Big G’s Groupon Test Called a Success
As Groupon deals go, it wasn’t very large. Nonetheless,
a limited test by General Mills of the daily deal site is seen as a significant
first step by a CPG manufacturer into the daily deal arena.
General Mills offered
a $40 sampler kit and coupon book for $20 to consumers in Minneapolis/St. Paul
and San Francisco. The offer, which included delivery to consumers’ homes,
was made available to 4,500 in its home market and 500 in California.
"We’re always looking for efficient ways to sample our products and given
Groupon’s scale, we thought this would be a way to reach a sizeable audience," Karl
Schmidt, director of promotion marketing at General Mills, told Advertising
Age. "Our next steps are to evaluate the results — I think the
early read is positive — and then factor the results into our next fiscal
year, which begins in June."
Mr. Schmidt told the Star Tribune that
General Mills did not look at Groupon as "an e-commerce platform." The
company was looking to put samples in the hands of consumers with the intent
of driving them to retail stores.
"There’s an argument to be made that Groupon consumers are consumers
like all other consumers and, therefore, they are great people to sample," David
Diamond, a CPG industry consultant, told Ad Age. "There’s another
argument to be made that Groupon users are some slice of society that spends
a tremendous amount of their time looking for deals and will do anything to
get a deal."
General Mills, Mr. Diamond said, could be recruiting consumers
interested in their products, "but only when they are on sale really cheap."
Discussion Questions
Discussion Questions: What do you think of General Mills test of Groupon? How likely are daily deal sites to become part of the promotional mix of CPG marketers going forward?
Daily deal sites have a potential value in the promotional plans of CPG companies who seek consumers who have the need and/or the time to seek out daily deals. The question is: How large is that audience, will it increase or shrink and what is the ROI of that effort?
The promotional thrust of General Mills is to reach and capturing consumers who eat profitable cereals and yogurt every day. The current test opens one more window of information for marketing-savvy General Mills.
I’d love to see the numbers on this program. If this was intended to be a sampling program, how much did it cost versus other forms of sampling? I’ll bet it was less expensive; in which case General Mills may have pioneered a new method of getting their products into consumers’ hands.
Brand marketers must continuously experiment with new avenues and techniques. Hats off to General Mills for giving Groupon a try.
Daily deal sites are a great way for CPG companies to form direct bonds with consumers and boost overall sales, rather than sales in one specific retail outlet. I would expect General Mills to continue on this path and other CPG manufacturers to follow.
Offering a 50% discount, up to a 25% rev share with Groupon, and free shipping to consumers’ homes would be a nonstarter in most CPG marketing plans. But General Mills did the unusual. Here are 7 things they got right:
1. Limiting quantities. General Mills limited the test to Minneapolis and San Francisco and only 5000 units.
2. Choosing high margin products. It’s easier to discount when products have 50% gross margins.
3. Classifying as sampling. Samples are typically free, so getting any revenue at all looks like a win.
4. Being creative about “value.” The program was $40 of value for $20, but that included $15 of coupons.
5. Capitalizing on breakage. Some estimates put Groupon nonredemption at 20%. That funds the program at 100% margin.
6. Distributing coupons. Getting $15 of coupons in shoppers’ hands costs money. Here, postage was paid for.
7. Gaining publicity. The program expanded virally and sold out within hours. News media, bloggers, and Groupon buyers alike spread the news.
Notwithstanding the above, the economics of Groupon are challenging and measurement is tricky. I don’t imagine many CPGs will emulate this. Whether this program generated enough re-purchase to justify repeat is something only General Mills will know (or will they?).
Dan, thanks for your list, you absolutely get it right. Anchoring off of sampling and perceived value vs. hard dollars are spot on. The challenge of the Groupon model overall is it works best for expiring inventory (hotel rooms, empty restaurant tables, etc). For CPG products it’s a bit tougher because they are broadly distributed, have long shelf lives and there’s always a risk of incenting purchases that would have happened anyhow (overall a risk with the daily deal model for anyone).
I would love to see this be used truly as a sampling and new product launch platform–really play around with allowing the daily deal customer to be in the know and the first to try–not just sampling products that have been on the market for a long time. Using this kind of promotion to drive a new product into retail distribution and then couponing on the back end to get it back off the shelf could have a lot of legs. It will be interesting to see where this goes next.
We are at the threshold of a transformational approach to marketing which will replace how and where marketing dollars are spent by brands.
