Category Archives: Group Buying

Would you let your 15 year old daughter ride alone with Uber?

11 Thursday Dec 2014

Posted by in Advertising, Branding, Digital, Digital marketing, Group Buying, Marketing, Social Media

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This was the topic of discussion last weekend amongst some civilised adults with whom I was dining. One, a mother of three daughters, said “I don’t let them hitch-hike so why would I let them get in an Uber car. It’s run by a private company with no industry regulations. How do I know the driver is insured, has a good driving record, or has no criminal record?”

Uber, in case you live under a rock, is a disruptive car service taking on the regulated taxi industry around the world. And while I love to see disruptive technology or services – Richard Branson has built a massive business disrupting the planet – this one has touched more nerves than most.

Typical of the questions being asked by the public are:

  • What happens when someone is killed or badly injured in an Uber car?
  • Does Uber have the right insurance?
  • What if it’s the driver’s fault?
  • Is Uber based in some offshore tax haven to protect itself from law suits?
  • Have the drivers been security checked?
  • What if the driver has been a criminal?

And of course there’s the taxi industry protests around the globe:

uber 1

Uber 2

uber 3

Uber protest

Then this week there was the news of an alleged rape in India by an Uber driver. Now I know that ‘regulated’ taxi drivers have also committed rape, so it’s not because he was an Uber driver that he allegedly committed the crime. But the news was not good.

As Uber is a global brand, disrupting taxi services around the world, the fall-out in one country can have serious ramifications in other markets. That’s the nature of the connected world. And it’s usually the negative news that travels fast. You won’t see a headline like this for example: “Uber driver delivers passenger as planned, without any problems“.

I used Uber when it first arrived in Australia. An American friend of mine introduced me to it. Even better, he sent me home ofter a few bevvies in an Uber car on his account. The car was clean. The driver spoke English as a first language, which is rare in the taxi industry. And he didn’t need to know where to go, because his GPS told him.

I’ve been in taxis where even the use of a GPS was a challenge. The driver couldn’t spell, struggled to comprehend (let alone speak) basic English, so entering a street address was nigh impossible. I had to direct the driver to the destination in between him answering at least 2 different mobile phones in his native tongue.

GPS

Uber is here to stay, but it will have to be incredibly transparent and not combative when questioned about its practices.The best thing it could do is run some mass media advertising to sell its message. It certainly can’t rely on people reading a few FAQs to solve its image and consumer confidence problem.

Airbnb is another disrupter facing similar difficulties. Councils have strict rules on short term holiday rentals and then there’s the issues of insurance, hygiene, privacy, noise, neighbours, theft, etc. They are investing more than most in lawyers to fight their cause and build their brand.

Who knows what will happen if Airbnb hooks up with Tinder, so to speak – the mind boggles? Though Loveroom is working on it.

LoveRoomlogo

Yet even in a regulated industry like accommodation, there are still scam artists. I had a relative who owned a holiday apartment in Queensland. He used a local real estate agent to manage the lettings. As nobody had rented it for a while he stayed for a couple weeks.

While talking with his neighbour he discovered it had been rented regularly for many months, but the real estate agent was ripping off all the money and not telling my relative.

We all hate red tape, but regulations are usually designed to protect the majority, define what’s legally acceptable and to clarify expectations. They are the first crutch humans lean on to argue a point when pushed out of their comfort zone.

And so it has been with the taxi industry. The industry is a monopoly of sorts and provides a barely acceptable standard of service as a result. In fact, it was the poor standard of the taxi industry that gave rise to Uber.

Customers are sick and tired of delays, dirty taxis, drivers who cannot speak the language or know where they’re going. So when they find a driver who is polite, has a clean cab, can speak English and enjoys their work, they cut a deal with them and call the driver directly on their mobile, rather than via the regulated booking system.

It’s why so many people use their own registered ‘drivers’ to pick them up at airports, home or whenever they need a lift. So the taxi industry really cannot blame Uber for existing – they built the foundations for its success and eventual acceptance. But it will be a rough ride for a while.

