Deal Sites and the truth behind them…

Contributed By Rohit Mittal




Recently a lot of websites like Snapdeal, Bagittoday, mydala etc have come up which offer deals on local businesses to the customers and by now, there are over 100 such websites. Most of these have been inspired by western sites like Groupon and have garnered a lot of media attention. They have been touted as a “win-win-win” model: customer gets the product or service at a discount, business gains publicity & new customers and the website gets a cut in the coupon price. However, even in US where the concept originated businesses have not had too good experience with the idea as the following post by Posies Cafe owner clearly shows. If you are a small business owner and seriously considering using one of those sites, first be clear on the amount you are willing to spend and what is it that you are expecting to gain out of such service. For a student/executive in Marketing, this demonstrates the stark difference between the promise and delivery of Return on Investment(ROI) in social media based promotions.

Post publish date: Sep 11, 2010

For months I’ve been thinking about whether or not to write a blog post about Groupon, and sharing the kind of experience it has been for the business. I’ve been weighing the possible repercussions of such a candid post as well, but after today, and having to decline a longtime customer’s Groupon for being past the expiration date, she asked that I share with everyone the reality of Groupon.
Today one of our most loyal customers, Lucinda, came in and asked if she could use her Groupon that had expired the day before. I felt terrible, but I had to say no. I knew she was upset, and I wanted to explain, but there was a line, and it would take longer than the few seconds we had together there to share why I couldn’t. She came up to me later when there wasn’t a line to tell me that she was really disappointed, that she had been a longtime supporter of Posies through the Mamananda Group, and that this experience made her never want to come back. I knew she felt my declining was personal. So I explained to Lucinda, and now to all of you, how Groupon works for the businesses, and why it has been the single worst decision I have ever made as a business owner thus far…
I heard about Groupon in January of this year from a friend, and after doing my research, I thought the idea was pretty clever. I, the business owner, would offer a discount to the consumers utilizing Groupon’s social network, and we would get noticed by many who may never have seen us otherwise. A great marketing opportunity and way to increase future foot traffic! I assumed Groupon would take a percentage, but that it wouldn’t be that huge… maybe 5-10%? I spoke with John, a Groupon rep, and we started formulating the idea. He didn’t have to sell me on the concept, I understood and thought it was genius. Then we talked pricing. We were going to offer a $6 for $13 (pay $6 and get $13 worth of product) because John told me people really respond to deals that are over 50% discount. It wasn’t starting off as that great of a deal for us, but we kept talking. Then we talked the percentage split. John told me that when the consumer pays less than $10, Groupon usually takes 100% of the money. What?! He reassured me that most customer buy more than the $13, and that we would never have to advertise again after taking advantage of their network. In my mind I thought “false. You can never stop advertising as a business,” but outloud I said, “Ok, let me think about it.”
I hung up and thought it over. I called him back and said we would have to get at least 50% to cover our costs of product… to this day I don’t know why I thought even 50% would be a good deal for us. Maybe because I thought since we were covering our food costs. What I didn’t think clearly enough about was that that margin we mark up is what covers all of our other costs… like staff, rent, utilities, etc. Our overhead is roughly $25,000/month, and this decision was about to make it so that we didn’t cover any of those other costs.
Against my husband’s advice, I decided to do it knowing how many other businesses I admired had utilized Groupon. We were featured on March 9th and sold nearly 1,000 Groupons. When I talked to Lucinda today, she asked if there was a cap on how many were sold to help protect the business from too much loss, and the simple answer is, no. When you sign up for Groupon, you are agreeing to sell as many as get sold… and why would Groupon want it any other way? They get half of the earnings.
We were bombarded the first weekend after our feature because our feature had come out a month late, and unfortunately coincided with the Kenton Library’s grand opening. Over the six months that the Groupon is valid, we met many, many wonderful new customers, and were so happy to have them join the Posies family. At the same time we met many, many terrible Groupon customers… customers that didn’t follow the Groupon rules and used multiple Groupons for single transactions, and argued with you about it with disgusted looks on their faces, or who tipped based on what they owed (10% of $0 is zero dollars, so tossing in a dime was them being generous). Or how about the lady that came in the day of Groupon (though you’re not technically allowed to use them until the day after) and asked for the Groupon discount without an actual Groupon in hand because she preferred to give us all $6 rather than half of it to Groupon. While the idea is noble, this causes mass confusion among the staff and makes it seem that without commitment, anyone should be able to get anything off of our menu for 50% off.
After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising. Sure, maybe thinking of it as just marketing may seem justified, but anyone that knows me well knows that I would never pay more than $100 for advertising, much less $8,000, because I don’t believe that regular advertising had much return on investment at all. So the experience jaded me, and the interactions with the few bad Groupon customers we had jaded our staff. After all of this, I find myself not even willing to buy Groupons because I know how it could hurt a business (side note: service industry businesses do quite well with features like this because it is just the cost of time – you are not paying for a product for resale. Resale, in my opinion, get hit the hardest).
In short, to dear Lucinda and anyone else that comes in with a Groupon in hand, please know that our respectful decline of your coupon is not personal. It’s because we cannot afford to lose any more money on this terrible decision I made, and the only saving grace we had was an expiration date.

