Profiting from the fundamentals of Group Buying: Part 4… Group Think

Group Think is a very effective mechanic used in Group Buying that is perfectly suited for use elsewhere, other than where exclusivity is important of course!

By publishing the number of items that have been sold, consumers are comforted at the prospect of being part of a crowd and are more willing to buy, assured that many others have thought long and hard before deciding to make the purchase negating the need for protracted consideration!

The effectiveness of this this mechanic will peter out when availability concerns emerge, but until that point the strategy is sound.

Where access to specific purchase data is problematic, manually updating the Offer to state “more than 1,000 sold to date” works well…

As well as “number sold”, “people who bought X, bought Y” is an example of Group Think. Again these can be manually programmed where automation is not an option.

Group Buying enters the Trough of Disillusionment, will it recover?

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Gartner describes the adoption of Technology (where there has been clear market Hype) using the Hype Cycle diagram. The same diagram can be usefully adapted to describe the current challenges facing the Group Buying industry given it was built on a platform of extraordinary hype and has since suffered its own decline. Also, much like how the Technology Hype Cycle describes the organic adoption of the technology over time once the Hype has dissipated and the useful nature of the innovation emerges, Collective Buying does add real value to Merchants and Consumers, and beyond the hype and the noise of Group Buying, that value add still exists – which then begs an interesting question, what is required to ensure an enduring future for Group Buying?

The key phases of the Gartner Hype Cycle are on the left of the table, an equivalent stage in the Group Buying evolution is on the right:

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I believe that to get through the Trough of Disillusionment and onto the Slope of Enlightenment, the players in the industry need to follow the 4 tenets of Effective Group Buying:

  1. Provide genuinely useful marketing services for Merchants, including valuable insights on their new customers and mechanisms to drive upsell and loyalty
  2. Minimise the promotion of irrelevant offers through investments in targeting technology
  3. Add Value to their members through genuine discounts on products and services
  4. Underwrite their offers with a suitable customer support policy and helpdesk

Huon Bush Retreat discovers the power of Facebook Offers, not sure they expected that response! (UPDATED)

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Facebook has launched their Offers product to a limited number of Business Pages, at first glance it looks like Facebook and the current approach may be just too powerful for this small business marketplace. image

Maybe it’s the sharing mechanic, maybe it’s just the fact that Offers are new and attracting curious clicks, either way, I’m not sure Huon Bush Retreat (accommodation for up to 60 guests!) expected 120k new customers! (interesting to see how many actual customers they have gained) – fingers crossed they are not being drowned by calls right now.

No doubting the power of the Facebook fire-hose, hopefully they tame it before the product is released. I am curious to hear from someone at Huon Bush Retreat to hear what they think of the Facebook product.

Facebook offers are described here.

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As an update to the post above, I went back to the Huon Bush Retreat Facebook page to get a sense of the impact the Facebook Offer had, the results are concerning.

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The Good news is that lots of people are talking about Huon Bush retreat, according to Facebook, some 102k people are talking about the business, however, on the downside, you don’t have to look far to see what they are saying…

Sadly, the overwhelming sentiment is negative, through no fault of the Huon Bush Retreat. Their wall has been hijacked by unhappy Facebook members concerned that they are now being spammed by the Retreat.

Here’s a snapshot:

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I hope they make it through this promotion with their reputation intact.

Profiting from the fundamentals of Group Buying: part 3… Scarcity

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A key tactic more often employed by Flash Sale sites than Group Buying sites is scarcity, but there is more to this tactic that meets the eye.image

Stock limitations can be a condition, i.e. we really only have 200 available in our warehouse, however setting a stock limit can be a very effective tactic to drive up sales, this is the Scarcity Game Mechanic. To set an appropriate limit, forecast the likely sell through of a particular item, then set a stock limit that is 10 – 15% higher than that forecast, the Scarcity Game Mechanic if played right will ensure the limit is reached and your forecast is exceeded. image

To illicit the right response, the shopper has to feel some sense of urgency due to the stress that comes from missing out, clearly this is less effective in the early phase of the sale but that’s ok given the forecast amount would have been reached on its own. Having a genuine countdown display is key, either literal or abstract, regardless though it has to be genuine, once the limit is reached the item is “Sold Out”, it’s tempting to find and release more stock however once this occurs, the scarcity mechanism will be discredited for good. imagePromoting the Stock Limit though display advertising or EDM is also good, however the level of promotion provided has to be proportionate to the Stock available. Lastly, if a Consumer comes to the site after the limit has been reached, this is a great time to reinforce the “don’t miss out next time, be first to know with our SMS program” or similar engagement/re-targeting program.

