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Beyond Groupon: New Deals Sites Take Hold

When Groupon first hit the scene it put the spotlight on a massive new market and inspired countless copycats. But many local businesses lost money with the Groupon deals model which often requires losing money on the initial offer in hopes of making it up on additional sales and return visits.

Sadly, however, that often doesn’t happen. Now a new deals model is emerging based more on the concept of “yield management.”  Yield management (YM) is a fancy term that basically means using tactics and strategies to maximize profit in a given circumstance. The idea here is to improve the deals model so local businesses can realize a profit immediately – not at some distant point in the future.

Services Using the New Model

The deals delivery app LeLoca (www.leloca.com) and popular online travel community Air B&B (www.airbnb.com) are two examples of services that use the YM approach. Both help merchants realize more profit from their goods and services by connecting consumers to them via mobile devices and other technology.

In the Groupon “loss leader” model, the merchant offers a large discount, has no control over how many people will use it or when, and then must pay Groupon half of the proceeds. One criticism of Groupon is that merchant deals are not highly-enough targeted (beyond city or geography) and that most buyers only want a quick discount and never return.

The airline industry is a perfect example of how yield management works. Owning and flying planes is expensive. Once a flight is scheduled, the airline incurs the costs no matter what. This is partly why airlines charge so many different prices for the same seat. They gauge (through sophisticated YM tactics) the maximum that customers are willing to pay at any given time, and try to charge exactly that.

The new generation of deals services tries to do the same thing for local businesses by using technology to connect people with goods and services that are already available (like empty airline seats) and might otherwise be wasted. For example, LeLoca, a free smartphone app, uses the Internet to connect consumers with nearby businesses that are offering real-time, geo-targeted deals when they have open space to fill.

Reaching Customers When you Need Them Most

“LeLoca gives the merchant the opportunity to bring in additional customers right when they need them via a discounted offer,” says LeLoca CEO Douglas Krone. “They have complete control over what they offer, the area that the deal will be offered in and when it will start and stop. Merchants get the customers right when they need them, thus maximizing profit and minimizing waste.”

Other deals companies operating on this concept include Savored, ScoutMob and kgb Deals. The following services are also finding success:

Uber (www.uber.com)

An app that allows users to hire a car at the touch of a button – connects professional, licensed drivers with people who need transportation.  Uber does not provide cars itself, but rather works with existing car-for-hire businesses that make use of its technology.  The app can pinpoint an exact location and then send a ride, utilizing the cars and drivers that would otherwise be idle or driving empty vehicles.

Air B&B (www.airbnb.com)

A fast-growing business that connects travelers seeking accommodations with places that have an open room, apartment or home.  Airbnb provides hosts with the opportunity to earn money on an otherwise open space and provides travelers a chance to stay in unique places for less money than a hotel.

ScoreBig Daily (www.scorebigdaily.com)

Uses a Priceline-style model – lets users view same-day tickets for various events and pick the price they want to pay.  Once a ticket is sold and a purchase is shared on social media, ScoreBig Daily reserves seats nearby so friends who purchase tickets can sit together.  The average ScoreBig Daily user saves 42%.

Waze (www.waze.com)

Started as an app for real-time traffic updates but also offers real-time gas prices and discounts in the driver’s immediate area. Users can search for fuel in the area and compare prices, as well as get access to real-time deals being offering by gas companies who have partnered with the app. Waze also lets users post gas prices that they find so others can take advantage of them.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

10 Small Business Predictions for 2012

Technology shapes how small businesses survive and thrive, and 2012 will see record numbers of small businesses harness the power of technology and especially new online productivity tools to grow their businesses. Jerry Nettuno, founder and CEO of Schedulicity, which is one of those online tools, shares his small business predictions for 2012: 

1.      Daily deals dive: The daily deal space exploded last year, but 2012 will see deal shrinkage of 30% or more. Rapid contraction will leave just a couple of “big guys,” some vertically positioned players and a long tail of locals finding ways to thrive by serving a few small regions or cities.

2.  Surviving deals get a makeover:  Burned by go-for-broke deals, many local businesses will fine tune and target their offers to strengthen loyalty. The more geographically concentrated your customer-base is, the better your chances of turning deal-seekers into repeat buyers. Look for an increase in frequent buyer and perk programs to support this movement in 2012.

