Local Business Merchants Warming up to Daily Deals

Daily deals on the rise?



Small business owners are definitely interested in trying “daily deals”, but few have actually taken the plunge. Despite a plethora of daily deals services, from the big pure-play companies Groupon and LivingSocial, to Facebook Deals, Google Offers, and dozens of other local alternatives, only 9% of small business owners have offered a daily deal via one of these services. This finding is part of the most recent quarterly Merchant Confidence Index survey of nearly 5,000 local business owners across the U.S., published by MerchantCircle.



However, merchants are warming up to the idea of using daily deals on a repeat basis – provided they find the right partners to make these offers effective. According to the Merchant Confidence Index, 77% of merchants who have tried daily deals said they would be willing to offer another daily deal in the future. Just three months earlier, only 50% of merchants who had tried deals said they wanted to offer another one.



This rise in “deal confidence” shows that merchants are becoming savvier with daily deal offerings – finding the right products, price points, and offers to acquire customers at an acceptable cost. Of those merchants willing to offer another deal, 58% cited effective customer acquisition as the reason to try again, while 30% said a favorable deal structure was the reason. Just 24% said profitability was a driver in offering a repeat deal.



Unfortunately, many merchants continue to be disappointed with the results of the daily deal offerings. Among those who wouldn't offer another daily deal, 42% said that it was not effective in customer acquisition, 25% said it was too costly, and 24% said they lost money.  Due to the high costs associated with daily deals via big sites like Groupon and Living Social (which take upwards of 50% of all proceeds on already discounted sales) many merchants feel they cannot “afford” to do them.

Even though less than 10% of small businesses have ever offered a daily deal, it’s not for lack of aggressive sales and marketing efforts on the part of big deals sites. More than a third of respondents who offered a daily deal did so after being contacted by a sales rep (34%) or seeing an ad for the service (31%).



Daily deals may feel omnipresent – what with the number of “deals” that land in most peoples’ inboxes daily and the recent news of Groupon’s proposed mega-IPO topping headlines – but the reality is only 9% of merchants have ever offered one. That may change as more competitively-priced deals partners enter the space. New offerings from Google and Facebook are catching on quickly with small business owners and may take a bite out of Groupon and LivingSocial’s businesses.



The Merchant Confidence Index shows that 52% of small business owners are considering using either Facebook Deals and Google Offers, citing their familiarity with these two mega-brands as the main incentive to choose them over competitors. Other reasons for choosing Facebook Deals include larger audience size (26%) and better local targeting (21%) compared to Groupon, LivingSocial, and other pure-play daily deal competitors. Those merchants likely to use Google Offers cited larger audience size (42%) and Google's brand reputation (34%) as top reasons for preferring Google.



Whether you run a hair salon, a dog walking service, a restaurant, a gym, or any other small business,  the reality is most merchants are working with very small marketing budgets. Daily deals may get new customers in the door, but at what price? With consumers reaching daily-deal overload, many people use the coupons to visit a business one time, then move onto another offer – never becoming a regular customer.



The draw to try Facebook Deals and Google Offers is not at all surprising. Because many merchants already buy Google ads and use Facebook, testing the daily deal waters with these familiar giants seems like, familiar one-stop shopping for what could otherwise feel like a risky expenditure of limited marketing resources.



However, unless Facebook Deals and Google Offers address some of the lingering concerns merchants have about daily deal services – high costs and few repeat customers – merchants may use them a few times, but not return. After all, small business owners are driven by one goal: grow their businesses profitably and sustainably. They don’t have time for gimmick marketing that doesn’t deliver.

Q2 2011 MerchantCircle Merchant Confidence Index Survey Results

Below are the results of our quarterly Merchant Confidence Index (MCI) survey for Q2 of 2011. The Index is designed to track trends in small business sentiment over time.



This sixth Merchant Confidence Index survey was fielded online, between April 30th and June 6th, 2011, and sent to a random sample of MerchantCircle's member base of over 1.6 million local business owners. There were 4,942 total responses from local business owners across the United States and no incentive was offered to complete the survey.



Merchant Confidence Index tracks track four key questions designed to synopsize the prevailing trends among local business owners.  The overall index score is based upon a standardized five-level Likert scale. 



