Amending IPOs: Does Groupon Really Work?

Just hours after the Wall Street Journal was reveling over the Groupon IPO last week, the unexpected happened. The "fastest-growing company in the history of mankind" had some wind knocked out of its sails over odd accounting. There's more to the story than record revenues.

It was also able to sustain its rapid sales growth, bringing in $878 million in net revenue, a quarterly increase of 36 percent. High expenses, however, resulted in an operating loss of $102.5 million in the second quarter. — Forbes

Most people know that the day deal site is big on marketing. It spent $165.2 on online marketing to gain new subscribers last quarter, which is lower than the $179.9 million it spent the previous quarter. Where people need to look under the hood is exactly what marketers talk about on a regular basis — what's the marketing ROI and how many people need to manage it.

Straight math might suggest that the company makes $4 for every $1 of marketing. However, that doesn't necessarily account for everything else — staff, consultants, and time-to-creation. Those are the numbers you might want to look at, and then you might wonder about some other things too. It would be a shame to discover Groupon is a company that loses even $.01 for every dollar it spends. Because if that were true, then the company is only growing by continually spending ahead of itself.

Groupon is a good idea, but advertisers need restraint.

There is plenty of truth to the old adage that everything is okay in moderation. A glass of wine with a meal, for example, can even be healthy. Ten bottles, not so much, but only because it comes with the hangover. And that's the question, isn't it? What happens when the party ends?

Personally, I know many social media pros who are down on Groupon. I'm not one of them, but I have expressed some caution. It's has nothing to do with Groupon as much as it has something to do with marketing.

Companies that rely too much on coupons and fire sales can create some unusual problems unless they know what they are doing. And unfortunately, not all companies know what they are doing. What problems?

Sometimes, wildly successful campaigns can hurt you too.

If you have ever worked with a restaurant (or a retail establishment), you might might be familiar with the story. If a modestly successful business suddenly has a surge that overpowers staff on hand, the experience changes significantly.

Not only does the restaurant suffer in terms of quality food and customer service, but people might also be turned away — except one customer, who happens to be a reviewer ordering the one dish that you're suddenly out of. To make matters worse, if the coupon counts exceed regular patrons, the revenues might look good, but the company could still take a loss.

The same holds true for non-restaurants too. When demand outpaces supply, those turned away may never come back. When discounts become the norm, people stop buying until the next deal. When one-time buyers flood the space, loyalists are accidentally pushed aside. When the experience isn't perfect, that's the day the reviewers show up. And when you have a math error, revenue records can carry a negative profit.

The best coupon campaigns are those with objectives that go beyond immediate sales. Product introductions, short-term, reason-specific campaigns (back to school, for example), or short-term engagements (special guest or limited time product) can help maximize exposure and market penetration, especially while working in conjunction with a public relations and/or social media campaign. And, always anticipate a response greater than expected, even if it never happens, and never take a loss on the offering.

So what about Groupon? It really depends. If Groupon is built on companies taking losses with impossibly attractive offers that are fueled by advertising at a loss for greater reach, there might be a pretty big problem. But if Groupon is everything that it says it is, short of creative accounting, then that might make sense for some. What are your thoughts about Groupon?

Publishing Temptations: Three Social Media Content Evils

Although some media companies are still struggling with the transition from print to digital, others are doing fine (even if a few might be fine for the wrong reasons). Eventually, the shakedown will leave us with leaner media companies (many specialized in affirmation opinion), probably made up of a mix between transitioned print and digital upstarts.

It's anyone's guess what the quality will be like, but it might be good enough, maybe. That depends on each publisher specifically and when the public eventually learns objective journalism does have value after all. In the meantime, any short term gains by some publishers might be tempered with a long-term outlook. It seems to me media outlets that jump on the most popular publisher trends are borrowing against their future reputations, bloggers too.

Three Content Creator Evils To Avoid As A Publisher.

• Trending Content Stories. While it's always a good idea to track social media trends to discover what topics people are interested in, publishers are better served in being vigilant in balancing their content. After all, publishing is not public relations even if it feels that way at times.

Specifically, some publishers have adapted what it generally considered a marketing or public relations tactic. They check the topical trends and then find something — anything — to write about that matches those trends regardless of how thin those connections might be.

Some publishers even make trend lists and then burp them out to all their writers, screaming that they need more stories on these popular topics. So, for example, if the Bronx Zoo has a lost cobra, they instruct their journalists to pile on stories about snakes — pushing anything important down and elevating the mundane. It's why the media sometimes feels dubbed down.

• Wrapper Content Marketing. While it has always existed, wrapper content has made significant gains in recent years. This technique isn't audience driven as much as it is advertiser driven.

