Daily Deal Diagnostic (formerly the Coupon CPA™)
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The Daily Deal Diagnostic helps small business owners clarify and assess their assumptions before they do a Daily Deal. An insightful planning tool for business owners and leaders. Note: Effective 9/17/2012 Coupon CPA is now part of the R.O.C.K. It™ Method.
IntroductionThe Daily Deal Diagnostic was developed to assist small business owners clarify their assumptions and improve the up-front planning of their Daily Deal promotions. The result can be a savings in time, effort and money compared to developing their own analytical tool.
Small business owners are strapped for time and cash but they need to make sure that their promotions are executed optimally. Additionally, small business owners often do not have the financial analysis skills on staff to provide an analytical overview of their planned promotion. There is nothing wrong with gut feel but often more analytical rigor is needed. The Daily Deal Diagnostic is a small easy to use financial model that assists small business owners think through variables that impact a Daily Deal type of promotion. For a few dollars and in only a few minutes, small business owners can confirm and/or challenge their gut instincts and refine the promotion terms and plans for execution. |
What is includedA number of data input variables that can assist and guide the small business owner's thinking about their proposed Daily Deal.
Handful of output statistics that show where the value of the planned Daily Deal promotion is being generated, based on the user's assumptions. Metrics on promotion costs to compare to various other promotional programs the small business owner is considering. Lists of hints, reminders and assumptions to help the small business owner better understand their planned promotion. Redemption worksheet to help with tracking. |
What some have said about the model
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"In comparison to my own worksheet, this is spot on." ~ K.T.
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"It's compact, accurate and most importantly user-friendly and very financially appropriate." ~ B.R.
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Development History
Geoffrey, the creator of the R.O.C.K. It™ Method, developed a financial model in the summer of 2010 after a few friends had shared an online promotional coupon opportunity for a restaurant deal with him. Being part of a family that owns, or has owned, a variety of businesses, including an interest in a very successful restaurant, Geoffrey had knowledge of the cost structure and he began modeling the coupon offer from the restaurant's perspective because his gut told him it appeared the promotion would NOT be profitable unless certain factors were considered and put in place.
Geoffrey developed a quick easy-to-use model to determine how much in up-sell and customer conversions would be needed in order for the promotion to pay for itself and add value for restaurant owner. As a longtime finance professional and a former Certified Public Accountant (CPA), he also knew that many small business owners don't have the time and analytical skills on staff to perform similar types of analysis. So a free Beta version was quickly launched to test interest. After some refinement, the Daily Deal Diagnostic (formerly called the Coupon CPA™) financial model is now available for purchase.
Geoffrey developed a quick easy-to-use model to determine how much in up-sell and customer conversions would be needed in order for the promotion to pay for itself and add value for restaurant owner. As a longtime finance professional and a former Certified Public Accountant (CPA), he also knew that many small business owners don't have the time and analytical skills on staff to perform similar types of analysis. So a free Beta version was quickly launched to test interest. After some refinement, the Daily Deal Diagnostic (formerly called the Coupon CPA™) financial model is now available for purchase.
Old Daily Deal Diagnostic blog entries
Some of the entries below may have been modified slightly from the original publication for consistency and/or purposes of clarification.
Changes!
Originally published 9/17/2012
We would like to announce a number of changes regarding the financial spreadsheet model that helps small business owners better plan for their online coupon crowdsourcing promotions (e.g. Daily Deals). Bottom line: Coupon CPA spreadsheet model incorporated into R.O.C.K. It™ more formally. Coupon CPA™ Android application will no longer be available and the stand alone Coupon CPA web site and Twitter handle will go inactive for the foreseeable future. Additional details follow.
Name Change
The financial spreadsheet model is now being marketed under the name Daily Deal Diagnostic. Everything else about the financial spreadsheet model is the same. Just changing the name. With the name change the financial model will become a sub-part of the expanding R.O.C.K. It™ Methodology body of work.
End of Android App version
The "original" basic version of the Daily Deal Diagnostic (formerly called the Coupon CPA™) financial spreadsheet model had been made into an Android application. Effective October 31, 2012 the Android App version will no longer be available and will be removed from the Google Play store. The spreadsheet model will continue to be available going forward.
Update: Android App unpublished as of November 11, 2012.
Coupon CPA website content
Content previously available on the stand alone Coupon CPA web site has been appropriately modified/changed and moved to the SIXSTRINGcpa website (update: now located here) to reflect the new name change, etc.
Coupon CPA domain
The Coupon CPA domain will be forwarded to the appropriate page on the SIX STRING cpa web site on a temporary basis (duration yet to be determined). There are no definitive plans for future uses of the Coupon CPA domain at the present time ... but you never know what might pop up in the future.
Coupon CPA blog
The Coupon CPA blog has been renamed to the Daily Deal Diagnostic blog (the blog you are reading). All original posts have been maintained and kept (though some may have been modified slightly to reflect new blog location, etc.).
Coupon CPA Twitter handle
The Coupon CPA™ Twitter handle will become inactive over a period of time. This post will be Tweeted via the Coupon CPA handle a number of times to help ensure folks who Follow Coupon CPA or have it privately/publicly listed will have numerous opportunities to see this announcement about the changes. Please feel free to follow the R.O.C.K. It™ Method Twitter handle.
Facebook and Google Plus pages
After a careful review we found that the Facebook and Google Plus pages had a pretty fair amount of overlapping content. So, the Facebook page that had been setup for Coupon CPA™ has had its name changed. The Google Plus page has been deleted. Deleting pages and/or posts is less than optimal but is necessary in order to ensure less confusion going forward and ensure that the Coupon CPA's social media presence reflects its new dormant/turnaround state. Interested parties and readers are encouraged to follow R.O.C.K. It™ Method which will begin sharing some Daily Deal type information in addition to its regular content shares. We will announce the publishing of the Daily Deal Diagnostic Facebook page once its ready.
Coupon CPA Paper.li
A new Paper.li has been created that targets information/content about Daily Deals. Follow R.O.C.K. It™ Method Twitter handle if you would like to keep up with information that has been included historically within the Coupon CPA Paper.li.
Name Change
The financial spreadsheet model is now being marketed under the name Daily Deal Diagnostic. Everything else about the financial spreadsheet model is the same. Just changing the name. With the name change the financial model will become a sub-part of the expanding R.O.C.K. It™ Methodology body of work.
End of Android App version
The "original" basic version of the Daily Deal Diagnostic (formerly called the Coupon CPA™) financial spreadsheet model had been made into an Android application. Effective October 31, 2012 the Android App version will no longer be available and will be removed from the Google Play store. The spreadsheet model will continue to be available going forward.
Update: Android App unpublished as of November 11, 2012.
Coupon CPA website content
Content previously available on the stand alone Coupon CPA web site has been appropriately modified/changed and moved to the SIXSTRINGcpa website (update: now located here) to reflect the new name change, etc.
Coupon CPA domain
The Coupon CPA domain will be forwarded to the appropriate page on the SIX STRING cpa web site on a temporary basis (duration yet to be determined). There are no definitive plans for future uses of the Coupon CPA domain at the present time ... but you never know what might pop up in the future.
Coupon CPA blog
The Coupon CPA blog has been renamed to the Daily Deal Diagnostic blog (the blog you are reading). All original posts have been maintained and kept (though some may have been modified slightly to reflect new blog location, etc.).
Coupon CPA Twitter handle
The Coupon CPA™ Twitter handle will become inactive over a period of time. This post will be Tweeted via the Coupon CPA handle a number of times to help ensure folks who Follow Coupon CPA or have it privately/publicly listed will have numerous opportunities to see this announcement about the changes. Please feel free to follow the R.O.C.K. It™ Method Twitter handle.
Facebook and Google Plus pages
After a careful review we found that the Facebook and Google Plus pages had a pretty fair amount of overlapping content. So, the Facebook page that had been setup for Coupon CPA™ has had its name changed. The Google Plus page has been deleted. Deleting pages and/or posts is less than optimal but is necessary in order to ensure less confusion going forward and ensure that the Coupon CPA's social media presence reflects its new dormant/turnaround state. Interested parties and readers are encouraged to follow R.O.C.K. It™ Method which will begin sharing some Daily Deal type information in addition to its regular content shares. We will announce the publishing of the Daily Deal Diagnostic Facebook page once its ready.
Coupon CPA Paper.li
A new Paper.li has been created that targets information/content about Daily Deals. Follow R.O.C.K. It™ Method Twitter handle if you would like to keep up with information that has been included historically within the Coupon CPA Paper.li.
A Simple Approach Can Be the Key to Success
Originally published 01/09/2012
Small business owners and entrepreneurs, many may think this may need to go without saying but I am going to go ahead and say it anyway. One of the most foolproof ways to spend your marketing budget is on the product and/or service you offer. What do I mean? Put money into the service details you offer your customers at your shop. Put loads of value and quality on the plate of food you dish out to your customers. These are the tangibles to which your customer can relate. More importantly, this is what will get communicated from your customers to their friends, and their friend's friends, etc. Word of mouth may have changed (think new technologies available) but it is your product, service and approach you offer that fosters the desire to share your story with others. Yes, you have to make sure you are knowledgeable about the new communication platforms that exist because a great product means little if no one is aware of it. But in the end, you have to have the chops to back it up, and that requires making sure your investing in the best product and/or service you can for your business and budget.
I will wrap this short little post up with a personal example. I share stories with people everyday. I get a kick out of sharing cool things I come across and I do it for free. The companies I talk about with others impress me with what they offer. I honestly could care less if they give me a huge discount via a Daily Deal platform or if they are on Twitter, Facebook, Google Plus, Yelp!, etc. These things influence how fast I find them (maybe, more on this in the future) but what gets me coming back and gets me sharing with others - and, again I am a sharer - is providing me something I truly enjoy in exchange for my dollar. Pretty simple concept.
