(Not So) Gaga over Groupon

I’m having a tough time with this whole Groupon phenomenon. Every time someone mentions them as a great example of a new business, it makes me nuts. Now, I have respect for anyone who can launch and idea into a business, but I feel like the service is missing a bigger point. The idea of group buying isn’t new; consumers have been consolidating their buying power for better deals for a long time, but Groupon isn’t a function of consumer buying power. It’s an exercise in heavy-handed, value-driven marketing that put’s Groupon in the center of the universe, not the consumer. Harsh words I know, let me explain.

The way the service works is that businesses contact Groupon about a partnership and together they create a bargain that will run in over a period of time – could be a one day blitz, could be a longer-term cupon. (This deal includes Groupon earning around 50% of the coupon price for its service.) Since the business is deciding what to push and Groupon serves as the delivery channel, that’s not actually consumer buying power. It’s not driven by consumer demand, the Groupon community isn’t polling it’s users to figure out where they would like deal; Groupon makes the call. Groupon’s main customer is the business offering the bargain, the Groupon community is a means to an end. The service isn’t even a platform that allows consumers to connect with each other and organize for buying power – it’s a pop-up, loss-leader service that businesses can rent by the day to drive consumers through their doors.

So, say you’re a small business, Groupon sounds like a pretty great idea, right? All of a sudden you can help people learn about your services and it’s cheaper than buying expensive advertising, right? Well, maybe. Groupon reports that about 22% of the people attracted by their make return purchases. Growth can be good, but what about the customer experience?

Let’s say you just opened an ice cream store and the first time a new customer walks into your shop it’s jammed with people looking for a $1 ice cream cone (that usually costs $3). It’s hectic, everyone’s very transactional because they came for the deal, and it’s very hard to engage with the ice cream store because all of the electricity in the air. People are pushy, lines are long. The extra sales are great for the buiness, but you aren’t building any new relationships, you’re just ringing up (discounted) sales. It seems like if you want that atmosphere maybe you should open Crazy Eddie’s Bargain Basement, buy lots of sales advertising and run that game every day. (The WSJ ran a story yesterday with some small business owners with similar sentiments.)

I’m frustrated because I know the experience could be designed with the end customer in mind. Groupon could connect people, look for shared interests, and source a mix of deals tailored for their community. Groupon could encourage people to share reviews that would help the businesses they serve so they can improve (right now, all discussions are about ‘the deal’). Groupon could really would be help businesses grow on their own merits. I feel like Groupon could be about more than just blatant consumerism. I’m sure it will be a big business, I think it’s a big idea, I just wish it had a little higher purpose.

Gaming Inspiration

(warning: heavy nerding ahead)

I usually find lots of inspiration from video games. I’m not a big gamer, but I’m fascinated with the space. Usually it’s less about the graphics or the game content, and more about the interactions that have been designed into the game. As games go, there seems to be a lot of really interesting things going on in massive-multiplayer games and web and phone-based games lately. Console games are sort of pushing each other deeper into this better graphics/extra gore niche. That’s mostly games for hardcore gamers. I’m more interested in what happens when there’s a wider cross-section of people just screwing around entertaining themselves.

I’ve seen a couple of interesting design/stratgey things lately, here’s my take on a few things I’ve seen. Hopefully you find some inspiration along the way.

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Third Moment of Truth?

I was in a client meeting today thinking about P&G’s fabled Moments of Truth. The ‘truths’ are marketing lingo for a few moments in the consumer experience where the consumer discovers a product and decided that product may be what they need, (first moment). Then, later, as the consumer uses the product they determine if the product actually delivers on the promises it has made to the consumer (second moment).

I’ve always liked the idea of these two moments working together, it’s kind of a nice reminder to not over-promise what you can offer. It’s also reinforces the importance of having continuity between your identity/packaging and your product. At one time or another, we’ve all been really excited to buy something only to be disappointed later with the results of what we’ve bought. In that case, the first moment was won, but the second was lost…you have to nail them both, I like this act of bringing things into harmony.

