March 1, 2011, 12:00 AM

Local Hero

(Page 3 of 3)

With Boost, a business owner can go into her business listing, select a category, set a budget, create a profile and write a brief description of her business. Google automatically creates an ad and decides when it's appropriate to display it. Boost places the ads, so business owners don't have to worry about learning the intricacies of keyword bidding and they only pay when an ad is clicked. Merchants can track impressions, clicks, cost during a specific time period, and more.

Google also is testing adding little yellow markers called Tags to listings in some cities to draw more attention to them, for a flat rate of $25 per month. A Tag in a search result might say "Watch videos about our business" or "Save $175 on your first visit."

EBay also is getting into local, and offering merchants more than just a business listing. EBay paid $75 million in December to buy Milo.com whose technology lets consumers see what's in stock at bricks-and-mortar and online retailers. EBay has linked Milo to the RedLaser mobile shopping app it purchased earlier last year, so that a shopper can now scan the bar code of an item with her mobile phone and see which of some 140 retailers that work with Milo have the item in stock and at what price. EBay also has integrated Milo into eBay.com and has plans to add it to its core eBay shopping app in the next year.

For Black Diamond Sports, which sells hard-to-find skateboards and supplies from a shop in Palo Alto, Calif., Milo has proved a conduit to local shoppers.

"Before Milo, people didn't know about our store or the inventory in it," says Konstantin Shostakovich, the store's manager. "I was always shocked when I'd ship an online order literally five blocks away. Sometimes I would drop off an order on my way home from the store, it was that close. They didn't know we were right down the street." Now that he's on Milo, Shostakovich says skateboarders sometimes walk into his shop with a printout of his inventory from Milo and snatch up the most coveted items.

Do it yourself
And local merchant groups are recognizing they can do their own web marketing. In Chicago, a neighborhood merchant association, the Northalsted Business Alliance, publicizes member retailers' promotions and in-store events on the association web site and on a web-enabled outdoor kiosk in the center of the district. The service is part of a merchant's alliance membership.

Anthony Almaguer, owner of eyeglasses retailer I.D. Inc., boosted store traffic and sales 25% on a recent promotion of high-end Tom Ford eyeglasses by using those marketing services, which are included in the $175 annual dues he pays the association. The alliance also offers its own take on Groupon during the holidays, selling member retailers' gift cards through its web site; the gift cards are sold at a 20% discount, and the alliance reimburses merchants for the discounts.

Almaguer says the gift card offer has helped boost his sales by 50% in December. "It completely knocks my December out of the park," he says.

It wasn't long ago that local businesses feared being knocked out of business by the web. But, with Groupon showing the way, they are starting to see how Internet marketing can offer them a new lease on life.

katie@verticalwebmedia.com

Comments | 5 Responses

  • I love Groupon - it has really given me a lot of incentive to buy local. I am going to San Francisco this summer and have signed up to receive notifications there as well in case anything fun comes up to do while I am there. It is such a great resource! My main rule is that I will buy one if it is something I already need. For example, a car wash Groupon came up last summer right around the time I was going camping. I knew my car would get trashed during camping so I would definitely need the Groupon. It was great to have a deep discount right at my fingertips without having to research where is the best deal! Great article though - it is interesting to see where the heavy hitters are at regarding competing with Groupon - it will certainly be fun watching it all play out and it doesn't hurt that it is helping local retailers in the meantime!

  • Great article! I was very curious about the in's-out's of how these things worked. Just recently used GroupOn for the first time and it was a great experience.

  • {Google also is testing adding little yellow markers called Tags to listings in some cities to draw more attention to them, for a flat rate of $25 per month. A Tag in a search result might say "Watch videos about our business" or "Save $175 on your first visit."} interesting - i kind of hope they don't start this, i like an aesthetically clean search results page. i also can't wait to see where Groupon and this market is in five years from now. it should be interesting to watch how they manage to maintain market share.

  • Katie, Did an editor read this before publication? The opening anecdote is about a seven room hostel and their "success" on Groupon. Instead of a hundred or two hundred coupons, they sold 450 in six hours. Amazing? Yes, but either something was left out of the story or they shot themselves in the proverbial foot. Seven rooms times 365 days is 2,550 rooms per year at 100% occupancy. Most hotels, B&Bs and hostels would die for 100% paid occupancy, but realistically, they get well under 80% or realistically 2,000 guest nights per year. (If they were hitting that number - they didn't need Groupon.) The owners managed to sell 20%-25% of their total annual occupancy in six hours at a 50-60% discount, and then they get the privilege of splitting the revenue they do get with Groupon 50-50. Whatever their marketing budget was, they now have to sit around and wait for the Groupon coupons to show up. How many of those Groupon customers are their existing clients and they just cut the revenue on those rooms from 100% to about 25% (discount and Groupon share)? Second, if they filled rooms that their regular customers would have paid for, they risk having dissatisfied regulars. The rest of the article is informative. There is even a token mention of Groupon trying to figure out how to help advertisers manage Internet couponing. This type of web selling exuberance is bad for the advertising customer. I think one of your articles from a few months ago said 50% of Groupon customers don't return. This anecdote is an example of why and should be used as a cautionary tale. Maybe a few more articles that remind us marketers that we need to be aware of the business model, margins and product availability/occupancy - its not just about creating demand. JF

  • Thanks for the feedback. The article explains how Groupon is a marketing tool that has its downsides, but users like the hostel find Groupon is a good customer acquisition tool. The owner was extremely pleased with her experience for a few reasons. Her business is very much fueled by word-of-mouth and she was able to reach new customers who came back and who also told their friends. In this case, Groupon offered increased exposure for a small hotel—reaching consumers that typical marketing efforts may not have. Another point to consider is that is that most hotel rooms aren't actually booked at the standard rate. There are different types of promotions and discounts offered across the board. Half of a hotel’s job is to give a customer the impression that they are getting a steal. So, while the hostel may have lost some revenue against what they may have received if they were at 80% occupancy selling at retail price, the reality is that very few customers pay the full retail price of a hotel room and the increased volume made up for the loss in revenue per night. Groupon has its upsides and downsides. And I think I make that point. Thanks again, Katie

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