Databases, Deals and Disrespect

This week I spoke at the BIA/Kelsey Deals3D Conference, which covered the daily deals and half off coupon space. I spoke on the participation of local media in the daily deals phenomenon. Pureplay deal platform providers dominated the audience, and my presentation was met with stark skepticism. The opinion of Perry Evans, CEO of Closely, a deal dashboard for merchants, was typical: "The old guard have no idea what they're doing."

But is this true? Are radio and other local media assets without value? My presentation went over the opportunities and challenges that local media face in utilizing daily deals. Let's take a look at them.

Databases of Significant Size

Pureplay daily deal companies face significant challenges, perhaps none more daunting than compiling a list of users. Without users, they can't push through deals, no matter how great their sales team is. As a result, a lot of effort is being placed on building up databases. If a radio station has done a good job over the past twenty years, it has an immediate and huge advantage: its database is most likely of significant size.

I can't really emphasize enough how big of an advantage this is for radio. There are literally dozens of companies with significant venture capital behind them that would kill for what radio already has in its back pocket. Of course, not all of these people will opt into a deal program, but a successful deal program doesn't need a huge number of people. Converting even 10% of your database into an opt-in for your deal program immediately makes you a player in the market.

When I mentioned this at the Deals3D conference, I was met with deep skepticism. Comments ranged from "Most media databases are made up of fake email addresses" to "they are databases made up of contest winners with no interest in deals." While pureplay deal companies may scoff, the scale of radio is so huge that even if these comments are true, radio still has a big competitive advantage. For a large number of radio databases, if you can convert 5% of the members into deal participants, you have a deal program ready to perform immediately.

Large Existing Local Sales Teams

The other half of the challenge for pureplay deal companies is actually selling deals. Supporting a large local sales staff across the entire United States is an expensive and formidable task. Radio, of course, has them on the streets in every market of the country. Even Groupon hasn't penetrated many of the smaller markets where radio has seasoned sales teams.

This radio asset was also met with deep skepticism. Pureplay companies doubted that radio would have the courage or desire to have their own sales teams sell deals. There is some truth to this assertion, as one of the biggest difficulties that I see with local media is leveraging the local sales teams to sell deals. But it can and has been done in quite a few markets. The reality here is that this is an education issue and not one that is a permanent failing of local media.

I like to think of local media sales people as the "sleeping giant" in the deals space. When sales people understand all the value that deals can bring, not just in pure revenue generation, but also in augmenting other pitches with additional value or in bringing unique assets to bear in beating Groupon or Living Social for those valuable dollars, we will see the game change significantly.

Massive Reach and Brand Loyalty

Living Social recently started running a significant amount of radio advertising. It is paying for just a small piece of what a radio station can bring to bear on moving deals: its brand. Don't get me wrong; a radio station that utilizes its airwaves to promote a deal has a major impact. One estimate I heard earlier this week was that mentioning deals on the radio led to a 30% increase in deals sold. That's huge.

But go deeper and you can see the truly spectacular asset that a radio brand can bring to this space at every level. If the morning show will mention a deal-of-the-day, how much easier is that to sell for the sales person going into a client who listens to that morning show? How would you like to be Groupon going in to sell the same merchant, only to be told, "I already did a deal with my local rock station. Their morning show is going to mention my deal every morning at 8:30!" And beyond making sales easier, how many more deals will you sell if the morning show does a daily deal endorsement every morning?

Again, the pureplay guys were highly skeptical. I am sure that they saw the overwhelming power that local media can bring to the deals space, but they were counting on the fact that local media simply wouldn’t see it or would be unable to execute. I have certainly seen some local media reticence to bring all their assets to bear on a daily deals program, but I also have seen successes strong enough that dedicated sales people have been assigned to further the program's progress.

Secret Weapons

One of the truly powerful things about a local media company embracing a deals program is that they have a whole armory of weapons that they can bring to bear to make the program successful. We discussed some of the obvious ones above, but think of all the little things that a media company can do that Groupon cannot. The possibilities are vast. Here are just a few:

Implicit Targeting. One of the things that radio, specifically, has is built-in demographic targeting. A Classic Rock station isn't going to have a database full of soccer moms. As a result, merchants have a greater likelihood of knowing that their deals will be targeted to the right audience when sold by a radio deal platform. Own a spa and have a pureplay deal provider sell you a deal program? You have no idea if it is going to be reaching your core female customer base. If you get the same pitch from a Hot AC station, you know you have a much better chance of reaching those customers.

Spot arbitrage. Provide remnant weekend or overnight inventory as an added value to close a merchant on a deal. Deal revenue can be massive with the right deals, so much so that the return on adding low value spots can lead to a better ROI than if you provided those spots as free added value for bigger high value spot buys.

Package deals. Sometimes a compromise on one part of a deal (small decrease in spot rate) can lead to a huge return on another (a big commitment for high dollar/value deals). The key is putting together the right package and knowing what kind of return you can get from each piece.

Promotional tie-ins. Add a deal to a personality-driven promotion in a way that closes a merchant on a high value deal.

The list really is endless. The key point is that this is a very crowded space already, and it is sucking money off the table. Radio can either watch the money flow to others, or it can jump in and claim a share. The good news is that radio and local media have formidable weapons at their disposal to maximize success, even if the pureplay competitors don’t believe that the industry will ever use them.