Jump on the bandwagon – it’s the last one: new developments in online promotion

Citation

Pitta, D.A. (2010), "Jump on the bandwagon – it’s the last one: new developments in online promotion", Journal of Consumer Marketing, Vol. 27 No. 2. https://doi.org/10.1108/jcm.2010.07727bag.001

Jump on the bandwagon – it’s the last one: new developments in online promotion

Article Type: Internet currency From: Journal of Consumer Marketing, Volume 27, Issue 2

Edited by Dennis A. Pitta University of Baltimore

We marketers are masters of repackaging. Usually our efforts take the form of bundling benefits in products and services or building assortments to satisfy customer wants. However, one should not underestimate the innovativeness of marketers. Just like boys who learn how to use a hammer find an infinite number of things that need hammering, marketers can find a variety of things to which they can apply their competitive tools. A new service, along with its new web site, combines some existing marketing and internet elements together in a new way.

The site, Groupon.com, focuses on the proven techniques of the coupon, with a dash of something new. Traditional coupons are printed certificates that promised a discount price or a free product. They are distributed via mail, fliers, with or in newspapers and magazines, or at the point of purchase. Marketers even attach them to the product package. Over time, marketers tried numerous variations to hit particular markets. Ever mindful of the cost of printing and distributing coupons, marketing metrics emerged to help monitor costs and return on investment as well as to reduce waste. Many facts emerged that are now part of industry lore. For example, the metrics showed that typical coupons distributed by mail to responsive segments enjoyed peak redemption rates about seven days after mailing. Equally important, redemption rates were found to tail off to negligible levels 30 days after mailing. To spur redemption, concerned marketers added “drop dead” expiration rates with limited success.

Innovation along the coupon life cycle

Fifty years ago, someone developed the idea of the “radio” coupon. It was not printed, but was delivered as a message over the radio. It was usually advertised with a very short redemption time, perhaps as short as a few days, and could be redeemed by the consumer at a retail location by mentioning it and asking to redeem it. Radio coupons enjoy some success and are still in use. They combine low cost and a measure of immediacy.

About 15 years ago, coupon issuers discovered the benefits of e-mail as a delivery system. Very low cost coupled with high specificity transformed the industry. Consumers can print only those offers they like. Today, e-mail coupon offers are so common that some retailers use them extensively. One notable example, Harbor Freight Company, offers e-coupons to customers who sign up to receive them. They supplement flier and print media advertising and offer substantial discounts on both expensive and affordable items. With the downturn in the economy, Harbor Freight has increased the frequency of its e-coupon offers. Today, some Harbor Freight customers receive two e-coupon offers, consisting of 15 to 30 discount items, per week. One issue that has not been solved is motivating customers to redeem those coupons, even after they have printed them. Sometimes the pressures of life interfere with the task of going to the retail outlet and buying the products.

Still, if customers seek deals, they are more likely to redeem coupons they choose compared to those that arrive unsolicited. One notable coupon site is Daily New Deals (www.dailynewdeals.com/). It is one of the coupon accumulator sites and offers numerous coupon deals and discounts focused on companies. They include Amazon, Avis, Bestbuy, and numerous retailers in alphabetical order up to Wal*Mart. Overall, the site features scores of deals for each retailer totaling hundreds of money saving offers. The sheer number of offers presents considerable clutter and may lead to such a large volume of information that consumers suffer ”brain fire” a kind of information overload that reduces overall sales. It also sets an expiration date that can last for one week to ten days. The coupons have a limited life but they do hang around for a while. Other accumulator sites such as BuyWithMe (www.buywithme.com) focus on deals in cities which may be easier for residents to use. However, the sign up process is cumbersome which inhibits use.

Groupon.comwww.groupon.com

Groupon.com has managed to avoid the information overload issues of other sites. It has harnessed the power of consumer word of mouth by making its offers few and perishable. It offers one – just one – coupon deal per day. One coupon is easy to understand and remember compared to hundreds. In the objective analytical calculus of value, Groupon offers less variety and thus less savings value than DailyNewDeals.

Groupon’s novelty and the source of its success, is that it requires a minimum number of subscribers or the deal does not happen. Thus, if less than 50 or so consumers go for the deal, the deal dies at the end of the day. The old marketing wisdom of perishability being a powerful motivator is still valid. The traditional marketing motivator was often couched as, “It’s the last one.” The threat of losing out on buying an item is sometimes enough to prompt a customer to act. That threat of loss helps make online and in person auctions effective.

Enhancing the motivational effect of immediacy, the internet facilitates communication with others. What will consumers do to get the deal? They may spring into action and get their friends involved. Social networks and e-mail make contact easy. After contact, consumers may persuade friends that if they do not act all parties will miss a good deal. In essence, Groupon.com creates energized customers who become sales agents for the site. The sense of community and interdependency Groupon builds differentiates it and makes it very effective.

Reaching the first friend in the network of friends can sometimes be difficult. Predictably, Groupon is using Twitter and Facebook to build a buzz and create awareness. More important, Groupon uses social media to do market research. We visited the Chicago Groupon Facebook site and found this “voice of the customer” question, “Hi Groupies! Looking for your opinion-if we created a Groupon store with Groupon swag, what kind of swag would you want most?” One of the helpful responses was, “Groupon E-giftcards so I can gift Groupon to friends in other Groupon cities without having to go thru mailing a physical gift card.”

More important, some of the “groupies” offered potentially valuable suggestions that would enhance the sense of community among customers. For example, “Groupon could have a competition where Groupies can design swags and then we can all come back and vote for the favorites,” and “How about a Groupon cereal bowl & spoon, to remind us first thing in the morning to check our daily Groupon?” Building relationships into a community is the culmination of a great web design strategy.

In essence, there are key lessons that other marketers can learn from Groupon’s strategy:

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  Make the interaction simple – Groupon offers one deal, one day, one city.

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  Create a sense of urgency in customers. The deal is perishable. If too few people buy by midnight, the offer dies.

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  Transform customers into salespeople who will get other customers to buy. C’mon guys, jump on the bandwagon so we can all benefit! Successful sales are the culmination of great word of mouth.

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  Exploit social media like Twitter and Facebook to build awareness at a bargain price, and survey customers inexpensively.

The focus on individual cities (35 of them at the time this column is being written) is a good match between the local retailer and the audience and further enhances the feeling of community.

Implications for marketers

Even the trusty coupon can be revitalized by innovative thinking. Groupon.com demonstrates the value of evaluating trends for their marketing potential and crafting new products or services based on the tried and true, and fresh and new. In this case, melding social media and the communities they can help create along with the imperative of a perishable offer seems like the ultimate marketing repackaging.

In our next issue, we will investigate other informative sites and invite readers to submit their favorite internet sites for our consideration.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: dpitta@ubalt.edu for prompt attention.