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HBR领导力评论:Do Social Deal Sites Really Work?  

2012-05-14 18:37:58|  分类: 领导力与管理学 |  标签: |举报 |字号 订阅

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HBR领导力评论:Do Social Deal Sites Really Work?

 

3:20 PM Tuesday February 28, 2012

by Marco Bertini, Luc Wathieu, Betsy Page Sigman, and Michael I. Norton

 

Marco Bertini, Luc Wathieu, Betsy Page Sigman, and Michael I. Norton

 

Marco Bertini is an assistant professor at London Business School. Luc Wathieu is an associate professor and Betsy Page Sigman is a distinguished teaching professor at Georgetown University’s McDonough School of Business. Michael I. Norton is an associate professor at Harvard Business School.

 

 

Editor's Note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you'd like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and email address.

The sales reps from DailyDilly had just finished their rollicking video presentation, and the laughter in the meeting room was starting to subside. Ruth Davison, the marketing director of Flanagan Theme Parks, was still smiling when she finally spoke. "I'm thoroughly impressed," she said. "This would give us the marketing capabilities we've always wanted."

Will Eastman, Flanagan's operations director, was beaming. He had suggested doing the promotion with DailyDilly, a fast-growing Australian social-couponing company similar to Groupon or LivingSocial. "Then I think we're ready to make a decision," he said.

Everyone looked at Allie James, a consultant decades younger than Will and Ruth. Allie had been working with Flanagan for just over a month. She knew she had to kill the DailyDilly initiative but was reluctant to do it with the reps present. "Let's discuss this off-line," she said.

Will slapped the table. "Come on," he demanded. "We're here now." The DailyDilly reps became wide-eyed.

Allie took a deep breath. If Will was going to push her, she'd be blunt. "No, then," Allie said. "It's not on."

Will simply turned on his heel and walked out of the room. The reps started to review their presentation, but Allie stopped them with a wave of her hand. Ruth, no longer smiling, told them all she was sorry and stood up to escort everyone out.

Allie knew she had just made some enemies.

Half an hour later, Ruth stopped her in the corridor. "So you're still not convinced?"

"Roddy asked me to weigh in on DailyDilly for a reason," Allie said. Roddy Brennan, Flanagan's managing director, had hired her from Gold Coast Partners, arguably Australia's top management-consulting firm, with a mandate to improve the customer experience at the company's six theme parks in Australia and New Zealand.

Ruth glared, and Allie had to summon all of her strength to muster a defense. She began: "I know everyone's getting caught up in the group-buying mania. DailyDilly sounds fun, but a promotion like that would hurt the customer experience at the parks and damage your company in the long run."

"Are you hungry?" Ruth suddenly interrupted.

Allie was startled. "Why?"

"I am. Let's get lunch."

"I brought a sandwich —" Allie said.

"Never mind your sandwich," Ruth said. "It's almost one. I'll treat."


Buckle In

Ruth's was a forceful personality, and Allie soon found herself in the car park. "Buckle in," Ruth said. Allie felt a little as though she were strapping into that zero-gravity ride at Mermaid Landing. What was it called? Ah, yes — the Great White Shark.

She and Roddy had ridden the Great White Shark together a few weeks back, when he was showing her around Mermaid Landing, the company's flagship park. He had screamed and laughed the whole time, and that tickled Allie. Roddy obviously had the heart of a kid and a real love for his product.

But Flanagan was struggling. The lines were shorter than those at competing parks. The problem wasn't the rides and attractions — they were state-of-the-art. In Allie's opinion, customers were being turned off by careless service, crowded conditions at the eateries, poorly managed traffic flow into and out of the parks, and awkward scheduling of shows. Roddy had brought her in to fix all that. "I want customers to leave here raving about it — raving," he had said.

Allie knew she could make Flanagan better. She had already helped an international hotel chain turn around its service reputation and improve guest satisfaction — she was becoming her firm's go-to person for that kind of thing. Allie was painstakingly attentive to detail and preternaturally decisive, which is exactly what Roddy wanted. "Rule with an iron fist," he'd told her.

Ruth pulled onto the highway. "I noticed you weren't laughing during the video this morning," she said. "Didn't you think that senior-citizen group on our zip line was funny?"

"The video glossed over the pitfalls of daily deals," Allie replied, knowing she sounded humorless. "There are ample case studies showing that people who buy from sites like DailyDilly are the worst kind of customers: ones with no loyalty. They're like a flash mob of coupon clippers. They overburden merchants, create shortages, annoy the staff, and erode the experience for other customers." She paused. "Where are we going, by the way?"

Just then Ruth exited at the sign for Coral Wonderland, another Flanagan park. She pulled up to a service entrance, showed her ID, and parked next to a high wall that separated this area from the one that customers see. "Did you notice the river in this park on your tour?" she asked, lowering her window. Allie nodded. "Well, there's a little canal down there," she said, pointing to a glimmer of water under a mass of pipes and machinery. "That's where the river starts. It runs through the whole park."

"I remember ducks," Allie said vaguely.