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Investing with the Crowd

An interesting article in the NY Times yesterday detailed a tech start-up called KaChing. The site basically allows people to create mock portfolios and try their hand at investing in the market. The big news in the NYT article is that KaChing now allows you to be able to create actual investment portfolios that mimic user portfolios on KaChing.

The site seems to have built some pretty interesting ideas around investor transparency – you can see current holdings and trades, investors are rated on returns over time, etc. The metrics aren’t so different from what’s offered by mutual funds (at least on a quarterly basis), but there’s something very powerful about the service being framed around an actual person. It also allows KaChing to position themselves as an interesting alternative against this big, evil, opaque $10T mutual fund industry.

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The Large Market Fallacy

Last week, during a new product presentation, I had an all too familiar moment. We had reached the point in the meeting where it was appropriate to review the business logic behind the concept at hand. At this point the presenter threw up a massive sheet of numbers and calmly commented to the audience, “well, overall this is a $4 trillion dollar market, so we think if we only capture 5% of the market, we’ll earn around $200M in the first year.” She didn’t even blink. (I changed the numbers to protect the innocent…the sad part is they’re lower than the actuals.)

I sort of live for these moments in presentations. It’s probably the same attraction that keeps baseball fanatics glued to their television for hours of what appears to be a pretty boring game. After waiting patiently, and watching things slowly play out, something goes very wrong, At that point, all hell breaks loose. At that point, you see who’s the power player in the room, who’s done their homework, and who’s completely out to lunch. This part of the meeting was pretty mush a wash, that argument basically threw itself out the window. This presenter had just committed a pretty common error, one I now refer to as a Large Market Fallacy.

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Business Models Happen

So I’ve been following Umair Haque for a while. A few months ago he made a comment that stuck with me, but didn’t sink in until just recently. He was discussing edge economies, so not traditional established businesses, rather new organizations creating value in a new ways. When discussing these bold new businesses he sort of made an offhanded comment that “business models just happen“. Wait, what?

That statement sort of offended my sensibilities at first. How can business models just happen? They take time, they’re complicated, and most of the time they fail. Also, edge economies are less proven. Wouldn’t that require more big brains and lots of ‘innovation’? It felt odd to say those models just happen.

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Experience: the biggest lever you don’t know you have

Springwise has a post about a concept called Charlie’s Burger’s. It’s an anti-restaurant of sorts that does dinners by private, sporadic invites. One thing that caught my eye was that people weren’t emailed directions when the event was happening, they were directed to a satellite location to pick up the actual dinner location and directions. In the rave days, that sort of maneuver was called a “map point”. Some guy hanging out in car or a record shop with the actual directions to an underground party. You didn’t get directions to the party, you got directions to the map point and you would go from there. (There’s other variations, sometime it was a phone number with a voice recording.)

Can you imagine how much this dials up the experience for the diner? Instead of wading through a crowded restaurant to speak with a stressed out greeter, you’re going on an adventure. Even better, once you arrive at the venue, you have a shared experience to share with 20-30 other people.

I think a lot about how to flip business models on their head to build something different. I’m beginning to think I’ve been going about things all wrong. I’m beginning to believe business models happen only when you create a compelling offering or experience. (I’ll blog more about that next.) I’m starting to think you that you have to start by to flipping the experience around, then figuring out what kind of business model could deliver that experience. I think building models for the sake of building models doesn’t get you to the right place.

Crowd Sourced Journalism

This internet newspaper deathwatch has been exhausting. I can’t even pretend to keep up with it all, but I’ve been pretty fascinated to try and keep up.

Jeff Jarvis had a really good post yesterday that reminded me about the Associated Press and their relationship with newspapers. The newspaper thing is fascinating to me because it’s a slow disintermediation of that whole value chain. The local newspaper is basically the confluence of a few forces – advertising, syndicated news, local news and distribution. Read the rest of this entry »