October 23, 2014

Scoutmob, GroupOn and other Flash Mob Promotions

First, I want to make sure to emphasis that the term Flash Mob is not negative. My very loose definition for this post is “getting a large number of people to act in a certain way, usually through social media.”

There are a number of emerging (or emerged) solutions that follow a basic recipe for what I call Flash Mob Promotions:

  1. Offer a ridiculously amazing special offer for a local business
  2. Promote the crap out of it to people that love these deals
  3. (Optional) Require that a certain number of people take advantage of the offer before it becomes “active”

The motivation for local organizations is to get a boat load of people to visit them in the hopes of turning them into patrons and possibly spend money beyond the terms of the offer. To help you better understand what these solutions are all about, below is a description of a few companies active in this area. The hope is that it helps explain what they are offering so you’re better informed when they come a’knocking.

Restaurant.com

Restaurant.com is what I consider the predecessor of this movement and I don’t technically consider them to be Flash Mob Promotions, but they are worth understanding. From what I’ve heard, patrons love the deals, but restaurants aren’t the biggest fans.

  • Offer and Restrictions – Local restaurants sign up with Restaurant.com and configure their offer. This typically is in the form of a $25 gift certificate for $10, $50 gift certificate for $20, etc. They post the offer on their website and promote in various ways to get people to buy these certificates. Typical restrictions on these certificates are conditions like minimum purchase amounts, valid for dinner only, 18% gratuity automatically added to bill, excludes alcohol, expiration date, etc.
  • Taking Advantage of Offer - The process for patrons is pretty straightforward
    • Go to restaurant.com
    • Search for a restaurant
    • Buy a certificate
    • It gets emailed to you
  • Promotion Channels – mostly through their website and email promotions. They don’t seem to take much advantage of social media.
  • Revenue model - They keep all of the money paid for the certificates.

What they are selling is marketing. You give away $25 worth of food in exchange for new (hopefully) patrons and restaurant.com gets paid $10.

GroupOnGroup On Logo

Groupon has great buzz from both patrons and businesses. They have a video to explain it, too.

  • Offer and Restrictions - You create a “Deal of the Day” with GroupOn (they only have one per market). Typically, these are offers similar to the ones described in the Restaurants.com model, but they seem much more savvy at getting the word out. Also, the ability to buy the certificates only lasts for one day (although they can be redeemed anytime before the expiration date), which creates a sense of urgency. As a final condition, a minimum number of people have to take advantage of the deal before “The deal is on” – if you are offering a $25 gift certificate for $10, you can specify that 200 people must take advantage of it before any can be officially sold.
  • Taking advantage of Offer - The steps a patron follows to take advantage of an offer are:
    • They find out about the deal of the day through email, Facebook, twitter, mobile app,  etc.
    • They indicate how many they are interested in buying and provide credit card information
    • As soon as the minimum number of participants is reached, “the deal is on” and everyone’s credit cards are charged
    • Users can log in to their GroupOn account and print the offer.
    • At anytime before the expiration date, they can use the certificate – subject to the terms of use
  • Promotion Channels – GroupOn is much more savvy about using social media than Restaurant.com… they actually have a separate Twitter account and Facebook page for each city. They also use email alerts as well as their website and a mobile app.
    • Facebook – 7,600 for Atlanta (23,000 fans for Chicago)
    • Twitter – 3,000 for Atlanta (10,000 followers for Chicago)
  • Revenue model – Groupon keeps a portion of the purchase price and gives the rest to the business. I’ve heard this is typically 50%. Business receives their cut immediately after the Deal of the Day expires.

The big benefit I see for businesses is cash flow – you get paid up front for all of the purchased certificates. You also hope the deal will drive traffic, gain new patrons that have a significant life-long value, and that the average ticket price will exceed any offer’s limit.

The concerns I have are related to cost. How many new patrons will you get, what do your margins look like, what will be your average ticket amount? In short, does this make business sense? Unfortunately, you have to decide that. Also, some business have expressed concern about how offering such deep discounts may affect their brand image.

NOTE: There are a few other sites, like LivingSocial that use a similar model.

ScoutMobScoutMob Logo

Scoutmob is a newer entrant into the market and is based in Atlanta (yeah!).