"The ducks love it," Ruth said. "So do the mosquitoes. That's because it doesn't flow — it's blocked by all of this." She motioned to the machinery. "I'm told this may be the biggest plumbing mess in eastern Australia. The circulation system wasn't built properly, and for years we've been patching it up because we don't have the cash flow to replace it. We can't budget for this kind of thing because revenues are so unpredictable." Satisfied that she'd made her point, she restarted the car.

But Allie didn't get it. "And?"

"I'm talking about DailyDilly. Think about it. If we work with them, our cash flow gets easier to predict — because people pay when the deal is posted, not when they come through our gates, if they ever do. That's why Will was upset when you said no. He needs to make operations more predictable. I suppose you could argue that cash flows don't affect customer experience, but mozzies breeding in our plumbing cesspool certainly do."

One of those mozzies had apparently got into the car. Allie crushed it efficiently between her fingers. "But how many deals could you do in a year?" she asked. "Three? That's hardly steady cash."


50% Off

Back on the road, Ruth pulled up to a fast-food restaurant.

"Here?" Allie gasped.

"Don't worry, we're not eating at this place. I just want to show you something." Inside, they observed customers getting their orders. "Notice the tray mats?" Ruth said. They all carried an ad for Flanagan parks — a cartoon image of the Great White Shark, along with a coupon offer.

"This is a typical comarketing effort for us, and it's typically bland," Ruth said. "With comarketing we don't control our message. We're limited by our partners' requirements. We can't use sophisticated humor or striking images to differentiate ourselves. We spend many thousands of dollars on this junk, and the return is pathetic." She looked around in disgust. "We're done here," she said.

"And DailyDilly would solve the problem?" Allie asked back in the car.

"We would have more control over pricing," Ruth said. "Right now we're giving away so many coupons that hardly anyone pays full price to get into a Flanagan theme park."

"I'd say that's what's wrong with DailyDilly, not what's right about it," Allie replied. "You saw the discounts the reps mentioned this morning: 50%. It creates the same pricing problem as the coupons. We'd be encouraging customers to wait for the next dirt-cheap deal. And no customer values an experience that's 50% off!"

Ruth shook her head. "True, we would take a hit for certain customers at certain times. And, yes, we'd get only 25% of the ticket price because DailyDilly keeps half of the promotional price. But overall we'd be better able to maintain our list price, given that we'd eliminate all those other coupons. And we'd be targeting our kind of customer: people hungry for a thrill, which is what we sell. Traditional marketing inevitably — invariably — means throwing money at people who aren't really potential customers. With DailyDilly we'd be hitting exactly the right audience — and that's worth a lot."

She turned into another parking area. "Here we are," she said.

"This place?"

"It's a hoot," Ruth said.


A Long Queue

Everything in the restaurant appeared to be in constant motion, like sea grass in the waves. That's because each table was suspended from the ceiling, and every seat was a swing. Even more surprising was how many of the seats were occupied.

"I'm getting the point that this lunch excursion is a theme-park ride devoted to daily deals," Allie said. "So what's the angle here?"

Ruth grinned. "You're right. The ride is over. This is our final destination. The DailyDilly reps told me that this restaurant just ran a very successful group buy, offering 50%-off lunch coupons. They sold thousands of them. That's what you're looking at. Can you think of any other type of marketing initiative that could target so many people predisposed to a quirky experience like this? Forget it. There isn't one."

Allie looked around at the dozens of people gently swinging as they talked and ate. The clink of dishes and the buzz of conversation mingled with the creaking of ropes. But Allie knew that if these were DailyDilly customers, they weren't the good ones every merchant wanted. She'd heard enough from her hotel clients about how badly deal seekers behaved. They were rude, left holes in walls, and, most important, never came back to pay full price.

"Let's talk to them," Allie said.

"Who, the owners?"

"No, the customers." Picking a table of four women in their twenties, she asked if they'd bought into the DailyDilly deal, and indeed they had. "So how much are you going to spend beyond the coupon?"

They giggled. "As little as possible," one said.

"Would you come back and pay full price?" Allie asked.

"Doubt it," another answered. "Who wants to get seasick while you eat?" More laughter.

Allie turned to Ruth. "Ask any table. I'm sure you'll get the same answers. Now imagine these people at Mermaid Landing or one of the other parks. Would they pay for photos or buy stuffed animals? Never. They probably wouldn't even buy food. They'd get sandwiches through some other DailyDilly deal, smuggle them in, and eat lunch on a bench."

Allie pointed toward the door, where another group of young women had just lined up at the hostess stand — more DailyDilly people, no doubt. "Do you see? They're queuing up for tables, just as they'd queue up for the Great White, making the experience that much worse for the good customers, the ones who pay."

"I just see a lot of eager customers," Ruth replied, "all acquired very efficiently at a relatively low cost. If short queues are Flanagan's goal, we're already a screaming success. I want to see longer queues. Not so long that people get fed up, but long enough to make them feel they're waiting for something special — and to make Flanagan money.