Good luck small business owners and entrepreneurs. As always, I am wishing you the best.
{update}
I will wrap this short little post up with a personal example. I share stories with people everyday. I get a kick out of sharing cool things I come across and I do it for free. The companies I talk about with others impress me with what they offer. I honestly could care less if they give me a huge discount via a Daily Deal platform or if they are on Twitter, Facebook, Google Plus, Yelp!, etc. These things influence how fast I find them (maybe, more on this in the future) but what gets me coming back and gets me sharing with others - and, again I am a sharer - is providing me something I truly enjoy in exchange for my dollar. Pretty simple concept.
Good luck small business owners and entrepreneurs. As always, I am wishing you the best.
{update}
Sharing article about pricing and loyalty
Originally published 10/25/2011
Someone sent me this article that talks about loyalty and customer resistance, or lack thereof, in the context of price increases by a national restaurant chain. My key takeaways? Offering true value and quality makes appropriate, measured price increases easier to implement and accept by the customer.
Loyalty matters but how much should you pay for it?
Originally published 10/10/2011
I came across this Tech Crunch article written by Erick Schonfeld. It is a good article. If you are a small business owner I think you should probably read it. Even if you do not plan on doing a Coupon Crowdsourcing Promotion, or Daily Deal, with Groupon or any of the other Daily Deal promoters. Why? Well, if for no other reason than your competition might be doing these type of deals and knowing your competitor's actions can prove fruitful.
The article talks about a new service Groupon will offer to small businesses designed to help with loyalty issues. As has been stated in this blog before, tools offered that help small business get us excited. This tool might go further down that path. However, its still prudent for small business owners to consider their own business model and the current and near future economics of the industry in which they compete.
Loyalty is great. It is what all businesses want and need, especially small businesses. But loyalty that has to be bought with expensive advertising and promotional programs should be scrutinized by business owners and entrepreneurs. The article gives an example of how this new loyalty program might work.
" With a Groupon Reward, a business that offers a regular Groupon deal will be able to follow up with another reward that gets unlocked after the customer spends a certain amount of money. For instance, after a customer spends $50 or $100 at a store over time, she might get a Groupon Reward of $20 worth of goods for $4. "
I don't know if small business owners need to get too caught up with the deal specifics mentioned in the article. They might be illustrative and the deal terms under this program could be negotiable. I think it is appropriate to look at this type of program at a high level until more data comes out. The impact of running a Daily Deal followed by a program similar to that above may or may not prove profitable and sustainable. Consider this.
Let's assume that the merchant breaks even on the initial Coupon Crowdsourcing Promotion they did. A big assumption? Yes, it may be in some cases. But let's assume this for simplicity. Now assume the small business does a loyalty type of offering like that mentioned above. What happens if they give away $20 and take in $4 (assuming the merchant gets all $4 too by the way). Depending on the cost structure and the life span of a customer this may or may not be a good deal for the business. Once again, small business owners will need to have a very good grasp on their cost and profitability models beyond traditional P&L analysis and understanding. Furthermore, a program like the one mentioned in the article will likely increase the need for small business owners to really understand the life cycle and/or life span of their customers.
A program like the one discussed in the article is an additional step toward providing a multitude of tools small business owners can use. But these promotional programs seem to still be predicated on discounting. And, in my opinion, loyalty purchased is not the same thing as loyalty earned.
The article talks about a new service Groupon will offer to small businesses designed to help with loyalty issues. As has been stated in this blog before, tools offered that help small business get us excited. This tool might go further down that path. However, its still prudent for small business owners to consider their own business model and the current and near future economics of the industry in which they compete.
Loyalty is great. It is what all businesses want and need, especially small businesses. But loyalty that has to be bought with expensive advertising and promotional programs should be scrutinized by business owners and entrepreneurs. The article gives an example of how this new loyalty program might work.
" With a Groupon Reward, a business that offers a regular Groupon deal will be able to follow up with another reward that gets unlocked after the customer spends a certain amount of money. For instance, after a customer spends $50 or $100 at a store over time, she might get a Groupon Reward of $20 worth of goods for $4. "
I don't know if small business owners need to get too caught up with the deal specifics mentioned in the article. They might be illustrative and the deal terms under this program could be negotiable. I think it is appropriate to look at this type of program at a high level until more data comes out. The impact of running a Daily Deal followed by a program similar to that above may or may not prove profitable and sustainable. Consider this.
Let's assume that the merchant breaks even on the initial Coupon Crowdsourcing Promotion they did. A big assumption? Yes, it may be in some cases. But let's assume this for simplicity. Now assume the small business does a loyalty type of offering like that mentioned above. What happens if they give away $20 and take in $4 (assuming the merchant gets all $4 too by the way). Depending on the cost structure and the life span of a customer this may or may not be a good deal for the business. Once again, small business owners will need to have a very good grasp on their cost and profitability models beyond traditional P&L analysis and understanding. Furthermore, a program like the one mentioned in the article will likely increase the need for small business owners to really understand the life cycle and/or life span of their customers.
A program like the one discussed in the article is an additional step toward providing a multitude of tools small business owners can use. But these promotional programs seem to still be predicated on discounting. And, in my opinion, loyalty purchased is not the same thing as loyalty earned.
Continued call for objective analysis
Originally published 06/16/2011
This blog and the underlying Coupon Crowdsourcing Promotion Analyzer, or Coupon CPA™, at its core is nothing more than a call for objective (hard) fact-based analysis of Daily Deal promotions. Early on I cast a critical eye on Daily Deals because it appeared that hype was generating a rising tide of interest, with little to no consideration given to the implication of engaging in a deep discount deal. Making gut decisions is great but gut decisions grounded in analytically fact-based decision making is even better.
This blog, and its author, does not have enough facts to now suddenly lay claim that any particular Daily Deal participant, or the entire industry, is engaging in less than scrupulous tactics. That may or not be the case. I have heard from small business owners and others about some of the tactics used. Regardless, the main issue is that you, the small business owner, must make the final decision - no matter how aggressive the tactics may or may not be. You must be prepared enough to be able to say "Are you crazy? There is no way I can afford to do that deal at those terms for my business!" to a Daily Deal representative pitching a poorly structured promotion.
Coupon Crowdsourced, or Daily Deal, promotions are similar to other types of promotional activities. Meaning that a well crafted plan needs to be prepared in order to optimize the promotion. Even if a promotion brings in numerous new customers, those customers will not automatically convert to regular customers. What has to happen to help that conversion rate come true? That is the plan that you, the small business owner, need to develop.
Up-front and on-going analysis helps with that. The Daily Deal Diagnostic micro book I wrote is one tool, as is the Coupon CPA™ model. But there are many tools and resources out there: your accountant, your ad/marketing team, your spouse, your employees and managers. These resources must be tapped and utilized though. Untapped and under-utilized resources cannot help anyone.
I sincerely hope that unscrupulous (abrasive, aggressive, whatever adjective one might choose) activities have not been pervasive in the Daily Deal industry. If they have then the entire industry has provided even less value to the small business community than I initially feared. Regardless, it is the small business owner who has to stick to their guns and analyze, analyze, analyze. And say 'NO' if that makes sense (I think not promoting can be better than a poor promotion).
And it is apparently no longer just me championing analysis, the author of a TechCrunch article interviewed a supposed former Daily Deal industry employee who, according to the article's author, says:
"The ex-employee encourages small businesses to really run the numbers themselves."
I have basically said the same thing for some time now ... so, could not have said it better myself.
This blog, and its author, does not have enough facts to now suddenly lay claim that any particular Daily Deal participant, or the entire industry, is engaging in less than scrupulous tactics. That may or not be the case. I have heard from small business owners and others about some of the tactics used. Regardless, the main issue is that you, the small business owner, must make the final decision - no matter how aggressive the tactics may or may not be. You must be prepared enough to be able to say "Are you crazy? There is no way I can afford to do that deal at those terms for my business!" to a Daily Deal representative pitching a poorly structured promotion.
Coupon Crowdsourced, or Daily Deal, promotions are similar to other types of promotional activities. Meaning that a well crafted plan needs to be prepared in order to optimize the promotion. Even if a promotion brings in numerous new customers, those customers will not automatically convert to regular customers. What has to happen to help that conversion rate come true? That is the plan that you, the small business owner, need to develop.
Up-front and on-going analysis helps with that. The Daily Deal Diagnostic micro book I wrote is one tool, as is the Coupon CPA™ model. But there are many tools and resources out there: your accountant, your ad/marketing team, your spouse, your employees and managers. These resources must be tapped and utilized though. Untapped and under-utilized resources cannot help anyone.
I sincerely hope that unscrupulous (abrasive, aggressive, whatever adjective one might choose) activities have not been pervasive in the Daily Deal industry. If they have then the entire industry has provided even less value to the small business community than I initially feared. Regardless, it is the small business owner who has to stick to their guns and analyze, analyze, analyze. And say 'NO' if that makes sense (I think not promoting can be better than a poor promotion).
And it is apparently no longer just me championing analysis, the author of a TechCrunch article interviewed a supposed former Daily Deal industry employee who, according to the article's author, says:
"The ex-employee encourages small businesses to really run the numbers themselves."
I have basically said the same thing for some time now ... so, could not have said it better myself.
Getting caught up in the Hoopla
Originally published 06/10/2011
It now seems to be en vogue to bash Daily Deal companies, or at least one of them. Obviously, I have been concerned how the Daily Deal business model affects small businesses for some time.