These deal sites work only for specific cases such as:

1) New businesses where you need to advertise anyway to get the word out,
2) High margin businesses where you can give away some profit
3) Businesses like dentists, where you’re almost guaranteed a revisit after that discounted teeth cleaning or the customer is mostly likely to come back and pay full price,
4) Venues like museums where most of the cost is fixed.
5) Very targeted discounts at time’s you’re normally slow, or for higher margin products that you’re able to pair up, as some have mentioned here.

Pre-Purchase Dissonance

Contributed By NIKHIL KAPOOR

Post Purchase Dissonance has for decades been a very important tool for marketers to influence consumer behaviour. Here the customer after purchasing a product thinks that if he had purchased some other item it would have been better than the one he bought. This has led to cognitive dissonance theories as a solution where the job of marketers is to convince the consumer that the purchase made by him is the best one and it will satisfy all of his needs. The customer is reassured that he or she has made the right decision.

But now things are different. In recent times the change in technology is so rapid that even before a product is launched its successor is already visualised and half way through its development. This ushers in the concept of Pre purchase dissonance.

Pre purchase dissonance occurs when even before purchasing a product you are dissatisfied with it as you realise that a better version is under works and still you purchase the product. It is a new trend that can be viewed as emerging especially in technology driven products, Like Mobile phones and Cameras.

Let’s take a real life example. In February Samsung announced a dual core 1.2GHz Phone called the Galaxy S2. This phone is simply the most powerful commercially available phone till date. The phone was to be Available in May 2011 in markets. In March Samsung announces that a 2GHz Dual core processor had been developed and would see the market in January next year. That is almost 50% more powerful than the yet to be launched ‘most powerful phone The Galaxy S2’. In the same month NVIDIA announces its quad core processors. These are 200% times more powerful than the Galaxy S2 and would also be available in January 2012.

Now let’s look at what a buyer goes through. He is excited about the Galaxy S2, very powerful. Then he realises that it is obsolete even before it is launched. It is easy to assume that he would wait 7 months for the new line of phones. But this is not the case always.

The buyer is already saving up and waiting for the Galaxy S2 for 4 months and then if you ask him to wait for an additional 7 months, he would totally get un-settled. Most consumers won’t wait the extra months. They will go ahead and buy the Obsolete yet to be launched phone in May, knowing that they are not that satisfied with their purchase. Thus Pre-Purchase dissonance.

This has a chance of creating a dissatisfied feeling in the consumer regarding the product for apparently no reason. The phone is still the best at the time. But an unwanted negative feeling towards it has been created.

Marketers need to understand that this trend is there to stay. They cannot simply stop announcing technology as and when they are developed. Because if they don’t their competition will. And then they would just be reacting to the competition. Being pro-active is a very important part of technology driven industries. Marketers now have to accept Pre-Purchase dissonance as a trend to stay and try to leverage it in a positive way through further study.

Kya Cool Hai Hum?

Contributed By AMAN OBEROI


It's not just about cooling anymore. Most Air Conditioning brands are having to sweat it out in order to differentiate themselves from the rest.The basic function of cooling simply isn't enough for these brands to sell.
Carrier still focusses on their core competency of Even Cooling , Just like in the Office.


On the other hand we have Voltas which focuses on Sensible cooling, and reduced power bills. A very TATA way of going about things - solid and sensible products for the value conscious and discerning Indian customer. They have continued their concept of using Kids to showcase the fact that even kids know that Voltas provides Sensible Cooling techniques.The latest series of commercials have kids using Nursery Rhymes such as Jack and Jill, Humpty Dumpty etc. to drive home the point of reduced power bills.

Hitachi i-Clean AC

Hitachi seems to promote itself on the ease of maintenance factor that its AC's feature. The new line of i-Clean AC's do not require the tedious process of the yearly cleaning that is required for other AC's.


Panasonic Hide and Seek AC

Panasonic seems to use the dual strategy of a Brand Ambassador as well as a product Innovation. They have come up with a cube AC,which is a slightly squared to rectangle shape and will be in the shape of cube on the whole and thereby giving you an aesthetic look to your interiors and may look unique unlike the regular split ACs.