"And if you want to interview a deal seeker, talk to me," Ruth continued. "I use DailyDilly for all kinds of things, and I do buy more than the coupon value, and I do go back to places I like. I'm one of those 'good' customers you're talking about." She paused and looked around again. "This could really help Flanagan," Ruth said. "That's why I'm asking you to reconsider your decision."

Question: Should Allie approve the DailyDilly promotion?

Please remember to include your full name, company or university affiliation, and email address.

 

Comments

Lisa Promise Moderator 02/28/2012 04:01 PM

This is an interesting scenario, and perhaps not atypical for many small businesses today. There are a few things I see as incorrect, however. 1, the reason given for doing a daily deal promotion was generating revenue up-front, even if the customer never visits the park. This is fundamentally incorrect if you look at the accounting rules for this. In effect, the merchant is selling something similar to a gift certificate, and thus, cannot account for the revenue until the voucher is redeemed. What this means is that if a customer never redeems, the merchant can never recognize revenue, and it stays on the books as deferred revenue - indefinitely, unless of course depending on state they force you to escheat the unrecognized funds. 2, while I understand the notion that deal purchasers are just that - deal seekers, this does not mean they do not bring value. If the deal is structured in a way to incentivize customers to spend more (i.e. get a second pass for 50% off, purchase 1 lunch and get 25% off your next ticket, etc.), merchants will find that customers are doing whatever they need to so that they meet that threshold. For example, setting a minimum order amount for customers to receive free shipping for e-commerce sites. In addition to that, not only is it a direct response tactic driving sales, it's also a brand play, reaching customers who had never heard of or considered the business before. We have seen repeat rates comparable or greater than other standard marketing channels (think E-mail, Online Display, etc.). All of this being said, I do think some businesses have more success with this type of deal than another. There is so much competition in the space, that a company/merchant needs to find ways to differentiate their business if they want to keep people coming back. - Lisa Promise, Group Buying Channel Manager, Vistaprint, lisa.promise@gmail.com

 

Lisa, I'm responding to only one point you have made. A few months back I was told by a LivingSocial employee (at a house party) that one of their pitches to potential partners is that nearly 50% (it may be been more, it wasn't less) of the people who purchase daily deals never redeem them. Thus, the company is actually receiving revenue for which it has not provided any service but rather the availability of the service (to a certain point, obviously; in the case of the restaurants that provide these types of deals there is incentive to bring them in so that they might start paying full price for some items. Also, in personal experience, my tendency to pay above and beyond the deal depends entirely on the experience of the restaurant (or excursion). If I think that the value or the experience is worth more money, I am simply thankful for the money I am saving because of the deal and buy that bottle of wine that is $10 more than the house wine. Lastly, if I were Allie, or even Ruth, I would propose a different type of Daily deal. One that provide 50% off a meal at the restaurants in the park, and perhaps free parking, something along these lines. The type of client that Allie wants is someone who doesn't need 50% off the entrance price to come one time, but rather just needs a friendly reminder that the parks exist and that there a value (discounted meal) is being provided in appreciation for the attendance. Obviously this would ensure that anywho who purchased the deal would have considered the park entrance fee and subsequently acquiesced. So, at the worst, the park would get the revenue from the restaurant deal without providing services, and clogging up its cues. Or, at best, the deal would draw out the types of customers that Allie is looking for: not the cheap deal-mongers. 

---Sean Dehan, President, Bar?a Clothing, U. of Texas-Austin Alumna, dehan.sean@gmail.com 

 

There are two goals at play here: a goal to fill the park in the short
term and a goal to build a strong, loyal customer base.  These two goals
aren't necessarily mutually exclusive but they do require some
ambidexterity on the part of Flanagan.

Flanagan needs to take three steps:

 - Don't do a DailyDilly now - inviting potentially loyal customers to an unimproved park will only serve to alienate them.  Instead, focus on improving customer experience.

 - Take a phased approach to improving customer experience.  At the end of each phase, offer a DailyDilly to get customers in the park to see the latest improvements.  If the improvements are working, they should see stronger performance between DailyDillys.  By focusing the first phase on short-term improvements, they can get people in the park sooner, rather than later.

 - Turn the park into a lab - By relentlessly trying new things, the DailyDillys can become a rich source of customer data.  Flanagan can use that data to develop a customer experience that drives loyalty and increases returns.

 

I believe that Allie should not approve the Daily Dilly promotion. If this is indeed a marketing and a new customer acquisition effort, then it needs to be approached as such. The company would do well to figure out who their target segment is (this might either be their most typical customer or it might be a new customer segment that they want to bring in - for eg, women between the age of 24-35, working at corporates or let's say kids living in a particular geographic area from where they usually don't get as much traffic), and then find a platform to reach them through targeted incentives. The free-for-all approach that most deals sites provide is not targeted enough for most small businesses, and is in fact detrimental to both top line and bottom line.