78.2% of responses from merchants with 1-4 employees

12.5% of responses from merchants with 5-9 employees

7.4% of responses from merchants with 10-49 employees

2.0% of responses from merchants with 50+ employees

State of the U.S. economy

How would you rate today’s economy compared to the past twelve months? (n=4,942)

Expectations for the future revenue

How do you expect your sales revenues to change over the next three months? (n=4,942)

 

Marketing expenditures

How do you expect your marketing/advertising expenditures to change over the next three months? (n=4,170)

Hiring expectations

How do you expect your company’s headcount to change over the next three months? (n=4,942)

Merchant Confidence Index Calculation

Marketing Budget

What is your annual ad/marketing budget? (n=4,170)

Adoption of specific online marketing services

Most effective marketing channels

Select the top THREE most effective marketing or advertising methods your business uses or has used. (n=4,170)

Adoption and repeat usage of Facebook Ads

 Perception of Facebook Ads amongst users.

Adoption and repeat usage of daily deals sites

Perception of Daily Deals sites amongst users

Perception of Facebook Deals and Google Offers

Awareness of group buying sites

How did you find out about the group buying site you used (n=366)?

Tablet adoption

Do you use a tablet device for your business (e.g., iPad)? (n=3,786)

Tablet adoption

Do you use a tablet device for your business (e.g., iPad)? (n=3,786)

Respondent Profiles

Size of business

How many people does your business employ?

Business categories

Which single business category best describes your business?

MerchantCircle and Reply! Thank You.

We've been overwhelmed by the response to yesterday's announcement and wanted to once again thank all of our friends, family, former colleagues, investors and advisers.



As shared in Ben's blog, we recognize that it's because we've been surrounded by such fantastic support, great people and brilliant minds that MerchantCircle is the platform you see today. The needs of our merchant base have driven the products we've created and we've been proud to serve them in the capacity that we have. And now, we're very much looking forward to delivering an even better customer experience!



The market response to this new combination has been fantastic. Thank you for tweeting, digging, facebooking, and emailing the many news clippings.  Each of your encouraging notes, texts, and phone calls were proudly shared with the rest of our MerchantCircle team. We've loved that you have been celebrating with us.



In case you missed some of the coverage, we're proud to pass it on.



And while you read, know that we're back to doing what we do best.. It's GSD time!



Cheers!

Payam Zamani and Ben Smith 

-Two Bay Area players in the increasingly competitive local online advertising space are hooking up as Reply Inc. announced plans Thursday to acquire MerchantCircle for $60 million. (San Francisco Chronicle.)



-When Wienbar and the rest of the team at Scale Venture Partners combed through a proposal for local ad network Reply to acquire local business directory MerchantCircle, they decided the companies were “more valuable together than apart.” (Wall Street Journal)



-MerchantCircle's Smith expects overall traffic to grow significantly as a result of the pairing... (ClickZ)



-Clearly, MerchantCircle brings Reply an inventory of small businesses. Reply says the combined company projects revenues of over $100 million in 2012. (TechCrunch)



-MerchantCircle itself has shaped up to be a strong, search-driven Internet Yellow Pages player — although it prefers to characterize itself in broader terms, having added a Q&A platform, appointments, leads widgets, etc. (BIA Kelsey)

The MerchantCircle Board in the voting room

-MerchantCircle has long targeted merchants in small locales versus catering towards the consumers, as sites like Yelp and CitySearch do. (Washington Post)

MerchantCircle acquired by Reply! Inc. (And we're really excited!)

When MerchantCircle launched in 2006, our mission was simple: to build a network of millions of local business owners to help them market themselves to nearby consumers. We had visions of creating a powerful network for local businesses everywhere...

At the time, we were watching as billions of local marketing dollars were being spent on dying media like the Yellow Pages. We knew the web held significant promise for small business, but nobody had yet figured how to make it work on a local level. Determined to change that, we created a plan and started building.

Now, over 1.6 million local business owners have joined MerchantCircle, and are getting connected with 20 million consumers every month. For many of these users, MerchantCircle has been their first introduction to the power of the web.

Today, we're excited to announce that we just got better. MerchantCircle has been acquired by Reply! Inc., the leading marketplace for the acquisition of locally-targeted consumer traffic. (You can read all the details in our press release.)

“As the first investor in MerchantCircle, I can say it's been an incredible ride since Ben and I first incubated the company in our conference room back in 2004”, says Mark Menell, a Venture Partner at Maveron, LLC and the initial investor in MerchantCircle when he was a general partner at Rustic Canyon. “This is a big win for the MerchantCircle team and an even bigger win for local businesses and consumers."

