June 26, 2018
Acquisition marketing is dying. Long live retention marketing.
With the New Year upon us, let’s look at the current state of acquisition marketing and how we can all improve going forward. One thought, in particular, will guide us — what to make of Groupon in the modern economy.
Frequent readers of the Thanx Blog will know inside and out the benefits of customer retention marketing versus customer acquisition marketing. Essentially, paying money to attract new customers does not make sense unless you can earn repeat visits.
However, merchants continue to be misled about how the economics of acquisition affects their business. Case in point — a recent analysis of customer acquisition from ex Groupon CEO Andrew Mason, and a single reply from an ex-Groupon customer. Let’s take a look, as we unpack our second new year’s resolution about how to solve marketing in 2016 and beyond. One of the best points made by Andrew in his post is comparing a tool like Google Adwords to Groupon. In his words:
If you have a small business, it’s hard to reach customers. If you can afford it, you can advertise in the paper or at a bus stop. If you have a good location, you can get some free foot traffic. If you have the technical know-how and a decent website, you can run ads on Facebook or Adwords.
Here’s the key takeaway between the lines — local merchants, of course, need innovative ways to acquire new customers who don’t currently know about their business. BUT, implementation of these “innovative ways” has to be feasible for those merchants.
As Andrew points out, the problem with a tool like Google Adwords (also speaking from experience here) is that to do it right, you need time and technical expertise. Taking a few hours just to set up Google Adwords — a significant amount of free time for any multi-location merchant — unfortunately, will never return a positive ROI. There’s a science behind pay-per-click advertising that requires more hours of research and continued iteration in order to see any real benefit.
Where Groupon succeeded was removing a technical burden for participating merchants. Due to an easy to understand the business model, executing an acquisition campaign through Groupon required no technical expertise.
On the other hand — Groupon’s fatal flaw as it relates to acquisition marketing
If you scroll down to the bottom of the post from Andrew, you’ll see a comment from an ex-Groupon customer named “Johny Miric.” Here’s what he had to say:
We run a spa in a 5-star hotel, so our prices are bit higher than average. Groupon brought to us thousands of clients who would usually never come, it was out of their price range. But what we noticed after few months is that numbers of complaints have risen significantly. They were complaining about so many silly things, and our conclusion was, the less you pay, the less you appreciate, let’s stick with the higher-end market.
I have few friends who put their own business on Groupon, then in 2010, 2011, now they all say they will never work with them again. Whoever had some experience in marketing, social media etc, stays away from Groupon because they know you can do a better job on your own, just it takes effort.
But when you go now on Groupon site you can still see dozens of deals, every single day, and it makes you wonder what makes businesses to go for it. My conclusion is that those who are lazy or have no marketing know-how, they stick to Groupon to bring the foot traffic. Which is fine I guess, but a lazy solution is never a good solution.
At last stage of our cooperation with Groupon, we also noticed a massive amount of greed. Sales representatives were so driven to make the closure that in the end, they forgot to see what actually their partners are getting out of it. They were pushing extremely high discounts, 60–70%, and to get a deal with 40% discount I would probably have to break their arm…Groupon could have been a great marketing tool, but in my opinion, greed has run it to the ground.
In essence, here’s Johny’s point: removing a technical burden for a merchant CANNOT mean that the technical burden is removed altogether. That’s laziness, not technology.
Groupon’s massive failure was simple — there was no accountability for the Groupon acquisition campaigns themselves — merchants had no idea if customers ever came back — AND there was no accountability on the Groupon sales team for setting reasonable acquisition incentives. Everyone thought someone else would do the heavy lifting.
Because marketing requires that somebody do the “heavy lifting”, the only acquisition technologies that will be successful going forward are those that can actually free up merchants’ time without sacrificing accountability. Utilizing technical strategies such as mobile marketing automation, customer experience management, or data analysis from a merchant success team has to become the status quo.
And that has to be acquisition marketers’ consensus new year’s resolution — find solutions and campaigns that are both easy to launch AND hold themselves accountable for implementing technical solutions that produce monetary results. In essence, true effortless marketing.
You read it here first — we’re going to eliminate laziness altogether in 2016, so it never infects multi-location businesses again.
Sneak peak at one way to launch accountable acquisition marketing
Above you can see one example of this new year’s resolution in practice. We’re calling it “Thanxgiving.”
Essentially, Thanx loyalty members can now send rewards and items to their friends. The benefit is three-fold:
- Loyal customers get a bonus for referring their friends to their favorite businesses
- Loyal customers’ friends get a bonus for trying a new place that their friends love
- Sponsoring merchants know exactly who referred which new customers and the exact lifetime value of these new customers for the merchant’s business
I.E. a smarter approach to referral marketing where each and every piece of the puzzle ties directly to incremental sales added for the sponsoring business.
Best of all, the merchant can set up Thanxgiving in less than a minute. As those who know Thanx know, we pride ourselves on doing all of the heavy lifting so our merchant partners can benefit — a standard we’ll continue to hold ourselves to forever.