It is important to remember many people get paid exclusively by attracting attention to themselves and their content. Small business owners do yourself a favor and remain objective. If a Daily Deal is not for you and your business do not do it. If the numbers and strategy make sense then consider it. This holds true from a historical perspective as well. If it didn't make sense to do a Daily Deal when it was the 'cool' thing to do, it should not have been done then either.
Objective thought and consideration by you, the small business owner, is all that is needed. If you have the skills and tools to analyze use them. If not, acquire them. Talk to your bookkeeper, your CPA, your accountant and your marketing staff and craft a plan.
Do not get caught up in all the Hoopla - either positive or negative.
It is important to remember many people get paid exclusively by attracting attention to themselves and their content. Small business owners do yourself a favor and remain objective. If a Daily Deal is not for you and your business do not do it. If the numbers and strategy make sense then consider it. This holds true from a historical perspective as well. If it didn't make sense to do a Daily Deal when it was the 'cool' thing to do, it should not have been done then either.
Objective thought and consideration by you, the small business owner, is all that is needed. If you have the skills and tools to analyze use them. If not, acquire them. Talk to your bookkeeper, your CPA, your accountant and your marketing staff and craft a plan.
Do not get caught up in all the Hoopla - either positive or negative.
Android App price reduction
Originally published 06/10/2011
The price of the Android App version of the Coupon Crowdsourcing Promotion Analyzer, or Coupon CPA™ has been reduced. This price reduction reflects the fact that the Android App is based on the early basic model, with a more limited set of input variables and output statistics. A new, updated spreadsheet version is available via the web site.
Reply to a blog posting
Originally published 06/06/2011
Whenever I post a reply on a web site that moderates comments I try to post a link to that article and recopy the reply that I made that is awaiting "moderation."
Here is a link to a post on the Knewton blog
And here is my reply:
Here is a link to a post on the Knewton blog
And here is my reply:
"Hello, I have been writing on the Daily Deal model and potential pitfalls for a bit now. In fact, in August last year I created a financial model to help small business owners run some quick numbers in advance http://www.couponcpa.com so they could get a feel and aid in planning. Then I started a new blog around the same time. I have to say I find it interesting that everyone seems to be asking questions about the industry's model only now after just one industry participant files an S-1. Truly intriguing to me."
I really do not understand the new mania that is close to bashing. I have been extremely critical of the financial mechanics of the Daily Deal industry for some time . There are real issues with it - positive and negative. But many of these can be planned out in advance. The bottom line is the industry mechanics have not changed that much since I started writing about it and developed the financial model. In fact, the Daily Deal industry appears to be adding additional tools for the small business owner to use - yes, some of these tools compete with the Coupon CPA™ model I created but that is OK - more tools are better. So, it is confusing to me why all of a sudden it seems that so many people are only now casting a critical eye publicly.
I recognize there have been many others who have been questioning the effectiveness of the Daily Deal industry model for small business. But most of these detractors have been Replies to main blog articles. Now the main article authors and article headlines seem to go beyond critical. This is absolutely fascinating to me.
I am not defending the Daily Deal industry, nor am I a Defender of any one single Daily Deal industry sponsor/provider. I still cast a critical eye but I am extremely intrigued by articles that seem to only now cast a critical eye at the industry business model just because of a single industry participant's S-1 filing (the Knewton blog article is only an example it is surely not the only one at all, I am not throwing a stone at Knewton - I mean only to use the above referenced post as an illustrative example).
I recognize there have been many others who have been questioning the effectiveness of the Daily Deal industry model for small business. But most of these detractors have been Replies to main blog articles. Now the main article authors and article headlines seem to go beyond critical. This is absolutely fascinating to me.
I am not defending the Daily Deal industry, nor am I a Defender of any one single Daily Deal industry sponsor/provider. I still cast a critical eye but I am extremely intrigued by articles that seem to only now cast a critical eye at the industry business model just because of a single industry participant's S-1 filing (the Knewton blog article is only an example it is surely not the only one at all, I am not throwing a stone at Knewton - I mean only to use the above referenced post as an illustrative example).
Yet another blog comment
Originally published 06/06/2011
Sramana Mitra has a post up related to this topic (she actually cites the same Knewton article I did). And here is the reply to her post:
"Sramana, I have been thinking, writing, and tool developing on the Daily Deal industry for a number of months now. The Coupon CPA™ is a tool to assist small business owners in determining the potential financial impact from doing a Daily Deal promotion. I don't think Daily Deals are for every small business. It is up for each owner to decide ... and they should do so by engaging and preparing fully.
But that is a separate issue from questioning a Daily Deal participants valuation and/or the business model of the Daily Deal promotion industry players themselves. I appreciate you zagging while others zigging. It seems now en vogue to bash where just six months ago most press outlets seem to gush praise and love. I may not necessarily agree with you but I very much respect you swimming against the tide as it were.
Folks can check out the Coupon CPA™ blog at http://couponcpa.blogspot.com if they want to review some additional writings on Daily Deals."
'Daily Deal Diagnostic' book excerpt
Originally published 06/01/2011
The following is a selection from the micro book 'Daily Deal Diagnostic' available on Amazon Kindle.
"First, the small business owner engages in some up-front thinking, planning, and analysis. In this phase the small business owner prepares goals and objectives for the proposed Coupon Crowdsourcing promotion. During this phase small business owners might also think about and assess the mechanics of the industry in which they participate. Are deep discounts really necessary? How will competitors react?"
RE: the power of email
Originally published 05/14/2011
This post is some select content from a post made by this author on Fred Wilson's blog. I thought it was important enough to share. It is a reminder to small business owners. No matter what type of advertising and marketing you do, Daily Deal or otherwise, email can still a powerful tool. So make an effort to reach out to every customer and prospect to obtain an email address you can use to connect with your customer & fan base, especially if you are paying good money on a promotion to increase traffic to your establishment.
Many folks might think (wrongfully) that I am totally anti Daily Deal industry because of the Coupon CPA model I offer small biz owners and the related new micro book I wrote on up-front Daily Deal analysis, etc. The fact of the matter is I actually applaud the industry in a couple of areas.
While I do think Daily Deals can be lacking in certain areas, I applaud the Daily Deal industry for reinvigorating email as a BOOM tool. While it is the quality of the 'deal' that gets people to read and act, the tech used is older tech that leverages newer social sharing components.
In my mind: Daily Deal offer = small biz owner willing to almost give away product + super sexy ad copy + email (plain, old, simple email)
It is amazing how effectively the Daily Deal industry was able to remake email marketing. In my opinion, the biggest factor to Daily Deal industry success is not properly recognized; it is the small business owners willingness to offer steep discounts. But the email delivery players (Daily Deal companies) are the ones who get all the press.
I hope small business owners utilizing Daily Deals realize this and do everything in their power to grab contact information (e.g. email addresses) from every single customer that walks through their doors.
Many folks might think (wrongfully) that I am totally anti Daily Deal industry because of the Coupon CPA model I offer small biz owners and the related new micro book I wrote on up-front Daily Deal analysis, etc. The fact of the matter is I actually applaud the industry in a couple of areas.
While I do think Daily Deals can be lacking in certain areas, I applaud the Daily Deal industry for reinvigorating email as a BOOM tool. While it is the quality of the 'deal' that gets people to read and act, the tech used is older tech that leverages newer social sharing components.
In my mind: Daily Deal offer = small biz owner willing to almost give away product + super sexy ad copy + email (plain, old, simple email)
It is amazing how effectively the Daily Deal industry was able to remake email marketing. In my opinion, the biggest factor to Daily Deal industry success is not properly recognized; it is the small business owners willingness to offer steep discounts. But the email delivery players (Daily Deal companies) are the ones who get all the press.
I hope small business owners utilizing Daily Deals realize this and do everything in their power to grab contact information (e.g. email addresses) from every single customer that walks through their doors.
Micro eBook covering the basics of the Coupon CPA™ and more
Originally published 04/19/2011
There is another book in the R.O.C.K. Star Business Method™ micro book series that is now available on Amazon's Kindle store. The micro book is somewhere around 10K words and is based on the premise of analyzing and preparing for Daily Deals up-front. The micro-book's author Geoffrey, the SIX STRING cpa™ is a recovering accountant and brings his numerous years of experience in analysis to take his efforts that created the Coupon CPA™ model even further. The goal is to try and demystify promotional type of analysis and give small business owners some comfort to tackle analysis head-on. The micro book looks at a variety of issues and variables that a small business owner might consider, from a financial perspective, prior to running a Daily Deal, or a Coupon Crowdsourcing Promotion.
A reminder that the Coupon CPA™ basic model is available as an Android application and that the spreadsheet model is about ready for re-release as a more advanced model.
You can find the book here.
A reminder that the Coupon CPA™ basic model is available as an Android application and that the spreadsheet model is about ready for re-release as a more advanced model.
You can find the book here.
Now they are helping!?
Originally published 03/14/2011
Great news small business, yours truly may not be the only one offering some tools to assist small business in planning their daily deal promotions. According to Business Insider, Groupon may be offering some ROI-type tools and capacity planning tools to assist small business owners. Obviously, we developed the Coupon CPA™ to assist in this same area but we are "pleased as punch" if the industry starts to head this way on their own. Many small business owners may still want to use a tool created by an independent party like ours (also, may we STRONGLY suggest you talk to your own accountant, bookkeeper, CPA, etc.) but the offering of tools like this is a step in the right direction. Maybe some day #Daily Deal companies will start discounting their own services from the 50% fees they charge. Stay tuned....
