Wednesday, October 12, 2011

the daily deal emperor has no clothes

“Coupons for the spa drew women from around the metropolitan area eager to see their bulges melt and their wrinkles removed,” reads a New York Times article. “Once.” The article, detailing the rise — and, subsequent waning—- of coupon sites like Groupon, features a New York spa called Wellpath who tried to use the service to drive customers into their business. Unfortunately, the results were a story all too familiar (and predictable).

“Then they would get another coupon and go do it with someone else,” Wellpath’s director, Jennifer Bengel, told the Times. “There was no loyalty.”

No loyalty? No surprise.

Groupon is in trouble, and not because the rise of localized, competitor brands has already begun to take a huge chunk from Groupon’s market share. More and more businesses are learning just how disastrous daily deals can be for their bottom line. “We’re giving [customers] a discount when we could be filling that seat with a full-paying customer,” Arlington, Virginia pizzeria co-owner Joel Mehr tells “If we are giving discounts when we don’t need to be giving discounts, that doesn’t benefit us.”

Mehr says that despite selling more than 5,600 Groupon deals for his restaurants in the area, the pizzeria still lacks name recognition. Worst of all, they can’t control when customers come because the deals can be used anytime. “We are seeing people come in one time only, on a Friday night, they’re not coming back,” says Mehr, echoing a common theme among disgruntled Groupon users.

However, the discount emperor, Groupon, isn’t the one at fault. While Groupon has its own internal problems, from a business model that has investors worried to its new-found appetite for line-extensions (Groupon Now!, Groupon Getaways, Groupon Goods), it can’t be blamed for customer loyalty issues. When businesses use discounts and deals, loyalty issues are right around the corner.

Discounts are not a permission slip to excuse oneself from brand-building strategies, nor are they a panacea for driving business through the doors. Businesses that use deal sites as a marketing device can quickly find themselves drowning in customers who are only looking for one-off purchases at a discount price. One owner called using Groupon the “single worst decision I have ever made as a business owner thus far,” after the deal nearly put them out of business.

Yes, Groupon can help businesses find new customers, but the very nature of discounting undermines customer loyalty — especially when driven by daily deal sites. And, even more so when businesses aren’t prepared to convert new “discount” customers into loyal “full price” customers.

For example, oil changes are one common deal on Groupon, and they come from a variety of businesses. It isn’t out of the question that a Groupon deal for an oil change will come about frequently enough where a subscriber would never have to pay full price for an oil change, if he were to use the deals that came about every so often on the site. Therefore, the subscriber never establishes a bond with any of the businesses that advertise on the site — especially if those businesses have not put effort into retaining new customers.

Daily deal sites should be regarded with a huge caveat emptor for businesses looking to use them. There have been a number of success stories, but on the other hand, they can absolutely ruin a brand — as they have, and they will continue to do.

Discounting in and of itself isn't a brand killer. Just look at major department stores, which have opted for discount strategies instead of brand strategies. Rather than rushing to discounting sites for growing businesses, focus on building the brand through good branding fundamentals. It may take a little longer, but in the end, brand integrity is improved — not diminished.

On a side note, I would be remiss if I didn’t note the unfortunate passing of Apple Co-Founder Steve Jobs. The death of genius is truly like extinguishing a candle. The world is less bright without him around.

3 simple steps to building emotionally connected customers

It should go without saying that branding is important. From a Fortune 500 company to the little shop down the street, branding is how businesses establish themselves in the minds of consumers. Miss this opportunity, and your brand passes consumers like a ship in the night. But, do it right by building an emotional connection, and you will have a customer for life.

A recent study by Motista shows just how important emotional connections to brands are, and why businesses should not ignore brand-building opportunities. The study showed that emotionally connected customers are “four times more likely to shop those retailers first when relevant needs arise, as compared to consumers who are simply familiar and satisfied with their retailers.” These “connected” customers are also “50 percent more likely to advocate for the brand and recommend the retailer to others.”

Essentially, the more connected customers are to your brand, the more likely they are to seek out your brand, and recommend it to others. It seems very obvious, but many businesses — especially small businesses with limited marketing budgets — write off brand building in favor of other needs. Unfortunately, neglecting branding needs comes at the expense of building this emotional connection with consumers, which has long-term consequences.

Roger Dooley, author of the site Neuromarketing and a neuroscience-marketing consultant, says that there is no single way to create an emotional bond with consumers. He refers to ways several major brands built theirs with consumers, such as Apple’s innovative designs and Zappos’ shipping upgrades.

