10

Social Advertising

Groupon, LivingSocial, and Facebook Ads . . . Oh My!

“Advertising is the ability to sense, interpret . . . to put the very heart throbs of a business into type, paper and ink.”

Leo Burnett

SIMPLY DEFINED, social advertising is all about using social networks to market to the individuals within them using context and relevancy. This category of advertising includes everything from group-buying sites like Groupon to the ads you see in your sidebar on Facebook.

Given that group-buying sites are all the rage recently, I thought it appropriate to briefly address how to best utilize them. I’ve asked good friend and colleague Albert Maruggi, founder and president of ProvidentPartners.net, to share his thoughts on what he calls the “buyer’s economy.” I first heard Albert speak of the “buyer’s economy” during a webinar we copresented, and knew that it was the foundation for all social advertising.

At the end of the chapter, Albert has also included an introduction to using Facebook ads, because as of this writing, Face-book is one of the most popular and cost-effective mediums for advertising, social or otherwise.

Group-Buying Websites

The Buyer’s Economy

The buyers’ economy is what I call the purchasing environment made possible by group-buying sites, where buyers take control of their purchases by rallying members of their individual networks in pursuit of a deeply discounted product or service. It requires a combination of the following: deep discount, limited time, and a qualifying quantity of customers who must purchase the deal for everyone to benefit.

Most people today are familiar with group-buying sites because of the success of Groupon (www.groupon.com) and its biggest competitor, LivingSocial (www.livingsocial.com). Like other group-buying sites, they partner with a variety of different types of companies to provide discounts on products and services, both locally and nationally. These deals run for a short amount of time, rarely longer than a few days.

Comparative demographic data for Groupon and LivingSocial. Check ComScore.com for any updated studies.

Why should marketers bother with these sites? For starters, Groupon alone has 85 million users (and counting). Its users are generally between the ages of 18 and 44, and also tend to be slightly better educated than the average users of other social networks. It can also be a great way to market your business—provided that your business is a good match for what group-buying sites have to offer.

How Group-Buying Sites Work

The basic premise of the group-buying site is that a company offers a deal—say, get a $50 restaurant voucher for only $25, or six yoga classes for the price of three—in exchange for some percentage of what site users are asked to pay to receive it. There are no set rules on the type of deals included or the percentage the company receives; each offer is negotiated individually.

Customers sign up to receive these deals by registering with a valid email address, either on the company’s website or through an app downloaded onto a smartphone. Customers do not have to register simply to view the deals for the day, but they do have to register if they’d like to purchase any.

If a required minimum number of people are interested in what a company has to offer, the deal happens; if not enough people are interested, then the deal is off.

Customers can see the minimum number of people required, and whether that number has been reached. If it hasn’t, customers can encourage their friends to buy the deal and increase the chances of “tipping the scale” (the term Groupon uses). Customers are also rewarded by engaging their own social networks: when a customer refers friends to group-buying sites, he or she is often rewarded with extra discounts and other “goodies.”

The Benefits of Group-Buying Sites

This setup obviously benefits both the customer and the group-buying site. The customer gets a deeply discounted product, and the site gets a cut of what the customer pays. But where’s the payoff for the businesses involved?

Offering deals on group-buying sites actually pays off in three different ways:

•It provides exposure. Eighty-five million potential customers is nothing to turn up your nose at (of course, that’s counting users in all cities and regions). The point is, these sites are a great source for finding new customers. Even if a customer who sees your deal isn’t interested in purchasing something from you immediately, they’re still seeing your company’s name. Even if your deal doesn’t happen, you’ve still received great advertising. And it’s a great opportunity not just to meet new customers but also to reconnect with established customers. Chances are that some of your current customers are subscribers to group-buying sites.

•It drives customers into stores, online and off. A group-buying site brings people into your store, whether that store is brick and mortar or css and html, increasing their exposure to your company and your products. Once there, you can provide them with an amazing experience they want to share with their friend networks. They might spend more than the amount of the group-buying deal—or come back again to make other purchases in the future.

•It’s a performance-based expense. Offering a group-buying deal is low in risk. Businesses get to negotiate the minimum number of customers that have to buy the deal before it becomes active, so if the costs outweigh the benefits at less than a certain number of customers, you can set the minimum number higher. You can also ask for a ceiling on the number of deals available for purchase, giving your business a cap on the total amount the program will cost. Plus, if the deal doesn’t go through, you haven’t lost any money. At worst, you’ve still gained a lot of free advertising.

Is Your Company a Good Match for Group Buying?

Yes! Or probably yes because the model is so flexible. No matter what kind of product or service you offer, there’s probably a way you can use group-buying sites to increase your customer base. However, there are a number of considerations to take into account before you jump in.

•Will offering a group-buying deal be financially worthwhile?Choosing to go with a group-buying site because you’re in a blind panic for more customers is absolutely the wrong way to do things. You need to research your options and pick the site, and the type of deal, that’s right for your company. This will take a little bit of time and shouldn’t be rushed. Look at the pros and cons. Compare financial compensation plans.