Some things to consider when discounting a service
Originally published 02/12/2011
There a number of factors to consider when thinking about developing a discounting promotion for a product or service (regardless of whether you use a big daily deal/coupon crowd-sourcing promoter or not). In this post, the discussion will surround capacity issues in a service business context!
If you run and operate a service business then you should gain some understanding of the capacity, or throughput, of your business. Here are just a couple of constraints that a service business deals with that affect capacity.
Specialized knowledge: Many service businesses often rely on the specialized knowledge of a few people, sometimes just a single person - the owner. If only one person can deliver the service then the capacity of service delivery is finite. This can be exacerbated further if the service being delivered is complex or specialized enough that long lead times to train others is required (e.g. takes awhile to train in chiropractic services). Furthermore, if the business is small and the owner, and key deliverer of services, wears multiple hats (e.g. answers phone, schedules, etc.) then the effective capacity of the business to actually deliver the services being discounted is reduced further; however, this type of constraint on capacity can be more easily lessened (it does not take as long to train someone to answer the phone, schedule, etc. in many settings).
Limited space: This may seem obvious to some but I know from previous business experiences that not everyone completely absorbs the effect a finite amount of space places on a business. For example, if you operate a small batting cage on the outskirts of town and have four batting practice lanes then you have a physical space constraint. The degree of this constraint differs depending upon how much activity the business currently enjoys, when the activity occurs, and, in some instances, whether you can flex your business to accommodate spikes in increased demand.
These are just a couple of issues related to service industry businesses and constraint. The post is meant to be descriptive, not prescriptive, in order to assist you, the small business owner, in thinking of issues that impact the capacity and ability for your business to deliver its services.
Use every resource at your disposal to craft the best promotion for YOU and your customers. The one that makes the most sense for everyone involved. As always, small business owners ... thanks for doing what you do.
Have a great weekend - although I know you will be working!
If you run and operate a service business then you should gain some understanding of the capacity, or throughput, of your business. Here are just a couple of constraints that a service business deals with that affect capacity.
Specialized knowledge: Many service businesses often rely on the specialized knowledge of a few people, sometimes just a single person - the owner. If only one person can deliver the service then the capacity of service delivery is finite. This can be exacerbated further if the service being delivered is complex or specialized enough that long lead times to train others is required (e.g. takes awhile to train in chiropractic services). Furthermore, if the business is small and the owner, and key deliverer of services, wears multiple hats (e.g. answers phone, schedules, etc.) then the effective capacity of the business to actually deliver the services being discounted is reduced further; however, this type of constraint on capacity can be more easily lessened (it does not take as long to train someone to answer the phone, schedule, etc. in many settings).
Limited space: This may seem obvious to some but I know from previous business experiences that not everyone completely absorbs the effect a finite amount of space places on a business. For example, if you operate a small batting cage on the outskirts of town and have four batting practice lanes then you have a physical space constraint. The degree of this constraint differs depending upon how much activity the business currently enjoys, when the activity occurs, and, in some instances, whether you can flex your business to accommodate spikes in increased demand.
These are just a couple of issues related to service industry businesses and constraint. The post is meant to be descriptive, not prescriptive, in order to assist you, the small business owner, in thinking of issues that impact the capacity and ability for your business to deliver its services.
Use every resource at your disposal to craft the best promotion for YOU and your customers. The one that makes the most sense for everyone involved. As always, small business owners ... thanks for doing what you do.
Have a great weekend - although I know you will be working!
Respectfully, I disagree
Originally published 01/24/2011
The following is my response (for whatever that is worth) to the well written article by Mathew Ingram on GigaOM. I started writing a couple of days ago offline but I saved the post for no other reason than to have a post for Monday...which, hopefully, will be a busy day for me. In short I disagree, Google does not need to buy a Groupon-type clone in order to be successful in the online coupon promotion space.
1) Limited barriers to entry. Why buy when so easy to build? Mr. Ingram mentions this himself in his article so no need to go on about this.
2) Acquisition route takes time too. There are numerous daily deal sites and with the exception of a handful most are fairly small in scale. Result is that multiple acquisitions would need to be made by Google to "buy" a salesforce. And the cost of lost time in integrating that many companies, and each respective salesforce, and integrate the cultures is likely to "be difficult" (to use corporate speak), in my opinion.
3) Valuations. Valuations in the industry are likely skewed high due to the "hotness" of daily deal sites. Unless Google went after Groupon, again, or Living Social (from what I can tell, the two largest online coupon promoters), they would be paying a premium for a bunch of small companies in what would be essentially a "roll-up" strategy. I am not sure there is enough overhead that could be cut by Google from buying up smaller daily deal sites - given a lot of the operating expense of the acquired company would stay (their salesforce) - to make a roll-up work. But roll-ups really need more of a financial buyer approach, in my opinion. And, if someone thinks Google needs the salesforce fast to make a dent to win then Google needs to approach these acquisitions as a strategic buyer. I am not sure if the current market (given such a limited market exists) would accept a financial buyer.
4) Acquisition integration. Look at Google's previous success and/or failure with acquisitions. Here is an article (albeit a bit dated) to jump start your own research. If the daily deal space is as important as many are claiming it to be then why leave it to chance. If you cannot acquire the biggest or best (remember, Groupon said no thanks Google) then why acquire? The acquisition pool in daily deal space seems extremely large but is made up of smaller players. Effectively separating the wheat from the chaff will be time consuming. This is not a Google issue at all by the way. Successful acquisitions are hard, often impossible. There is some interesting research out there about the true long term value that is added via acquisitions. Here is a recent article that lays out a really compelling framework but even this article has some caveats, if you look closely.
The next point is really more of a desire (something I would like to see happen) rather than something that actually supports my argument that Google does not have to buy a Groupon-clone to begin to compete....
5) A test of the new CEO's strengths and capabilities. You have to build stuff over the long term to create lasting value for the shareholders. By building the capabilities in the daily deal (coupon crowd-source promotion) business, Google's new CEO will be able to show he is up to the challenge. I think the online daily deal space will change. I don't see how it cannot. It is an important shift in the way business owners can market, if done correctly, and it therefore makes sense Google is interested in the space. Google has some internal capabilities its would-be daily deal rivals do not. Use them. By carefully mapping out Google's strategy and showing that he and his team have the capabilities to build something meaningful and valuable, Google's new CEO can provide investors some assurance he has what it takes.
There are some issues with Google pursuing a build strategy. Actually there are some issues I see with Google even wanting to enter this space but I will leave that topic for a later post.
1) Limited barriers to entry. Why buy when so easy to build? Mr. Ingram mentions this himself in his article so no need to go on about this.
2) Acquisition route takes time too. There are numerous daily deal sites and with the exception of a handful most are fairly small in scale. Result is that multiple acquisitions would need to be made by Google to "buy" a salesforce. And the cost of lost time in integrating that many companies, and each respective salesforce, and integrate the cultures is likely to "be difficult" (to use corporate speak), in my opinion.
3) Valuations. Valuations in the industry are likely skewed high due to the "hotness" of daily deal sites. Unless Google went after Groupon, again, or Living Social (from what I can tell, the two largest online coupon promoters), they would be paying a premium for a bunch of small companies in what would be essentially a "roll-up" strategy. I am not sure there is enough overhead that could be cut by Google from buying up smaller daily deal sites - given a lot of the operating expense of the acquired company would stay (their salesforce) - to make a roll-up work. But roll-ups really need more of a financial buyer approach, in my opinion. And, if someone thinks Google needs the salesforce fast to make a dent to win then Google needs to approach these acquisitions as a strategic buyer. I am not sure if the current market (given such a limited market exists) would accept a financial buyer.
4) Acquisition integration. Look at Google's previous success and/or failure with acquisitions. Here is an article (albeit a bit dated) to jump start your own research. If the daily deal space is as important as many are claiming it to be then why leave it to chance. If you cannot acquire the biggest or best (remember, Groupon said no thanks Google) then why acquire? The acquisition pool in daily deal space seems extremely large but is made up of smaller players. Effectively separating the wheat from the chaff will be time consuming. This is not a Google issue at all by the way. Successful acquisitions are hard, often impossible. There is some interesting research out there about the true long term value that is added via acquisitions. Here is a recent article that lays out a really compelling framework but even this article has some caveats, if you look closely.
The next point is really more of a desire (something I would like to see happen) rather than something that actually supports my argument that Google does not have to buy a Groupon-clone to begin to compete....
5) A test of the new CEO's strengths and capabilities. You have to build stuff over the long term to create lasting value for the shareholders. By building the capabilities in the daily deal (coupon crowd-source promotion) business, Google's new CEO will be able to show he is up to the challenge. I think the online daily deal space will change. I don't see how it cannot. It is an important shift in the way business owners can market, if done correctly, and it therefore makes sense Google is interested in the space. Google has some internal capabilities its would-be daily deal rivals do not. Use them. By carefully mapping out Google's strategy and showing that he and his team have the capabilities to build something meaningful and valuable, Google's new CEO can provide investors some assurance he has what it takes.
There are some issues with Google pursuing a build strategy. Actually there are some issues I see with Google even wanting to enter this space but I will leave that topic for a later post.
Now on Broadway - Daily Deals!
Originally published 01/20/2011
Yesterday clearly was a BIG day for the online coupon/daily deal industry. It was almost like the opening of a new play on Broadway - bright lights, congratulatory remarks, etc. I have a couple of thoughts.