I would recommend that Allie first fix the problems inherent in the business (e.g., bad customer service, etc.) before pursuing very targeted marketing campaigns as I've described above. Increasingly, startups are building easy-to-use self-serve (or assisted self-serve) platforms that let small businesses run such targeted, often local or hyperlocal, campaigns where they can control for several additional factors (peak vs off-peak times, number of such incentives to gives out, etc.). Ultimately, what small businesses need is a smart advertising platform with the ability to incentivize new customers to walk in.

 

In my view Allie should approve the engagement with DailyDilly - though in a limited manner. As was mentioned, the main problem at the parks in Allie's opinion and I assume her opinion was based on some research and facts was this - 
careless service, crowded conditions at the eateries, poorly managed traffic flow into and out of the parks, and awkward scheduling of shows. These are problems the DailyDilly deal is not going to solve. It seems getting the customers to the park is not a problem, but its sending them back happy and satisfied. A happy and satisfied customer more likely than not will come back and recommend to others.
What the company needs to do is have a multi-prong approach approach:
1. Fix the fundamental problems in the business - improve customer service experience, add more capacity to the eateries, install a better system to manage the traffic flow in and out of the parks and align the show timings to customer preferences. All of these are projects in their own right and need to be completely successfully.
2. Engage DailyDilly for a limited interaction and see the effectiveness of partnering with them. e.g Initial engagement could be only limited to coupons for off-peak days.
3. Based on the results of the initial engagement with DailyDilly, expand the interaction to full scale engagement.

What is required is a "agile" approach using the PDCA cycle (Plan, Do, Check, Act) instead of a big bang.

Hrishikesh Karekar
www.managingtheproject.com

 
Isaac Hwang Moderator 02/29/2012 05:26 AM

The full impact of the marketing partnership has not been studied properly as such Allie should not accept the deal but rather put it on hold for further review.

*While the purpose of the marketing strategy to attract primarily new customers and bargain shoppers may be sound, Allie is correct in having concerns about the quality of the customers. A discount shopper isn't a discount shopper without reason.

However the problem cannot be fully explored because of lack of information. The article doesn't give a revenue breakdown so we do not know if the main revenue comes from Entrance/Ride tickets or from gift shops, restaurants etc. But reading along the lines and from experience going to park themes and playing "Theme Park", I believe that Flanagan gets more revenue from tickets (cash cow) than from other sources.

It would then be dangerous for Flanagan to pursue aggresive discount marketing strategies with social deal sites. That is because the deals cannot be fully controled by Flanagan and thus it doesn't serve as a dynamic tool that can be quickly implemented when needed.

Another danger that a social deal site may pose is with customer loyalty. Such customers will most likely remain loyal to the social deal site rather than to Flanagan, so if Flanagan does partner with DailyDilly they would be opening Pandora's box and may be forced to deal continuously with them and that brings me to my following point. Judging by the article there are other competing theme parks and if they too use DailyDilly that would create a demand not for Flanagan, but for discounted 'Theme Park' tickets regardless of which theme park. Meaning that if Flanagan refuses to deal with DailyDilly again that would only mean another 'Theme Park' would fill that empty spot.

*In effect, customer loyalty would not be directed at Flanagan but rather towards DailyDilly.

*Flanagan would be better off in starting a NEW package deal (perhaps an annual membership package) and then creating a partnership with DailyDilly to promote the package at a discount (limited to say "FREE" for the first 100 people, 75% for the next 300 people, 50% for the next 600 people, and 25% for the next 1000 people.).

This would create the impression of a once-in-a-liftime deal and therefore would not create any expectations of further deals of such kind to be found at DailyDilly's in the future.

This would certainly ensure a high level of commitment from prospective customers and perhaps even dictate their quality because the high price that an Annual membership may cost even at a discounted price would mean middle-class customers and families, therefore meaning a higher propensity to spend.

I could go on forever with this interesting discussion.

Bottom line, the situation hasn't been studied and researched enough therefore Allie should not accept the deal.

Isaac Hwang, Yonsei University UIC '08 Alumnus, globalhwang@gmail.com

 

This is a fantastic scenario and is particularly germane to the changing of the generational guard in terms of perspective of marketing success as well as to my business (promotional re-engagement platform for SMBs).  I assume that while money would be better spent improving the experience at the park, the executives are mostly obsessed with the idea of spending marketing dollars to grow their bottom line as consistently and quickly as possible.

DailyDilly, in this case, could be a boon to the theme park but certainly not without diligent restrictions and a thorough, well thought-out re-engagement mechanism that likely starts at the actual theme park.  I will lay out two successful scenarios that could effectively utilize DailyDilly.

Scenario 1
$60 for $30 DailyDilly promo (assuming admission is $70) + at the window offer for future discounts/promotions in exchange for contact info (email address or Facebook like) and basic demographic info (age, gender, zip code).  50% discount will get lots of people to visit the park.  Asking for their contact info for something they want (promotions), builds your re-marketable audience base and gives you heightened opportunity to turn that one-timer into an all-the-timer.  You can run sample promotions to specific subsets of your re-engage-able audience base and then iterate to drive more loyalty.

