Since exploding onto the local commerce scene a few short years ago, online deals and offers have had to grow up fast. And there have been some significant growing pains in the process, resulting in disillusioned merchants and consumer deal fatigue.
While the outlook for the online offers industry continues to show revenues trending upward, that growth is slowing. Local media research firm BIA/Kelsey expects U.S. consumer spending on online deals to reach $3.6 billion in 2012, an increase of 86.9% over 2011. Sustaining that degree of growth isn’t feasible with deals alone. In fact, the firm projects 23% growth in deals spending in 2013, followed by mid-single-digit growth in later years.
This means that deals companies that want to remain relevant must diversify their solution sets to include other services for local merchants. At the same time, publishers who are looking to expand digital revenues through deals and offers need to overcome some of the objections raised by merchants.
So at Mobile Spinach we wondered what would happen if we bundled local deals with other advertising products, like display ads. We ran several pilot tests with major players in the local online ad space, and what we discovered is the concept of deals-plus-ads is a no-brainer—for deals companies, publishers and merchants.
In the first pilot, using an automated sales platform (no sales reps involved), a major search engine promoted targeted offers to 500 merchants in 30 cities across the U.S. In only three days, 53 merchant deals closed (again, without a sales rep), representing an 11 percent conversion rate—a conversion rate enviable by most traditional sales forces.
In the next two pilot tests, offers were bundled with the online ad products of two major digital media publishers. On average, merchants paid $167 per month for a pay-per-click or click-to-call ad driving traffic to the merchant’s profile page on the publisher’s site. On the profile page there was at least one offer or deal designed to drive revenue to the merchant.
The result was that publisher sales conversion rates nearly doubled (19% and 18% in each of the two bundled tests) compared with the offers-only pilot. What makes these results even more impressive, is that no sales reps were required to close the merchant sales. All sales were automated through an online offers platform.
In addition to enabling deals players to diversify, bundling ads with offers allows publishers to differentiate themselves and make digital marketing easier for merchants by delivering a proven solution rather than a dizzying à la carte menu of choices. This is part of the essential evolution for deals and offers. Bundling with other digital marketing platforms is one strategy that works across the ecosystem — for deals platforms, publishers and merchants.
John Vitti is CMO and co-founder of Mobile Spinach. In 2010 he founded Mobile Spinach on the vision that local merchants deserve customizable, targeted and affordable marketing to keep up with a rapidly changing digital world.