Not so long ago, we invited our readers to suggest novel revenue streams for Anthill.
The responses were numerous, inspiring and triggered an avalanche of ideas.
One of these involved the creation of a Groupon-esque service, specifically dedicated to the sale of business products and services.
With this sister-site almost live (ugly and awkward but starting to show swan-like qualities), we’re now seeking progressive companies to partner with.
Would you like Anthill to sell your products and services using this new sales model?
Before you answer in the affirmative, we’d like you to first consider whether this model is right for you.
What’s the Groupon Model? Here’s a reminder.
If you haven’t yet heard about Groupon and the dot-com business model it spawned, perhaps check out this post by Anthill’s Stefan Abrutat.
But if you don’t have time to read Stefan’s full post, Groupon is a Chicago-based startup that scored itself a $1.35 billion valuation within a year of launch by creating a business model that harnesses the power of collective buying.
This week, the internet was awash with rumours that the company had been purchased by Google for a staggering US$2.5 billion.
The model works by offering a deal a day (a bit like Catch of the Day) but only if a minimum number of ‘units’ are purchased.
If not enough people sign up for the deal, the deal becomes unavailable and all purchases are refunded (everyone misses out).
Thus, the model exploits consumers’ growing use of social media platforms and peer-to-peer recommendation services to spread the word.
It empowers while also incentivising consumers to promote the deal.
The model has proved so successful, so quickly, that Groupon clones have popped up in almost every corner of the globe, including Australia (such as Scoopon, Jump On It, Spreets, Ouffer and even MSN and PBL have now jumped on the bandwagon, with Cudo).
There are so many that a new site, called DealsGuide.com.au, has even emerged as an aggregator of the major Australian Groupon-esque businesses.
What’s Anthill’s take on the Groupon model?
What these sites have in common is a model that offers largely ‘experiential’ deals, like restaurant meals, beauty treatments and theatre tickets.
But we were thinking, and I’m sure we’re not the first, what if this model was tweaked to target an industry category or specific audience, such as business products and services?
In other words, what if Anthill created a Groupon-esque model, selling products and services specifically geared toward startups and business owners?
The audience is ‘socially connected’. It is constantly on the look-out for a better deal. And we already have the merchant channels, the critical mass and the infrastructure to trial the model and give it a kick-start.
Indeed, our email newsletter reaches 14,000 opt-in subscribers. We have 16,000 Twitter followers (across four accounts), 1,400 LinkedIn Group Members and 1,200 Facebook Fans.
In other words, we wouldn’t be starting cold.
Why would anyone want to promote their business this way?
There is something about the word ‘discounting’ that causes most business owners to shudder.
However, since announcing our possible interest in the model, we have received a surprising number of phone calls and emails from outside parties, keen to promote their products and services to our readership.
This is largely because the financial structure closely resembles a reseller model and, therefore, the concept initially seems risk free.
Unlike traditional advertising, where the advertiser pays for the privilege of communicating a message (with no guarantee of financial return), the Groupon model invites these advertisers (‘sellers’) to offer a product or service, at a heavily discounted rate.
The offer need only be honoured if a minimum number of sales are made, helping the seller appropriately price the product or service to reflect the volume, potentially improve economies of scale and allocate response staff appropriately. (Although, word from the industry is that most sellers honour most deals even when their minimum sales volume is not met.)
The organisation promoting the offer, like Anthill, makes revenue by taking a cut of each sale (sometimes up to 50% of the sale price). This arrangement (and percentage of the sale) is similar to a wholesale relationship, except that the seller carries the burden of delivering the product (if it’s a tangible item like those traditionally sold through retail stores).
What are the main benefits for advertisers and sellers?
One of Australia’s more successful Groupon-inspired websites, Scoupon.com.au, describes the benefits to sellers as follow:
Expose your brand to new customers
Scoopon users are searching for great new experiences. A Scoopon gives them the perfect excuse to try something different. And because a minimum number of people are required to trigger the deal, you’ll see a lot of them. Even better, many will become repeat customers.
No risk, big reward
Amazingly, it costs nothing to be involved with Scoopon. Compare that with traditional advertising and you can see why it’s so popular amongst businesses.
Your business up in lights
Are you ready to receive the star treatment? On Scoopon, you own the day. For 24 hours, the focus is on you, exclusively, in your city. That makes your business the centre of attention for the entire Scoopon database.
Take your offer viral
Scoopon is the direct way to connect with customers… thousands of them. And because Scoopon leverages social media, those customers share your offer with their friends, using social networking sites such as Facebook and Twitter, for an ongoing stream of new customers.
However, there are three factors any business must first consider when deciding whether this sales model is right for them.
When does the Groupon model work for advertisers (sellers)?
Following a number of conversations with aspiring ‘sellers’, with a desire to promote a Groupon-style offer through the Anthill network, it quickly became apparent to us that some types of products and services are better suited to this model than others.
These sellers fall into three groups:
The Liquidator: This seller is overstocked on a certain item that it can’t shift. Rather than write-off the goods as losses, it elects to sell the item at a massive discount. This is possibly how organisations like Dealoftheday.com.au publish such amazing, although eclectic deals. Sell to clear stock.
The Disruptor: This seller has a new product or service and wants to seek wide adoption of the product or service quickly. By launching through a Groupon-style site, the seller rapidly acquires a customer base, that is hopefully pleased with the service and spreads the word. Sell to accelerate adoption.
The Trail-Blazer: This seller is able to offer a product or service at a cheap rate (sometimes even at a loss) in full knowledge that a certain percentage of buyers will become long-term clients. For example, some organisations generate trailing, passive revenues from a sale, such as telcos and web-hosting companies. Others use the cheap deal to get a foot in the door and then use that relationship to sell a broader range of products or services. Sell to profit later.
From Anthill’s perspective, we’re seeking Disruptors and Trail-Blazers to partner with.
Want us to sell your products and services?
With any new model or product offering, we need to be suitably cautious.
We also hope to create a service that will excite our readers and delight our sellers.
For that reason, we’ve established a set of criteria that are simple yet restrictive.
Here are four points to keep in mind:
The item must be easy to ‘package up’ with a transparent RRP
There is no point attempting to sell something at a discount when the full recommended retail price is not clearly set, transparent and widely promoted elsewhere. This point prevents sellers from attempting to artificially inflate prices to satisfy the discount requirements.
The offer must involve a significant discount
Most successful offers made through this model offer a discount of 50% or more on the advertised price. Once again, the discount must be clear and transparently weighted against the RRP (and not a make-believe figure devised to be discounted).
It must match the needs of the audience
From Anthill’s perspective, we are only interested in promoting goods and services of interest to a business audience. If your product or service is of general appeal, is there a way to make its purpose specifically relevant to this audience?
It must pay both advertiser and Anthill well
This model works well for sellers that fit into one of the three categories described above (Liquidators, Disruptors and Trail-Blazers). The seller must be able to offer a significant discount, pay the promoter’s commission and still gain commercial benefit. The promoter’s commission can be up to 50% of the sale price or negotiated as a trailing commission. Remember, your deal must be profitable to the promoter too.
These points obviously demonstrate that this model is not suitable to everyone. So, to see whether your organisation might qualify, we’ve created an online checklist.
If you have any suggestions, observations or questions (even concerns), we’d be delighted to hear your thoughts. So, don’t be afraid to leave a comment below.