John Mulvey's epiphany came in February at his kitchen table with a Wall Street Journal in his hand. He was reading an article about daily internet coupons from LivingSocial and other groups. These sites partner with a restaurant or retailer to offer a 30-percent or half-off coupon that spreads like wildfire over Facebook and Twitter. At the time, these offers were sharply focused on major metropolitan areas like New York, Boston, Chicago, and San Francisco. A Charleston financial adviser, Mulvey leaned back in his chair and thought about the opportunity staring out at him.
"The thing about Charleston, from a business marketing perspective, is that a lot of it operates by word of mouth," he says today. "Word of mouth is what drives people to patronize the businesses they frequent, and to me, social marketing, for want of a better term, is word of mouth on steroids."
Mulvey isn't the only one who recognized the potential for a local deals site. Over the past several months Charleston-centric daily-deal sites have surged into the market — some as independents startups and others with well-established media partners like, well, the City Paper, which sponsors the local Deal Mobs daily special.
After reading the Journal article, Mulvey contacted LivingSocial and ultimately brought the program to Charleston in early September. By mid-October, the site had run 17 deals with a backlog of nearly three dozen businesses looking to participate, according to Mulvey.
The concept is as novel to many businesses as it was to Mulvey himself eight months ago. But the simplicity is a major ice-breaker, he said. In most cases, a predetermined number of people have to sign up for the deal for it to become available, so promoters say it's a "no risk" avenue for retailers — with businesses frequently paying nothing unless the deal finds enough interest. But there is no doubt that the interest is out there. National deal site the Daily Groupon has reportedly generated $500 million in revenue in the past year.
"It's a learning experience, sure, but they quickly realize there's nothing hidden behind the curtain," Mulvey says.
A married 39-year-old father of two, Mulvey fell right in the middle of LivingSocial's demographic, so he started by reaching out to the businesses he knows and frequents himself. "LivingSocial, of course, has broad national categories of businesses it likes to feature, but I try to tailor it to the local market," he says. He's already got a subscriber list of 43,000 in a community with an estimated population of about 600,000. "That's a large percentage of the buying population," he says.
Jim Flannery, who partnered with the City Paper for Deal Mobs, says he saw a need for more advertising options for smaller markets like Charleston, as well as Columbia and Athens, Ga., where he's launched similar daily deals.
"On top of that, I always thought it was pretty difficult to track the success of the advertising that was out there and that advertising was pretty expensive for small businesses. I mean, there's a business I work with in Athens that spent about 20 percent of their gross revenue on advertising," Flannery says. "That seems like a lot for small businesses to have to handle when margins are pretty tight and the dollar amounts they are making are pretty low."
Daily deals are a flexible complement to traditional advertising, but Flannery doesn't see it as a permanent replacement.
"You don't want to run a 50-percent-off sale every week," he says. "That would have minimal value at best, would put you out of business in a worst case situation, and would condition people to just wait for the sale. What you want is for this to be a once-or-twice-a-year shot in the arm."
And businesses aren't just getting foot traffic. With demographic information in hand, Flannery says he can educate his clients in general terms about the kinds of shoppers scooping up their deal. "For instance, we can say, 'Your average user is a female in her 30s, and they typically like these kinds of products," he says. "Armed with that information, they can then tailor their other marketing efforts accordingly."
Publicist Caroline Nuttall started a Steal of the Week at her online magazine, Charlie, but she was skeptical of the deals model at first.
"Charlie is hyper-local and very niche, and I finally concluded that perhaps this could work if, instead of trying to compete with the mass deals offered by others, we offered great deals on hyper-local experiences that are highly recommended by us. In a sense, our deals are kind of more like one-of-kind auction items," she says.
Charlie's recent Steals include steep discounts on four rounds of golf at Wild Dunes Resort and an in-home consultation with gRAWnola's holistic chef Ken Immer.
