Meals on deals - the collective buying phenomenon

June 5th, 2011

Karen Osman investigates the collective buying phenomenon and some tried and tested promotional marketing platforms.

Fact: even the most moneyed among us cannot resist a good bargain. I’ve been known to drag hordes of my friends out to a little known and majorly suspect restaurant to redeem a 15% voucher which is due to expire the next day.

Because everyone has a little Scrooge in them, we, as hoteliers, know that we can reel in customers if we have the right bait. That’s the easy bit. What may be a little trickier is delivering that bait to the right target audience while still managing to maintain brand integrity.

As Sasha Bartz, general manager of Park Rotana in Abu Dhabi, comments: “From the brand perspective, the hotel should give thorough consideration to the offer itself, to the way it’s formulated and communicated to the market in order not to jeopardise the brand.”

A number of other factors also come into play when looking at how promotional marketing should be included in a communication strategy.
Positioning, timing, objective, seasonality and type of vehicle should all be dwelled upon. Doing your homework is crucial and with this in mind, many would agree that this method of driving business can be effective.

“I believe if used correctly with the right offer, it can be beneficial as long as you have researched and looked at both the positive and negative effects,” explains Derryn French, director of market communications at Le Méridien Mina Seyahi and The Westin, Dubai.

She continues: “One of the benefits is the tracking mechanism of these types of offers or deals.”

From a long-term perspective, hotels also have the opportunity to turn offer-driven customers into loyal guests.

“It encourages a whole new set of customers who may never have entered your property otherwise, and this is the best way to ‘capture’ new guests and turn them into repeat customers,” explains Aftab Sayed, cluster e-commerce manager at Dubai Marriott Hotels.

However you choose to fish for new business, whether it’s by offering a loyalty programme, discount scheme or an internet based offer, there’s a lot to consider. So, what options are available?

Collective Buying
It’s no secret that when it comes to the online sphere, we are still playing catch-up with Europe, but we aren’t slacking.

It’s estimated that there are in excess of five million Facebook users in the GCC (http://www.spotonpr.com/mena-facebook-demographics/) and as we know, when you find a large group of people in one place, the first thing you should do is say hello and then try to sell them something.

Recently, an online trend has emerged which marries the power of the large group with the allure of deep discounting. Welcome to collective buying.

There is a large and growing number of websites which have made it their business to become chummy with the denizens of Facebook and Twitter. This is with the express objective of letting their followers know about great discounts.

These sites take your offer out to the world and announce, “we have an offer you can’t refuse”. However, “we won’t let you have it unless you cajole a few of your friends into buying it.”

That’s because for each deal, there is a minimum amount of interest (purchases) that need to be generated in order for it to be activated. This is known as ‘tipping’.

In a nutshell, you get a promotion that is designed, marketed and tracked for you. You get paid up front (if there is a no show, you still keep the money) and you are guaranteed a minimum number of paying customers (if the deal doesn’t tip, no financial harm, no financial foul).

If the deal does tip, most sites ask that you pay a percentage of the total revenue generated from the promotion, otherwise there’s usually no sign up charge.

Do bear in mind though, that these sites tend to only feature one offer a day, so if you want to get on the band wagon you need to put something very attractive forward in terms of a discount number (30% plus).

Also, some would argue that unless the offer is very well positioned, you run the risk of diluting your brand ever so slightly.

Another consideration should be ensuring that your operation is up to scratch to receive these new customers.

Aftab Sayed sums it up when he states: “The last thing you need is customers coming in and leaving with a bad experience. Don’t forget that they came to you on the social media boat and if they don’t get what they expect, they can take that same social media boat and ruin your business”.

He advises: “Have a list of general answers on hand as you will definitely be asked all sorts of questions on the offer. It’s a good idea to brainstorm your own deal — scrutinise every aspect of it before you set it to sail”.

With this in mind, who are some of the players in the market and how do they differ?

Group buying in numbers across the region
First voucher issued: May 2010 (Gonabit.com).