3.   Small businesses move to the cloud. The ability to self-publish quickly via the cloud is moving businesses out of traditional media.  Productivity services such as Google Docs, Zoho Creator, Office 365 (from Microsoft) and many others are making it easier than ever to operate entirely online.  Low cost tablet computers will let more service professionals and small business owners run their businesses from a mobile device. 

4.      Breakthrough tools arrive. Emerging technology will spawn more break-through productivity tools.  Business owners will see new, off-the-shelf ways to connect with consumers.  With the launch of Siri, Apple’s new voice-activated personal assistant application, developers will be hard at work on amazing voice-activated apps that will offer a unique way for local businesses to stand out.

5.      The “Digital Coupon Book” takes off:  The move to more online shopping turns passive discount recipients into active coupon seekers.  Digital “coupon books” will dominate within the next two years, offering small businesses another way to leverage existing customer relationships with hyper-local offers.  We’ll see a growth in local offer networks, personalized consumer dashboards and highly targeted deals.

6.      The appointment book disappears.  The success of sites such as Schedulicity, OpenTable and ZocDoc reinforce the idea that the traditional pen and paper appointment book may soon disappear.  The number of appointments booked online is soaring.  Schedulicity alone has seen nearly 7 million appointments booked online since mid-2009. 

7.      Mobile commerce soars.  Mobile payment, location-based promotions, and mobile scheduling will all change the way small business owners conduct business in 2012.  Whether iPad or iPhone, Kindle Fire or Droid, the move to mobile will continue apace.  Making your business website mobile-friendly is only a start.  As more and more consumers are making mobile a mainstay, it will be essential for small businesses to have a mobile commerce strategy to tap into this opportunity.

8.      Thinking “local” gains steam.  With a still-shaky economy and unbending unemployment rates, 2012 is poised to be trying for small business.  Small business owners need to think local – the headlines in the local newspaper and the vibe on Main Street are more important than what’s being talked about on CNBC.

9.      Social media gets marketing money.  Social media marketing isn’t just for early adopters anymore.  Big brands and Fortune 500 companies have spent the past three years discovering (and utilizing) the marketing capabilities of Facebook, Twitter, and other online tools.  In 2012, more small businesses will expand online and embrace Facebook as the dominant social media marketing tool for local business.

10.  The client continues to be king.  Small business and independent service professionals are no longer “too busy for new clients.”  Taking advantage of networking opportunities and exploring new online listing options will help small businesses make themselves known and available to new clients. 

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

Why Daily Deal Sites are Doomed

Unsatisfied small business owners are abandoning daily deal sites such as Groupon, LivingSocial, Travelzoo and BuyWithMe and won’t return in sufficient numbers to sustain such sites long term.   That’s one key take-away from the most exhaustive study yet done on the daily deals phenomenon. The study by Rice University business school professor Utpal Dholakia –probably the nation’s top expert on this topic – analyzed the performance of daily deals offered through five major deal sites in 23 U.S. markets. The study examined the results that businesses achieved on deals offered over an 18-month period ending in March 2011.

Overall, the picture isn’t pretty.  Most small businesses that have been making discount offers on Groupon, LivingSocial and other sites either don’t track the actual financial results of their offer, or have a distorted view of what’s really happening. Results from three Rice University studies and some 500 businesses surveyed show that most offers are not producing anything close to the financial successes for participating small businesses that a few claim to be having.  In short, daily deal sites may in fact be doomed.  

As small business owners look closer at the bottom line results of offering deep discount deals online, two things will happen:  1) the daily deal websites will have trouble attracting enough local businesses to fill their deal pipeline; and 2) business owners will be able to demand a higher revenue share, lower fees and more services.

If your business has made or considered a deep discount offer on Groupon, LivingSocial or any of the hundred or so copy-cat sites that have sprung up, first consider why many small businesses aren’t coming back.  Some of the study’s findings seem rather positive.  While 27% of businesses said they lost money, and 18% broke even, 55% said they made money.  About 80% of deal buyers are new customers (a good thing); and a stunning 1-in-5 consumers who buy a deal never redeem the voucher they’ve already paid for.  While this may actually be the primary way many businesses are turning a profit on their offers, it’s not much of a business model.