Scenario 2
[reference to Sean Dehan] - offer 50% off additional services within the park.  This is the best way to remind former customers of your presence and give them a perk for coming back.  The challenge here is that their allegiance is to DailyDilly, not the theme park, and that the coupon will only serve as a reminder as to why they don't came back all the time (probably poor service, conditions and food quality).

These daily deal type programs can be intelligent when used appropriately.  They must: (a) be seen as a strategic loss of revenue (e.g. marketing expense, NOT a revenue stream), (b) be matched with a program to collect contact information and feedback, (c) have a total voucher value that is slightly less than your average ticket price to encourage additional spending, (d) not anticipate an organic return rate of more than 15% of the DailyDilly customers, (e) be used to spread word of a new product/service or announce a new location, not for cash flow.

It has been well documented that experience and service are the most significant drivers of loyalty.  After that, re-engagement through promotion is quite solidly the next best option.  These new-age media networks that are daily deal sites offer the next best thing in terms of mass distribution of information about your product and nothing more.  When coupled with re-engagement mechanisms, they can be huge, but you must be thoughtful to succeed.

Jake Cohen, co-founder, www.getprivy.com, jake@getprivy.com

 

I agree with mjbigelow, “There are two goals at play here: a goal to fill the park in the short term and a goal to build a strong, loyal customer base. These two goals aren't necessarily mutually exclusive but they do require some ambidexterity on the part of Flanagan.”

First things, first: Improve the company’s services.   Because Flanagan Theme Parks have state-of-the-art rides and attractions, the trouble is not there.  The problem is customer experience: careless employees, crowded eateries, poorly scheduled shows and mismanaged traffic flow in and out of the park. 

Prematurely signing up for a DailyDilly only creates a larger problem for the future.  A bad experience is a bad experience, even at a discounted price.  And offensive.  And more difficult to compensate for later.  The park would have to offer a much higher return on investment (ticket price) in the future to overturn the tarnished memories it creates in its present state.  Especially during a depressed economy. 

People go to amusement parks for fun, but Flanagan sounds anything but joyful. 

Having been on both sides of the business: Service provider and service consumer, I know that people are willing to pay more if it means getting what they want, and how they want it. 

Now is not the time to start a cash grab by haphazardly offering customers a DailyDilly.  Now is the time to focus on training the staff at Flanagan.  Teach employees how to interact properly with customers.  Use both parties as focus groups and reward them with incentives other than discounts.  Listen to them and make them feel valued for their opinions.  People enjoy feeling like agents of change.  Transform hopelessness into opportunities for improvement.  That’s how to build staff and customer loyalty.  It’s also how to inspire innovation. 

Lastly, it’s important to note that the novelty of social shopping sites has worn off. As Reuters reported on 8 February 2012: Groupon loss and weak sales clobber shares --

“Groupon Inc reported a loss on Wednesday as user growth slowed from the breakneck pace of past quarters, potentially signaling consumer fatigue with daily deals and wiping 13 percent off its shares.

"That suggests there are fewer newer customers, consumer fatigue and the impact from lower marketing spending," said Sameet Sinha, an analyst at B Riley. "That means not enough people are buying groupons."”

http://ca.reuters.com/article/...

To answer the question: Should Allie approve the DailyDilly promotion? 
I answer: No, not until significant changes can be made in service such that marketing efforts can effectively highlight the improved and new features of the park.  Give the customers several reasons to return or try your establishment for the first time, not simply a discount. 

As jfccohen explains, “These daily deal type programs can be intelligent when used appropriately. They must: (a) be seen as a strategic loss of revenue (e.g. marketing expense, NOT a revenue stream), (b) be matched with a program to collect contact information and feedback, (c) have a total voucher value that is slightly less than your average ticket price to encourage additional spending, (d) not anticipate an organic return rate of more than 15% of the DailyDilly customers, (e) be used to spread word of a new product/service or announce a new location, not for cash flow.

It has been well documented that experience and service are the most significant drivers of loyalty.”

Lisa Green

GothamGreen212@Gmail.com
http://about.me/gothamgreen212

Wellesley College, AB
Dartmouth College, MA

 

Very interesting Case Study. Straight off the block, these are the issues I see:

The Flanagan Ops guy, and Ruth, are interested in short-term profits, and creating what I will loosely term an illusion of great customer experience, in the hopes that this will sustain consumption.
On the other hand, Allie seems to be seriously looking at the quality of customers, and potential to generate long term loyalty. Let us therefore, look at the problem in a slightly more zoomed-out framework.

At the top-level, there are two kinds of customers - (potentially) loyal consumers and one-time visitors. By one-time visitors, I mean people who will definitely not entertain the possibility of revisiting Flanagan.

What is DailyDilly going to do? Simply put, it promises to take never-before deals in a directed manner to customers hungry for a thrill i.e. if somebody is looking at what theme park to go to, Flanagan will score simply because of the DailyDilly deal.

Let us say, hypothetically, that the deal with DailyDilly goes through. It is projected that suddenly the parks will start running full. It must be pointed out, though, that due to the inherently directed nature, it can only be filled by a) adventure enthusiasts and b) DailyDilly loyalists i.e. people who keep looking at the site for deals. 

