantic has done, to me and to other Virgin virgins, is to set the expectation too high. They have allowed their marketing message to get ahead of the organisation’s ability to execute which has led to a jarring customer experience. I have no intention of flying Virgin Atlantic again, or any of the Virgin branded airlines for that matter. Qantas just invited me to a BBQ.