Wednesday, June 22, 2011

Social Deals - The Real Thing (for Some Businesses)

There's a lot we have to learn at Five Star Martial Arts, and I don't just mean Karate. A big part of my job is to leverage my business experience to pave over some of the bigger potholes and speed bumps before we hit them, but a lot of what we face is new to me as well. I've never been responsible for advertising, for example, so now I have to draw on what I've learned in my MBA program and what I've seen my friends in the Marketing Departments do.

And some of our challenges are just plain new, because they involve technologies and services that simply didn't exist before. Social Marketing is one big one - using Facebook to serve existing customers by providing a constant (daily) stream of news, events, motivation, encouragement, recognition, articles and other information. It also serves potential new customers, giving them a taste of what we're all about, showing how active and dynamic we are, and showing that we're "hip," using this new technologies that a lot of our competitors either don't bother with or don't use with energy and consistency the way we do. Sadly, it's hard to draw conclusive effectiveness data from social marketing on Facebook. Did we actually get any new students or retain any existing ones because we were using Facebook aggressively? I have no way to really tell, but it seems like a good idea anyway.

The other brand-new technology is the "Daily Deal" form of social marketing. I'm referring of course to tools like Groupon and Livingsocial (among many others). I'm not personally responsible for using this tool at my business, but I have input and I try to account for it in my strategic business planning. And a powerful tool it can be, if used for the right purposes. Sort of like The Force, I suppose.

I read an article recently about how Groupon, as a company, is more or less one big Ponzi scheme, paying today's bills with the deal they're going to offer tomorrow, and so on. Moreover, the article argued that companies dealing with Groupon were at severe risk of digging themselves into a hole, relying on the sales of new Groupon offers to pay for the supplies they needed in order to fulfill the previous ones they'd sold. Well, here - you can read the article for yourself: Why Groupon is Poised to Collapse.

I can't entirely disagree with the article, because I just don't have enough facts. But I can sort of disagree, because I've personally seen some incredible results using these tools. I even left a comment about it on that article. Here it is:
Like any other business tool, companies need to be smart about how they use Groupon. It's not going to be for every business. You can only afford to sell at or below your cost for a very short time before you overload yourself and go under. The business I work with - a martial arts and fitness center - has been EXTREMELY HAPPY with Groupon and LivingSocial. They bring us QUALIFIED LEADS in the form of customers who have already paid for the privilege of trying us out before they've even walked in the door to see the place. Read that again - they PAID for the privilege to come see what we're all about. And what we give them back in return effectively costs us nothing (at least in terms of inventory or product) - it's the service of our knowledge and our classes, both of which were going to be there anyway. Granted, when we sold over 200 fitness classes the first time - expecting to sell 20-30 if we were really lucky - it stressed us out a bit and we needed to buy some extra equipment in a hurry, but it was totally worth it and then some. The cash we got from Groupon itself was a pittance, but the new customers we gained - especially those we've been able to convert into long-term clients under contract - are irreplaceable. PLUS, we've managed to get in the game early and beat our competitors to the punch. We consistently see them showing up AFTER us with similar deals that sell much worse than ours - because we've already captured that market.

I'm positive that a lot of companies would lose their shirts using Groupon. That may arguably even be Groupon's fault if they're overselling their own product and not divulging the ristks, but I can say with confidence that it's a tremendous service for the right industry, and we're thrilled we got on board with them when we did.
I'll tell you, success feels good, and these new "social" tools feel like they're successful to me. They're working like crazy for us, anyway. Every business struggles with basic challenges like building brand identity and getting the word out to potential new customers. How can anybody find out how awesome you are if they've never heard of you. Advertising is expensive, but Groupon (as one example) PAYS YOU for the privilege of advertising your services to a broad range of customers. And it pulls them in by the truckload. If you're the right kind of business to take advantage of that without losing more than you can afford in the deal, maybe you can win with social deal marketing, too.

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