As BizBest recently wrote (see:  How to Create a Profitable Coupon Offer), crafting a discount deal that actually benefits your business long term is tricky. Most small businesses don’t get it right.  And the Rice University study uncovered a number of troubling red flags that point to structural weaknesses in the daily deals business model in general.  For example, two big things that local businesses bank on when deciding to offer a discount via Groupon or elsewhere are:

1)      That deal buyers will spend at least a little money beyond the deal value itself; and,

2)      That a goodly portion of the deal buyer customers will return at some point for a full price purchase.

But things aren’t working out that way on either count.  According to the research, just 1-in-3 buyers (35.9%) spends anything beyond the basis discount deal price. Even worse, fewer than 1-in-5 (19.9%) return later to make a full-price purchase.

Salons, spas, bars and restaurants – the bread-and-butter businesses for Groupon – seem particularly disillusioned with offering online daily deals.  Only 35.9 percent of bar and restaurant owners said they’d do it again, while 41.5% of salon owners would run another such promotion in the future.

If you do plan to proceed with a daily deal offer, here is BizBest’s advice on making it work:

  • To increase your chances of a profitable promotion, consider offering a daily deal of relatively high face value (say, $50 or more) with a shallow discount (at most 25% off face value), a short redemption period (90 days or less), and a limit on the number of deal vouchers consumers can buy.
  • Among industries, health care, professional services and special events have been the most successful at using daily deals; more than 70% of them made money on the promotion. However, two of the largest industries – restaurants/bars and salons/spas – don’t perform as well. Only 43.6% of restaurants surveyed earned a profit from the daily deal promotion, while 53.7% of salons and spas made money.  
  • Most importantly, don’t cut your other advertising and marketing spending to do daily deals. “Many local businesses that are spending their marketing dollars on daily deal sites have dramatically cut their advertising budgets,” Dholakia says. “This is a problem because they’re not building their brand when they offer discounted prices for their products and services. Only about 20% of customers using daily deals return to businesses to buy at full price, but customers acquired through other programs typically have much higher rates of full-price repurchases.”

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

B2B Daily Deal Sites for Small Business

Times have never been better for small business owners and startup entrepreneurs looking for deep discounts of up to 70% on the products and services they need to run their businesses day to day. A bevy of B2B daily and weekly deal sites have emerged, offering big discounts on everything from printing, food services and web development, to online surveys, computers, travel and office furniture.  They include RapidBuyr, BizDeals, BizSaves, Bizy, GroupPrice and MarketSharing.  Some are still in startup mode and aren’t yet operating in a large number of cities, but more cities are being added almost weekly.

Here’s BizBest’s roundup of six key players (in no particular order):

RapidBuyr is a business-to-business (B2B) deal of the day site that offers daily deals — both local and national— for small and mid-sized businesses (SMBs).  The site provides access to deep discounts (30-70%) on products and services such as computers, software, peripherals, web development & design, IT outsourcing, marketing, local services, office furniture and equipment, travel and business events. The site was launched by a group of entrepreneurs formerly with firms such as Amazon.com, Microsoft, CNET, Dow Jones and Ziff Davis. One thing that sets RapidBuyr apart is its exclusive relationship with American City Business Journals. ACBJ is the largest publisher of metropolitan business newsweeklies in the United States, and has over 40 city and regional business journals nationwide. This strategic partnership gives RapidBuyr an edge over other B2B deal sites, and allows them to reach nearly 8 million monthly visitors to 40 regional business journal websites.

BizDeals calls itself a “social eCommerce” site offering deals on products and services that help small business owners generate brand awareness and drive growth. Its weekly deals deliver savings on products and services in the categories of Business Essentials, Business Growth, and Rewards & Recognition.  From marketing services and computer products, to travel deals and entertainment, these categories include key areas where savings can do business owners the most good.  One example:  PR Newswire, a BizDeals launch sponsor, offers discounts on its enhanced PR Toolkit, an online public relations resource tailored to small business and entrepreneurs. 

