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Unique Marketing Tool for Local Businesses Creates a Flood of New Customers… In a Single Day… At No Cost to You for Traditional Advertising.

What’s the Key to Its Success?

Limited Time Offers Combined With Social Networking Done Right.

For some time, I’ve been watching an exciting marketing tool for small business that combines social networking (Twitter, Facebook, etc.) along with some of the best direct-response style offers I’ve ever seen. Remember that “direct-response” is really just an advertising technique that provides all the information a prospect would need in order to make a buying decision, then adds scientifically tested phrases and known emotional triggers to compel prospects to buy much faster and in far greater numbers.

The social marketing platform I’m talking about, www.Groupon.com, has combined three elements I really like: (1) Social networking, (2) great offers pushed to consumers via email, and (3) a limited time to buy…one of the most proven direct-response triggers.

Each day, Groupon sends an email to its thousands of subscribers in your local area featuring an offer from one local business. The offers are designed to create a flood of BUYERS to a store, restaurant, service location or other type of business.

Groupon doesn’t require any money from you — instead, they sell redeemable vouchers for your specific offer to their subscribers, then keep 50% of the purchase price and send you the remaining 50%. Once subscribers buy your package or product, those new customers receive an emailed voucher they can present in your store. The voucher has a specific code number that cannot be used again.

Groupon pays you daily as customers use up their vouchers — then provides you with a list of new customers so you can follow-up with additional marketing later.

But here’s how Groupon protects your interests and makes the whole thing work to get you hoards of new customers: A minimum number of subscribers must buy your offer before “the deal is on.” If that minimum is reached (usually once 10-40 consumers have purchased), Groupon will continue selling vouchers and keep your offer on their website as the Featured Deal of the day — and afterward under a section called “All Deals.” If the collective masses don’t buy, your offer is eventually taken down.

Why is this formula good for you?

• Groupon employs a dozen experienced copywriters to write your offer for you — making sure it’s compelling, hip, fun and appealing to the young, urban, social networking demographic to whom they appeal. (But don’t worry…the 40+ crowd is now catching on fast, too, especially since Groupon offers have expanded beyond nightclubs and urban clothing stores to spa treatments, electronics, theaters, fishing trips, auto services, furniture and more.)

• If Groupon’s writers don’t articulate a compelling offer, the “killer deal” they convinced you to put together for their subscribers won’t sell…meaning Groupon won’t make money from their portion of the proceeds.

• Because many Groupon buyers really want your deal, they’ll alert friends using Facebook, Twitter, email and even chat time around the company watercooler to make sure the minimum number of vouchers are sold so your deal is “on.” Not only that, but Groupon buyers are social networkers extraordinaire, so they want to make certain their friends can join them and socialize around their Groupon purchases.

• If the minimum number of sales are not reached, you’re protected from having to deliver on a killer deal for only a few people. Groupon wants you to have a good customer-generation experience so you’ll make money, participate again, spread the word, and treat Groupon subscribers well during the promotion.

The formula seems to be working since 97% of Groupon merchants want to be featured again. Not only that, but 90% of merchants see Groupon buyers returning later as regular customers.

What are the economics?

Groupon asks you to offer a product, service or bundle — usually at 50% to 90% off the regular price. Groupon keeps half of that, paying you the remaining half of revenues.

For easy math, you’d be fulfilling on your offer for 25% or less of retail. Can you afford that?

Here’s a better question: What would you give up to create a new customer who later comes back to buy again and again at full price? Would you willingly give up 75% of retail or more? In other words, what would you pay to buy a customer for life?

The Economics of Buying Customers
When I wrote the Instant Income Business Enhancement System course, I spent a bit of time explaining the Lifetime Value of a Customer — the total amount a customer will spend over their lifetime of patronage with you.

When you know the lifetime value of your customers, you can also calculate what you could spend to bring that customer in the door—and still make money over time.

Take a look at your own customer list, for example, and calculate—on average—what each new customer will spend over a lifetime of purchases with you. Do they purchase once only? Do they come back every week? Do they renew their annual maintenance contract once a year? Do they buy only for their children and then only while those children are in grammar school? However they buy from you, add up the average customer’s lifetime purchases in gross dollars.

Next, calculate your profits on those sales.

Then decide just how much of that profit you would be willing to spend to acquire that customer in the first place.

If you own a lawn-care company, for example, you could probably calculate the average number of years each one of your customers has been with you, as well as the average monthly amount they pay you. Let’s say their lifetime value is an average of three years at $40 per month—or $1,440—on which you make a profit of $1,080. Can you see how—with more than $1,000 in profits—you could easily afford to spend $100 (maybe even more) to bring that customer in the door?

When you do the math for your own business, you’ll discover that customers are such a valuable asset, it’s worth calculating down to the penny what you can afford to spend to bring new ones in the door. Here’s the formula:

formula for success chart

Groupon’s economics work the same way. They help you “Buy” hundreds of new customers with a single promotion, yet you pay only when new customers are generated.

If you think your business is too “different” to be a good candidate for Groupon — or that it’s impossible to get lots of customers this way — consider a recent Featured Deal in my county: A local fishing boat that hires out for day trips. At 8:00 in the morning, just 10 people had bought their 10-hour boat tour. By 7:00 that night, the boat company had generated a whopping 375 new customers through Groupon.

Check out Groupon for yourself. Subscribe to read how their writers pitch the various featured offers. Then consider how you could use the same Lifetime Value of a Customer principle in your business.

Here are links to help you:

Until next time,
Instant Income

Janet Switzer

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