I wrote on Street Fight last September that the arrow was pointing up for the deals industry and that local media companies were well-positioned to emerge as major winners in the space thanks to their winning combination of loyal audiences, established brands, connected sales forces and unmatched promotional reach.
At Second Street, we remain confident in that assessment nearly 10 months later (which is a lifetime in this industry). According to BIA/Kelsey, deals are set to grow by 149 percent through 2015 and we have already seen a range of local media companies generate significant revenue through their deals programs.
However, it is also fair to say that many local media companies have not realized their full potential. Many properties have not structured their programs appropriately or put the necessary resources behind them. While there is no silver bullet to guaranteed deals success, we have used our experience working with more than 400 local media companies to develop a model that breaks down the five most important factors to creating a successful deals program.
Second Street’s Five Fundamentals of Deal Success
Go Organic! (For Database Growth)
Local media have a major built-in resource that pure-plays do not: loyal audiences. Local media need to capitalize on their communities of readers and viewers by converting them into deals customers — and it all starts with encouraging them to subscribe to deals email lists.
Our latest data across more than 400 local media deal sites shows that 92.4 percent of deal revenue is generated via email. Local media need to focus on building email lists organically because purchased lists provide significantly lower rates of return. The good news is that local media can build lists organically more efficiently than any other players in the deals space.
In recent years local media have placed a higher premium on the importance of email, but there is still room for improvement. Promotions, contests and product giveaways are effective tactics local media can employ to grow email lists organically. For example, in 2011 The Washington Post grew its subscriber list by 65 percent through a free pizza giveaway in partnership with Papa John’s (who also received significant exposure through the promotion). This example shows how efficiently local media can build their email databases — sometimes all it takes is a couple slices of pie.
Turning passive subscribers into active buyers is just as important as growing an email database. Our most successful partners constantly analyze their lists and create new ways to engage their networks. Consumer incentives – such as a $5 credit on your next deals purchase – can function as low-cost options to bring new consumers into the fold and greatly enhance the success of a deals program. To engage subscribers fully, local media companies need to segment their lists and send targeted deal emails based on past purchases. SourceMedia – which owns KCRG-TV and The Gazette in Cedar Rapids – sent personalized emails to subscribers that had never purchased a deal with a $5 credit on their next purchase and raised its percentage of total purchasers by 33 percent.
Deals programs are too important to be anyone’s side project — they demand full-time attention. We recommend installing a dedicated deals representative to be the driving force behind a program. A deals representative will master the pitch, maintain the pipeline with leading offers and balance the needs of the property, its merchants and its audience. Incorporating deals into sales reps’ digital goals will provide focus around a program and improve overall results. In order to be successful, local media organization must commit to the program from the top down and hold their teams accountable.
Maintaining quality deals is of the utmost importance because every deal e-blast is an implicit endorsement of the merchant and a direct reflection of the deal site’s brand. However, successful programs across the country share a common attribute — they are able to find deals that align with their audiences. High-quality deals lead to better sales and are shared more frequently by consumers via social networks, increasing organic database growth. All deals programs should comb through their data to understand how their communities perceive quality offers with the goal of increasing the amount of successful deals. Our most successful clients form standing deals committees to vet offers coming through the pipeline and ensure that their site is accepting quality deals and rejecting lackluster ones. A deals committee should be comprised of members from key departments including sales, marketing, promotions and product.
Keep Up With the Evolving the Model
The world of deals is constantly changing and it is essential to stay ahead of the curve. For example, the term “daily deal” has already become obsolete – many deals lifecycles last one week or longer. Extending the deals lifecycle is not just a trend – it is a proven strategy to generate more revenue. Our data shows that 65 percent of revenue from weeklong deals comes after the first 24 hours. In February 2012, Billings Gazette moved from running their deals for only one day to seven days, and had the following results:
- 91 percent increase in number of deals sold
- 107 percent increase in gross sales
- 109 percent increase in net revenue
Deal stores and malls are also effective vehicles for running longer, targeted deals. Some of our partners generate approximately 50 percent of their revenue through malls and seasonal stores — and these formats were not even around two years ago. While it is tough to say what the future holds, it is clear that programs that fall behind the changing trends will forfeit major opportunities to competitors.
The Road Ahead
Performance-based advertising is here to stay. The success of local media is an untold story in the deals space and many outlets have only just scratched the surface of their potential. Ultimately, the rise of local media deals is part of a larger story — that local media are poised to own greater market share across many categories of online promotions thanks to their unique attributes and unmatched ability to create value for advertisers. Stay tuned.
Matt Coen is the president and co-founder of Second Street, a leading provider of private-label online promotions platforms for media companies and brands, based in St. Louis, Mo.