So what's all this mean?

For our merchant members, we're thrilled to assure you that this deal will result in an even more powerful network. It will mean more effective web marketing tools, more connections with local consumers, more inbound customer phone calls, appointments, request for quotes, and business leads for YOU.  For consumers, this means even more meaningful connections to businesses in your area. We'll be more capable of empowering mutually beneficial, productive local relationships.

The team at Reply!, led by CEO Payam Zamani, shares our passion for giving businesses the best place on the web to reach local consumers. The MerchantCircle team will become the Reply! Media division of Reply! Inc. and will continue to work in the interests of our merchant customers. If you’re worried that we’re going away, don’t! You can rest assured, because our dedication to growing and improving the MerchantCircle platform still remains true

Every small business owner needs someone to believe in them – we are no different. For our investors, this merger represents an excellent opportunity to achieve our vision.  Scale Venture Partners, Steamboat Ventures, and Rustic Canyon  believed in MerchantCircle from the beginning. They understood our passion and desire to make the local web scalable and profitable. We were determined to succeed where many dozens of other start-ups had failed. Even when we didn’t know exactly how we’d turn that vision into reality, they supported us with funding and great advice. We are very grateful for their help in getting to this point.

As with most great success, this milestone could not have been reached alone. It's only because we've been surrounded by such intelligent investors, advisors and team members that MerchantCircle has grown into the organization your see today. And we think it's time to call some people out…

Joey Levin, Kara Nortman, Rob Angel and Jay Herratti at CityGrid Media have been invaluable partners and friends of MerchantCircle and are very much appreciated. Ron Conway (the Silicon Valley Angel), Michael B. Aronson of MentorTech , Alex Lloyd of Accelerator Ventures , Auren Hoffman of Rapleaf, Patrick Grady of Rearden Commerce , and Chris Tolles of Topix  have provided direction, support, and contributions that for which we are more than thankful.

This announcement also offers a tangible victory for our dedicated Board of Directors:  Ben T. Smith, IV, Scott Hilleboe, Peter C. Horan, Mark Menell, Neal Hansch, and Sharon Wienbar. The MerchantCircle team cannot thank you enough for giving us your trust, offering us direction, and executing on decisions that weren't always easy.

Even with 1.6 million users on the MerchantCircle network, several individuals have continued to stand out. Making significant impacts in their communities while sharing their small business stories, Community Leaders like Michele Gorham , Gino Orfitelli  and Monte Tareski  keep the MerchantCircle team fired up. We do what we do because of merchants like them. They've been our evangelists in their local neighborhoods and they've reached across the web to offer community to new MerchantCircle members. We cannot tell you enough how deeply we appreciate your loyalty.

This is very much a team win.

For MerchantCircle employees, the success we’ve had to date in building a major force in local is due to your hard work, creative thinking and consistent dedication to producing the best products possible. 

There have been countless cubicle meetings, more pizza than we'd like to admit, and many long walks around the block- just to brainstorm. We've become real friends… and somewhere along the way, we've built a family. You've launched some brilliant products, weathered some frustrating storms and exercised excessive amounts of innovation and creativity. MerchantCircle exists because of you.

Former team members like Ryan Osilla, Daniel Swartz, Jennifer Lin, Irit Epelbaum, and David Creemer have left a significant mark on MerchantCircle and while they're no longer in the office, their contributions continue to permeate how we operate. Jason Culverhouse and Wayne Yamamoto were both essential elements in building MerchantCircle from the ground up. We see and appreciate their work everyday. And though they've moved on to a new venture, together, they're still very much a part of our everyday lives.

Thank you. You've each poured yourself into MerchantCircle and now we're excited to join the Reply! Inc. team together. This acquisition means even more opportunity to be a part of an innovative, growing organization with an incredibly bright future.

It's time to celebrate!

Cheers,

Your MerchantCircle and Reply! Media Division Team

Another Quick Review of This Week's Small Business Trends

What a week it was! Here's a quick recap.



(And make sure you're following us on Twitter for great tips, news, and articles throughout the week!)



