Local Merchants Love Groupbuying. Google Gains on GroupOn. Facebook Ads Are Slowing.

MerchantCircle provides local merchants with an easy to get online and also enables customers looking for goods and services to find local merchants. In their latest survey of local merchants they focused on group buying and the results are pretty interesting.

While some studies show that end users are waning of group buying services and just deleting the avalanche of emails, local merchants continue to use group buying services and in fact many are testing Google’s group buying services as well.

The insight from MerchantCircle follows:

(1) Group deals are experiencing steady growth among local merchants.

Group deals have seen steady growth over the past six months, and nearly 12 percent of local merchants now report having offered a daily deal, up 33 percent since the last MerchantCircle survey in June 2011.

Group deals still also enjoy high favorability among businesses who have tried them.  About 75 percent of respondents say they would offer another deal in the future, citing its effectiveness for customer acquisition as their top reason (61 percent).  Deal profitability also appears to be on the rise: 37 percent now say solid profitability will lead them to offer another deal, up from just 24 percent in June.

But not everyone has had success acquiring new customers and generating a profit with group deals.  Among the 25 percent who said they wouldn’t offer another daily deal, 42 percent said it was not effective for customer acquisition, 36 percent said it was too costly and 34 percent said they lost money on the deal.

When choosing a deals provider, cost remains the most important criteria for local merchants, with 64 percent citing cost as their top consideration.  Local targeting (57 percent) and the ability to reach a large audience (52 percent) were the second and third-most important selection criteria. However, businesses that plan to use Groupon in the future report that the ability to reach a large audience is equally as important to them as cost, with 62 percent citing reach and cost as key selection criteria.

(2) Groupon and LivingSocial may face increased pressure from Google Offers in 2012.

While Groupon and LivingSocial helped establish the daily deals market in 2009, they now face increased competition for local marketing dollars from Google as well as specialized deals providers. About 19 percent of local merchants who have offered a group deal have tried using Google Offers since its launch this summer, as compared to Groupon (26 percent) and LivingSocial (21 percent).  A large number of specialized deals providers have also entered the market; these services have been used by about 43 percent of local merchants who have offered a group deal.

 

The data points to an even stronger 2012 for Google Offers, with about 32 percent of merchants planning to use Google Offers for their next deals, as opposed to 26 percent who plan to use Groupon and 16 percent who plan to use LivingSocial.

 

Much of Google Offers’ growth may come at the expense of these vendors, as just 41 percent of Groupon and LivingSocial customers report that they plan to use these services again. Google Offers actually enjoys the highest retention rate of all the large deals providers: 66 percent of its customers plan to use Google Offers again.

 

Google Offers may also benefit from the recent demise of Facebook Deals.  Before ceasing operations, Facebook Deals had been used by 22 percent of the respondents who’d offered a daily deal in the past.  More than half of these customers say they plan to use Google Offers for their next deal (53 percent).

 

(3) Facebook Ads growth slows among local merchants.

 

Although twice as many local merchants have used Facebook Ads than have tried a group deal – and 96 percent are aware of Facebook’s targeted display ad offering – growth for this advertising medium has slowed.  About 23 percent of local merchants report having tried Facebook Ads to date, which is only five percent more than six months ago.

 

That being said, favorability for Facebook Ads remains strong among those who have tried them, with 62 percent saying they would use Facebook Ads again, citing ease of use (62 percent) and the ability to start and stop campaigns (55 percent) as the top reasons for continuing.

 

Of the 28 percent who say they wouldn’t use Facebook Ads again, nearly two-thirds report that they didn’t acquire new customers (66 percent).  But more merchants now also cite high costs and low click-through rates as reasons not to advertise with Facebook again: 41 percent of merchants said the ads were too expensive (up from 35 percent in June) and 37 percent reported low click-through rates (up from 29 percent in June).

 

While Facebook Ads growth may have slowed, general Facebook marketing continues to be extremely popular among local merchants, with 70 percent of people using the social network for marketing, up from 66 percent in June.

 

(4) Merchants continue to invest in marketing strategies that drive customer acquisition.

 

In spite of the difficult economy, merchants are still spending money on marketing strategies that drive customer acquisition. Print newspaper ads and direct mail remain quite popular and are being used by about one-quarter of merchants (25 percent and 24 percent, respectively).  In terms of online marketing, 18 percent are buying pay-per-click search ads, and 11 percent are advertising in newspapers online, in addition to the 12 percent who have offered a group deal and the 24 percent who have used Facebook Ads.

 

Merchants in several top business categories also indicated that they would be willing to purchase qualified prospect information on a pay-per-lead basis in the coming year.  More than 60 percent of merchants in the financial services and insurance industries expressed a willingness to pay a per-lead fee for qualified customer prospect information, while at least one-third of merchants in the automotive, construction, home and garden and home improvement industries said they would pay for qualified leads.

 

Less proven customer acquisition strategies, such as mobile marketing, may be slower to gain steam.  Just 22 percent of merchants report having done any sort of mobile marketing and 72 percent saying they don’t have a good understanding of how to reach potential customers via mobile marketing.  But there may be promising indicators for future mobile marketing activities – about 60 percent of local merchants now own a smartphone, and 24 percent own a tablet or plan to purchase one in the next six months (up from 19 percent in June).

 

(5) High cost of online marketing cited as top marketing challenge for local merchants as budgets remain tight.

 

MerchantCircle’s data shows that local marketing budgets continue to be tight: 63 percent of local merchants are spending less than $2,500 a year on marketing, and 78 percent have no plans to raise their budgets this year.  The data also shows that the high cost of online marketing is the top marketing challenge for merchants (30 percent).

 

In spite of this, online marketing service providers continue to aggressively target local merchants in their sales efforts.  One-third (33 percent) of respondents who offered a daily deal did so after being contacted by a sales rep, and more than 20 percent of local merchants report that they receive more than 10 sales calls per month from online marketing service providers.

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Ramon Ray, Editor & Technology Evangelist, Smallbiztechnology.com . Editor and Founder, Smart Hustle Magazine Full bio at http://www.ramonray.com . Check him out on Google Plus, Twitter or Facebook

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