Chicago-based Bizy helps small business owners buy a wide array of products and services at deep discounts, including office equipment and supplies, IT network equipment, software and hardware, mobile communications devices, shipping, payroll services, legal and accounting services, travel, car rental, banking, credit cards, insurance and more. It works like this:

  • Sign up to receive an email when there is a new and interesting Bizy deal, or look for invites from friends, colleagues, ads or the website.
  • When you see an offer you like, you can click the big “buy now” button.
  • Some deals only work if a minimum number of businesses buy.
  • Within 24 hours you’ll receive a purchase confirmation.  Print it and take it with you to the supplier or quote the reference number featured in the email to redeem your offer.

BizSaves bargains on behalf of business owners for deals on products and services that small companies and startups need most, with discounts reaching 50% or more. Sign up at the website to receive email notices of new deals weekly.

GroupPrice “Daily Deals for Your Business” brings small biz owners discount deals on services, software and supplies, including access to top end features on the software and services many small firms can’t get because they don’t meet minimum volume requirements. GroupPrice aims to take the hassle and stress out of getting a good deal. A couple of clicks and you’re done.

Meanwhile, MarketSharing hopes to position itself as a “premium B2B deals provider for exceptional business products and services.”  Initial deals are in New York only, but the site plans to expand to other major U.S. cities quickly.  Their first three daily deals include discounts on SeamlessWeb food delivery, BlogWorld and New Media Expo passes and TeamWorx team building events.

MarketSharing aims to offer businesses high quality, deeply discounted (50-80%) daily group deals on a wide range of products and. With an emphasis on brick and mortar to support local businesses, MarketSharing focuses on curating the best local products and service deals for businesses.  “Our vision is to provide deals that foster the discovery of new experiences for businesses, creating a happier, healthier, and more well rounded work environment,” says John Amato, MarketSharing’s CEO.

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.

New Business to Business Deal Sites offer Big Discounts

Small and local business owners of all types will have new opportunities to grab deep discounts on business-related products and services thanks to a battle heating up in the daily or weekly deals marketplace.  Several B2B daily and weekly deal sites have sprung up recently, offering big discounts on everything from printing, food services and cell phones, to online surveys, computers, travel and cloud-based business applications.  New York-based MarketSharing, one of the latest to launch, joins the likes of BizDeals, BizSaves and Bizy, in jockeying for position in the booming business of B2B deals.  

BizDeals calls itself a “social eCommerce” site offering deals on products and services that help small business owners generate brand awareness and drive growth. Its weekly deals deliver savings on products and services in the categories of Business Essentials, Business Growth, and Rewards & Recognition.  From marketing services and computer products, to travel deals and entertainment, these categories include key areas where savings can do business owners the most good.  One example:  PR Newswire, a BizDeals launch sponsor, offers discounts on its enhanced PR Toolkit, an online public relations resource tailored to small business and entrepreneurs. 

Chicago-based Bizy helps small business owners buy a wide array of products and services at deep discounts, including office equipment and supplies, IT network equipment, software and hardware, mobile communications devices, shipping, payroll services, legal and accounting services, travel, car rental, banking, credit cards, insurance and more. It works like this:

  1. Sign up to receive an email when there is a new and interesting Bizy deal, or look for invites from friends, colleagues, ads or the website.
  2. When you see an offer you like, you can click the big “buy now” button.
  3. Some deals only work if a minimum number of businesses buy.
  4. Within 24 hours you’ll receive a purchase confirmation.  Print it and take it with you to the supplier or quote the reference number featured in the email to redeem your offer.

BizSaves bargains on behalf of business owners for deals on products and services that small companies and startups need most, with discounts reaching 50% or more. Sign up at the website to receive email notices of new deals weekly.

Meanwhile, MarketSharing hopes to position itself as a “premium B2B deals provider for exceptional business products and services.”  Initial deals are in New York only, but the site plans to expand to other major U.S. cities quickly.  Their first three daily deals include discounts on SeamlessWeb food delivery, BlogWorld and New Media Expo passes and TeamWorx team building events.

MarketSharing aims to offer businesses high quality, deeply discounted (50-80%) daily group deals on a wide range of products and. With an emphasis on brick and mortar to support local businesses, MarketSharing focuses on curating the best local products and service deals for businesses.  “Our vision is to provide deals that foster the discovery of new experiences for businesses, creating a happier, healthier, and more well rounded work environment,” says John Amato, MarketSharing’s CEO.

Copyright © 2000-2011 BizBest® Media Corp.  All Rights Reserved.