This blog post could have taken the form of an anecdotal reference on the horror stories from businesses using/used group coupons and/or YellowPages as part of their online marketing strategy.
But what’s the point of anecdotes when you have evidence?
Tough stories are emerging from businesses who are literally being crippled by bad decisions on marketing opportunities particularly with the group coupon craze. Here’s why.
First off, the group coupon craze is fantastic for the customer, fantastic for the new middlemen (the group coupon vendors), but generally terrible for the business. The concept of group couponing is a worthy marketing strategy–rewarding your tribe with bulk discounts based on volume. But few companies actually employ group couponing effectively. Most suffer extreme losses.
The purpose of the coupon strategy is to attract new customers AND have them return. The problem is a) few new customers actually return, b) even if they did very few companies have capable reporting systems that could identify customers who returned as a result of a group coupon campaigns.
To make a bad problem worse the group coupon middleman will take upwards of 50% (this greed will be their eventual demise) for each coupon purchased. This model certainly makes large short term profits, but word travels quickly and businesses using the new strategy are quickly reporting that they simply cannot afford the discounts. .
Take this local example of a Calgary sushi place that just re-opened. They sold in excess of 4000 vouchers for $50 worth of food for $20 bucks! There was no cap on the total # of vouchers because the group coupon company was probably happy to issue as many as possible, (their mindset is each business will probably use the service once so why not squeeze as much out as possible?) That means the sushi place takes home $10 for each voucher–or put another way they give away $40 worth of food. In total the voucher equated to the business giving away $40×4000 or $160,000 worth of free food.
Do you think you could run a better campaign with 160K? Did those 4000 (or even 1000 if everyone bought 4) return? The answer is an UNEQUIVOCAL YES!
But that’s not the only dead-end/bottom-less pit of money sucking ideas to watch out for. YellowPages has past its expiration date when it comes to feasible methods of achieving a desirable rate of return on marketing investment dollars.
Of course, group coupon middlemen or Yellowpages would be viable if their costs were outweighed by profits. This is simply not the case.
Do you think I’m a biased marketing director hawking my wares over the competition? Maybe. But why has the stock dropped 91% in the past year other than the business model is defunct and their claims of traffic and advertising success is bogus?
YellowPages is a poor investment because the return is small, and what return you get is hard to measure. Furthermore, their tactics to market are stuck in the 80’s. You’re literally 30 years behind if you’re still in the print edition. Don’t believe me? How many of you still use the Yellow Pages (hardcopy) to find information?
Show of hands?
Very few do, yet the expense for the smallest of listings is in the thousands of dollars per month to have the smallest of ads. Want a full page ad? Thousands upon thousands a month. Why the wasted expense?
Yellow knows few use the hardcopy version, so now they’re pushing their online advertising in particular their app and web directory offerings. These would be good alternatives IF the prices were different, but in some cases they’re even higher! (In comparison to other online directories they are among the most expensive currently in existence).
A business with one listing in the hardcopy, a directory listing, some web ‘marketing’, and a superficial Adwords campaign will pay in excess of $20,000 a year. That’s 20K at the bottom end of the scale! Now I know you can scale down, but let’s say you just wanted to take advantage of some of their web offerings, you’re looking at minimum of 10K a year (and remember they make you sign on for a full year.)
Yellow will claim astronomical traffic to their directory but in reality your listing in your business category will receive little. One visit a day does not justify $1500 a month for your listing. Kepein i mind Yellow’s claims of ‘special’ standing with Google Adwords, huge directory traffic, and massive adoption for their smartphone app are either untrue or don’t help your bottom line. You’re paying a premium for exceptionally little in return.
I can assure you that if you cancel YellowPages, ignore group coupons, and instead put that money towards a focused web marketing campaign that seeks to build a targeted tribe around your brand, your investment will pay off in spades.
But I’m willing to be wrong. But first, you have to check. Measure your success in Yellow and group coupon websites. Prove to me your investment yields a return that legitimizes your expense. Maybe you do break even or better, but what if I told you your business could be the local leader and not just a player among many?
The thing with Yellow is the cost they squeeze out of their customers would be enough to literally rule in any local industry. Don’t believe me? I do it all the time for clients. I have my evidence and I know colleagues around the industry have their corroborating data as well.
To reiterate, the amount invested in broken marketing strategies like group coupons and defunct directories could be used to build powerful online brands and a tribe surrounding that brand. This translates into lasting value for your business that’s measurable. That should sound far more appealing than throwing money at tactics you’re pretty sure might work. Pretty sure isn’t good enough. Time to make the call and innovate.