Evolve Impact

The Compression Effect series identifies new media strategies that help brands deliver on foundational marketing needs.

The Hypothesis: National offers with Living Social or Groupon should not be compared with individual tactics brands traditionally use to deliver an offer. The very nature of daily deals and social shopping is taking on costs from other tactics you might have used in the past, but likely reduces spend against any one of them individually.  Therefore, brands should evaluate profit relative to costs (media, people, time, etc) of bringing a traditional offer to market, and compare ROI with a deal delivered on Living Social or Groupon. I think we (brand marketers) just might be surprised at the results.

Let’s look at national brands deliver national offers for key buying seasons (Back to School, Black Friday, Dads & Grads, etc.) - and compare with how the same might be executed on a social shopping site like Living Social or Groupon.

• How it’s been done: Brands typically invest time, people and money to bring an offer to market. Employees work on financial models and market research that shows why an offer is needed, pay their agencies to create messaging and buy media to drive awareness, build point of sale experiences, and even sometimes put their own $$ on the table to help a partner off-set costs. That’s a huge investment of not only media dollars, but the company’s resources in people.

• Delivering a National Offer — via Social Shopping: Here’s the key difference: almost no time invested the process above. Living Social, for example, works with brands to find offers that will resonate best with their communities. After some careful evaluation, this comes to the brand as one line in an Excel spreadsheet — what’s the split once offers are live. But investment and resources that the brand would have had to put into people, time, media, agencies is almost completely off the table, if not one tenth of the original cost. (That’s not to say that it’s not important for brands to identify the best target audience for their offer. They should – and if their audience is on sites like LS or Groupon, the argument below is applicable.)

So why haven’t we seen more brands adopt? My theory: the way the opportunity is positioned to and evaluated within the brand. These days, an opportunity with Living Social or Groupon arrives at the brand through the internally appointed “new media person.” Usually they sit in the media or marketing organization — but when you stack up the offer (pun intended) against other media buys, the math just doesn’t make sense. That’s because what you’re doing with Living Social isn’t just a media buy — it’s eliminating the need to pay agencies to buy media and create a campaign to drive awareness. They already have the audience (subscribers) and a way to deliver awareness (daily emails, push notifications, site traffic).

The same scenario applies when your retail or relationship marketing teams might evaluate the offer. It’s not apples to apples comparison because this is a new way to bring offers to market. Yes, brands will need to invest some time train retail sales reps to fulfill at point of sale. But my guess is that cost is significantly less expensive than launching a national awareness campaign – it’s just coming from a different line item in the brands’ overall marketing budget.

The solution: national offers with Living Social or Groupon should not be compared (from a price perspective) with individual tactics brands traditionally use to deliver an offer. The very nature of daily deals and social shopping is taking on costs from other tactics you might have used in the past, but most likely reduces spend against any one of them individually.

With Alure, I’d love to work with a brand to confirm the hypothesis I’m getting to above. I’d like to see a brand track sales of an offer in comparison all of costs associated with doing it the old way: people, media/campaign planning, in-store experiences, research, etc. Then, I’d like the same brand to conduct the exercise with a national deal delivered via Groupon or Living Social. How much revenue did the brand generate relative to costs of bringing it to market? My hypothesis is that we (brand marketers) might be surprised at the results. 

Looking forward to your thoughts.

I’m constantly confronted with how new media challenges marketers to reevaluate the categories and definitions we use to describe how we use our time.

• Advertising in Social Media isn’t just advertising, its also social media. When planning a Twitter campaign for a client last week, I realized there were virtually no creative needs, taking the creative agency 100% out of the picture. Traditional? I think not.
• Who says Market Research is more valid when you’ve paid someone to sit in a room & answer the marketer’s questions about a product than real-time feedback we get every day from Facebook and Twitter?

What I want to focus on is the effect this has on how brand marketers do their jobs. I’m calling this The Great Compression Effect of New Media. So, I’ve decided to start a series of posts addressing this - each focused on a particular marketing function. We’ll evaluate how marketing needs at big brands that have been silo’ed into different teams using different tools, even sometimes in different organizations, are being compressed into more streamline new media strategies. The series will focus on how brands can meet their marketing needs through modern media channels and strategies they might not have looked to before.

First one is coming up….Brand Offers and Social Shopping. Ideas on interviews, categories, and partners are always welcome!