The Players
Given yesterday's daily deal I think clearly Living Social is committed to playing on the daily deal stage. It also appears that Amazon wants to assist. It is not a secret that Amazon invested in Living Social (click here for one article). And so Amazon has a stake in Living Social being a winner in the online coupon promotion space. I am extremely curious to see what additional details come to light on the deal. I have asked Living Social for some additional information about the structure of the deal and am waiting for a reply. [UPDATE 12:05PM 01/20/2011: Reply from Living Social "As with any deal, we’re unable to disclose the deal specifics."] One interesting tidbit that I hope comes to light is any information on the deal structure. Online coupon promoters take a cut of the deal price for their own. I am curious as to what take, if any, Living Social, received for the Amazon Deal. For example, did Amazon get the right to pay a smaller fee, if anything, to Living Social as part of its investment in Living Social? Amazon based deals are likely to be widely accepted and so a smaller cut of the daily deal price the consumer pays by Living Social may have been the case. There would be justification given the volume - more on this below.
I have seen some comments that make me think some think yesterday's deal was a sale of $20 for $10. I do not think that yesterday's event was a sale of $20 cash for $10 of cash. Other than the relationship between Amazon and Living Social I don't see how yesterday's deal is really more or less different that that with another business. Why? Let's assume Amazon keeps 50% of the $10, or $5. Let's also assume that each customer buys only the $20 amount - TOTALLY unlikely but keep the math simple. If the average direct cost of an item purchased from this deal is $10 then effectively the cost/transaction is $5. This is no different then if an educational toy store did the same deal under the same conditions. The toy store gets $5 ($10 (20 - discount) - a 50% take to Living Social) and if the educational toy store also had a $10 direct cost per deal and each customer only bought $20 worth then the result would be the same.
What makes this deal interesting is the relationship. Assume Amazon did not have to pay anything to Living Social (whether this was negotiation as part of their investment or a special one off condition to signing up for a BIG promotion that would clearly benefit Living Social as much as Amazon). If that is the case then something very interesting happened. Living Social could have acquired a bunch of new customers with zero acquisition cost. Let's keep the math simple (ignoring up-sell and overage, etc.) and assume all $10 goes to Amazon (e.g. 0% promoter fee) and if customers again only buy the $20 worth and Amazon has a direct cost of $10 for each item purchased then Living Social just potentially acquires a ton of new accounts, driven to Living Social by the Amazon deal, with little effort and a big Living Social investor (Amazon) has roughly broke-even on their daily deal (again, the math is kept simple in this example).
The Stage
I am a big proponent of some changes to the online coupon promotion industry. I have made a number of blog entries and comments to this effect in the past. I believe that too much adoration has been given to the promoters and not enough to the businesses who bear the financial burden that a deep discount deal for consumers requires. I am a firm believer that the the percentage of the take the promoter gets needs to trend downwards from as what has been reported to be as high as 50%. Furthermore, I think its to soon to tell if any change in the economics of the online coupon/daily deal industry was accelerated by yesterday's daily deal by Living Social and Amazon. If the percent that Amazon paid to Living Social becomes known, and if it is a relatively small percentage, then this might be the catalyst causing a deterioration in the margins of the online coupon promotion industry participants.
I caution against premature celebration by those watching this industry as closely as I. Yesterday's event was peculiar (as was Groupon's deal with Gap). Large scale deals are unique and if the promoters see ways to profit from doing larger deals with national retailers, even at reduced fees, they may just leave small businesses to fend for themselves once again to promote their businesses.
{ Disclosure(s) - You can take the boy out of the CPA industry but you cannot take the CPA industry out of the boy so here are a few disclosures. I am the creator and publisher of the Coupon CPA™ tool that allows small business owners to analyze their planned online coupon promotions. Additionally, I may, or may not, have begun business development efforts with those mentioned in this post and/or their competitors about the Coupon CPA™ tool - so, obviously, I have some stake in what happens with online coupon promoters (e.g. Daily Deal sites). I sell my book(s) on Amazon. I am also an Amazon affiliate. And, well ... um, yeah I purchased one of the Amazon gift certificates promoted. Because of my relationships with Amazon (although minuscule and tangential) I waited until today to make this post.}
The Players
Given yesterday's daily deal I think clearly Living Social is committed to playing on the daily deal stage. It also appears that Amazon wants to assist. It is not a secret that Amazon invested in Living Social (click here for one article). And so Amazon has a stake in Living Social being a winner in the online coupon promotion space. I am extremely curious to see what additional details come to light on the deal. I have asked Living Social for some additional information about the structure of the deal and am waiting for a reply. [UPDATE 12:05PM 01/20/2011: Reply from Living Social "As with any deal, we’re unable to disclose the deal specifics."] One interesting tidbit that I hope comes to light is any information on the deal structure. Online coupon promoters take a cut of the deal price for their own. I am curious as to what take, if any, Living Social, received for the Amazon Deal. For example, did Amazon get the right to pay a smaller fee, if anything, to Living Social as part of its investment in Living Social? Amazon based deals are likely to be widely accepted and so a smaller cut of the daily deal price the consumer pays by Living Social may have been the case. There would be justification given the volume - more on this below.
I have seen some comments that make me think some think yesterday's deal was a sale of $20 for $10. I do not think that yesterday's event was a sale of $20 cash for $10 of cash. Other than the relationship between Amazon and Living Social I don't see how yesterday's deal is really more or less different that that with another business. Why? Let's assume Amazon keeps 50% of the $10, or $5. Let's also assume that each customer buys only the $20 amount - TOTALLY unlikely but keep the math simple. If the average direct cost of an item purchased from this deal is $10 then effectively the cost/transaction is $5. This is no different then if an educational toy store did the same deal under the same conditions. The toy store gets $5 ($10 (20 - discount) - a 50% take to Living Social) and if the educational toy store also had a $10 direct cost per deal and each customer only bought $20 worth then the result would be the same.
What makes this deal interesting is the relationship. Assume Amazon did not have to pay anything to Living Social (whether this was negotiation as part of their investment or a special one off condition to signing up for a BIG promotion that would clearly benefit Living Social as much as Amazon). If that is the case then something very interesting happened. Living Social could have acquired a bunch of new customers with zero acquisition cost. Let's keep the math simple (ignoring up-sell and overage, etc.) and assume all $10 goes to Amazon (e.g. 0% promoter fee) and if customers again only buy the $20 worth and Amazon has a direct cost of $10 for each item purchased then Living Social just potentially acquires a ton of new accounts, driven to Living Social by the Amazon deal, with little effort and a big Living Social investor (Amazon) has roughly broke-even on their daily deal (again, the math is kept simple in this example).
The Stage
I am a big proponent of some changes to the online coupon promotion industry. I have made a number of blog entries and comments to this effect in the past. I believe that too much adoration has been given to the promoters and not enough to the businesses who bear the financial burden that a deep discount deal for consumers requires. I am a firm believer that the the percentage of the take the promoter gets needs to trend downwards from as what has been reported to be as high as 50%. Furthermore, I think its to soon to tell if any change in the economics of the online coupon/daily deal industry was accelerated by yesterday's daily deal by Living Social and Amazon. If the percent that Amazon paid to Living Social becomes known, and if it is a relatively small percentage, then this might be the catalyst causing a deterioration in the margins of the online coupon promotion industry participants.
I caution against premature celebration by those watching this industry as closely as I. Yesterday's event was peculiar (as was Groupon's deal with Gap). Large scale deals are unique and if the promoters see ways to profit from doing larger deals with national retailers, even at reduced fees, they may just leave small businesses to fend for themselves once again to promote their businesses.
{ Disclosure(s) - You can take the boy out of the CPA industry but you cannot take the CPA industry out of the boy so here are a few disclosures. I am the creator and publisher of the Coupon CPA™ tool that allows small business owners to analyze their planned online coupon promotions. Additionally, I may, or may not, have begun business development efforts with those mentioned in this post and/or their competitors about the Coupon CPA™ tool - so, obviously, I have some stake in what happens with online coupon promoters (e.g. Daily Deal sites). I sell my book(s) on Amazon. I am also an Amazon affiliate. And, well ... um, yeah I purchased one of the Amazon gift certificates promoted. Because of my relationships with Amazon (although minuscule and tangential) I waited until today to make this post.}
Spend a little - Save a lot
Originally published 01/19/2011
The Coupon CPA™ (spreadsheet or Android App version) can help small business owners. For just a few dollars and a few minutes of time, the Coupon CPA™ can assist small business owners better plan and execute their proposed online coupon offerings, potentially saving thousands of dollars and hours of lost time and headaches.
A fast easy formula
Originally published 01/18/2011
The Coupon CPA™ financial model, and related Android App, gives the small business owner what they want ... an affordable easy to use specialized calculator that helps them test their gut feel to a planned promotion and/or act as a first line of analysis of the planned promotion.
Friend or Fox in the farmyard?
Originally published 01/17/2011
Today, some in the world are abuzz with Groupon founder Andrew Mason's apology for the Groupon Osechi incident in Japan (click here for one of the stories). Efforts to apologize, whether in business or personal life, should be applauded. Admitting mistakes is powerful and may start the healing process. Unfortunately, Groupon's greatest strength may hurt it in this case. Groupon is known for its successful marketing & PR capabilities and the mainstream press love affair with the Groupon "story" could be the subject of a romance novel. And so, many may wonder if this is a sincere apology or a PR campaign given that the company has recently raised so much private capital and is rumored to be planning an IPO. So, if the small business community can be considered one giant Farmyard, is the above-referenced apologetic communication one of a Friend or a Fox? Only a handful of people will ever know for sure. I desperately hope its that of a friend.