Tuk-Tuk-Song-Taow

Gotta go to a meeting, but it’s changeover time for taxis and nearly Christmas so there’s no chance I’ll find a cab. Where’s that Uber App?

Never underestimate the customer…

12 Thursday Apr 2012

Posted by in Customer Service, Group Buying, Sales Promotion

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It seems my last post about the death of group buying is being supported by evidence elsewhere – see this article from the Sydney Morning Herald: http://tiny.cc/e0bocw

Group buying is another reflection of herd mentality, which is in our DNA. Just look at the reaction of young teenage girls to manufactured boy bands when the ‘band’ arrives on your shores.

And it is herd mentality – or the desire to part of a group – that influences a lot of consumer behaviour. Facebook is a recent example. But if you have ever run a retail business or any type of business where you deal face-to-face with customers, you know to always expect the unexpected from those customers.

When my family owned a supermarket on Sydney’s north shore, Thursday night was known as late-night-shopping night, because stores were only allowed to open late on Thursday evenings – until 9pm. Nowadays the rules are slightly different.

Thursday was also the day (as mentioned in my previous post) when all retailers advertised their loss leader products to try to attract more customers to their stores.

I’ll not forget a particular evening. I was operating one check-out (probably a vision you’d not planned to have today) and my mother was operating the other one.

Every week, like clockwork, a particular lady would come into the store with the tear sheet of specials that were advertised in the metropolitan newspaper. On this particular day tins of pinapple pieces was reduced from $0.54 to $0.49 – a saving of 5 cents. There was a limit of 4 tins per customer.

For some reason we had been able to buy the brand of pinapple pieces on offer for less than usual  wholesale price, so our normal retail price was $0.48 – this meant our standard retail price was cheaper than the advertised special price.

The ‘customer’ arrived at the checkout with her basket full of specials, each at the limit of the number of items she was allowed. She never bought anything else but the specials.

As she placed the tins of pinapples on the checkout counter, she exclaimed “these are on special”. To which my mother replied, they are advertised as a special but our normal price is 1 cent cheaper than the special price.

The confused customer asked for clarification and my mother again explained that as our normal price was cheaper than the special price the customer would be saving an extra one cent on the advertised price.

The customer then exclaimed “so I’m not saving anything from you on your normal price?” to which we confirmed “no”. So she promtly said “well I’ll not have the pineapple then” paid for her other specials and walked out the door.

She believed that if she was getting a ‘deal’ on our normal price then she wasn’t going to buy the goods.

This is the type of mentality that exists in the people taking up group buying deals. Last weekend I was at a lunch where two couples were organising a dinner, but only if they could get it through a group buying deal. They didn’t want to go out together at full cost.

Like I say “never underestimate the punter”. The deals they buy are all about themselves, not about the retailer supplying the offers. The punters don’t care if they never go back to the retailer, unless it’s at half price.

Eventually the retailers and other businesses making the group buying offers, will realise thay don’t have to outsource their sales promotions to a profit-making group buying mob. After all, the group buying mob is in it for themselves too – not for the small business that use their group buying ‘service’.

If a business wants to give away 50% of the price to attract new customers, they can do it themselves, via their own lists (email and mail), local advertising, letterbox, search engine marketing and other proven channels, even social media. At least they can capture the details of those who take up the offer and not rely on collecting their money from a third party.

Buy hey, these are proven channels so why use them? It’s much more fun and far cooler to use the magical new wonders of “the internet” regardless of whether it’s profitable or not – after all, everyone’s doing it and we all want to belong to a group, don’t we???

 

The coming crash of Group Buying…smells like 1999

03 Tuesday Apr 2012

Posted by in Direct Marketing, Group Buying, Marketing, Sales Promotion

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If you were working for a living at the end of the last century (pre 2000) you may have a sense of deja vu.

All those dot.con businesses stealing money from investors with hopelessly inflated business models that were never going to pay for themselves. Well the same whiff is in the air – it smells like 1999, just before the massive tech-stock meltdown.