Estimated number of group buying sites in the region: 15 (according to http://thenextweb.com/me/2011/01/18/middle-east-2011-group-buy-watch/).

Estimated combined Facebook reach of group buying sites in the region: Over 200,000 (based on a physical count of Facebook fans on group buying sites’ Facebook presence).

Estimated worth of vouchers sold to date: Over AED 4.6 million (based on a physical review of past deals on facebook.com and a calculation of numbers purchased into discount amount).

Not So Collective (But Still Effective) Options
Most of us will be familiar with the more traditional means of dealing with surplus room inventory or the low season blues in food and beverage outlets and spas.

Loyalty programmes, discount coupons, buy three get one free offers to an existing consumer database (or someone else’s database), and the ever popular affiliate programmes (spend on your credit card and get 20% off) are such examples.

These strategies have proven their ability to bring in the business time and again. With so much competition in the market, drawing the customer in once is often the biggest challenge.

This is where the aforementioned strategies can come into their own, as they provide the hotel with a one-time opportunity to showcase their restaurant, spa or deluxe room giving them the chance to excite that customer and win them over.

However, they can be time consuming to set up and run. They often rely on the hotel’s marketing team to develop and visualise, and, because any given facet of the hotel can be running up to 10 of these sorts of offers at the same time, can often get confusing for the staff on the ground who need to punch in codes when the customer decides to scribble in the air.
Don’t despair though, there are a few specialists out there who have made it their business to get heads in beds and bums on seats and have proven their weight in marketing gold.

Conclusion
The good news is there are a lot of options out there that will no doubt drive business through your door. The bad news is there is a lot of homework to be done when it comes to picking the right partner to communicate your offer to the world at large.

One thing to remember is that when entering an unmoderated social sphere, there are no holds barred when it comes to what can be said.

Therefore, who you pick and how you do it will most certainly have an impact on your brand, your ROI, and how well you sleep at night. Whether it increases repeat business is a matter of ensuring that a customer paying discount prices isn’t getting 50% off service.

The key players

Cobone.com

The low-down
Cobone.com is amongst the biggest of the collective buying sites in the region. Offering a daily deal in each of Dubai, Abu Dhabi, Beirut, Amman and Jeddah, it’s supported by 200,000 registered customers and 70,000 Facebook fans across the Middle East. Future plans include Cairo, Bahrain and Kuwait, and there will be further expansion across the UAE and the Levant.

What’s so special?
The site offers a variety of payment methods including paypal, credit card, cash on delivery, cashU and one card, making it easy for the customer to pay for a deal and helping quell security fears which are so prevalent in this region.

The site is also available in English and Arabic. Cobone.com recently launched the most expensive coupon ever sold in the world — a 15% discount on the Nissan Pathfinder 2011. At the time of writing this article, three cars had been sold generating AED 333,000 (US $90, 664).

What’s in it for you?
The customer reach combined with the activeness of the social community is what makes this site such a strong vehicle. Cobone.com can also work with you to develop a quarterly activity calendar.

For example
Offer: 53% off the full beverage brunch package at Al Muna, Mina A’Salam, Madinat Jumeirah.
Result: 1730 vouchers bought at AED 199.

Case Study: Saray Spa at the Marriott Harbour Hotel & Suites Dubai Marina
In a group buying deal, the spa at the Marriott offered users the chance to experience the milk and honey immersion treatment at 50% off the menu price.

In this instance, not only did the deal tip, but the deal hit the maximum threshold of 300 vouchers purchased.

Aftab Sayed, cluster e-commerce manager, Dubai Marriott Hotels, said of the offer: “We paced the clients coming in via bookings and this allowed us to dedicate more one on one time to the guests. The numbers we have as return guests are great — not to mention the positive recommendations.”

He goes on to say: “We will definitely be doing more of these deals across all of our Marriott properties in Dubai. Keep a look out for us.”

In this instance, not only did the deal tip, but the deal hit the maximum threshold of 300 vouchers purchased. Aftab Sayed, cluster e-commerce manager, Dubai Marriott Hotels, said of the offer: “We paced the clients coming in via bookings and this allowed us to dedicate more one on one time to the guests.