Television and print media is no longer as effective as it was because the world has changed. People don’t sit down and read newspapers, magazines or watch three major networks like they did 10, 20 or 40 years ago, but marketing spend is still weighted heavily towards “traditional” marketing approaches.
Groupon represents not “the” promotional medium of the future, but the growing trend towards micro and “social network” marketing.
General Mills is wise to begin to build a greater understanding and experience with this type of marketing to prepare itself for the transformation of spend strategy that recognizes the potential for many hundreds of instant markets that could pop up anywhere. Companies like General Mills will have to be able to build the flexibility and response needed to support and thrive in this new environment.
Smart phones will be one of the leading catalysts in this transformation to “instant markets,” and those who can respond and take advantage of this opportunity will win with consumers.
Kudos to Groupon and to General Mills for trying something new. The Groupon-style social-buying model has gained enormous traction outside grocery, and it’s inevitable that it will have an impact within grocery too. The question is what form social buying will ultimately take in the grocery vertical, and who (Groupon, one of its competitors, or an entirely new company) will emerge as the leader in this space?
That said, there are some issues that I as a marketer for General Mills would want to understand about this trial:
1) Did the deal change shopper behavior? Were shoppers who bought existing General Mills customers, or were they new? If existing, did the deal cannibalize those shoppers’ normal General Mills purchases, or was it truly incremental? If they were new customers, did the shoppers continue to buy the specific items in the package? Sure, with the right planning, subsequent redemptions of the included coupons could give some insight into some of these questions, but without tracking the individual households’ full shopping history before, during and after the deal, you’re only getting a partial view. Absent these metrics, these types of deals will stay in the realm of tests and experiments, not ongoing programs.
2) How would this scale? The 5,000 consumers impacted, were, at the end of the day, fewer shoppers than buy General Mills items every day in even a small regional grocery chain. Grocery stores have mastered the art of large-scale distribution, and the economics of a UPS or FedEx truck will be crushed by the economics of Walmart’s, Kroger’s, or any other chain’s highly refined supply chain.
3) How do chains (and the brand’s own sales team) feel about the channel conflict? Selling direct to consumer (even through a third party like Groupon, Amazon grocery, Alice.com, etc.) is an explicit end-run around the grocery retailer and the sales organization that services that channel. I imagine that if this were to become anything more than a “sampling program” (which, as David Diamond points out, it may do quite well), it would encounter some stiff resistance within General Mills itself.
If General Mills can get away with charging consumers for coupons, that they can get for free, than more power to them.
I also don’t see this as a trend, because competitors will flood the marketplace with coupons for free, in order to respond to the General Mills deal, and if they’re smart, use it against them as a competitive advantage.
Groupon should be a good tool to drive first time usage and trial, so the application to CPG makes sense.
Measurement of the performance of Groupon ads is in question and CPGs already are challenged to connect the end consumer with their product purchase. As much as people tend to dislike grocery clubs and rewards programs, they are the path to connecting the data dots. See what Kroger and Tesco are doing in this area.
Work out the measurement piece and Groupon (or something similar in construct) could be a good tool for CPGs going forward.
If you have a good product you should always sample it. The challenge in this case is who you are sampling. Is it new users? That is good. Is it people who just see this as an opportunity to make future purchases of products they normally buy? That’s bad.
In any case, the idea is good. It should be reasonably easy to track and analyze.
The downside is that the Groupon type sites may now be flooded with these types of offers, diminishing the value of each.
General Mills found an audience via this vehicle that was responsive to the offer and this tactic returned a measurable result both positive. I would expect other CPG manufacturers to run Groupon pilots to see how this vehicle performs for their products.
As our economy deteriorates consumers will even more frequently be looking for ways to save money. Groupon and its imitators can deliver and do it with some cachet. Like Trader Joe’s and Aldi, Groupon has added to the pallet of choices for consumers. This will help for a while but when it gets to the point that bread is $100 a loaf, nothing will help.
This is a misleading win in my opinion. 4500 mailers in a major CPG company’s home market and emarketing listings are not typical, nor do they represent the standard reach for an emarketing platform in the daily deals arena. Add to this just 500 in San Francisco (which is very emarketing sensitive) and we have a distortion of what should be happening when using Groupon. Instead, this test should have been done in a non-emarketing sensitive location with alternate comparisons (i.e. mailers for some, no mailers for others with attached promo codes to differentiate responses). Add to this an alternate offering which was perhaps not so sacrificial, would truly emphasize the reach and power of Groupon, and measure its actual effectiveness.