In reading the above Osechi article, readers may note that Groupon states it has developed capacity models. It is unclear when these models will be made available. It is no surprise this statement grabbed the attention of this author. Six months ago, almost 2 years into the coupon crowd-sourced promotion industry's existence, I found a lack of readily available tools that could help small business owners improve their preparedness for online coupon promotions. So, I developed the Coupon CPA™ financial model (and more recently an Android App) because the lack of such models existed. I am disturbed that these coupon crowd-sourcing promoters (Groupon, Living Social, etc.) have been in business so long and only now seem to be understanding that the business owner is the purchaser of their service and is a key stakeholder in the process. I have written about this before but it needs repeating. The small business owner is the entity that allows fantastic, deep-discount deals to happen - not the promoter! In my opinion, the love-affair should be directed at the small businesses sacrificing to make these deals a reality.
An increase in the quantity and quality of analytical resources made available to small business owners is a GREAT thing and I applaud Groupon's announcement. With Groupon's announcement however, one issue in the future will be whether or not small business owners will trust and use models created by online coupon promoter industry participants - the very folks trying to sign them up for the promotion(s).
#no-hate-just-talking-straight
In reading the above Osechi article, readers may note that Groupon states it has developed capacity models. It is unclear when these models will be made available. It is no surprise this statement grabbed the attention of this author. Six months ago, almost 2 years into the coupon crowd-sourced promotion industry's existence, I found a lack of readily available tools that could help small business owners improve their preparedness for online coupon promotions. So, I developed the Coupon CPA™ financial model (and more recently an Android App) because the lack of such models existed. I am disturbed that these coupon crowd-sourcing promoters (Groupon, Living Social, etc.) have been in business so long and only now seem to be understanding that the business owner is the purchaser of their service and is a key stakeholder in the process. I have written about this before but it needs repeating. The small business owner is the entity that allows fantastic, deep-discount deals to happen - not the promoter! In my opinion, the love-affair should be directed at the small businesses sacrificing to make these deals a reality.
An increase in the quantity and quality of analytical resources made available to small business owners is a GREAT thing and I applaud Groupon's announcement. With Groupon's announcement however, one issue in the future will be whether or not small business owners will trust and use models created by online coupon promoter industry participants - the very folks trying to sign them up for the promotion(s).
#no-hate-just-talking-straight
The Coupon CPA™ - making math more sexy
Originally published 01/14/2011
Math is not typically thought of as sexy but consider this:
Profit can equate to Money
Money can equate to Success
Success is often considered Sexy
Determining one's profitability and, more importantly, improving one's profitability can be had with a bit of mathematical understanding. The Coupon CPA™ does just that ... makes a little bit of math go a long way and assists small business owners better plan for their group buying type promotions.
The Coupon CPA™ - helping make math just a little more sexy!
Profit can equate to Money
Money can equate to Success
Success is often considered Sexy
Determining one's profitability and, more importantly, improving one's profitability can be had with a bit of mathematical understanding. The Coupon CPA™ does just that ... makes a little bit of math go a long way and assists small business owners better plan for their group buying type promotions.
The Coupon CPA™ - helping make math just a little more sexy!
Analysis of Gap's Groupon promotion
Originally published 01/13/2011
There was an interesting article on Huffington Post that was one person's take on analyzing Gap's Groupon promotion. You can find the article here ... along with some Comments made by the SIXSTRINGcpa. Article champions the approach taken to build the Coupon CPA™ tool months ago, that is incremental Contribution Analysis is the way to look at these deals ... and that is the way the financial model was built. Good stuff in the article and more food for thought. Pay close attention to my comment about need for considering where you are as a business in terms of your capacity. Changes in available capacity often change cost model/structure. So, if you need to alter capacity to meet the anticipated increased demand from the planned coupon crowd-sourcing promotion, please make sure the proper costs are being analyzed and considered.
[NOTE: Gap and Groupon are trademarks of their respective companies.]
[NOTE: Gap and Groupon are trademarks of their respective companies.]
True cost of Group Buying article, and reply to it
Originally published 01/12/2011
Here is a link to the original article from the Huffington Post.
My "Pending" reply is below:
Great article! I must confess I too am a former PW alum and in the spirit of full disclosure I have created and am marketing a financial model and now an application for smart-phone's running Google's Android called the Coupon CPA™. Analysis up-front is key. The Groupon-type deals (there are others out there) are actually very powerful because one can analyze up-front ... you control when a deal activates. Contribution (incremental) analysis is the key and understanding your costs is of paramount importance. A couple of points. First, an understanding of one's capacity is CRUCIAL. Cost models often change if a business busts through current capacity levels/constraints. Smaller businesses that are already operating at or near capacity may need to consider this. Second, I would be cautious on the "breakage" element of group buying deals. If these are viewed more as certificates then they might be subject to some type of unclaimed property rules - especially since customers who have purchased can be found relatively easily - they must give their email information at a minimum - not sure if anything concrete has transpired but I spoke to an unclaimed property official in fact about this topic for research I did on a blog post of mine.
Again, great post and information to be shared and used.
My "Pending" reply is below:
Great article! I must confess I too am a former PW alum and in the spirit of full disclosure I have created and am marketing a financial model and now an application for smart-phone's running Google's Android called the Coupon CPA™. Analysis up-front is key. The Groupon-type deals (there are others out there) are actually very powerful because one can analyze up-front ... you control when a deal activates. Contribution (incremental) analysis is the key and understanding your costs is of paramount importance. A couple of points. First, an understanding of one's capacity is CRUCIAL. Cost models often change if a business busts through current capacity levels/constraints. Smaller businesses that are already operating at or near capacity may need to consider this. Second, I would be cautious on the "breakage" element of group buying deals. If these are viewed more as certificates then they might be subject to some type of unclaimed property rules - especially since customers who have purchased can be found relatively easily - they must give their email information at a minimum - not sure if anything concrete has transpired but I spoke to an unclaimed property official in fact about this topic for research I did on a blog post of mine.
Again, great post and information to be shared and used.
Coupon CPA™ for Android phones
Originally published 12/27/2010
Very happy to announce that the Coupon CPA™ financial model is now available as an Android Application (APP) on Google's Android Marketplace. The Coupon CPA™ helps small business owners improve planning of their proposed online coupon promotions (e.g. Living Social, Groupon, etc.). For just a few dollars, and in only a few minutes, small business owners can quickly and conveniently analyze the proposed online coupon promotion. Whether they are using the APP for their first line of analysis, or as a "gut check", the Coupon CPA™ can assist in maximizing the efforts and dollars spent by small business owners on online coupon promotional events.The Coupon CPA™ was created and developed by Geoffrey aka SIXSTRINGcpa. The Android Mobile version of the Coupon CPA™ was developed in order to provide a quick and easy method for small business owners to access the model and run calculations.
Marketing Pilgrim article
Originally published 10/13/2010
Here is another Groupon related article from Marketing Pilgrim. I made a couple of replies - still waiting for them to post.
The Rice University research report
Originally published 10/13/2010
Glad to see this research report came out. I had been doing some informal research for awhile. Great stuff to be shared with other small business owners.
Wall Street Journal article on Groupon
Originally published 10/13/2010
Here is a Wall Street Journal article on Groupon
Ugh, the sound of a slap in the face
Originally published 09/30/2010
Yesterday Groupon™ announced a new promotion. I assume it is not a joke, if it is then it was incredibly hilarious. If it is not a joke, well then. This promotion is not targeted at me but I still can appreciate the humor and the ability of a company to reach deep and break the mold. Heck, in most cases I applaud it. But not sure I can this one.
What I could have applauded is a new promotion announcement from Groupon™ that rewards their customers. No not the end users of their service but the ones actually footing the bill and paying them. Many say it is the Groupon™ purchasers. I say Balderdash! It is the hundreds and hundreds of small business owners who offer steep discounts AND then give Groupon™ a cut of the purchased Groupon™ to boot. The small business owners are the folks that allow the sexy enticing promotions to happen and allow Groupon™ to generate fanfare. The deals come straight out of the pockets of the small business owner. Don't get me wrong, small business owners may receive a benefit. I have talked about this before and have offered tools to help. But not all do receive benefit. Fine, it happens. There are no guarantees of success with a promotion or in business, in general.
Now with a recent research report out I truly hope that as much attention will be paid to the hard working small business owners who are making this craze a reality. It would be nice if Groupon™ had announced a promotion targeted at them. Just one opinion ... one, on which, I think many should think.
[NOTE: Thanks to Om Malik's tweet that led to awareness of the new research report.]
What I could have applauded is a new promotion announcement from Groupon™ that rewards their customers. No not the end users of their service but the ones actually footing the bill and paying them. Many say it is the Groupon™ purchasers. I say Balderdash! It is the hundreds and hundreds of small business owners who offer steep discounts AND then give Groupon™ a cut of the purchased Groupon™ to boot. The small business owners are the folks that allow the sexy enticing promotions to happen and allow Groupon™ to generate fanfare. The deals come straight out of the pockets of the small business owner. Don't get me wrong, small business owners may receive a benefit. I have talked about this before and have offered tools to help. But not all do receive benefit. Fine, it happens. There are no guarantees of success with a promotion or in business, in general.
Now with a recent research report out I truly hope that as much attention will be paid to the hard working small business owners who are making this craze a reality. It would be nice if Groupon™ had announced a promotion targeted at them. Just one opinion ... one, on which, I think many should think.
[NOTE: Thanks to Om Malik's tweet that led to awareness of the new research report.]
Coupon Conversation Continues - Part 3
Originally published 09/17/2010
[Disclaimer: Geoffrey, the SIX STRING cpa™ is no longer a practicing public accountant and he has never been a lawyer. The information below is for informational purposes only and any and all readers are encouraged to seek counsel if they have a question about their specific circumstances.]
So, rock-n-roll fans. I am not going to prepare a R.O.C.K. Star Business Method™ post this week. I am going to share some valuable insight I learned from doing a little researching and talking. You guessed it ... coupons ... again.