A social buying network’s cut can be anywhere from 15 to 50 percent, making the true cost of business to the company offering the deal up to 75 percent of the purchase price. Make sure such a cost is a worthwhile one for your business. I’ve put together a return on investment (ROI) form for a fictional restaurant as an example.

Consider also how many people will see your offer even if it doesn’t end up going into effect. Ask those in charge of the group-buying sites you’re considering working with about the number of subscribers in your geographical area.

•Is your product or service perishable or cyclical? Products and services with a limited lifespan (like food or flowers) or which are available in specific quantities at any given time (like hotel rooms or spa treatments) are especially well suited to group-buying sites. The extra customers who visit your hotel through a group-buying site are buying rooms at a discount that might normally have remained empty; customers at your flower shop are buying flowers at a discount that normally might have gone to waste.

•Are price-sensitive buyers your ideal customers? Group-buying customers tend to be deal seekers—they may only spend the Groupon amount and not more, and may not come back again. If you’re looking to create repeat business, this is obviously not an ideal situation. Ask yourself if any of your regular-priced goods and services are appealing enough (read: cheap enough) to make the group-buying subscriber want to make the jump to regular customer.

•Can your company’s cash flow handle the group-buying reimbursement model? Different group-buying sites have different ways of reimbursing you, and rarely is it quick or all at once. Although LivingSocial usually reimburses a business within 15 days of the end of a deal, Groupon can take up to three months—which can be less than ideal for a small business or restaurant, or anyone who needs to make up the costs of the group-buying program in a timely fashion. Make sure your business is prepared.

How to Use Group-Buying Sites Effectively

If you’ve decided group buying is the right choice for you and your company, you need to make sure to take full advantage of the opportunities in front of you. Here are some ways to make sure you’re using group buying and social advertising to the fullest extent possible:

•Negotiate. The standard commission rate for both Groupon and LivingSocial is about 50 percent…unless you negotiate. Keep in mind that these websites have a ton of competitors (and there are more of them every day), so it’s becoming easier and easier to negotiate a mutually beneficial arrangement.

•Make group-buying customers your customers. Unless customers who buy your deal provide you with an email address or some other means of contacting them, they’re really the group-buying site’s customers, not yours. But you can change that. In your promotional copy, provide a link back to a landing page on your website where customers can provide you with their email addresses. Even if they don’t want to buy your offer, they still might want to sign up for a newsletter and keep you on their radar (which is definitely a step in the right direction). Also provide links to all your other social platforms.

 

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You also can acknowledge group-buying customers specifically on your website or store premises, whether through a sign or graphic welcoming LivingSocial customers or a special night set aside just for Groupon customers. This provides a way for you to communicate specifically with the group-buying customer and pass on important information—for example, that you’re on Yelp and they should leave you a review (or to check out your Facebook and Twitter sites).

•Provide a bridge from the discounted deal price to full-price items. Going from paying a discounted price to paying full price is not always a natural transition, so anything you can do to help that process is beneficial. If you use one of your signature items—for example, your most popular entrée or a smaller version of it—in the group-buying offer, consider also providing samples of other premium price items for those customers, to encourage them to return and pay full price another time.

•Remember to upsell and cross-sell. In the past, many participants of group-buying sites have found that customers are reluctant to spend more than the value of the coupon. This is where you have to put in some more effort. If you’re a restaurant, make sure your staff is consistently suggesting additional items: cocktails, side dishes, desserts, and other menu items. Hotel? See if guests want to upgrade their rooms for a small fee upon check-in. With a little (and we mean little) push, some of these customers will be willing to spend a few extra dollars with you.

•Make sure you provide the best service possible. People who are active on group-buying sites are also likely to be very active users of other social media sites. If your service is less than top-notch when they come to redeem their discount, be assured that their entire network of friends will hear all about it. This may sound obvious, but it’s something many business owners overlook. The first rule of using a social buying network is to get your house in order, from product to service to decor to staff, and make sure everyone responsible for the customer experience understands the social buying customer. If you deliver average, you’ll get average comments online. People will not go out of their way for average. This point needs to be reinforced at every staff meeting prior to and during the deal redemption period.

Although group-buying sites don’t come without their share of potential downfalls for you and your business, they also have a lot of potential. Your experience with these sites, much like your experience with any other social site, depends on how you use it. If you do your homework and provide great service to your customers, then you’ll see the benefits.

 

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AHA! Zen Moment

Some quick tips for using social buying networks profitably:

•Double check financial formulas and work toward the most profitable outcome.

•Create a way for social network buyers to provide their email addresses to you, whether by using a unique landing page for each group-buying program to capture email addresses or by encouraging group-buying customers to sign up when they come to redeem their deal.

•Provide all other social platforms your business is involved in landing pages and, if possible, in the social buying network copy to increase your number of followers.

•Print signage, decals, or some other visual reminder of your other social platforms, which will be mental hints for customers to share their experience.

•Identify and plan for offering potential upsells and cross-sells.

•Invite buyers to communicate directly with you to help make their experience favorable.

