Kick Groupon to the Curb: The 4 Truths of Online Marketing

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1 Kick Groupon to the Curb: The 4 Truths of Online Marketing Presented by PFL Seth Gardenswartz Kurt Rued

2 Dawn of Groupons (and Clones) Ø Brand for deals Ø 50+ million subscribers Ø 22 million Groupons sold in North America Ø Over $980M discounted in North America

3 Dawn of Groupons (and Clones) Ø It s a coupon with a hi-tech twist Ø Legitimate discounts, big and real Ø Time limit and group dynamics Ø Pay up front Ø Opted in clients

4 Deal Sites Growing Like Weeds!

5 Deal Sites Also Dying Like Weeds!

6 Merchant Benefits? Ø Help or harm participating merchants? Ø Risk of legal exposure? Ø Subject of several investigations Ø Some class action suits, participating merchants have also been sued Ø Is the model sustainable?

7 The Dark Side of Group Deals Ø Attracts the wrong clients Ø Negative margins Ø Inundates your staff Ø Tramp-stamps your brand

8 4 Truths of Online Marketing Success 1. Deal sites are dangerous 2. Focus on your website for best ROI 3. Must build your own relationships 4. More relationships = more profit

9 Truth 1: The Economics of Directory and Coupon Sites Review sites: Yelp, CitySearch, Urban Spoon Coupon sites: Restaurant.com, Valpack Daily Deal sites: Groupon, Buy With Me, Woot They use your content to develop their own customer relationships, so they can sell them to you!

10 LaPausky-v-Yelp

11 LaPausky-v-Yelp (cont.)

12 How Much is a New Customer Worth? Ø $100 Average check Ø 3 visits/yr per regular customer ~ $300/year Ø 20% customer attrition rate (retention 69-79%) Ø $ lifetime sales value per client Ø $40.34 lifetime profit per customer (807/5%) 2010 NRA Restaurant Industry Operations Report Restaurant RX 2010 Fine Dining Report

13 Groupon Numbers To break even from the Groupon deal you will have to sell $110,000 in regularly priced services ($5,500K loss divided by 5% Net Profit) Even if you believe you will convert 20% into new clients you are still $2,276K in the hole after 5 years

14 Daily Deal Effectiveness 36%: Deal buyers that spend more than deal value 20%: Deal buyers that return for a full price purchase Less than 50%: Businesses willing to run another daily deal promotion (lower among spas and restaurants) Dholakia, Utpal M., How Businesses Fare with Daily Deals: A Multi-Site Analysis of Groupon, Livingsocial, Opentable, Travelzoo, and BuyWithMe Promotions (June 13, 2011). Available at SSRN:

15 Truth #1 (cont d) Groupon Dims Your Stars Deals lead to 10% decrease in Yelp Rating according to Harvard study

16 If You Must -- Tips For Groupon Strategy Ø Timing is everything Ø Manage margins Ø Understand cash flow Ø Prep your staff Ø Plan for regulars Ø Harvest s

17 The 2 nd Truth: Internet Marketing Begins and Ends With YOUR WEBSITE Your site is the Anchor to your digital identity

18 The 2 nd Truth: Internet Marketing Begins and Ends With YOUR WEBSITE

19 Bad Websites are Prevalent theoatmeal.com/comics/restaurant_website

20 theoatmeal.com/comics/restaurant_website A Better Look at Bad

21 Keys to an Effective Website: Ø Can be found (SEO) Ø Intuitive navigation Ø Easy to Share Ø Mobile Friendly No flash, music or distractions Ø Engages online consumers with content Ø Reflects your brand Ø Check out our last webinar: Ø how-to-build-a-profitable-website-webinar

22 Effective Websites Rely on Content (Not Flash)

23 The 3 rd Truth: Develop Your Own Customer Base or Someone Else Will Your Options: Ø Rent a bad list cheap, Ø Rent a good list for a fortune (Groupon), or Ø Build a good one yourself A good web strategy solves this problem

24 Example: Cloud 9 List Building Ø Independent day spa and salon in Gainesville, Fl Ø Strong local brand Ø 1,972 Facebook fans before sweepstakes

25 Sweepstakes Ø $250 Ø Appealing Ø Tied to Mom Ø Facebook Ø Website Ø Ø Direct Mail

26 Engagement Ø Very engaged fans Ø Reminder posts Ø Thoughtful Ø Sincere

27 Results Ø 1,346 people registered Ø Invited 4,857 of their friends to become fans of the Cloud 9 Facebook page. Ø Cloud 9 went from 1,972 to 3,977 Facebook fans in 8 days.

28 Reach Ø Started good Ø Doubled fan-base Ø Kept momentum Ø Added benefits: check-in ü Added 20,000 impressions!

29 Build Your List Ø Understand the value Ø Address is worth $20-$100 Ø Sell the benefits of your list Ø Create a plan Ø Harvest what you have Ø Measure and improve

30 Build Your List Opt-in form on your website In-house sign-up

31 Build Your List Opt-in form on your website

32 Build Your Social Media List

33 The 4 th Truth: A Good Web Strategy Puts YOU in Control Ø Group deals Ø Online appointments Ø Newsletter Ø Instant Gift Certificates Ø Blog Ø Special events

34 With a List You Are In Control PFL Deals Ø Build your own deal Ø Keep your margin positive Ø Targets right demographic Ø Measure results Ø Keep your clients

35 Power of a PFL Deal Ø Strong offer Ø Group dynamics Ø Opportunity for engagement

36 Run the Numbers! Metric Groupon PFL Deal

37 Exclusive PFL Offer Ø Basic Website Package $399 (regularly $499) Ø Custom Website Package $1299 (regularly $1,499) Ø Custom Website Package (with mobile animation) $2,299 (regularly $2,499) All packages are $99/month and include live US-based support, , social media and PFL Deals To take advantage of this offer, us at: Referral Code:PFL09 Offer expires October 5, 2011