The Unprecedented Potential of Facebook Deals
Posted by Matt Cashatt on 4/29/2011 (Last updated on 4/29/2011 8:56 AM)
It was only a matter of time before it happened: Facebook has boarded the group-discount gravy train. This doesn't really surprise anyone but what is surprising is that the social titan, with its half-billion plus users, is adamant that its focus is one that won't go straight for the jugular of competitors such as Groupon and Living Social.
Not sure if I buy that due to the fact that there is no other company better positioned to create a firestorm of social buying experiences. Think about it: Facebook already possesses such a vast amount of data about each of your customers--including their demographic information and what items they like--that the Facebook Deals platform is already in a superior market position to offer up deals that an individual is likely to care about. Now imagine what will happen if Facebook begins tracking which of your customers friends wield the most influence over their buying decisions and it is not hard to see that Facebook can potentially offer surgically targeted marketing opportunities never before seen.
Facebook Deals is going to be unique in that, as with anything else your customers do on Facebook, their friends will know about it within seconds whether via desktop, laptop, or smart phone. When this happens, there is a pretty good chance that if the friend is a close one and lives nearby, then that friend will want to join in on a fun experience with your customer. This is really no different than sending out a group e-mail at work to invite a few co-workers out for a beer at 5:00. What is new about happy hour is that local business will have the opportunity to influence your choice of venue by offering a group discount ahead of time.
What will be especially interesting about Facebook Deals is that a whole new layer of market data will be exposed by the decentralized decision making--especially when it comes to products. What products or experiences do people *like*? Of those products, what are they actually buying and at what price point? In what types of social circles do these consumers reside? How quickly do the consumers muster to your product and who among them led the pack?
How is this useful?
Aside from the data that Facebook will gather, the data that they already have will be the key to serving up offers that your customers are likely to buy. Unlike Groupon or Living Social, Facebook is going to have a much more detailed profile of your customer and the types of deals they are after (for the last time Groupon--I DON'T NEED MY LEGS WAXED!!).
Facebook will also ultimately know with which friends your customers are most likely to have a beer and which of your customer's friends wield the most influence over their purchasing decisions. This could result in the use of a strategic surgical marketing campaign in which the discount is not the same for each user.
Why go to such lengths for a coupon campaign? Because broad group discounts run a very serious risk of costing you more marketing dollars per customer than necessary. Consider this: as with any group discount scheme, you are providing a means of price discrimination to your consumer base in order to gain new customers. In other words, you are offering a deep discount to the entire critical mass so that those consumers who value your business or product less than the ones that have purchased from you in the past will give you a try. So maybe you won a few new customers, that's great. But you might have done so at the expense of granting unnecessary discounts to the majority of the consumer base who would have gladly paid the sticker price. You also had to pay the facilitator (i.e. Facebook Deals, Groupon, Living Social, etc.) a hefty fee.
The promise of Facebook Deals is that they might eventually expose to you the ability to target certain individuals who have not, say, "liked" your business and offer them a deeper discount than the Facebook users that are already loyal customers. What's more, you may be able to comp promotional products to individual Facebook Users with a track record of influencing the buying decisions of their friends. Ever hear of those great baskets of promotional items left in the dressing rooms of celebrities? This is obviously done because the makers of those items are hoping for free celebrity endorsements. Well, now the same may be achieved on a micro level within a given circle of friends by gifting such items to the most influential person in the circle and ultimately creating for you an organic (and free) sales force.
Yes this all seems scary in a very Orwellian sort of way so it will also be interesting to see how Facebook balances the potential of this feature with the privacy of its users.