A cautionary tale for small businesses emerged when cake maker Rachel Brown offered such a good deal on her cupcakes that her business almost went bust. Rachel, owner of the ‘Need a Cake’ company, normally sells 12 cupcakes with a range of designs and flavours for £26. In a drive to attract customers, Rachel used the online discount voucher site Groupon to offer the same order for £6.50. Usually baking around 100 cupcakes a month, Brown was delighted to begin with and then alarmed as the consequences sank in, when she received something in the order of 8,500 orders.
Need a Cake only has eight employees. To honour the demand, Rachel Brown had to bring in agency staff which, as she was already losing money on each cake sold, meant she nearly brought her own business down.
Yet this tale should not put small businesses off using e-vouchers; and should not dissuade companies making what was a mismanaged, rather than misguided, promotional venture online.
The main thing to remember is it shows just how phenomenally powerful an e-coupon site like Groupon can be. If you’ve got a great product, and you put it in front of customers in the right way, you’ll get a large number of orders. Need a Cake’s owner can – once the dust has settled – congratulate herself on just how remarkably successful her promotion actually was.
Yet there are lessons to be learned here. First, factor in the potential number of orders that you might get, and ensure you put provisions in place for not allowing the promotion to run away with itself. Limit the number of orders any one individual can place; ensure the order expires after the number of sales you’re comfortable with. And bear in mind that you don’t necessarily have to use an e-voucher provider like Groupon, who take a percentage, if that’s not what you want to do. If you have your own CRM systems working efficiently, and you have opt-in for mobile marketing messages from your customers, then you target people with your own vouchers, in your own way and at a pace that suits you. You could even use the geographical- and time-based nature of mobiles to target customers with particular offers in certain places and at certain times, if you want to. And you can limit the offer to a certain number of people, so you can be sure that it will never be so successful that the success becomes a nightmare.
Some companies will read about Rachel Brown’s experience and avoid using e-vouchers in future. But they are a fantastically successful way of reaching new customers – and once those new customers have been reached, it becomes far easier to hold on to them as returning customers in the future. Don’t be put off by the Need a Cake story, but do bear it in mind to remember just how powerful online campaigns can be.
For more on optimising digital and mobile campaigns, read our papers "It’s not a phone: a future of mobile marketing" and "What hasn’t happened yet: the future of digital marketing", both free to members.