Samsung Virus Doctor AC

Samsung has decided to bank upon the popularity of its brand ambassador as well as the fear that viruses have created in the mind of the public . They try to showcase the AC as an effective way to keep the house Germ free and Virus Free.This AC seems to be certified by various organizations like Kitasato, Yeonsei, Retrosceen, Chungnam National University, BAK UK, RTI test.  This is the first of its kind air conditioner to hit the market, made possible by Samsung.


Onida Pre Cool AC

Onida makes use of an everyday situation in the life of most people , the problem of entering a heated home and then having to switch on the AC.
Onida Air Conditioners have come up with this Pre Cool ACs which just does that without any hassles.  Just before you are about to enter or nearer your home just send an SMS from your regular Onida Pre-Cool Mobile Phone to the AC receiving device and now your Airconditioner will be switched on automatically without any manual intervention and when you enter your home, then you can enjoy the full coolness of the AC immediately upon your entering.  You will need to send the SMS “AC ON” to the receiving device to make your air conditioner switched on automatically. They have clearly differentiated themselves with respect to the competition and have created a strong impact in the consumers mind, who remembers it as the SMS wala AC at the time of purchase.


LG active AC

LG uses its status as the official sponsor of the ICC world cup to draw attention to its tagline STAY HEALTHY, STAY ACTIVE. It focuses on the benefits of clean germ free air conditioning, and how it leads to a more active lifestyle.

The Royal Wedding

Contributed by AMAN OBEROI

When I read reports of people waking up at 4am to watch the Royal wedding , I knew that this was the Wedding of the decade. One can understand UK going all gaga over the wedding but such was the kind of global hype surrounding the wedding that the hysteria was not limited to the UK alone. People from Australia to India to the US have been talking about this event.

Analysts have estimated that the economic impact of the Royal Wedding is around $3.3 billion, although there were no direct sponsors for the wedding, the TV channels had a great spectacle to cover, which meant more eyeballs that translates to higher advertising revenues.

Brands such as Pond's White Beauty(The reason for Princess Kate's flawless glowing skin), Maggi Pazzta (Italian delight For those hungry moments during the extremely stretched wedding), Volkswagen (The German People's car sponsoring the Royal Wedding), MakeMyTrip (Royal Honeymoon Packages) , 

Tanishq (the wedding ring), Slice ( Aamasutra??), Yardley (The only British Brand in this list) - All of them lined up to be sponsors of this Mega Event. This was in India!

In the online space we had the the Royal Wedding Channel on Youtube, which was the most viewed channel that day with live streaming of the Royal spectacle. But the single most impressive Royal wedding Stunt was pulled off by T mobile, who spoofed the Royal Wedding Entrance Dance in this Video 

They used Royal Look alikes to create an impressive sequence which has attracted 18million views so far. They had a channel named the Life is For Sharing Channel which showcased their creative genius.

Shaadi.com chose to take advantage of the Royal Wedding by using the Royal Wedding theme to revamp their website and ran a survey on which do their members think is the best Indian celebrity to match Prince William. The survey showed that Katrina Kaif as the top voted celebrity with 75% votes followed by Priyanka Chopra and Sonakshi Sinha. 

The Kodak ad, which was a corny pun intended at Middletons (Middletones).

TLC has been offering viewers 89 hours of programming with royal themes, among them “Royally Astounding: 30 Defining Days of the Monarchy,” “Untold Stories of a Royal Bridesmaid” and “Wild About Harry.”

Betty Crocker has been a symbol for the American Kitchen Values since 1921 but even they found a reason to get associated with the British  Royal Wedding, with a special Royal wedding cake recipe.

The Papa John's commemorative pizza was too much for Advertising Age, which said, "There is no excuse for this sort of marketing tie-in".

Such a neutral event allowed brands to jump onto the advertising brandwagon and get associated in anyway that was possible. Such a stunt works only if executed properly , otherwise they might end up like Kodak , whose Middleton ad is being severely criticized (only a 34% approval rating).But if pulled of with grace they could end up becoming Legendary campaign like the T Mobile Dance.

Cross Promotions

Contributed By VARUN VASUDEVAN

McDonalds turns Eeco-friendly

When you lift that burger from your plate to take a bite, your eyes fall on that paper mat which a McDonald’s vendor has slipped onto your tray. And what do you see?

A Maruti Suzuki Eeco advertisement! Eeco is targeting the middle class family man who loves to take his family out with him frequently – for shopping, to restaurants, picnics etc. Priced for this target audience, Eeco is positioned as being spacious and value for money. Of course, reliability and service are implicit in any new offering by Maruti India.

Hey, but isn’t that whom McDonalds is targeting too - the middle class family which loves spending time together over a value for money, hearty meal and wants quick service and reliability.

