Groupon and the others are suffering – and here’s why. With some observations on marketers’ foolish priorities
About 30 years ago, Ogilvy and Mather collaborated with Prof. Andrew Ehrenberg and his colleagues to research the impact of discounting.
They discovered that firms which discount more than they advertise are half as profitable as those that do the opposite.
I have been bleating on about this forever. Discounting is the business equivalent of crack cocaine: immediate euphoria, followed by a slump. You get hooked, and it’s hard to get unhooked. You need more and more to get the same result. The hangovers get worse.
Entire industries get hooked. Home improvements is a good example. Most of their communications are about discounts. They do little or nothing to build their brands.
This graphic shows that firms that promote discounts reflect what happens to those who rely on them. Massive euphoria – then a decline.
I have seen this happen before in my time. There was a craze for collecting discount stamps forty years ago. Now many if not most retailers are hooked on loyalty cards.
If everyone offers me a loyalty card why should I choose one rather than another?
Their chief benefit to the retailer is the garnering of information so they can communicate better to customers based on their what they buy. Tesco did a pretty good job at this.
The whole thing will fall down if what you offer isn’t much good. I don’t want to save money on what I don’t want.
It tends to fall down at another critical point, too. That is writing the messages to customers. This job is usually given to lowly drones with little talent and poor pay.
I strongly believe that in this, as in so many other areas, marketers invest in precisely the wrong things. They expend oodles of cash and pay high-priced talent to work on the visible, the flashy – advertising – which customers don’t give a hoot about.
But they invest hardly anything on what customers do care about: the service messages.
It’s the old story. Marketers do what pleases them, not what pleases their customers.
Hi Drayton, Great insight there is so much wrong with the way people are doing business today, did you see the huge fuck up with Workplace Pension Wookie which cost 8.5miliion a year in ad cost well some muppet complained on Twitter saying it was condescending.
Probably the same persons who are among the 72% of people in the UK who don’t even realise that Automatic Enrolment contributions is set to triple next year so their clever remedy is to get some celebrities to make a new one to appeal to who ? are these people for real they could not organise a piss up in a brewery 🙂
hope all is good with you and Gerald still making a decent brew Best Regards your one of the few sane people I listen to in a crazy ass world