Profiting from the fundamentals of Group Buying: part 2… Fleeting

It is common for consumers to react negatively to a deep discount where they don’t understand the reason for the sale. Often customers will assume there is a hidden catch, something they can’t see that others can, reasons they will look foolish and regret the purchase – in each case they will walk away from a discount rather than risk being exposed… to prevent these barriers emerging is it critical that consumers are provided with a sound rationale for the sale. This is a fundamental principle behind Group Buying, providing sound explanations for the discount, i.e. group discount, time limited offer, discount in exchange for promotion etc.

Consumers are a savvy bunch, without a clear explanation for the discount, the customer will assume there is a catch and walk away.

imageThe second mechanism employed in Group Buying to illicit maximum discounts from Merchants (and ensure impulse behaviour from consumers) is by making the offer “Fleeting”, i.e. limiting the time an offer is available in order to drive customer action through our basic fear of missing out!image

“Fleeting” is a critical function of Group Buying and Flash Sale sites and is incredibly effective at driving action. Fleeting is also used to great effect in the real world through “stock take sale”, “this weekend only” and “closing down sale”.

By time-limiting offers and proving game mechanics to generate excitement and drive action a lift in sales is guaranteed.

Much like the other tactics covered here, though, the use of a timer has to be genuine, like the Rug Store with its perpetual “closing down” sale, savvy consumers will quickly see through a fake deadline.

Profiting from the fundamentals of Group Buying: part 1… Focus

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Group Buying works for a reason, regardless of the service woes plaguing the industry (which have been driven by a combination of greed and inexperience, not the model itself) the principles behind Group Buying are sound. Over the next few posts, I will explain the key mechanics and position them in a series of non-Group Buying contexts.

There are six key mechanics inherent to the category that are designed to illicit an emotional response, such as an impulse purchase.image

This is the first of six posts I will write that describe those mechanics.

FOCUS ATTENTION ON ONLY A FEW OFFERS

Limiting promotional efforts to only 1 – 3 featured offers enhances the perception of those offers and likely uptake, minimising “noise” around those offers will further spotlight the chosen few. Featuring multiple offers on the other hand dilutes the “WOW” and runs the risk of Paradox of Choice effects.

Most email platforms will support controlled tests, such as sending one control group an EDM with multiple offers, one with the three best offers and one EDM with only a single “hero” offer.

Assuming the control conditions are sound, the likely outcome is that the Hero and “three best offers” EDMs will each provide a click through rate that is greater than the “multiple offers” EDM even though the multiple offers email included the featured offers from the other tests.

Finding the right balance is critical, and running controlled A/B and Multi Variant Tests will find that balance.

Come back soon, the untapped power of the Thank You Page.

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Most transactional websites share a common shortcoming, leaving a significant amount of value up-tapped. The Thank You page is seen as a simple confirmatory page, there to provide certainty to the customer that what they think just happened, just happened. But the Thank You Page is a comma, not a full stop.

You have battled hard to win the customer, fought to provide the right product at the right price, and you have lost many along the way. But once a transaction is complete, you’re done, there’s a tick in the box and the user begins again, <close window>, <new tab>.

But your customer is, at that moment, your biggest advocate – you are in the Golden Window. Your Advocate is brimming with delight at the purchase of that holiday, auction item, or e-book, so why stop now?

Immediately post transaction is the right time to harness their advocacy, and here are six ways to get value from the Thank You Page:

  1. Cross Sell: Have a series of pre-determined product offers, “you bought X, check out Y” – providing such offers pre-transaction is tougher and will result in a reduced conversion rate overall, but it will lead to an increase in the average basket size and may be worth while in the long run. With post transaction, there is less risk and can be used to perfect product matching.
  2. Loyalty Discounting: Reward the first purchase with a discount on an immediate subsequent purchase
  3. Voucher offer: Provide a variety of vouchers, gather opt in to email alerts to grow your email base and encourage redemption
  4. Friend Get Friend: Great time to encourage your advocates to recruit for you, make it easy for them, and provide incentives the purchaser can give away, such as discount on first purchase (people don’t like to profit from their friends, but being able to secure a discount for their friends makes them feel important)
  5. Facebook promotion: simply “click here to Like our Facebook page”, or “share the news with your friends that you just secured a holiday!”
  6. Promote affiliates: (this option is possibly the easiest to execute but the lowest value adding) add a display ad to the Thank You Page which can be sold on a CPM or on a take-over basis.

[check out RockLive in Australia and the many other agencies emerging in this space]