Electronic Coupons Startup + Social Media Marketing = Profitable Network Externalities

E-commerce coupon startups such as Groupon.com, GroopSwoop.com, Mobiqpons.com and LivingSocial.com, which serve both the enterprise customers (the SMB merchants) and the consumers, strive to create large network externalities in order to provide value proposition for its merchants and its consumers, thus, driving revenue growth. However, the service that promises great deals to consumers and low cost customer acquisition to SMB faces the classic chicken and egg problem. SMBs are willing to sign up and offer great deals only if there is a critical mass of targeted consumers signed up already to receive offers. And the consumers are willing to sign up only if there is a critical mass of great deals offered already.

This blog entry aims at providing a plausible solution to this problem utilizing social media marketing techniques, professed by many popular online marketing gurus, including David Meerman Scott. The strategic plan and the operational tactics proposed in the blog are applicable to both consumers and SMB merchants, here on referred to as buyers.

At the organizational level, the primary goal of any for-profit startup is to drive revenue growth. Every strategic initiative undertaken by a startup must strive to achieve this goal. With this goal in mind, the e-commerce coupon startups should devise a social media marketing strategy as part of its overall go-to-market plan. The companies should first analyze their current incoming website traffic and any other buyers they plan to target. This analysis should include secondary (internet, publications, industry reports, etc.) and primary (interviews) marketing research to learn and record comprehensive information about their targeted buyers. Next, using this information, the buyers should be segmented into a set of consumer and SMB merchant personas. These personas are created based on their differences in targeted buyers’ goals, aspirations, problems, social media preferences, words and phrases used, image and multimedia preferences, and current publications read among other aspects. Such detailed information will allow the startups to fully assimilate its targeted segments. Using this information, the overall segment size and projected growth, the companies should develop a set of quantifiable goals (specific growth rates in specific time frames) for each of its targeted segments.

In order to achieve these goals, a content strategy should be put in place to provide solutions to the problems of its targeted personas at the time and the place (media preference) they are demanded. That is, instead of directly talking about the ease of its SMB facing application to its targeted merchants or talking about the number of deals available to its targeted consumers, the companies should create content that provides solution to broader problems. For instance, the companies may create bi-monthly newsletter for its SMB owners to provide insights on proper inventory management, how to avoid food spoilage, and other topics of concern in small business environment. Similarly, the startups can create blogs and Facebook groups catering to consumers seeking entertainment tips or spas in San Jose, or create tweeter presence to micro-blog best sandwich places, best bars, best clubs, best restaurants, and best local spots in San Francisco. By either creating or plugging into such online communities, the companies will be able to get better attuned to its buyers’ problems, and by providing valuable problem-solving content, it will be able to establish a strong trust relationship with its buyers. This will lead to the creation of a faithful following of prospective consumers and merchants who will perceive the startup as a source of trusted information and will be eager to do business with. The startup that is able to effectively execute of this strategy will be able to differentiate itself from the rest of its competition and overcome the aforementioned chicken and egg problem.


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