Celebrate small business every week (USA Today)



What? You've never heard of Small Business Week? You're not alone. It's not exactly like Hallmark is cranking out cards with sentiments such as "To my favorite entrepreneur -- glad those years of eating peanut butter and jelly finally paid off!" (Read more)





Recession Brought a Small-Business Boom (Portfolio.com)



There are actually more small businesses now than there were in 2006, when the recession began. That’s according to Dun and Bradstreet which released a report on the state of small business this week. The trend follows a deep trough through the recession, but a steep climb as the economy has slowly recovered. (Read more)





Top Five Tips For Women Small Business Owners (Forbes)



Women-owned firms account for 40% of all privately held firms, employ more than 13 million people, and generate $1.9 trillion in sales, according to the National Association for Women Business Owners <http://www.nawbo.org/> . However, most of these businesses (97%) have revenues below the million-dollar mark. (Read more)





Google Keeps Brands, Marketers 'Inside Search' (Media Post)



Google announced the launch of an official search blog Thursday, sending a message to marketers and those searching for content on the importance of search engine marketing and search activities across its portfolio of Web sites. (Read more)





Foursquare, LivingSocial eye local ad dollars (Reuters)



LivingSocial and Foursquare are both fighting for local ad dollars from mom and pop stores, neighborhood restaurants, and even big box retailers as online social media companies set their sights on a largely untapped pool of revenue. (Read more)

MerchantCircle Goes Mobile and Other News from the Week

It's been quite the week of exciting news! On Wednesday, TechCrunch broke the story of the MerchantCircle mobile app release and we couldn't be more excited. 



MerchantCircle VP Darren Waddell said it best, "We anticipate that merchants will use the Merchant Mobile App in a variety of different ways - everything from staying on top of new customer inquiries to uploading real-time photos of their business and their work. We believe that making content creation fast, easy and convenient will enable many more merchants to maintain the kind of robust online presence that will help them drive new business.”



There were some other interesting stories that came out this week. As usual, we wanted to keep you in the know. Enjoy!



Google Business Photos – Google Focuses on the Small Business (WebProNews)

Last year, Google started going around taking pictures of the inside of stores , for what seemed like the indoor equivalent of Street View for businesses. Google has now announced the product around this, which it is calling Google Business Photos.

(Read more.)





Hot topic in the Senate? Declaring that May is Small Business Month (Sacramento Bee)

Its stated goal was to "raise awareness of the contributions made by outstanding entrepreneurs and small business owners.  " But that wasn't the issue. (Read more)

 



How Would a Website "Do Not Track" Law Affect Small Businesses? (ReadWriteWeb)

The so-called "Do Not Track" legislation is favored by consumer groups and privacy advocates, but opposed by many online marketers, who fear it may limit their ability to monetize their content and services online. (Read more.)





Blogging for small business – what you should have in mind (Travel Wires)

End of the day, your blog is directly responsible for your growth and reputation. At a glance, here’s what you should keep in mind while blogging for small business. (Read more.)





Facebook accounts for 31.2% of display ads (Vator.tv)

With 346 billion display ad impressions in the U.S. in Q1 2011, Facebook beats the top ten combined. (Read more.)

A Quick Review of This Week's Small Business Trends

From Facebook to Royal Wedding mania, we've got a wrap-up this week's most interesting news stories related to small businesses. Take a look!



Facebook Jumps into Crowded Coupon Market (Reuters)



With the new service, Facebook becomes the latest Internet heavyweight to jump into the red-hot daily deals market pioneered by Groupon a few years ago. Last week, Google Inc began marketing a new daily deals service dubbed Offers to users in Portland, Oregon, with plans to expand to San Francisco and New York, and Amazon.com invested $175 million in LivingSocial in December. (Read More)





Smartphone Users Are Using Their Phones In The Bathroom (HuffPost Tech)



It's clear that the portable quality of the smartphone has a great deal to do with they way its used. Search engine sites were the most popular type of site that users visit, and ninety percent of mobile searches ended in an action of some kind, such as buying a product or visiting a restaurant. (Read More)







SMBs Need Real Plans For Social Media (InformationWeek)



Without clearly defined goals for social media activities, small and midsize businesses risk chasing an elusive return on their investment in the technology. (Read More)







5 Reasons Why Effective Marketing Makes Your Business More Valuable (WebProNews)



If indeed you have any vision of selling your business in the future you’ve got to focus on marketing instead of simply focusing on sales. (Read More)







The Entrepreneurs’ Princess (Wall Street Journal)



When this couple says their "I dos," the royal family will officially be wed to the dreams and aspirations of millions of entrepreneurs in the United Kingdom and throughout the world. (Read More)