We set out to fix this mess! (see Part 1 - the problem) We’d build a platform that wouldn’t hurt the merchants pocket or reputation, but would actually create an environment where they could start to build/rebuild brand recognition and then later reward customers for their loyalty. And for the customers well, we’d give them deals they actually wanted, when they wanted it, wherever they were.
Highlights:
We spoke to 30 plus of Groupons subscribers (mostly family and friends, and a couple of strangers)
I spoke to the man who brought Groupon to South Africa, Neal Gandhi
We raised the startup capital ourselves with loans from family and friends
We designed and developed a Blackberry App in 2011
We partnered with a business advisor from the UK
Over Skype we pitched a Lord from Scotland for funding
We spoke to some of the top minds in marketing and business strategy from well-known and respected advertising agencies locally and abroad
We took to the streets to test the our MVP with merchants
Standing in front of potential business people with an iPad and a 1min 30second video (awkward)
We nearly got investment
We spent money too early as we dreamed of making so much more
The market wasn’t ready for a location based deal finding app then
We built a location based, deal finding smartphone application - this is mouthful and always needs to be elaborated. We did try making it easier to digest, and while there wasn’t anything exactly like it in the market to compare it to, we would sometimes just go with “A better version of Groupon”.
Let’s break it down:
Location based - Wherever you are
Deal finding - It looks for deals, based on your interest (which you’ve specified)
Smartphone application - In 2011 we needed to mention this
In 2011 Blackberry was still very much a thing, so we chose to build the app for the Blackberry App Store first. We enlisted the help of a development team from India, the same team we used for bigger projects at Scream Media.
We wanted to hit cmd+r (refresh) on this cesspool the deal buying economy had created - “Good, clean business” is what we coined it as.
Merchants could offer deals they were comfortable offering, starting at 25% off (as a minimum, because is it a deal otherwise?) and they could even offer current specials like Calcacchios Twos’day special where you buy one, get one. They would have full control of the deals they posted, the margins they set and the validity of these deals.
For users of the app they could select the types of deals they were interested in and opt-in to receive push notifications in time to receive these deals. Example: Candy could be driving home through the CBD after a long day at the office, when suddenly her phone pings her “Piiingggg!” and a push notification shows that if she heads to La Perla right now, she can enjoy a free pink drink and with her feet dipped into the little pool she can enjoy the beautiful Cape Town sunset.
And just as easy as it would be for the merchant to create the deal and push it live, it would be as easy for the customer to redeem the deal. All they’d need to do was show the deal on their smartphone to the waitress of the restaurant, the therapist at the spa or receptionist at the hotel.
How did we plan to keep track of how many deals were redeemed from the app? Well, can a restaurant keep track of how many of its customers saw their ad on a billboard along the high way? Nope.
Reminder of the Groupon model:
Continuing with the Candy’s example, Pink Drink
Normal price: R86
Groupon suggested price: R43
Groupon commission: 75% (R32,25) paid when Candy buys the deal
Your payout: 25% (R10,75) when Candy redeems the deal
Because the above would no longer be the case, they could afford to have every person in the restaurant use the deal and still have it be profitable for them.
They would keep the same level of service offered on Twosdays at Calcacchio and the customers would be as happy as Larry. Would it create a new stream of brand loyal customers? Maybe - maybe not, but the rest of the work would be up to them and, for a flat monthly fee, we would provide the platform for them to make it happen.
Neal Gandhi said “It’s a better business, but Groupon will make more money”. This was in response to us pitching him, to get a feel for where we fit into this industry.
Side note: We did implement a QR code for the customers, that was scannable by the merchant from inside the app. We even created a prototype for a way-to-pay that would allow customers to scan a merchants QR code to pay for their deal with a wallet on their phones. This was 2 years before ScapScan would launch in 2013 as a fully-fledged QR code powered payment system. Nicely done!
Via LinkedIn we somehow managed to hook up with an early stage startup advisor from the UK, who did his best to help us sharpen our pitch and who even toyed with the idea of putting some of his own money into this.
Which came first, the chicken or the egg?
We needed users to get merchants on board, but we also needed merchants to get the users interested.
We ran competitions on our Facebook page, where we would offer cash vouchers (of the type of merchants we hoped to attract) to potential customers. All this to start building an audience.
We took to the streets, with a team primarily made up of students, wearing Do-A-Deali branded t-shirts and a few with iPads (armed with our kickass explainer video) to validate our business.
Through pure luck, we managed to get a meeting with Michael Abel and Zeyaad Davids (now head of marketing for Virgin Active South Africa) of M&C Saatchi Abel. In doing my due diligence I found an article Michael wrote on challenger brands.
“A Challenger Brand as I apply the term, and having studiously avoided looking for formal definitions, is a brand or business that wishes to aggressively occupy the territory or market currently held by established others, usually through a differentiated offering and/or approach.”
- Michael Abel
In closing our first meeting I muttered “Are we the Challenger Brand?”, hoping to score some brownie points for having done my research before the meeting. Michael replied “No, you’re innovators”. That was way more than I needed to feel like we’d happened upon something really great! Time for celebratory beers! This while we started to spend (in our minds) the money we had not yet made on cars we could never afford and places we’d only dream of going once the millions started to pour. Oh little light of mine…
One day after covering most of Long Street’s businesses, we reached the following consensus:
We would need to get users onto the platform to draw the merchants in. I was fortunate enough to sit with the owner of an already popular bar & restaurant in an always busy section of Long Street. During our chat he outlined what it really cost their business to be on platforms like Groupon, and that even though most times the margins they made were lower and the customers were not always repeat ones, they did still bring in a lot of foot traffic. But, and he said this would probably be true for many other businesses on the strip, if we had a bunch of users on the platform to start, there would be no reason for them not to run a trial with us.
We packed up the team and went back to our home office to share notes.
Do A Deali - Part 3 (the conclusion) coming soon