The numbers we have as return guests are great — not to mention the positive recommendations.” He goes on to say: “We will definitely be doing more of these deals across all of our Marriott properties in Dubai. Keep a look out for us.”

Dealgobbler.com

The low-down
Dealgobbler.com is a social, e-commerce group-buying site with a simple philosophy for its consumers: get out, have fun and try something new at a great price.

There are over 30,000 opt-in subscribers in Dubai; these are people who have requested to receive the daily email alert. Exclusive contracts with content providers in the UAE mean the daily deal is also distributed to other email databases; one such relationship is with 7DAYS.

The deals therefore go out to almost 100,000 individuals in the country. The site is active in Dubai, Abu Dhabi and the Northern Emirates. The plan is to operate across all major cities in the Middle East and North Africa.

What’s so special?
As well as daily deals, closed deals are also an option for hotels. A closed deal is an offer that runs on a hidden section of the site and is not available to all site visitors.

The deal is only accessible to a pre-determined audience which is specially targeted for that particular offer. This is a great way for an outlet or hotel to stress test an offer before distributing it to a broader audience.

What’s in it for you?
The site allows hoteliers to assess the funnel of how many people saw the offer, how many purchased it and how many people redeemed their purchase.

The daily deals drive volume, so if you are looking for 100 customers this is your option. But closed deals drive targeted bookings and therefore, lower volume, allowing hotels to increase occupancy without paralyzing operations and leaving room for full-paying customers.

For example
Offer: 50% off of Blades Friday Picnic Brunch, held at Al Badia Golf Club.

Result: 90 vouchers were bought at AED 165 (US $44 ) with customers requesting, via social media sites, that the offer be repeated. IHG DFC director of marketing communications Katerina Dixon comments: “We had a couple of great campaigns that worked well with dealgobbler.com for our Blades picnic brunch.

We’ve just launched it and needed something instant as we don’t have that many weeks to do outdoor activities before summer. Dealgobbler reached out to their audience that wasn’t part of our database and we now have pre-confirmed bookings up to the end of May already”.

GoNabit.com

The low-down
GoNabit.com became the first group buying website in the Middle East when it officially launched its daily deals for Dubai in May 2010.

Since then, GoNabit.com has become the first Arabic group-buying website in the world.

It introduced a combined daily deal website for Sharjah, Ajman and Ras Al Khaimah and most recently started running deals specifically to serve the families of Dubai.

The site currently provides offers in seven territories in five countries — Dubai, Abu Dhabi, Kuwait City, Amman, Beirut, Cairo and a combined site for Sharjah, Ras Al Khaimah and Ajman. Family friendly deals in Dubai also run on a separate channel.

What’s so special?
It has local offices in all the markets it operates in, meaning good local market knowledge and easy accessibility for hotels. Customers can call, email, Facebook message, Tweet or leave a comment on the website and are promised a response within 60 minutes.

What’s in it for you?
Across all cities, GoNabit.com has a subscriber database in the hundreds of thousands and a large social media following. If a hotel wants to directly engage with potential new customers, they can use the social media buzz generated by the deal.

For example:
Offer: 50% off of The Banyan Tree Al Wadi — a night’s stay in an Al Rimal Deluxe Pool Villa, which includes a Rainforest experience at Banyan Tree’s renowned spa.

Result: 966 vouchers bought at AED 1400 (US $3,800) each.

Groupon.ae

The low-down
The original idea for collective buying sites was first seen on Groupon.com which launched in Chicago in the United States in 2008. Now available in 44 countries, it has taken the internet by storm and is purported to be one of the fastest growing online companies.

It has recently hit the shores of the UAE and has approximately 250,000 subscribers. Currently in Dubai and Abu Dhabi, opportunities are being considered for the rest of the region.

What’s so special?
In one word — experience. As the inventors of the collective buying model coupled with a huge team in their head office in Chicago continuously work to enhance the system, groupon.ae brings a wealth of experience and resources to the table.