You may think they are strange bedfellows, but our ‘M&M’ have joined hands to do a classic ‘Cross Promotion’. Yes, that’s the marketing term for this alliance. Think about it – their target audience is similar and their positioning is on the same lines. So while Maruti reaches its target audience in a more focused manner, McDonalds gets some extra pocket money.   

ABG books Crossword

Crossword, of all the places, I thought! But then, why not? Actually, it’s a pretty good hunch that the person picking up a book from the baby care shelf may be buying baby-care products as well. So Aditya Birla Group’s baby care brand - Puretta has strategically placed its advertisements on these shelves so as to catch their target consumer’s eye.

Surely, there are many such cross-promotions running at your place. You just gotta keep your eyes open. At least the company targeting you will be hoping so.

FIFA World Cup - Brand Battle Ground

Contributed By AMAN OBEROI

Football is no child’s play, its serious business.  The global football market is valued at $10.9 billion, with the U.S. siphoning off $900 million. Top dog, however, is the U.K., with $1.4 billion being spent on soccer. In 2006, Brits spent almost $245 million on replica football merchandise.

Last year the biggest football fiesta took place in South Africa – the 19^th FIFA World Cup. It is the most widely viewed spectacle across the globe with an estimated viewership of around 700 million for the finals alone.

This is a golden opportunity for anyone who can shell out the money to garner the maximum eyeballs they can. When it comes to sports apparel, this event is what all their efforts boil down. With billions of dollars riding on their world cup campaigns no one can afford to make a mistake.

Nike and Adidas are the leading players in the Sports Apparel Industry. They have a strong presence throughout the world and together they account for about two-thirds of this market, with Puma coming in a distant third.

Adidas has long been associated with the World Cup and has been the official Ball manufacturer for FIFA since 1970 and it was also the official sponsor of the World Cup. Apart from this , 12 teams kits were sponsored by Adidas as compared to Nike’s  nine.

But as the world cup kicked off both the companies had only one thing on their mind, whose brand generates the maximum buzz.

Nike countered Adidas’s official sponsor strategy by launching a massive campaign “ Write the Future” which went viral on the internet, it also bought the top banner ad on Youtube (which readapted its logo for the football frenzy). Nike also leveraged the success of its 2010 World Cup Write the Future ambush marketing effort with a campaign extension that promotes HIV/AIDS awareness in partnership with (RED). The pro-social message, which stars soccer icon Didier Drogba, is particularly apt in Africa as "ground zero" for the global AIDS crisis.

It  also let fans "Write Your Headline, Write the Future" in an interactive extension of its World Cup campaign. Johannesburg's 30-story Life Center is served as a digital billboard that projected a mix of soccer stars with social networkers' personal messages sent via #NikeFuture on Twitter, Facebook, QQ in China and Mxit in South Africa.

The Write the Future ad was a 3 minute video featuring the top footballers with whom Nike has a contract, even though these footballers such were wearing Adidas kits during the World cup (example Cristiano Ronaldo who plays for Portugal , sponsored by Adidas). The video was aired on primetime sports channels before and after the world cup matches and garnered about 20 million views till date . Adidas tried to make a comeback with a video based on star wars featuring Daft Punk, Snoop Dogg and David Beckham but couldn't match upto the buzz created by Nike.

But even as Nike took the lead in this respect Adidas had crossed $2 billion in sales before the World Cup had begun.

This pattern was seen throughout the World Cup before the matches started. Non-sponsors outperformed sponsors in terms of online marketing around the event. There's Nike over Adidas; Pepsi over Coke; Carlsberg over Budweiser. FIFA organizers got a lot of cooperation from South African officials to stop ambush marketing during the matches. 36 Dutch fans in orange mini dresses were removed from a game, for planning a stunt for non-sponsor Bavaria Beer.

But as the world cup progressed the buzz around Nike died down and Adidas took the lead again , partly due to the controversy over the Official Jabulani ball and partly due to the success of the teams that it sponsored mainly Spain and Germany which were tipped as the favourites for the Cup.

But FIFA, which earns 30% of its income from sponsorships, can't do much about marketers capitalizing on World Cup excitement on the web (or TV, for that matter). This raises the question of what the future holds for big-money sponsorships around events. Non-sponsors are showing they can do as well or better without paying up for "official" status, especially if they have existing marketing relationships with the athletes themselves, as Nike and Pepsi do .This becomes all the more important in the Indian context, as we are on the threshold of witnessing another sporting phenomenon, The 2011 cricket World Cup. In the past, companies have not shied away from launching an offense on the official sponsors (ala Pepsi versus Coke, Nothing official about it campaign in 1996). So it still is a tough call whether to go Official or not , but with stricter laws and stronger enforcement in order to protect official sponsors by the governing bodies such as FIFA and ICC, the ambush marketing campaigns are set to get better and more innovative than ever before.