The Groupon Phenomenon

It seems like only yesterday General Mills began CPG’s flirtation with Groupon specifically, and daily deals in general. Jealous, in quick succession PeopleString announced that its approach was better than Groupon’s because it actually builds loyalty and creates a more viral element within the process, Total Beauty claimed the same thing (albeit only in the area of health & beauty products, a veritable facelift for your brands), and banks and retailers decided they were best suited to run daily deals. I’m sure there are other companies feeling slighted because I didn’t mention them, but you get the idea – CPG deals are coming, and a bunch of companies are lining up to be the Groupon for CPG, assuming Groupon can’t be the Groupon for CPG.

Now before going too much further, a couple of disclaimers are in order.  First, I have a bias toward experimentation on the small scale conducted by General Mills (and other CPG companies up to this point) – whether online discounts, social media, point of purchase, or other approaches.  I see little downside, lots of upside, and think it often the best way for companies to learn.  Second, Groupon seems to me like a rare infectious disease for which no known cure has been discovered, with the potential to course through my wallet and send it into cardiac arrest.

Those disclosures in order, the question I really want to explore is what benefits CPG companies hope to achieve via leveraging the services of companies offering daily deals.

The Fourt-Woodlock View of Groupon

From The Wall Street Journal, “The Groupon deal offered in Minneapolis and San Francisco… includes 12 General Mills products, including Fiber One bars, Cinnamon Toast Crunch and Kix cereals, Fruit Roll-Ups snacks and other items, for $20, a discount of more than 50% of the value of the package. The deal also includes a $15 coupon book for General Mills products, all which will be delivered to buyers’ homes.”

So besides catching a mild case of Groupon, what might General Mills (I’m focusing on them because they had the distinction of being first out of the gate, with a relatively well-publicized offer – though to be clear I have absolutely no first-hand knowledge of their objectives) get out of a promotion such as this one?  Let’s take a look through the lens of some typical marketing objectives:

  • Awareness:  Beyond awareness within the marketing community for the promotion itself, I’m going to argue there wasn’t much consumer awareness lift for these already-ubiquitous products.  Awareness building, though, is a potential benefit if new products are being promoted (and realizing that the awareness from something like Groupon is probably inferior to a medium such as television, at least in the longer-term).  If Groupon can do a good job with targeting, it may provide an awareness building mechanism – otherwise, it doesn’t seem to be a wide enough net.
  • Distribution:  Though these products were already widely available, a clear part of this test seems to be whether General Mills could leverage a direct to consumer (d-t-c) model.  General Mills appears to have cut out the retail middleman, which may or may not prove viable.  It might be worth considering how powerful this could be for a company such as P&G, whose eStore already provides a d-t-c model.
  • Trial:  Clearly, Groupon can serve as a mechanism for generating trial, much as any coupon or promotion might (in my opinion, this seems to be the primary function of daily deals for CPG in an ideal world – to get discounted products into the hands of consumers who are either non-users or light users).  That said, much like with awareness the question is whether it can generate trial with enough people.
  • Repeat:  As much as any price promotion generates repeat, Groupon does that.  To the extent that it can be targeted to consumers who were less likely to repurchase and induce that behavior it seems an effective mechanism; to the extent it is offering a discount to consumers who would have repurchased anyway, it has the same drawback as most price promotions.  We are training consumers to wait for a discount to buy our branded products, and in the process devaluing our brands.

It Sounds Like a Virus, Does That Make It Viral?

I do think that one of my kids caught Groupon once, and the doctor prescribed antibiotics to get rid of it.

One of the arguments that proponents of daily deals – or social media, for that matter – would make is that they also get consumers talking about the product, one of our aims.

Though if I worked for a CPG manufacturer, I’ll admit that I would be experimenting with social media like crazy, I’m less inclined to place much weight on this element of daily deals.  I’m skeptical of the idea that the promotion will carry over into significant word of mouth benefits.  I’m more sympathetic to the position offered by Byron Sharp in his book How Brands Grow when he writes “Within every brand’s customer base there are a few people who feel much more attitudinally committed to the brand…But the marketing consequences of these brand fan(atic)s turn out to be very limited.”

However, there do seem to be ways to leverage a word-of-mouth element while making it about the consumer, not about the brand.  As recounted in an Ad Age article, Kimberly-Clark offers a recent example, for its Kleenex brand.  The company allowed people to send samples to their friends and family via Kleenex.com, through sign-ups at retailers, and via Facebook.  All told, the company sent over a million packages of Kleenex-brand tissues via this social sampling, and according to the same article saw its market share rise 3.9 percentage points (to 49.9%) in the month the campaign began.

There’s Gold In Them Thar Hills

The impact of daily deals today really rests on their ability to impact traditional marketing drivers such as awareness, distribution, trial and repeat.  To the extent they can impact one of these areas, there’s an opportunity to see an uptick in sales (albeit one that is relatively limited, given the reach of any individual daily deals site versus the number of consumers already in most categories).

That said, there does seem the possibility that services like Groupon can become viable within the CPG realm.  At a minimum these services can be used to launch new products, induce trial, and create another distribution channel.  Beyond that, if they can truly be made to be social (such as the Kleenex example, or the promises of a company like PeopleString), the value conceivably increases.

So experiment now.  But do start with an end objective in mind, like you would with any marketing initiative.  And be sure to get your vaccinations first.

Sources:

http://online.wsj.com/article/BT-CO-20110421-710289.html?mod=dist_smartbrief

http://supermarketnews.com/news/GM_Distribution_0422/

http://www.adweek.com/news/advertising-branding/groupon-wannabe-peopledeals-pitches-improved-dealmaking-130935

http://adage.com/article/news/groupon-effect-spreads-totalbeauty-launches-deep-deals/227228/

http://adage.com/article/news/social-sampling-scores-big-kleenex/149272/