Specifically, some publishers pick up advertisers and then look for content that is loosely or overtly connected to the product that the company wants to peddle. Marketers and social media pros do this all the time, but it begins to become creepy when third-party publishers jump into the space too.

For example, let's say you publish communication content and an advertiser knocks on your door with a new travel bag. So, you drop the story you planned to do about crisis communication and start writing the story about how much you love the bag, wrapped up nicely with five travel tips for busy professionals. Sure, this works well enough for marketing (we expect to see travel tips on an airline's blog from time to time), but one would hope publishers respect their readers more than writing advertorials.

• Automated Content Pushes. While there is nothing wrong with sharing content across multiple networks, it's always a good idea to practice some self-restraint. After all, if exposure is overshadowing quality in terms of priorities, then the content probably isn't worth sharing.

Specifically, some publishers blast everything they say in one place to every place they have a presence. Their Facebook page has the same content as their Twitter page, which now mirrors their Google+ page, etc. While a certain amount of sharing and duplication is expected, not every story, comment, or thought needs to be threaded everywhere.

The reality is that different networks respond differently to different content and almost every network is sensitive to how it is presented. After sharing stories with primary networks, pick and choose what might best fit where and how to present it. (For example, this story would be mostly senseless to share on Reddit, so I won't put it there. But if I did, the title would have to be something like 'hungry dog eats a village.')

Some marketers tell me I'm silly for not sharing every story everywhere, especially those that know my networks consist of mostly different people. I don't worry about that too much. I share where it makes sense, and if someone else (like a reader) thinks it will fit better elsewhere, then they might be willing to share it instead. I think that's cool, because it places engagement over broadcast.

Creating Controversy: Sometimes PR Makes Its Own

Like many public relations firms, Kentucky-based Guthrie/Mayes seemed to have sound advice. If your county board of education had suffered a soap operatic firing of a superintendent and less than stellar hiring of a new one, you might consider doing something to manage your public image.

Unfortunately, the public relations firm didn't anticipate that their hiring — at $215 an hour, or up to $20,000 for three months' work — would cause equal friction for the Jefferson County Board of Education, which already staffs communication and public relations professionals with a collective salary of almost $1 million per year, according to WLKY.

So far, the advice — speak with a singular message or not at all — isn't working. WLKY took exception to only one board member answering their call (only to say she wouldn't talk about the issue and hung up). The PIO for the board did try to answer the question. She claimed that the school district communication team has a conflict, working for the board and the district.

The chairman of the board, however, refuted the claim. They work together with the communication department all the time.

This time the public has a point. They needn't fund public relations for elected officials.

The Courier-Journal called it right. Elected board members are obligated to be responsive to the voters and are not entitled to public image makeovers simply to look better for re-election.

What they seem to need is more internal communication among each other, more honesty in the decisions they make, and more appreciation for the people who elect them without fear of "confusing them." At minimum, if they want to have a more unified voice, then they ought to be deferring calls to their chairman unless the issue has individual viewpoints. And if he's not up to the challenge, find someone who is.

In fact, that is what the public relations firm correctly advised. But where the public relations firm was wrong was in advising them to hush up over an issue that area residents seem impassioned about. And considering at least one board member or staff member is leaking the firm's advice to the media, it clearly seems they aren't improving relations as much as they are becoming fodder for controversy.

Some solutions for a fractured board, much more valuable than a muzzle.

Having done considerable work for various public entities as an outside consultant, there are times when overburdened combination staffs need assistance or advice on special projects or in specific situations. However, massaging the messages from the Jefferson County Board of Education doesn't seem to be one of them although the board members might seek independent coaching. As individuals, they obviously know how to undermine their own efforts.

Here's some free advice. Sit down and talk about the issues. When the board decisions are unanimous, let the media know and defer to the chairman. When they are not, meet both obligations by talking to the media about what the board has decided, and why (although in the minority) you felt differently without the rhetoric. Such action might not always result in a quiet and complacent public, but at least you'll be able to sleep at night, knowing that you're being honest.

This is probably the advice the district's communication team could have provided. But given the answer, it seems they could have used that advice themselves. Now, about how much that district ought to be spending on public relations ...

Studying Psychology: Aversion Training For Kids?

As crazy as it sounds, some psychologists are jumping on the fright makes right band wagon. According to a study published in Health Psychology (as highlighted in a weight loss article), showing kids photos of obese people and arterial diseases for 30 minutes helps reduce the urge to eat sweets and foods that are fattening.

Are you kidding me?

Looking at arterial diseases for 30 minutes will suppress anyone's appetite to eat anything. Besides, some of us saw the movie version of this study. A Clockwork Orange was produced in 1971, starring Malcolm McDowell as a protagonist who is "programmed" to detest violence by being subjected to graphically violent films, eventually conditioning him to suffer crippling bouts of nausea at the mere thought of violence. (The book came out in 1962.)

