Commentary
The Psychology of Couponing: Where Ajillitee Went Wrong
- by Gord Hotchkiss , Featured Contributor, September 22, 2011
Is a Groupon model the next big thing for B2B? Apparently not. Or, at least, not now, based on an early trial by a Chicago-based consulting firm, Ajillitee. The company used Groupon to offer $25,000 worth of consulting services at half price.
It was the biggest deal Groupon had ever offered. Hey, keeping $12,500 in your pocket is nothing to sneeze at. And, since buying consulting services is not exactly the same as snagging a half-off lunch coupon, the offer stayed open for three weeks, giving all potential takers plenty of time to act.
But, at the end of the three weeks, the offer disappeared. The result? Nary a sale -- not even one. Ajillitee extended the offer on its own website, with the same result.
"We were really trying to test the market," said Ajillitee CMO Diann Bilderback. "What we learned was that we were early to the game. Groupon's platform is the platform for this (online coupons), but it's very consumer-oriented. The rules didn't align with our kind of sale. Groupon works on snap decisions, but business decisions typically take longer."
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Well, that's true. But there's another element at play here. It's the psychology of the deal itself. Do you really want to buy thousands of dollars of consulting services with a coupon? Even one saving you 50%? Thought not. Pizza? Sure! A pedicure? Maybe. Half-price yoga? Sign me up. But critical information systems for your company? No thank you!
Coupons work well in certain markets, and not so well in others. For example, would you use a coupon for a doctor or a lawyer? Probably not, but why? Why a pizza, and not a heart surgeon?
The answer can be summed up in one word: risk. Coupons work extremely well in some well-understood circumstances -- to save money on something you were going to buy anyway, or when you want to treat yourself. In a previous series of columns, I talked about how all buying decisions are predicated on a balance of risk and reward. Reward is the gas pedal, and risk is the brake pedal. If risk is very low, coupons can serve to push you past the tipping point and get you to act immediately rather than "someday." They accelerate latent consumer demand.
Coupons can also sway a purchaser from one brand to another, but this typically only happens when risk is minimal. Coupons work in the world of the "pretty good problem," where all the options are within a range acceptable to the buyer. Think of laundry detergent, cheese slices or hand soap.
Finally, coupons can reduce the barriers keeping you from an indulgent impulse purchase. Coupons play on short-term gratification, introducing the promise of reward, compounded by the dopamine rush that comes from snagging a great deal. It amps up the "reward" portion of buying motivation so that the "risk" limiter doesn't stand a chance. Groupon, in particular, pulls out all the psychological stops by throwing in equally addictive elements of geographically targeted rewards, limited availability and elemental crowd psychology. If this is the mental landscape you're playing in, online couponing can definitely stack the odds in your favor.
But alas, B2B purchasing, especially big-ticket items like consulting, meets none of the above criteria. B2B is all about risk avoidance, and there is little reward driving these types of purchases. This came through loud and clear when I was researching my book, "The BuyerSphere Project." Not only will a coupon offer fail to eliminate risk in these circumstances, it will actually increase risk by raising questions about the credibility of the consulting firm offering the coupon. If the consulting is any good, why are you offering it at half price? Are you that desperate for business?
Apparently, companies like Ajillitee haven't given up on the concept. A new rash of B2B oriented online couponing companies like BizyDeal and RapidBuyr are jostling each other in a rush to jump on the Groupon bandwagon. If the types of deals offered are targeted to low-risk scenarios (copy paper and toner cartridges), they'll probably work. But don't expect to get a rush on coupons for consulting services, enterprise-level solutions or other big-ticket, complex purchases. When the buyer (or buyers) is looking at all risk and no personal reward, using couponing is like bringing a knife (or, more appropriately, a spatula) to a gunfight. It's absolutely the wrong tool for the job.
Maybe Ajillitee went wrong, Gord, but I totally disagree with your premise that big ticket items won't sell using a couponing approach and even on mobile at that.
Now, agreed, that the example of eBay:
http://www.ebaymotorsblog.com/most-expensive-cars-sold-ebay/
selling six digit products is using an auction approach might not be the greatest example,, but it could easily be married with a mobile ecoupon concept.
Fact is, eCouponing and especially Mobile eCouponing has just begun and anyone who thinks it's only for '50 cent off a burger' or most recently another wrong approach - Groupon - hasn't looked at the entire vision and application possibilities.
Be prepared. Groupon has come and will go soon as will LivingSocial and most of the other Deal A Day sites. The entire business model is flawed, if not illegal.
But, the psychology of couponing will be shown to show where companies go right in the future. In fact, all of the companies from Yahoo on up or down are still trying to discover the holy grail of monetizing their advertising.
The answer is Mobile eCouponing. I believe you can have a mobile search/couponing site that can become the first site people turn to in the future for most of their information and deals.
It just makes more sense to go to one site for all of it versus even a Google where you can find the location, phone number and something about the place for which your looking to go, BUT, no deals. That just makes no sense.
You are so on target. As Ken Rutkowski says. "Experts are expensive; amateurs are a fortune." Purchasing big ticket items such as defining a business because of a coupon is for amateurs.
Gord, well stated facts you have made here. The coupon marketing plan sample in this case may not ever work the way it is currently constructed. This is where survey results prove their weight in gold. Also, very good case in point, Coupon ideas will not be a good fit for every vertical’s market penetration strategy. There is no doubt that social coupons must be have a well-defined Marketing communication strategy, yet, many business owners who get perused into this marking mix promotion will never even consider them or how to define them. Maybe, it is because they do not know the questions to ask and may never know them. This is where deep market intelligence is required from multiple various angles. Social coupons can work! However, too many may have been poisoned and stung bad due to poor management of a good thing. Dr Deb ~The Adz Dr
seems like food catering would work well.
After all, when their is a crisis in federal govt, they do all nighters with plenty of pizza delivery...
Hmm..Jim. You wouldn't happen to work for a company offering mobile ecouponing..by any chance? I admire your enthusiasm, if not your logic.
Hi Gord, Michelle from Ajilitee here. Good discourse on a topic that won’t be going away any time soon. When we hatched our 50% off a $25K Business Intelligence Strategy or Cloud Strategy deal, we truly didn’t know what would come of it, as this was far and away a new approach for any of us in B2B. Still, we saw that buyers and sellers were meeting, interacting and transacting in different ways and wondered if B2B organizations – particularly those under budget pressure and also in the market for BI and Cloud services – would be willing to contract services differently if we passed their vetting process. We knew a sale would not come with the click of a button. Winning a consulting contract involves a series of calls, meetings, and/or RFP response. But as a new market entrant (with decades of major league experience), we needed to break through the clutter – how many IT consulting firms are out there? Groupon Stores was the right platform for eyeballs, but 1:1 interaction was integral to proving our expertise and track record. There was much interest from the media, and far less from prospects. No doubt our marketing approach was unorthodox, but nothing ventured, nothing gained.