  • Offer and Restrictions - ScoutMob doesn’t sell gift certificates/coupons, they market promotions of ridiculously great offers. You make a deal with ScoutMob to be their deal of the day (generally 40% to 60% discount) and tell them how many people have to subscribe to the offer before the “deal is on” (similar to GroupOn). They then promote the crap out of you and hope the minimum number of people sign up. Another difference compared to GroupOn is that GroupOn only makes the deal available for one day, but purchased certificates have an expiration date. ScoutMob makes their offers available over a period of time (seems like about 3 months), but promote you heavily on the day the deal is announced. On the day your deal launches, people can have the coupon texted or emailed to them, after that they can only redeem the offer through the mobile app and have to be at your location (determined through GPS) to access the coupon.
  • Taking Advantage of Offer – Scoutmob uses a slightly different model than GroupOn for deals. This is divided into how they handle Deals of the Day versus how they handle the offer through their mobile App.
    • Mobile App
      • A person launches the app and can browse all of the deals that are still active – including the deals close to them (determined by their GPS location)
      • If they find a deal they want, they go to the business and “Redeem” the offer.
      • ScoutMob checks their GPS location to see if they are actually at the business and, if so, displays the offer.
      • The offer is shown to the business and marked as “used”
      • Patron gets the discount
    • Deal of the Day – from the ScoutMob website. This only works for the deal of the day, not for deals that launched on previous days.
      • People find out about the deal of the day through email, Facebook, Twitter, etc.
      • They specify they want the deal and receive a text message to their cell phone (you can have it emailed if you want a physical coupon)
      • The patron shows the offer at the business and gets the deal. Both the text message and email have an expiration date associated with them.
  • Promotion Channels – ScoutMob uses similar promotion methods to GroupOn, however, because patrons can opt into offers over a longer time, ScoutMob has added functionality on their mobile apps that allow people to redeem on the go…  based on where they are (this is called Location Based Service or LBS).
  • Revenue model – ScoutMob’s pricing model has 2 parts:
    • Deal of the Day texts and emails – they charge a small fee for each message sent
    • Mobile App Redemption – they charge a few dollars for each offer redeemed through their app. This is more because the business knows that the patron was actually at their location (GPS confirmed in order for the patron to gain access to the offer).

One of the benefits that I really like about ScoutMob is the mobile app redemption… you actually know the number of people that were in your business (or really close by). Similar to GroupOn, the big goal is trying to drive traffic and, since ScoutMob doesn’t require people to pay anything up front, there is an argument to be made that more patrons will take advantage of their offers.

The concern is still cost. Does ScoutMob actually drive traffic, gain new patrons, and lead to ticket amounts that exceed offer limits? Maybe. They might even do it better than GroupOn, but with GroupOn you get the up front cash benefit, although with ScoutMob it seems like you get to keep more of each transaction.

* Special thanks to David Payne from ScoutMob for giving me the 411!

Conclusion

All of this is really, really cool stuff and is only going to get cooler. The biggest problem I see is tying the business decision to ROI… I smell a future blog post!

I would love to hear about people’s experiences using these or similar offerings as well as from the providers themselves!

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Comments

  1. I’ve personally used Groupon for my business, Grindhouse Burgers. I was skeptical about all of it until a ton of people told me to try Groupon, so I did, and I sold 1,200 $20 Groupons in one day! It was pretty exciting. I saw an immediate spike in traffic AND revenue – people ended up spending more and bringing people because they had a Groupon. Yes, I gave away a lot of food, but I think it exposed my business to so many new customers, and it was essentially free marketing since Groupon was paying me for each coupon. I’d probably not do other deals where its just a discount without a payment. Restaurant.com also seems problematic because its available all the time, so I don’t think it reaches the right customer base – probably more just cheap customers who aren’t loyal. Also Scoutmob seems popular among iphone users, but I don’t have one, so I’m not going to do Scoutmob until they embrace all phones equally.

  2. dailydeallover says:

    A few of these sites are getting traction, others are not –
    http://siteanalytics.compete.com/scoutmob.com+yipit.com+dealon.com/

  3. David says:

    Great post! Lots of great insight into how and why these services are so popular.

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