Once the adventure enthusiasts are in, its definitely customer experience and loyalty rewards from Flanagan that will drive whether they come back, as opposed to how the deal with DailyDilly plays out. Also, converting them to higher-value customers when they're at Flanagan depends on the physical structuring of deals inside. On the other hand, for the DailyDilly loyalists, its going to be a function of how much better the next deal is, how the customer experience was, and whether they're converted to adventure enthusiasts or not.

PRELIMINARY VERDICT: Carry out a blitz of deals with DailyDilly AFTER having carried out myriad investments in improving customer experience. Having done this, concentrate on winning the loyalty of every customer in the next three-month period. 

Shift to a different marketing concept thereafter. 
Shirish Subramanian, Indian Institute of Technology Kharagpur (thinkshirish@gmail.com)

 
Nitesh Harry Moderator 03/01/2012 01:11 AM

This is a very interesting case study.

As most people have said already, on of the critical factors Allie needs to take into account is what kind of customers the deal will attract. If, as Allie stated, the deal attracts unloyal  customers, then they should not approve the deal. Ruth mentioned that she often buys DailyDilly deals and she does go back and she does spend more money at the place of the deal. However, I think that people like Ruth are a minority (I have done no research on this, it is just my opinion). I think one of the main issues here is sustainability. How many DailyDilly deals will it take to get increase customer loyalty to a point where revenue is sustainable? And would the minority of people like Ruth be enough to create sustainability?

From the case study, it seems clear to me that Ruth is thinking short term and Allie is thinking long term. As Ruth is the marketing director, she is looking at the ROI the DailyDilly promotion will generate. Allie is thinking long term, focusing on customer loyalty and sustainable revenue.

One question I have is how much customer loyalty is there at theme parks? Surely after going on all the rides a few times, the thrill is over? Do people still get the same kind of thrill when they go on a ride for the 10th time compared to their 1st time? In my opinion, thrill-seekers will always move on to the next thing that will give them a bigger thrill. Getting loyalty from them would be difficult. Perhaps they should focus more on entertainment for the whole family and in that way generate customer loyalty.

In my opinion, I think that Allie should not approve the DaillyDilly deal. It will attract the many one-time customers who will make queues longer and make the experience worse for their loyal customers. Also, running multiple DailyDailly promotions will not help either as these same one-time buyers will come back and not spend beyond the coupon.

- Nitesh Harry. Information Systems Honours student at the University of Cape Town (UCT), Cape Town, South Africa, nitesh.harry@gmail.com

 
Andrew Bradford Moderator 03/01/2012 01:20 AM

I think some of the people here are way over-thinking and over-analyzing the situation.

There are two types of businesses that use daily deal sites:

1. Those (the minority) already offering a solid product/service that view these sites as a way to reach new market segments (and who know how to manipulate the deal sites to best leverage the advertising while minimizing the risk of acquiring the discount-shopping groupies)

2. Those (the majority) that lack a base of loyal customers and solid revenue streams because they offer either a poor product/service or a dismal experience, and because of this are attracted to the idea of a quick injection of cash and new customers, even if it means accepting the quantity over quality customers that often come through daily deal sites

Now step back and ask yourself: To which group does Flanagan belong?

Next, let's not forget, Allie was brought in to perform a specific task, and that was NOT to increase the number of customers in Flanagan's database or the number of tickets sold (although these two outcomes would certainly be positive by-products of Allie doing her task well).  Allie was brought in SPECIFICALLY to move Flanagan from the bottom group above to the top group, by fixing the issues that (she feels) are most hampering the company: "customers were being turned off by careless service, crowded conditions at the eateries, poorly managed traffic flow into and out of the parks, and awkward scheduling of shows."

Based on Allie's assessment, the one way to guarantee that Flanagan doesn't fix its customer experience problem is to flood its amusement parks with a ton of new marginal customers - who would further clog the eateries and contribute to traffic flow problems.

Any debate about whether or not daily deal customers can be turned into repeat customers is irrelevant if the one thing we know for sure is that the very first experience will be abysmal.

As with many businesses that choose to participate in this type of permission marketing, Ruth's assessment of the daily deal is based on nearsighted thinking.  She might claim that the quick injection of cash will provide the capital needed to make necessary repairs, but really, she wants to see long lines...long lines of unhappy customers. 

Could Flanagan possibly benefit down the road from partnering with a daily deal site?  Perhaps.  But first, systems need to be put in place to ensure that every customer that walks into a Flanagan amusement park has a great time and leaves wanting to come back with a friend or three.

As the company currently stands, Allie should reject the daily deal promotion and focus on what she was brought in to do.

Andrew Bradford
Marketing Manager, San Francisco Classical Voice
andrew@sfcv.org

 

First of I find the case very interesting and I think this is a problem that a lot of people have to deal with on a daily basis. Making it a very important subject to discuss. 