That’s because we have the explosive growth in easily replicated commodity businesses – the so-called group buying businesses. And their business model is flawed, their customers (the small businesses) are unhappy and increasingly the final customer (the consumer) is also unhappy.

But don’t take my word for it – check out these articles sent to me by a couple of colleagues from the UK and Australia – Michael Rhodes and John Hancock. Once again commonsense is warning the world, but is anyone listening…just like 1999?

Why you shouldn’t believe the theory behind Groupon’s business model:
http://tinyurl.com/bqbgo4e

Why Groupon is poised for collapse:
http://tinyurl.com/83c8vcx

Like most things on the internet, group buying is not new. It’s just an old habit executed with new technology. For decades we have been able to buy discount coupons in bulk via the Entertainment books and their various competitors.

These are group buying services that supply all sorts of discounts at various retailers in a book. The books are usually sold by fundrasiers as a way of raising funds and many of us have owned one at some stage in our life, heading out to a local restaurant with friends, coupons in purses and plonk in hand.

For my sins, I was once the owner of a family supermarket in suburban Sydney. Unlike most packaged goods marketers, I’ve packed shelves, operated a cash register, packed customer’s bags and carried them to their car, as well as dealt with the ruthless wholesalers who supplied the groceries in our branded retail group. So I have some knowledge about human behaviour.

Every Wednesday and Thursday our metropolitan newspapers were filled with supermarket advertisements promoting loss leaders. These were high turnover items, usually staple foods such as butter, margarine, jams, tinned food, etc. The principle was simple: offer these high-demand products at cost or below cost, to attract customers to your store in the hope that those customers would then buy other products with better profit margins, while they shopped.

These loss-leaders were often only available in limited supply eg “limit 4 tubs of margarine per customer”. While the technique certainly shifted lots of loss leader products amongst regular customers, it also attracted another group of buyers.

These were the people who only bought the loss leaders and drove from shop to shop to stock up each week on the items that were on sale. Not the best way to manage one’s diet, but it saved money. These were not loyal customers and they never spent money on items that weren’t for sale.

Many of these are the same people taking up the group buying offers. These are people who are buying a sale item. They are not looking to become regular customers. And many of them are taking up the cheap milk or petrol discounts now being offered as the loss leader by the two major supermarkets.

We’ve recently mystery shopped over 20 different group buying deals and in most cases have successfully redeemed the offers. Though a couple the stores had signs stating they no longer honoured group buying coupons. In one restaurant, despite advising when we booked that we were using a group buying coupon, we were ostracized for having the temerity to use the coupon.

There are a few interesting characteristics about the stores that offered the group buying deals. Most were small businesses who were not necessarily savvy marketers. They had been sold  a scam that would allegedly get them loads of valuable new customers through the magic of “the internet”.

Only one in over twenty stores asked for our contact details – and that was because she was a hairdresser and it was her habit to get your details so she could record your next booking before you left the salon.

None of the stores collect payment for providing the service until they redeem the coupons returned by the group buying customers. So they have to fund the sale until the group buying company redeems their funds. Any coupons that are not redeemed stay with the group buying company, they don’t go to the retalier.

The retailers cannot get from the group buying company, the database of people who buy the coupons for the deals. That’s because if they did get the list of customers, then they could contact them directly and not need to use the group buying company again. Although they could just ask the customer for their details when they redeem their coupon.

Many small businesses have been unprepared for the type of buyers who take up these offers. And this has caused significant backlash amongst the customers. Interestingly most of the small businesses we spoke to will not be using the service again. As one retailer said “I had people driving 40 kilometers across town just to get a two-for-one meal. I’ll never see them again and I never want to. They were not the sort of customer we want in our business.”

Of course, the business owners could easily have done some maths to determine whether or not a group buying deal would pay for itself. All they had to do was 101 marketing maths – how much do I invest to gain a customer and how much do I invest to keep a customer? Then work out the cost to convert a group buying “customer” into a profitable customer.

But hey, it was a new idea and it’s on the internet and investors are pouring gazillions of dollars into it, so it must be good.

Like I said “smells like 1999”.