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Engineering Your Own Discounts and Incentives with Social Media


Posted by on January 20, 2009

auction

I just got off the phone with David Churbuck, the VP of Web Marketing at Lenovo.  We had an interesting conversation about social media, marketing, and customer relations.  A topic that came up was brand and customer engagement through social media for the purpose of receiving (or giving) discounts or incentives to purchase or use a product/service , or as David cleverly puts it, “reverse coupon engineering.”

Let me explain.

Let’s say you are a company such as Comcast, you’re monitoring the social media space and come across a customer who says “should I go with Comcast or Charter Communications as my internet provider?”  Naturally if you’re Comcast you want to do whatever you can to persuade the customer to go with your service, so what do you do?  Well, why not offer the customer and incentive?  “If you go with Comcast I will get you HBO free for 3 months and won’t charge you an installation fee.”

Now Charter Communications chimes in and says “we will give you HBO for a 6 months and will lower your monthly payment by 20%.”

and the customer replies:

“Great Comcast it is”

Do you see what just happened here?  As David mentioned on the phone with me, it’s the Lending Tree slogan that says “when banks compete, you win.”  In other words, users are going to understand that brands and companies are watching the social media space and will begin “engineering” their own coupons by asking publicly, “which product or service should I by?”  This hasn’t happened on a large scale yet, but it might, especially through a platform such as twitter.  This is actually a very interesting concept.  Imagine creating bidding or coupon wars between companies on public social media channels in order to receive the best possible deal.

If I say I want a laptop with 4 gigs of ram, a 160 gb hard drive, 15.4 in screen, (etc) and I don’t want to pay more than $1,000, then you would expect (in a brand active social media world) that I would receive offers or bids from Dell, Lenovo, Toshiba, etc.  The challenge for companies is going to be scaling these coupons or services.  If I buy my laptop through the Dell website for $800 but then find out that someone else got their exact same laptop through twitter $700, then I might get a little upset.

How does an enterprise size corporation deal with this?  Is this even a possible scenario?  Does this mean that pricing for products/services can become relative?  There are a lot of questions that I can ask (and I’m sure you can to) regarding what this means for business (if it’s possible) but I am curious to hear your thoughts on this.

Let’s hear it!

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  • http://www.ariwriter.com Ari Herzog

    I'm confused, Jacob. Why are you focusing on social media? Supermarkets and assorted retail establishments already do this by means of accepting competitor coupons and/or matching prices. What's different online?

    • http://www.thefutureorganization.com jacobmorgan

      because here you have the ability to create your own coupons and discounts, nobody is sending them to you or advertising them

  • http://www.member-to-member.com Dana Theus

    Wow. This is a big subject (bigger than a tweet response). While I think there is probably good opportunity in this scenario you lay out, it's territory companies should step into very carefully. The primary reason is that I don't think your assertion that “if you’re Comcast you want to do whatever you can to persuade the customer to go with your service” is necessarily true. If Comcast is going to lose money on that customer – because they discount below cost, because they'll have to sell to others at that below-margin price, and/or because that customer will churn faster (discount customers tend to be pretty unloyal) – maybe Comcast shouldn't spend the time/energy on acquiring that customer in the first place. More profitable customers usually pay a higher price and value things about the brand/product/company that are hard to put a price tag on.

    That being said, there is a whole new science developing in relative pricing. Revenue management systems for airlines, hotels etc have been exploring the dynamics of this for decades now, but dynamic pricing is becoming more common on lots of sites (including Dell etc.). It varies by factors related to the customer (buying history, age, demographic, site of origin etc.), as well as non-customer related factors like inventory levels, time of day/year etc.. However, the systems have to be deployed carefully because if customers get the sense that they're being totally gamed, they tend to resist and brand backlash can occur. That's why in your scenario – if this exchange took place in public and other people who had paid full price saw it and complained or demanded similar rates, it could get ugly for the company who rushed to give the discount.

    Not sure I've really provided much enlightenment here, but pricing is a complicated aspect of marketing for a very good reason!

    Dana (@dtheus)

  • http://ariwriter.com Ari Herzog

    I'm confused, Jacob. Why are you focusing on social media? Supermarkets and assorted retail establishments already do this by means of accepting competitor coupons and/or matching prices. What's different online?

  • http://www.member-to-member.com Dana Theus

    Wow. This is a big subject (bigger than a tweet response). While I think there is probably good opportunity in this scenario you lay out, it's territory companies should step into very carefully. The primary reason is that I don't think your assertion that “if you’re Comcast you want to do whatever you can to persuade the customer to go with your service” is necessarily true. If Comcast is going to lose money on that customer – because they discount below cost, because they'll have to sell to others at that below-margin price, and/or because that customer will churn faster (discount customers tend to be pretty unloyal) – maybe Comcast shouldn't spend the time/energy on acquiring that customer in the first place. More profitable customers usually pay a higher price and value things about the brand/product/company that are hard to put a price tag on.

    That being said, there is a whole new science developing in relative pricing. Revenue management systems for airlines, hotels etc have been exploring the dynamics of this for decades now, but dynamic pricing is becoming more common on lots of sites (including Dell etc.). It varies by factors related to the customer (buying history, age, demographic, site of origin etc.), as well as non-customer related factors like inventory levels, time of day/year etc.. However, the systems have to be deployed carefully because if customers get the sense that they're being totally gamed, they tend to resist and brand backlash can occur. That's why in your scenario – if this exchange took place in public and other people who had paid full price saw it and complained or demanded similar rates, it could get ugly for the company who rushed to give the discount.

    Not sure I've really provided much enlightenment here, but pricing is a complicated aspect of marketing for a very good reason!

    Dana (@dtheus)