In my opinion we do not have the sufficient knowledge at this point to actually answer the question. I guess that you can discuss on meta level if "DailyDeals" are good or bad. But this is not the case here. We have to discuss if Flanagan should go forward with DailyDilly.

There are four things I would like to discuss in this matter. 

First. Good loyal customers come from a good user experience. Meaning that I would never write off DailyDilly based on the belief that the people that use DailyDeals are bad people or bad customers. People are in general looking for good deals and it has been like that since forever. It's in our nature. Flanagan needs to have faith in their product and believe that customers that come to the park will have a good experience, hence they will recommend the park to others and at some point come back.

Second. If they have cashflow problems DailyDeals may not be the way to solve this. I think it is to much of a job for DailyDeals to solve. They should look into their business model and explore new way of creating cashflow. Things such as Yearly Membership Card to the park - discounts on second visit within 6 month of first vist. In this way they can get a higher value out of every new customer in the park and in general a better cashflow. Also they could do music concerts on friday nights attracting a new audience that may not usually consider the park. 

Third. Based on the belief that Flanagan will do what is necessary to give customers a good experience when they come to the park I think they should for sure go ahead and continue their talk with DailyDilly. Every new customer into the park represents the possibility of up-selling a Yearly Membership Card, a returning customer and a recommendation to friends and family, pictures and video posted on Social Media etc. DailyDilly must be considered marketing / sales. These normally come with a cost! In this case they come for free and even with an income. The marginal cost of a new visitor in the park is close to 0 making it even better. Flanangan will for sure make money on their marketing activity. 

Fourth. There are many ways of setting up daily deals. Flanagan should analyze their customer inflow and then make the DailyDeal work on the days of the week where they normally do not have many customers. Or they could even make it work like before or after a certain time of day. Lots of possibility. 

Go Go Go :-) But they do need to think and prepare themselves a little before they get started. 
 

--- Jacob Hagemann, SearcusGroup.com, jha@searcus.dk @jacobhagemann 

 
Scott_Korey Moderator 03/01/2012 12:26 PM

Stop dilly dallying!  Allie is absolutely right, and in NO WAY would I do a daily deal for my business or any business.  One of the most important take aways I got from attending the Kellogg Graduate School of Management is that you have to be very careful in structuring coupons, if you use coupons as part of your marketing mix.  The reason is the UNSEEN risk that coupon users justify the reason for their patronizing your business as that it was on deal.  If customers justify their action in that manner, then they will ONLY return as customers if they get a like deal in the future.  They will not return as list price customers.  The GREATER RISK is that existing customers that you have painstakingly cultivated and that have paid list price in the past will fall into this same category.  It will not be all of them, but it will be a significant portion of that such that historical consumer research shows that the level of business of a business drops BELOW the original level they were at PRE-COUPON after they remove the coupon or it expires.

Every business wants more sales.  Sales are hard.  Treat it that way and WORK HARD to gain new, AND good customers.  A desperate business that does a daily deal is just hoping, but they are hoping against reality that the level of business will increase.  The truth is it is only a decision that will only put the business in a deeper abyss.  The true interest of the daily deal companies is in themselves, not you.  Coupons will be done online more and more as opposed to the traditional medium of print, but they will not be done with the typical 50% off terms that the daily deal companies have created.  Daily deals will be a fad, as those who are still around and not out of business that have used them have realized from their results that the deal was not worth it in the first place.  The reality confirms the prior consumer behavior theory.  The reason why it does is because the consumer behavior theory was derived from real life research.

I had the privilege of going to the Kellogg Graduate School of Management, am self-employed, and have an email address of Scottkorey@aol.com

 
Rob Deutsche Moderator 03/01/2012 12:51 PM

Allie nailed it here in that a) people who buy deals from this site are valuing the deal, not the actual experience that is being purchased, b) people who redeem the deals are going to spend the absolute minimum beyond what their voucher is for, and c) you aren't creating any customer loyalty, just a (likely) one-off novelty purchase.  My favorite Indian restaurant in my neighborhood has been around for years, but recently turned to a few of these deal sites to try and shake up some new business.  It did bring in some short term revenue (that the deal site took 50% of), but did not create any regulars, and for a small town restaurant you need regulars to survive.  They also observed that patrons spent very little beyond their vouchers.  I noticed that voucher holders were also more likely to complain on Yelp after the fact about service, (the restaurant didn't have the staff to accommodate the spike in business) and the food (many opted for the discount lunch buffet, which when compared to the dinners is like night and day) when regulars have nothing but nice things to say.  This can certainly dissuade potential future business from ever checking it out and even prevent someone from becoming a regular.  In the case of this theme park, they need to do the footwork on their end first to make sure that the experience that they are offering is one that would warrant repeat visits.  Spend the money to revamp and clean up the park, then once that is done, try initiating some sort of customer loyalty or referral program.  