What’s in it for you?
Hugely popular across key markets such as North America and Europe, the brand value that comes with this site cannot be under-estimated with more than 66 million subscribers worldwide. There is also huge potential for hoteliers to tap into holiday-makers from the United States and Europe who frequent the website.

For example:
Offer: 80% discount on access to the beach, pools and the childrens’ recreation areas at Le Méridien Hotel.

Result: 932 vouchers were bought at either AED 46 ($12) for single entry or AED 84 ($22) for family entry.

The Entertainer
The low-down
The Entertainer books are a concept offering incentives in the form of buy-one-get-one free vouchers at restaurants, cafes, nightspots, attractions, spas and beauty centres throughout the GCC. There is also a book dedicated to hotel accommodation offering two for one room nights.

In 2010, The Entertainer published over 340 million vouchers across the Gulf reaching over one million customers and currently produces 12 books in seven countries.

The books however, aren’t free to the consumer and cost between AED 195 to AED 350 ($53 to $95) depending on what edition you are buying. There’s also a free newsletter which contains a selection of online offers for users to print out.

What’s so special?
It’s the simplicity that makes The Entertainer so effective. Consumers find it easy to use and understand — just one factor of its popularity. With a choice of books tailored to different segments of the industry, consumers can choose what suits them best. There’s no doubt of its long-standing reputation in the GCC market.

What’s in it for you?
The Entertainer allows hotels to target the affluent demographic and gives premium customers a discounted option to try featured hotels and outlets.

This can lead to an increase in business by creating new relationships and hopefully generating some repeat business. Hotels can also choose to use the company’s database, although it is exclusive to The Entertainer.

Time Out Dubai City Card
The low-down
The Time Out card is a membership scheme which provides discounts at venues across the city. The card is free and has over 200 restaurants on board. Customers simply register their details online and receive their card in the mail or can arrange collection.

What’s so special?
Easy to use and associated with the ever-popular Time Out, this card has some serious pulling power. Perhaps because it’s the go-to publication for both tourists and residents alike or simply its status as the fountain of all knowledge for everything happening in the city, the Time Out City Card is a viable option.

What’s in it for you?
Visibility comes in the form of a listing on the Time Out website and the weekly magazine. Overall, this is a consumer-friendly, easy to use, straight-forward offer where you get to control the discount and the terms and conditions.

Benefits also include inclusion on a monthly City Card newsletter, which is dispatched to all 16,000 members, and on a comprehensive City Card listings page whichis included in the magazine each week and partners are highlighted on a rotational basis as Editor’s choice or Critic’s Pick.

For higher level discounts, Time Out runs a series of co-branded house ads in their publication.

Case study: A two for one restaurant deal at The Westin Hotel
For the newly launched ‘Yum Cha’ restaurant, a two for one offer communicated via The Entertainer was launched to drive market awareness.
This offer was for food only and valid on Saturdays. Over a four week period of four Saturdays, 107 vouchers were redeemed driving a footfall of 217 guests (excluding children).

Covers increased throughout the month as people who used the voucher brought their friends along. The beverage consumption also increased.

Derryn French fed back on the offer, commenting: “It was very successful in driving awareness in the marketplace as well as restaurant covers and we would use The Entertainer again.”

DineDubai
The low-down
The idea behind DineDubai is to identify, reward and retain customers by creating loyalty to a restaurant. The first dining loyalty programme in the region, it uses a data capturing card which provides customers with unique discounts in hotels and restaurants throughout Dubai.

The B2B side of DineDubai offers hotels and restaurants an insight into the transactions and behaviour of the dining consumer. DineDubai is a similar model to iDine in the US.

What’s so special?
Restaurants of all shapes and sizes are able to find their niche. In addition, the monthly newsletters and e-mailers provide information on various menus and promotions, which is added exposure for the participating outlets.

What’s in it for you?
The data allows offers to be targeted to consumers through various platforms. It also provides flexibility — you decide the offer and its parameters. It can also benchmark a restaurant’s performance against that of similar establishments in the DineDubai network.