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The Art of the Deal

  |  July 9, 2010   |  Comments

Online bargain hunters and gatherers are converging.

Who among us has not prowled the Internet in search of a good-if-not-great deal? From the early days of the great consumer online revolution, we’ve had eBay and Craigslist, which offered not only a limitless portfolio of products, but also the chance to get something for an absolute steal. Throw into that the powerful presence of shopping comparison engines and sites that specialize in handing out discount coupon codes, and you would have to be absolutely insane to pay anything above wholesale on anything that you bought over the Web.

The bargain hunter gene is evidently present in all of us, and years upon years of marketing revolutions have done little to force it to recede. In fact, we may be on the verge of yet another surge in the amazing, online global garage sale that is the Internet. In particular, we have three big items making news:

  • @Earlybird Twitter has been slowly moving toward a business model that actually makes money. Odd how making money has suddenly become a revolutionary, disruptive concept, but...there you go. The company has just announced the creation of an account called Earlybird, which promises to provide special deals and sneak peeks to its followers (a few days after its announcement, the account had over 14,000 followers). These deals are from selected advertisers and retweeted, but the catch is that the deals can only be for the Twitter community.

  • Amazon buys Woot. If you haven’t visited Woot, you should. Woot is a site that has existed by selling precisely one thing a day at a ridiculous discount. The thing is always different, and you only have a day to buy it. Like eBay, this is commerce that’s loaded with drama and expectation, and keeps consumers returning day after day. And, like eBay, it has managed to build a community around the products, by enabling forums and having a very strong and appealing personality. For Amazon, this is an investment in the adventure of shopping.

  • Groupon is a site and a service that allows group buying. Similar to Woot, it has one thing on offer each day at a significant discount. The main twist is that Groupons are local and are for services, such as a massage or a meal. According to Compete.com, Groupon’s site got 13,000 unique visitors in May of 2009. In May of 2010, it had over 4.5 million. Clearly, this is a phenomenon and its growth seems fairly unabated.

And these are really just the latest in the bargain hunting world. We could also talk about some of the new mobile technologies that allow shoppers the chance to scan prices in the store to see if they can get a better price down the road. Google has an Android app called Goggles that is brilliant at this, especially with wine.

Good Thing...or Bad Thing?

Marketers have long had a love/hate relationship with discounts and coupons. The widespread availability and adoption of discounts will always erode prices, which is clearly bad. But how can you pass up the volume that gets delivered to you? The brand that is able to provide the best discount gets the benefit of generating a ton of sales, at least for that day.

Brands have long been frustrated with this cycle. I know that I’ve talked to companies as diverse as fast food restaurants to clothing manufacturers to cleaning products, and they all have the same complaint: they are forced to offer coupons. If they don’t, they cede sales to their competition. If they do, they feel like they are paying for people to buy their product.

The natural way to think about the coming discount revolution, then, is to imagine that brands are just going to get a whole lot more of what they struggle with. That view, however, doesn’t take into account the changing nature of the Internet - the medium upon which these discounts sit.

Brands need to start thinking about coupons and discounts not just as a way to move a pile of products, but almost as a cost of generating a relationship. The abundance of discounts through online channels means that brands should integrate discounts directly into their marketing mix. That is, not just a promo or a one-off. But rather as strategic tool to grow their business.

For example:

Tap into a new market. Brands can target discounts into different communities via social media that they specifically want to grow. For example, you could create a coupon code and make it only available to people who belong to a particular forum ("moms") or follow a certain person on Twitter (Oprah).

Catalyze brand advocates. Coupons can be distributed just to existing fans of the brand. Potentially, there could be one that they use personally, and four more that they can distribute to their networks.

Trade discounts for likes. There are some issues around this, concerning Facebook’s rules, but it’s possible for brands to use the coupon as an incentive to become a fan of a page on Facebook (also known as liking) or follow on Twitter.

Ultimately, like anything else in this new medium, the opportunity of coupons and discounts is not the same as it was without the Internet. All interactive marketing is relationship marketing, and if you use this approach, you can move past just slashing prices.

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ABOUT THE AUTHOR

Gary Stein

Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.

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