The study hints at the same thing, except the villain in this case isn't violence as much as it might be a Hostess cupcake.

Teach Reason Over Aversion.

In a recent Wall Street Journal article, David Wessel had some harsh words about where America is today, saying the "deeper issue and root cause of our malaise is the broken U.S. educational model that is producing bloated people with bloated egos and senses of entitlement, broken values, a broken work ethic and an intellectual incompetence with which to think and innovate."

I'm not sharing Wessel's words to give more attention to the blight within his premise, even if some of it touches on truth. I'm including it because it represents the polar opposite of the study. Whereas the study suggests America's woes might be handled though aversion programming, Wessel is taking a (albeit heavy handed) approach that we might teach deductive reasoning, critical thinking skills, and personal responsibility. One looks to curb a symptom; the other looks toward fixing the cause.

Of course, our society doesn't always want reason. Ask any marketer today that is hell-bent on deciphering "influence." They don't want people to make the best decisions; they want go head to head with competitors and let the best "influencer" win. Never mind the facts.

In some cases, it goes well beyond marketers. There are plenty of political parties and institutions and organizations that want to do the same. They don't want people to make educated choices but rather to be comfortable in the leadership's ability to influence its way out of everything. So much so, some people are studying how do it, regardless of the consequence.

What's The Difference?

Aversion programming and fear marketing teach children rote memorization that may lead to equally harmful eating disorders. To avoid those, you have to teach your children to make proper choices about what to eat using reason and responsibility.

Personally, I never worry about what my kids eat or don't eat. I guide them toward making healthier choices that will eventually turn into making better choices as adults (I hope). That means before they can have the pudding, they have to eat their meat. Or more specifically, despite how fun it is to drop in a Pink Floyd reference, fruit before some other snack.

By asking them to eat fruit first, they often find the apple or orange or peach or plum satisfies their craving for something sweet or fills the small empty feeling they might have in the late afternoon (without spoiling dinner). This indirectly reminds them that fruit is good, tasty, filling, healthy, and makes you feel good without feeling guilty. At the same time, it does't discourage them from looking at a cookie and feeling guilty or as the inspiring study suggests — aversion.

Nowadays, my kids have even passed on offers of candy in favor of fruit if it's available, not because they have to but because they want to. Imagine that. And I never had to show them pictures of diseases and unhealthy people.

Marketing might learn a lesson here too. If you win the influence game, you win a customer for a day. If you truly have the better product and can deliver on your brand promise, you will win a customer for life. People don't have to be frightened. Let the politicos keep that one to themselves.

Recharging: How Self-Engagement Helps

Worry Is Like Interest Paid In Advance On A Debt That Never Comes Due. — The Spanish Prisoner

While also attributed to Will Rogers, the quote was reintroduced in the 1997 suspense film The Spanish Prisoner. We might even go one step further by saying it is interest paid on money you never borrowed. And even so, it's also an increasingly common prognosis for Americans.

The only thing bigger than the American debt is the amount of worry that has been levied on its people by politicians, news media, propaganda shills, and everyone else who wants to attract attention. Fear marketing has become the singular biggest influencer of all time.

Looking at the most popular stories parlayed into major news headlines — child abductions, governmental collapse, pandemics, debt default, stock shocks, climate change, health care crisis, economic ruin — it's a wonder more people aren't depressed. By comparison, the children of the 1950s and 1960s felt safer clamoring under desks in preparation for a nuclear war.

That's not to say all these other issues aren't important. Remaining vigilant against such threats can be prudent. But being paralyzed by them is not. Most of the worries people embrace are issues they can do nothing about on the grand scale.

Sure, they can take steps on a small scale: safeguarding children, living within their means, encouraging companies to be green in practice and not public relations, and so on. But beyond what can be done on the small scale, none of these issues are worth the worry. Most are well beyond our control, with the zombie apocalypse outstripping Y2K in eventual likeness.

One small study that reaches further than its intent.

Last week David H. Rosmarin of the Harvard-affiliated McLean Hospital released a study that suggested people who trust in a benevolent God tend to worry less and are more tolerant than those who mistrust an indifferent or punishing God.

At a glance the sampling sizes seemed rather small, but there is something to take away from it regardless. While Rosmarin suggests several applications for his findings, it might be worthwhile to consider something else too. Those people who are more tolerant and less prone to worry are also more comfortable letting the world run and then adapting the best they can.