"Now that we've launched this, I'm saying, 'Oh my God. We have to come up with 52 of these a year!" Nuttall laughs. "But obviously, I think Charleston is a city full of great experiences, so in all seriousness, that's not going to be a problem."
Thanks For Your Business
Brad Mosier, general manager for Moe's Crosstown, was glad to sell 196 coupons through a Deal Mobs offer between his two downtown restaurants.
"I'd probably do it again," he says, but the offer — a $20 coupon for $10 — was also a learning experience.
"I had never really tried anything like this before, and I think, having now done it once, I would target our efforts only for our downtown location," he said.
The reason, Mosier said, is that the midtown location, in a neighborhood directly across from Hampton Park, is frequented by scores of regulars, whereas the downtown location, within walking distance of Charleston's busy cruise ship terminal, has a bigger turnover of first-time customers.
"Not that I don't want to show our regulars some love, but as a small business with limited advertising dollars to spend, your biggest bang for your buck is going to be those people who are trying you for the first time precisely because they came across your coupon," he explained.
Rod Bradly, owner of Charleston's Dog & Duck Pub and Restaurants, participated in a Deal Mobs offer in July — offering a $20 coupon for $10 — and described the experience as overwhelmingly positive.
"The thing I liked about it was that it was quick, especially compared to traditional advertising," he said. "A lot of the couponing that's out there, whether it be in a newspaper, magazine, or a mailer, can sit on a shelf for weeks or months.
"With Deal Mobs, we sold, I think, 25 coupons in total, and 20 have already been redeemed," Bradly continued. "To me as a businessman, that's a clear sign that our name got out there and that we actually got those people into our restaurant."
Bradly said the other appealing part of the offer was getting a large percentage of the sale price back, an opportunity not afforded by a traditional coupon.
"So it was a case of yes, you're having a sale, but you're also getting a little back to cover your costs," he said. "And then, if I get lucky and they buy an extra bucket of beer or something like that, that's all the better."
But if Bradly liked the social marketing experience better than traditional advertising, he was perhaps even more effusive about its superiority to other online sales devices — even those he participates in.
"For instance, I've done Restaurant.com, and while they say you can only print out one coupon from their site, I have the feeling that I see the same people come in all the time with those same coupons," he said. "With Deal Mobs and some of these other 'social marketing' companies I really feel like it's more of a one time or short-term offer, and I don't have to make a six-month or year-long commitment to having my coupon on their website."
The verdict is still out nationally as to whether the "deals" become persistent revenue drivers for participating local businesses, according to a recent study by Rice University's Jesse H. Jones Graduate School of Business. Looking at promotions offered by 150 merchants through Groupon, researchers found a majority considered the offers a success, but 40 percent said they wouldn't run the promotion again.
The researchers' advice for businesses was to try to use the promotions for building relationships instead of creating one-time transactions. Instead of offering $60 worth of food for $30, businesses should parcel it out to offer $20 worth of food for $10 over the customers' next three visits. They also recommended that merchants only offer discounts on specific products and services — rather than say, 30 percent off a total bill — and that they choose the discounted items judiciously.
"It can be hit or miss," Flannery says. "It really depends on the business owner. I think as this kind of advertising becomes more well known, people will understand what they are getting into. It's important though that merchants understand that theoretically, an unlimited number of vouchers may be sold, so they need to be prepared for that."
It's hard to say where social networking will take us, says Nuttall.
"I think the days of placing an ad online and calling it a day are long over," she says. "You're talking about a really empowered consumer, and your approach to marketing has to engage them."
With the proliferation of smart phones with apps for Twitter and Facebook, and uniquely mobile social networks like Foursquare, it isn't just an empowered consumer, it's a roaming consumer.
"Right now, I'm already looking beyond the 'steal,' looking at how Foursquare is proliferating here in Charleston," Nuttall says. "We're looking at it primarily to help drive our editorial coverage, but it will be interesting to see if that platform becomes more popular, how people will use it to market themselves, and how we can use it in a savvy way to do the same."