This is the follow-up I promised on the KC Confidential article I posted about earlier this week. I felt it necessary to do a little preliminary research on any potential unclaimed property issues and find information to share with the small business community. Specifically, my interest was peaked by the following comment in the above referenced post:
“Another thing about Groupon is that truth be told, not everybody will use their coupon – there’s a percentage of gift certificates that never get used – so that’s just free money. And then 50,000 to 100,000 people are going to see Groupon’s email blast whether they buy it or not, so that’s just up-front advertising.”
I talked with someone who deals with Kansas unclaimed property issues daily on September 15, 2010 who asked for anonymity. It appears, at least for the state of Kansas, the above statement may not hold true. According to the person with whom I spoke, Kansas does have a "gift certificate exemption." Which apparently means that if a retailer sells a gift certificate or card which is difficult to track the original purchaser then a business owner does not have to report any Unclaimed Property to the state based on the balance of any unused certificates. Many retailers are familiar with this rule.
Here is the issue according to the person with whom I spoke. The rule that many rely on above was meant to alleviate the reporting burdens. These burdens were even heavier when it was difficult for the business to track who purchased the gift certificate. But this is the 21st century and technology and customer interaction has changed. So, if newer promotional schemas and technologies for generating certificates and customer pre-payments allow for customer identification then tracking and reporting of unclaimed property is likely a requirement, again at least in the state of Kansas. So, what constitutes the ability to track a customer? Do these new online coupon platforms provide enough information to allow for customer tracking?
Bottom line, small business owners should get comfortable with their particular state's requirements for unclaimed property reporting. If tracking and reporting are necessary based on a particular state's statutes and regulations then these "free money" quotes being bandied about by business owners using these promotional campaigns might be challenged. 21st century technology is enabling businesses to get closer to their customers. It appears this "closeness" has potential to force an examination of the breadth at which gift certificate are considered exempt from unclaimed property laws. More importantly could this implication surprise business owners? In this economy, fewer surprises are needed not more.
Some additional resources:
State of Kansas Unclaimed Property - Laws and Regulations - again, each state appears to have different laws and regs, business owners should check their particular state and/or their legal counsel
State of Kansas Unclaimed Property - General Site
An Unclaimed Property Advisory Firm - no affiliation with this site and this site was not used to gather information; putting it here in case a reader has existing issues and needs a resource
Unclaimed Property Professionals Organization - educational site for unclaimed property professionals; site has recent news and updates, etc.
[ EDIT - Correction - The date of my phone interview was September 16, 2010 NOT September 15, 2010. ]
So, rock-n-roll fans. I am not going to prepare a R.O.C.K. Star Business Method™ post this week. I am going to share some valuable insight I learned from doing a little researching and talking. You guessed it ... coupons ... again.
This is the follow-up I promised on the KC Confidential article I posted about earlier this week. I felt it necessary to do a little preliminary research on any potential unclaimed property issues and find information to share with the small business community. Specifically, my interest was peaked by the following comment in the above referenced post:
“Another thing about Groupon is that truth be told, not everybody will use their coupon – there’s a percentage of gift certificates that never get used – so that’s just free money. And then 50,000 to 100,000 people are going to see Groupon’s email blast whether they buy it or not, so that’s just up-front advertising.”
I talked with someone who deals with Kansas unclaimed property issues daily on September 15, 2010 who asked for anonymity. It appears, at least for the state of Kansas, the above statement may not hold true. According to the person with whom I spoke, Kansas does have a "gift certificate exemption." Which apparently means that if a retailer sells a gift certificate or card which is difficult to track the original purchaser then a business owner does not have to report any Unclaimed Property to the state based on the balance of any unused certificates. Many retailers are familiar with this rule.
Here is the issue according to the person with whom I spoke. The rule that many rely on above was meant to alleviate the reporting burdens. These burdens were even heavier when it was difficult for the business to track who purchased the gift certificate. But this is the 21st century and technology and customer interaction has changed. So, if newer promotional schemas and technologies for generating certificates and customer pre-payments allow for customer identification then tracking and reporting of unclaimed property is likely a requirement, again at least in the state of Kansas. So, what constitutes the ability to track a customer? Do these new online coupon platforms provide enough information to allow for customer tracking?
Bottom line, small business owners should get comfortable with their particular state's requirements for unclaimed property reporting. If tracking and reporting are necessary based on a particular state's statutes and regulations then these "free money" quotes being bandied about by business owners using these promotional campaigns might be challenged. 21st century technology is enabling businesses to get closer to their customers. It appears this "closeness" has potential to force an examination of the breadth at which gift certificate are considered exempt from unclaimed property laws. More importantly could this implication surprise business owners? In this economy, fewer surprises are needed not more.
Some additional resources:
State of Kansas Unclaimed Property - Laws and Regulations - again, each state appears to have different laws and regs, business owners should check their particular state and/or their legal counsel
State of Kansas Unclaimed Property - General Site
An Unclaimed Property Advisory Firm - no affiliation with this site and this site was not used to gather information; putting it here in case a reader has existing issues and needs a resource
Unclaimed Property Professionals Organization - educational site for unclaimed property professionals; site has recent news and updates, etc.
[ EDIT - Correction - The date of my phone interview was September 16, 2010 NOT September 15, 2010. ]
Coupon Conversation Continues - Part 2
Originally published 09/16/2010
More interesting stuff to share. This story is from TechCrunch.
I will have an update on other items I have been researching shortly.
I will have an update on other items I have been researching shortly.
Coupon Cnversation Continues - Part 1
Originally published 09/12/2010
KC area blogger writes article about KC restaurant Blanc's successful Groupon promotion. Here is my reply below - still waiting on it to pass "moderation" and post.
Geoffrey, the SIX STRING cpa™ Says: Your comment is awaiting moderation.
September 12th, 2010 at 7:22 am
Metmac & Bob, thought I would jump in to the brief conversation you both are having. It may be worth it for a business to discount its product / services at times. In this case, Blanc (business in question) needs to look at exactly “who” purchased the Groupon offer. I purchased it. Their promotion was wasted marketing dollars on me. why? Because I would have gone anyway. Not everyone fits this category (although I know dozens who purchased this promo that fit the same description as I do). Additional risk of over-use of coupons by a business is that it continually places downward pressure on prices and squeezes margins. From now on, some customers may think twice before going to Blanc … because they may be waiting for that next discount deal to patronize the establishment. In Blanc’s case, it appears they have a loyal following so this risk may be small. Finally, I don’t believe Blanc received $10, some of that was shared with Groupon (e.g. Groupon’s fee). So, they may have only received $5 for each coupon. If so, that is a whopping 75% off the regular retail price. I personally like Blanc’s food. It sounds like this promotion may have been “sexy” I just hope it is profitable. [Disclosure: I have written about coupon issues on my own blog and it is a subject near and dear to my heart.]
EDIT 10:54 AM - New Content
I wanted to share some additional information with some of my blog readers. I already posted a long reply to the article (see link above) - maybe why it has not passed "moderation" yet - but thought I would give some additional thoughts on the matter. The issue is not if the Groupon-type promotion is good or bad. That depends on the particular circumstances under which the promotion is being considered. In the case above, if we assume that the restaurant kept 50% of the coupon cost or $5 (50% of the $10 promo price) and they sell 14,000 Groupons then the restaurant is receiving $70,000 but providing approximately $280,000 (original retail price of $20 x 14,000) worth of goods. Is this good or bad?
Furthermore, if the restaurant is not developing some way to identify which the promotion coupon purchasers were already customers they cannot estimate how inefficient a portion of the campaign dollars may have been. Notice, I used the word inefficient here. These are wasted marketing dollars, they still have some value but the value is greatly diminished. In this case I would have gone to the restaurant anyway and didn't need to be enticed. The restaurant paid me to come there. Whether or not that fact provides value (e.g. I tell people about the promotion - which I did) only gets them additional benefit if they implement a system to track it.
One final thought. The article states “Another thing about Groupon is that truth be told, not everybody will use their coupon – there’s a percentage of gift certificates that never get used – so that’s just free money...." I am not sure this is the case. Are there any unclaimed property issues? [edit for clarification 9/12/2010 at 12:13 PM] Regardless, a valuable promotion should provide value based upon something other than an implicit hope that purchasers don't use the item they bought.
The key to building lasting value from a successful promotion is not the promotion itself. It is the ability to build a methodology to ensure that when you hit the home run promotion you can capitalize on it and convert the new customers to repeat ones. Otherwise, you may just be hurting yourself.
Geoffrey, the SIX STRING cpa™ Says: Your comment is awaiting moderation.
September 12th, 2010 at 7:22 am
Metmac & Bob, thought I would jump in to the brief conversation you both are having. It may be worth it for a business to discount its product / services at times. In this case, Blanc (business in question) needs to look at exactly “who” purchased the Groupon offer. I purchased it. Their promotion was wasted marketing dollars on me. why? Because I would have gone anyway. Not everyone fits this category (although I know dozens who purchased this promo that fit the same description as I do). Additional risk of over-use of coupons by a business is that it continually places downward pressure on prices and squeezes margins. From now on, some customers may think twice before going to Blanc … because they may be waiting for that next discount deal to patronize the establishment. In Blanc’s case, it appears they have a loyal following so this risk may be small. Finally, I don’t believe Blanc received $10, some of that was shared with Groupon (e.g. Groupon’s fee). So, they may have only received $5 for each coupon. If so, that is a whopping 75% off the regular retail price. I personally like Blanc’s food. It sounds like this promotion may have been “sexy” I just hope it is profitable. [Disclosure: I have written about coupon issues on my own blog and it is a subject near and dear to my heart.]