Whether you accomplish that by placing faith in God or a god or simply recognizing that as individuals we are pretty small specks on a planet hurling itself around a sun that is hurling itself around a galaxy that is hurling itself around a universe, it works out the same. Don't take on worries that you have no control over. Stick to what you can do. Take action, not worrisome non-action.

"What would you do if you weren't afraid?"

For all the emphasis by the media and other interested parties peddling fear, take some time to turn it off and do something you can do. Or, to illustrate with an old proverb Chinese farmers used to say — forget about the emperor and get down to milking cows. You might be surprised to discover how much cooking a challenging dinner, painting miniature figures, working out, or choosing some other engaging activity can do for your head.

For even that brief period of time, as long as you can focus on whatever task you've picked up without distractions from social networks or the outside world, chances are that all those worries — most of which you can only do a little about — will slip away. And, even better, there is no risk of a hangover (although I understand some people pour on to supplant this intent too).

It's especially critical for creative types to unplug or become otherwise self-engaged for a few hours a day. If you allow too many voices and worries and calls for alarm in your head, you won't hear those sparks of inspiration. So let those who took on the debt worry about how to pay it back for awhile. It's their job for as long as we let them keep it.

The comments are yours. If you have any tips and tricks you use to tune out and then tune back into things closer to home, I'd love to know. They might make a worthwhile post all on their own.

Minimizing Test Variables: For Better Marketing

While larger marketing campaigns might include varied offers (e.g., A, B, C) relatively few marketers attempt to use scientific models to conduct marketing research. If they did, they would have clearer picture of consumers, especially online consumer groups or communities.

So why don't they? The most common reason is time, as any effective study group only tests for one variable at a time. Since most marketers do not have patience for true scientific models, they tend to test for multiple measures at one time or split variables (A, B, C) among demographics that they hypothesize are more likely to respond favorably to each variable.

An historic case study regarding mixed variables.

Unfortunately, mixing variables can have adverse or disastrous results. Probably one of the most famous accounts is tied to a 1996 McDonald's campaign, which became one of the most expensive marketing flops in history. You can find some background about the campaign on Wikipedia or a reference to it at The New York Times. But it's not the whole story.

Prior to the launch of the Arch Deluxe, McDonald's had simultaneously launched various deluxe versions of its burger across the United States — including one I was directly involved with. Out West, there was no Arch Deluxe (at least, not before the national rollout of the Arch). McDonald's had marketed the California Deluxe, which was also an adult burger with different ingredients.

There were other regions with variations too. If memory serves me right, there were six regions (but I could be wrong here). And as much as the Arch Deluxe was test marketed in the Northeast, the California Deluxe was test marketed in primarily the West Coast.

Each test area also had localized campaigns, created by regional advertising agencies to market the burger. And the winner, determined by total sales, would be the one McDonald's would pick for a national rollout. The Arch Deluxe won, and none of the others were even mentioned again.

On the surface, it seemed to someone that the test market idea was a solid marketing approach. Until, of course, you consider the variables: different products, marketed to different test markets with different concentrations of population, using different messages (within McDonad's mandatories). Add it all up and the marketing study they created measured nothing, even though it had convinced McDonad's to invest $200 million into the campaign.

As a point of interest, the California Deluxe rivaled Big Mac sales in its test markets. But the smaller sampling size predetermined that the better burger was doomed out of the starting block.

A quick take on developing a better test market model, using the historic case study.

McDonald's could have created a different test model, but the timing to execute the campaign would have taken significantly longer. It could have introduced three burgers in one test market with a singular campaign asking people to choose. It could have rolled out one burger at a time in several areas across the United States. Or, well, any number of ways with an emphasis on minimizing variables.

It's one of the lessons marketers (and bloggers for that matter) would be well served to apply. In science, medicine, or psychology, for example, researchers generally create an experimental group (one receiving an independent variable) and a control group (one receiving a similar experimental situation, but without the variable), with the participants randomly assigned.

Provided there is no other tampering, the variable could be anything. It could be two products, one with an "improved feature." It could be the same product, with different creative campaigns. It could be a specific incitement offer. It could be the same everything, but tested in two or more different test markets. Or maybe two different price points. And so on and so forth.

In terms of social media, for example, narrowing the variable can help marketers determine what content different social networks respond to or the style of communication. (Managing several social programs, we've seen differences in each network community emerge over several months.)

The point is to narrow the measurable variables, which increases the reliability (the ability to get the same results in successive studies) and validity (the ability to measure what you want to measure). The benefit is increasing the return on investment by running continuous tests until patterns emerge.

In the case of the Deluxe debacle, for example, they might have found that people in the Northeast also preferred the California Deluxe (or one of the others) over the Arch Deluxe too. But ironically, no one will ever know. Instead, all they learned was the Arch Deluxe could not support itself nationwide.