 

I think that theme parks and all businesses for the matter should do daily deals in a manner that encourages loyalty. For example, they could charge for parking and include parking in the voucher. I know that souvenir bottles are a way to drive a high F&B profit margin and encourage loyalty, so they could start one of those programs where it's $14 for the bottle w/ free soda for the day, which would only cost $.03 or so every time a customer wants to fill it. So the voucher could be 2 park admissions (regularly $50), 1 parking (regularly $20), and two bottles (regularly $14) for $74 as the regular total price is $148. Exclude all peak dates on the voucher as you don't want those getting a discount to take away from those willing to pay regular price to visit on busier time. At $37 for 2 people, you're probably yielding something, and what you're yielding is probably better than what you'd be getting during off peak times. And for the sake of bundling 2 park admissions onto 1 voucher, who goes into the theme park by themselves?
There are businesses that do this quite a lot. There's a particular sports club in my area that has been coming out with vouchers for free 1 year membership (which gives you about 10-30% discount on their activities) and a day ski trip (bus ride plus a lift ticket) for what they charge members regularly for the just the ski trip. It's a bit wise as their buses are more often sold out and less often cancel due to lack of bookings even though they are a few dollars more than their competitors (yet they offer the same exact service as their competitors especially during peak days during the season). Plus, the free 1 year membership gives them the right to market to them for a year for the exchange of maybe taking a few dollar loss of taking that incremental customer on their first trip.-Michael Krieger mlkrgr@gmail.com

 

Enjoy
the Ride!

 

Most
of the salient points have been raised in the comments to date – that’s what
happens when you wait this long to post. 
Great ideas, all!  My
recommendation is that Allie should approve the DailyDilly promotion,
conditionally based on key metrics from a pilot program.

 

Allie
is a consultant and while she has executive sponsorship “to improve the
customer experience at the company's six theme parks,” she still needs to
understand and balance the current corporate needs with long term goals and
strategies, and must also realize that the price point to entrance is part of
the customer experience.  A pilot program
allows Ruth and Will to further validate their business initiatives, but also
allows Allie to confirm heretofore anecdotal data regarding social deals and
the type of customers it may or may not generate.  Before the pilot program begins, Allie should
work with DailyDilly to identify key customer profile and usage data that could
be tracked over the duration of the program. Metrics like average age, gender,
marital status, current or new customer, other entertainment activities,
average household income, social network(s)… come to mind. To validate her
theory, Allie must add in a brief survey before the coupon is generated or must
have DailyDilly glean from their data those profile attributes that are
relevant.  She must also be able to track
ticket sales, peak and off peak customer populations and “inside the park”
sales, matching historical to the time when the DailyDilly is piloted.

 

I
thought the example of Disney mentioned here earlier was extremely useful.
While Disney may not offer “couponing”, Disney does in fact offer discounted
rates and bundled or packaged vacations. Discounted rates can be offered in a
“pre-buy” scenario or at the ticket gate if you are over the age of 65 for
example.  What Disney has so brilliantly
done (big fan by the way – two Disney princesses at home) is to realize that
the entire vacation and associated customer experience is the product.  So, discounted hotel rates, transportation
and meals in Downtown Disney are all part of the user experience.  I’m sure everyone remembers the old product
lifecycle curve and those key levers that help us alter or impact the curve.
Couponing is typically done at the front end to increase user adoption, market
share and brand awareness, but can also be done at the end to extend the life
of the product.  In the world of family
vacation theme parks (I made the assumption that this was a family oriented
theme park with a name like “Mermaid Landing”), the product, the experience,
can also be changed via different rides, different eateries, new themes etc. ,
but coupons and discounts also offer up additional methods to positively impact
the product lifecycle, if used effectively. 

 

This
is where Ruth is demonstrably frustrated with the current coupon and marketing
strategy, all of which won’t be fixed with another unfocused coupon initiative
like the one proposed by DailyDilly. The comment earlier about short term goals
is valid here and even within this context, I am doubtful they may be achieved
through the proposed campaign.  Allie’s
specific mandate to improve the customer experience directly impacts the
customer lifetime value – better experience could translate to slower churn
rate, higher average revenue per customer, and lowered retention costs.  She will need to implement ongoing methods to
collect this data without being totally intrusive: Fast Pass, “Comp” cards,
location check ins via a mobile application, credit card information at the
point of sale for example.

 

Allie
surmises that “…customers were being turned off by careless service, crowded
conditions at the eateries, poorly managed traffic flow into and out of the
parks, and awkward scheduling of shows.” And, she believes these to be the main
reason why Flanagan is “struggling.” 
DailyDilly could be a powerful tool to solve some of these issues.  For example, to manage crowd conditions at
eateries, she could use DailyDilly to encourage customers to buy food items at
specific times during the day (off peak hour attendance might get you a
discount).  This could also drive
behavior during entrance and exit, as leaving at certain times might result in
a discount reward on your next visit (managed traffic flow and additional
incentives to come back).

 

The
relevant usefulness of a social media application like DailyDilly to Flanagan
and to Allie lies in not only the company’s ability to glean important
information about  current and potential
customers, but also in the company’s willingness to collaborate with its
customers to create a better experience.

Will Yen

 

以上内容摘自:

http://blogs.hbr.org/cs/2012/02/do_social_deal_sites_really_wo.html

 

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