EDIT 10:54 AM - New Content
I wanted to share some additional information with some of my blog readers. I already posted a long reply to the article (see link above) - maybe why it has not passed "moderation" yet - but thought I would give some additional thoughts on the matter. The issue is not if the Groupon-type promotion is good or bad. That depends on the particular circumstances under which the promotion is being considered. In the case above, if we assume that the restaurant kept 50% of the coupon cost or $5 (50% of the $10 promo price) and they sell 14,000 Groupons then the restaurant is receiving $70,000 but providing approximately $280,000 (original retail price of $20 x 14,000) worth of goods. Is this good or bad?
Furthermore, if the restaurant is not developing some way to identify which the promotion coupon purchasers were already customers they cannot estimate how inefficient a portion of the campaign dollars may have been. Notice, I used the word inefficient here. These are wasted marketing dollars, they still have some value but the value is greatly diminished. In this case I would have gone to the restaurant anyway and didn't need to be enticed. The restaurant paid me to come there. Whether or not that fact provides value (e.g. I tell people about the promotion - which I did) only gets them additional benefit if they implement a system to track it.
One final thought. The article states “Another thing about Groupon is that truth be told, not everybody will use their coupon – there’s a percentage of gift certificates that never get used – so that’s just free money...." I am not sure this is the case. Are there any unclaimed property issues? [edit for clarification 9/12/2010 at 12:13 PM] Regardless, a valuable promotion should provide value based upon something other than an implicit hope that purchasers don't use the item they bought.
The key to building lasting value from a successful promotion is not the promotion itself. It is the ability to build a methodology to ensure that when you hit the home run promotion you can capitalize on it and convert the new customers to repeat ones. Otherwise, you may just be hurting yourself.
Thank You
Originally published 08/18/2010
I just wanted to take a quick moment to say thanks to those who have already requested the little Groupon Ad program Analyzer spreadsheet I created to try and help small business owners get a better handle on a promotion they are planning so they can improve their odds of success. I am totally amazed at the geographical diversity of people requesting the Groupon ad program analyzer tool I created. It is just so humbling. thx
Coupon Your Business to Success
Originally published 08/06/2010
[NOTE: some 90% of this post and 100% of the referenced tool at the end were created on August 6, 2010. It is by luck and happenstance that I received a preview of the upcoming Forbes article on Groupon that I could use to support this post]
Recently a friend (and hard working small business owner) posted a comment on Facebook about receiving $15 of food for only $7. Obviously, the coupon was for a local a restaurant and was generated by Groupon. Great deal for the consumer but what about the business? I know the type of restaurant in question (the family owns a similar one). And I could tell that they would be losing money. Maybe they were going to make it up on volume? Totally kidding! But I wondered if any analytical rigor was put into this promotional exercise up-front?
OK, let me first start by saying that I do not think there is anything wrong with Groupon. In fact, of all the new, social-type media avenues for small business I have high hopes for Groupon's success (and my thoughts appear to be correct, I started writing this on August 6, 2010 before I discovered Aug. 12 that an upcoming Forbes article would touch on similar discussion). Out of the numerous new platforms, I think Groupon has the potential to actually solve a small business problem - reach people in a more cost effective manner - versus say, allowing potential customers to "check in" somewhere and tell the world about it, or just blindly using media that is hard if not impossible to track effectiveness.
That said a GREAT tool, poorly applied can yield disastrous consequences. Having spent some time perusing recent Groupon deals in my geographic locale, it seemed that there appears (and I say appears because I do not have exact numbers) to be a limited, if any, use of plain, old simple variable cost and contribution margin analysis in the usage of coupons as a promotional tool and pricing the offer.
In many industries, coupons have become a drug. The restaurant industry is one of them. The restaurant industry is already a brutally competitive, thin margin, thankless (although still very fun) industry in which to participate. So why do so many of its participants continue to feed the beast and make it harder for themselves by essentially giving their product away , at times, through OVERUSE (e.g. constant use) of coupons and/or the mismanagement of the opportunity that coupon-generated traffic provides? I think it is a mystery best left for philosophers and sages. I have tried to understand it and just cannot wrap my arms around it.
So many small business owners think the hard work is done when they decide which promotion they are going to do. In actuality, the hard work has not even begun yet. The real work is much more esoteric. What tactics are being crafted to ensure that coupon users will become repeat customers? Is there a formal plan to up-sell the coupon users to increase the average ticket so a positive contribution margin may actually be obtainable and the business owner is not just giving their product away in the hopes of winning customers/fans? The financial benefits are not generated by the coupon offer itself but in only a few instances in my experience. The lasting financial rewards are from the efforts a business owner puts in place to maintain all the traffic they hope to generate from the promotion. Coupons do generate interest but is it lasting interest?
In the case of Groupon, the cost of the promotion may be more manageable because the small business owner has some level of control over when the offer triggers by creating the interest-level cut-off point. And that is a GREAT and wonderful thing! However, not all businesses may get the same bang for the buck. In the upcoming Forbes article, a success story is provided about selling tickets to a King Tut exhibit. The article mentions a key point ... little marginal cost to produce the product / service once the offer is triggered. This is more likely to occur in service industries where there is likely a much smaller percentage of variable cost to produce. However, in industries where substantial variable costs to produce exist (retail and restaurants 30% to 60%) the coupon promotional program is a definite expense and the business owner has to do everything in their power to ensure this real cost is able to be recouped. And they do that by planning ahead.
So, I created a small, easy (yet effective) model that small business owners can use to input basic information on a handful of variables that will help determine in advance what a proposed Groupon offering might do for them. What is great is that small business owners can use this information to compare a planned Groupon promotion to other types of promotions they are considering and determine what looks to be the most financially advantageous (just a gut feel but I wouldn't be surprised if Groupon often wins out by the way). Finally, this model highlights the most important aspect of any kind of promotional activity ... that lasting financial benefits to the business accrue by planning ahead and making sure that if the promotion actually generates traffic the business has a plan to take advantage of it.
Recently a friend (and hard working small business owner) posted a comment on Facebook about receiving $15 of food for only $7. Obviously, the coupon was for a local a restaurant and was generated by Groupon. Great deal for the consumer but what about the business? I know the type of restaurant in question (the family owns a similar one). And I could tell that they would be losing money. Maybe they were going to make it up on volume? Totally kidding! But I wondered if any analytical rigor was put into this promotional exercise up-front?
OK, let me first start by saying that I do not think there is anything wrong with Groupon. In fact, of all the new, social-type media avenues for small business I have high hopes for Groupon's success (and my thoughts appear to be correct, I started writing this on August 6, 2010 before I discovered Aug. 12 that an upcoming Forbes article would touch on similar discussion). Out of the numerous new platforms, I think Groupon has the potential to actually solve a small business problem - reach people in a more cost effective manner - versus say, allowing potential customers to "check in" somewhere and tell the world about it, or just blindly using media that is hard if not impossible to track effectiveness.
That said a GREAT tool, poorly applied can yield disastrous consequences. Having spent some time perusing recent Groupon deals in my geographic locale, it seemed that there appears (and I say appears because I do not have exact numbers) to be a limited, if any, use of plain, old simple variable cost and contribution margin analysis in the usage of coupons as a promotional tool and pricing the offer.
In many industries, coupons have become a drug. The restaurant industry is one of them. The restaurant industry is already a brutally competitive, thin margin, thankless (although still very fun) industry in which to participate. So why do so many of its participants continue to feed the beast and make it harder for themselves by essentially giving their product away , at times, through OVERUSE (e.g. constant use) of coupons and/or the mismanagement of the opportunity that coupon-generated traffic provides? I think it is a mystery best left for philosophers and sages. I have tried to understand it and just cannot wrap my arms around it.
So many small business owners think the hard work is done when they decide which promotion they are going to do. In actuality, the hard work has not even begun yet. The real work is much more esoteric. What tactics are being crafted to ensure that coupon users will become repeat customers? Is there a formal plan to up-sell the coupon users to increase the average ticket so a positive contribution margin may actually be obtainable and the business owner is not just giving their product away in the hopes of winning customers/fans? The financial benefits are not generated by the coupon offer itself but in only a few instances in my experience. The lasting financial rewards are from the efforts a business owner puts in place to maintain all the traffic they hope to generate from the promotion. Coupons do generate interest but is it lasting interest?
In the case of Groupon, the cost of the promotion may be more manageable because the small business owner has some level of control over when the offer triggers by creating the interest-level cut-off point. And that is a GREAT and wonderful thing! However, not all businesses may get the same bang for the buck. In the upcoming Forbes article, a success story is provided about selling tickets to a King Tut exhibit. The article mentions a key point ... little marginal cost to produce the product / service once the offer is triggered. This is more likely to occur in service industries where there is likely a much smaller percentage of variable cost to produce. However, in industries where substantial variable costs to produce exist (retail and restaurants 30% to 60%) the coupon promotional program is a definite expense and the business owner has to do everything in their power to ensure this real cost is able to be recouped. And they do that by planning ahead.
So, I created a small, easy (yet effective) model that small business owners can use to input basic information on a handful of variables that will help determine in advance what a proposed Groupon offering might do for them. What is great is that small business owners can use this information to compare a planned Groupon promotion to other types of promotions they are considering and determine what looks to be the most financially advantageous (just a gut feel but I wouldn't be surprised if Groupon often wins out by the way). Finally, this model highlights the most important aspect of any kind of promotional activity ... that lasting financial benefits to the business accrue by planning ahead and making sure that if the promotion actually generates traffic the business has a plan to take advantage of it.