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Facebook Advertising

Facebook’s advertising program gives you the ability to place an ad, sponsored story, or post on the right side of a user’s page. It’s one of the most customizable advertising platforms for business, one in which the business can quickly determine whether their message and audience are connecting. In some cases, Facebook ads even show users which of their friends have already liked the particular product or service—combining the power of traditional advertising with word-of-mouth appeal.

Advertising on Facebook has a variety of advantages:

•It allows you to target your audience by interests, geography, and age, and quantifies audience size.

•You get immediate feedback on how well your message and audience criteria are working.

•You can easily drive traffic to your Facebook fan page or company website.

The big downside to advertising on Facebook is that Facebook is not Google (obviously): people aren’t on Facebook to search for something specific, they’re there to connect with their friends and family. Facebook is not traditionally a shopping platform; people are not generally on Facebook to shop. Users connect with brands and “like” pages of companies, but those are connections based on experience or association with the company or with others in their network.

How to Use Facebook Advertising Effectively

Each company and customer base is different, and the social web changes too rapidly for hard and fast rules. Still, we can offer some guidelines to help you get started in setting up an ad. The following ideas may help you find a strategy for using Facebook advertising that works for your business.

The key to Facebook advertising is making sure you understand your customer. This will determine which Facebook users you target, and also the content of your ad.

For this section, we’ll use the example of a bakery with three different target audiences: college students, parents with young children, and people living within a certain distance of the store. Getting these three groups of people to a bakery means using three different types of ads. So let’s focus on just one of these audiences: college students.

The first step to creating an effective Facebook ad is to write down the attributes of the types of customers best suited to your products or services. Most undergraduate college students are between the ages of eighteen and twenty-four. What else do we know about college students? They spend a lot of time studying, they generally don’t have a lot of money, and they stay up late.

The next step is actually to set up your ad, which involves entering several key pieces of information.

•Targeting: The Targeting section allows you to determine the size of your potential audience based on the attributes of your customers. As you select the variables in this area (location, relationship status, age, gender, interests, religion, etc.), watch the Estimated Reach box to get a sense of the number of people that match your criteria. These are not precise numbers, but they do provide a starting point for whether to advertise—for example, if your estimated reach is 25 people, maybe it wouldn’t be worth targeting that particular group. It also helps you understand what percentage capture of that audience is necessary for the ad to be successful.

Our bakery could choose to target every person between 18 and 24 years old in a 10-mile radius of the physical shop. Or they could get even more precise and choose to target people in that age range that have a specific nearby university listed under their “education” section.

•Content: On Facebook, your ad content needs to be less about you and more about the customer. The most effective ads typically include four things:

 

1. A provocative headline

2. An emotional connection

3. An offer or call to action

4. An image that is memorable or involves faces

 

In our bakery example, a headline targeting college students could say, “All Studied Out?” or maybe, “Need to Escape the Library?” This taps into college students’ personal experience; it’s easy for them to connect with. You could then promote a special offer for students who come in after 5 pm: show a student I.D. to get a discount or a free drink. For an image, you could use a photo of a miserable-looking student reading a textbook—or a picture of a delicious-looking cupcake.

•Budget: Facebook gives you two options to pay for advertising: pay per click (PPC) or per thousand impressions (PPM).

•With PPC, you are only charged when people click on your ads. This can end up being cheaper in the long run, especially when first testing the waters with Facebook ads. PPC is also a good pick for those on smaller budgets.

•With PPM, you are charged for every thousand people who view the ad, whether they click on it or not. Paying for impressions usually costs less in the bid process, but this method often ends up costing more in the long run.

Another term you should be familiar with here is click-through rate or CTR.Your CTR determines how much and how often you’ll be charged if you choose PPC. It’s also important because Facebook monitors your CTR and will run your ad less often if your rate is much lower than average. Your ad’s display rate increases as the CTR increases. A good CTR varies depending on platform, format, and product, but the average CTR on a Facebook ad is around 0.25% (or two to three of every thousand people).

•Bidding: Facebook has you “bid” for keywords, similar to Google’s AdWords. Facebook will suggest a “bid range” for you based on how much other companies trying to reach your target audience are willing to pay. (Facebook officially states that your ads are less likely to run on the site if you bid below the suggested bid range.) It’s an auction system, so if you bid $1.00 but only needed to have bid $0.60 to be the highest bidder, then that’s all you have to pay. And once people start clicking on your ad, the suggested bid will generally decrease, and you can adjust your bid accordingly.

Finally, make sure to monitor your ad results through your campaign management page, at www.facebook.com/ads/manage/campaigns/. If Facebook notices that an ad’s CTR has declined or isn’t very high, they’ll run the ad less often. It’s important to monitor how your ad is doing. If you’re not getting a very good response, change your strategy. You could target using different criteria or to a different group altogether. Try changing your headline; maybe it isn’t compelling.

Although this may seem complicated or like a lot to take on, it’s really not. Facebook wants you to advertise with them—let’s face it, they want some of your money—and they help you as much as possible every step of the way. As we’ve said in previous chapters, Facebook is where the people are. You should be there too.