This is good news for businesses with limited marketing budgets because it doesn’t require tens of thousands of dollars to create an emotional connection. In fact, most small businesses would be better off investing in improvements to their operations rather than putting all of their marketing dollars into “daily deal” programs like Groupon. By hiring staff to improve customer service, or spending a little extra to make a website more user friendly, businesses can enhance the customer experience and better the emotional connection customers have with the brand.

Unfortunately, as many small businesses have discovered, Groupon packages send hundreds, if not thousands, of new customers through the door who are only looking for one-off purchases. And, if these businesses have done nothing to establish their brand by proving why customers should return — even if customers are paying a higher price for the service or product — then they have wasted a tremendous amount of money for nothing in return.

There are three simple steps to follow to build brands with which customers can emotionally connect:

1. Build your brand based on one single idea that demonstrates a value to potential consumers that they cannot get from any of your competitors. (For example, Apple built their brand on innovation, and Zappos built their brand on unmatched customer service).

2. Focus your efforts (and expenses) on fulfilling this promise of unique value and ensure you can deliver on everything that you promise.

3. Do not stray from this focus over time. Keep it simple and consistent. While you can innovate and upgrade your brand, you must always keep it differentiated from competitors in that single, unique way.

Any business, larger or small, can adhere to these three steps to create emotionally connected customers. It simply requires following the building blocks of branding. Differentiate your brand in a meaningful way, and keep that differentiating factor simple and consistent. It doesn’t require a big budget, just a dedication to maintaining a brand. And, if you are successful, you will create a large body of emotionally connected customers who are more likely to seek out your brand and promote it to others.

digital era makes a brand alignment analysis even more important

Decades ago, brand management was a much simpler pursuit. Limited access points to brands for consumers allowed brands to better craft their messaging and control how customers perceived them. The access points to brands were limited mainly to traditional advertising and storefront operations. If you kept your advertising on point, and your brick and mortar operations running smooth, that was managing the brand.

The advent of the digital age, especially in regards to the rise of social media, has made brand management a much more complex operation.

The Internet has opened a seemingly endless number of ways for consumers to connect to brands. Information is widely available, and can be shared instantly with thousands — if not millions — of others. This makes a once manageable mistake, such as a distasteful ad that wouldn’t go beyond the circulation of the magazine in which it was printed, a very, very public scandal. Take, for instance, Kenneth Cole's tweet announcing a new spring line of clothing using a pun and hashtag related to the riots in Egypt.

“This time, however, Cole isn't simply forcing his ‘Aw, Dad!’ jokies via billboards,” wrote MSNBC Technolog’s Helen A.S. Popkin. “Thanks to Twitter, perhaps Cole is now getting the feedback on his ad work he inexplicably never got before — well, at least in such volume, anyway.”

In addition to the amplification effect, consumers also have access to information that can shine sunlight on previously “protected” secrets. A little research can expose unscrupulous manufacturing processes that may conflict with brand messages. Viral videos — such as that featuring two Domino’s employees bathing in a sink as a prank — can lead to major public relations disasters in a matter of hours.

Even more than just gaffes, secrets, and scandals, brands are constantly being judged by the online community for things such as customer service or response times to issues. “ apologized for a ‘ham-fisted’ error after Twitter members complained that the sales rankings for gay and lesbian books seemed to have disappeared,” writes the New York Times, “and, since Amazon took more than a day to respond, the social-media world criticized it for being uncommunicative.”

Brands operating in today’s world of lightning-fast communication — where brand reputations can be “blindsided by two idiots with a video camera and an awful idea,” as Domino’s spokesman Tim McIntyre stated in response to the sink prank — must take precious care to ensure every facet of the brand is in line with the overall brand strategy. For example, if your company promotes a culture of environmentalism and “green” responsibility, it will not be long before your company’s energy usage or manufacturing processes come into question if they don’t also align with the environmentalism brand message.

Be it a major corporation or a small business, brands can greatly benefit from a “brand alignment analysis.” Think about everything — from customer service, to marketing messages, to your front-end operations — and make sure they all serve to not only bolster your brand strategy, but also fulfill all your promises. If you take time to improve areas that aren’t serving to support your brand, you’ll strengthen your brand and protect it against an online “black eye.” You may also see a boost in positive online chatter about your brand.