Customer-vendor relationships may be of greater value than sales at this stage of trend
by Wailin Wong.
The employees at information technology consultancy Ajilitee like to keep ahead of trends and be known as pioneers. That’s why the Rolling Meadows firm conducted an experiment on deals site Groupon, offering $25,000 worth of services for $12,500.
The three-week offer was the priciest deal ever run on Groupon and marked one of the first times a merchant used the Chicago-based daily deal site to market services to businesses rather than consumers. And while the company saw a spike in traffic on its Web site, no buyers stepped forward.
“We felt like we were testing the waters, using the discount platform, which was Groupon, to get the most mileage from our experiment,” said Diann Bilderback, Ajilitee’s chief marketing officer. “But we jumped into a pool that’s still filling with water. In time, it will be possible to swim.”
Ajilitee’s foray into group-buying illustrates the challenges for an emerging group of entrepreneurs hoping to translate Groupon’s lucrative model in the business-to-business space, already populated by the likes of OfficeArrow, BizGrouper and B2Bucks.
All of them hope the same zeal for deals that has sold millions of discounted manicures and restaurant meals also can work for printer cartridges or legal services.
Gary Slack, co-founder of BizyDeal, a Chicago-based deals platform for businesses that launches Monday, said he wants his site to be an additional channel that small- and medium-size firms use to reach new customers. Slack said his platform is tailored to the specific needs of small-business owners. For example, some of the offers on his site will be open for a week or even a month because buying decisions at companies typically require more time, especially if multiple people have to sign off on big-ticket purchases.
This is a major difference from the consumer space, where the prevailing model is to offer a deal for 24 hours. But by running longer offers, providers of B2B discounts risk losing the sense of impulse that is a key factor in getting consumers to open their wallets.
“I think the basic psychological premise that has fueled Groupon in the consumer space (will) largely be there as well in the small-business space,” said Slack, who is also CEO of Slack and Co., a local B2B marketing services agency. “We do believe that for the deals to be compelling and to emotionally connect with people … discounts of 50 percent will really contribute significantly to their interest level in doing something sooner rather than later.”
For some business owners, a 50 percent discount might not be tempting enough if the overall scale of the deal is too small. This is one lesson Jordan Stewart learned when he started BIZcounts, a deals site for businesses, in August 2010. The site is on hiatus while Stewart and his team work on building more features. He plans to relaunch the platform in a few months.
“Offering a small business owner $25 off on a stack of paper is not going to get that job done,” said Stewart, who is based in Huntington Beach, Calif., and previously ran a social media consulting firm. “Is a $50 deal even worth a business owner’s time? They need more expensive products or services … a reason to go through the process. If I can save you $500 or $5,000, you’re looking at a totally different conversation.”
Slack said he wants BizyDeal to be a wide-ranging platform, offering discounts on reams of paper and rates for events at hotels or retreat facilities. He said he’s been talking to Ford Motor Co. about a deal for the Transit Connect, a compact commercial van, although nothing has been finalized.
For Desks Inc., a Chicago-based office furniture dealer, the appeal of partnering with BizyDeal was the ability to reach small businesses. Jim Ford, the company’s managing principal, said he had been mulling the idea of hiring dedicated salespeople to address that segment when he bumped into Slack at New York’s LaGuardia Airport. The two men later met up in Chicago and agreed to work together.
“As a vendor … you’re not going to make a lot of money on any one individual sale,” Ford said. “But you’re building a relationship database with companies that will hopefully grow, and you can grow with them.”
Ford said the products his company offers through BizyDeal will be items that can be sent via UPS and assembled by the buyer, such as office chairs. These restrictions cut down on shipping and labor costs that would otherwise eat into the value of the deal.
The new B2B group-buying platforms have the potential to help companies such as Desks Inc. by attracting small businesses. The big question mark is whether those buyers will become long-term customers, or whether they’re simply chasing discounts and will hop from one site to the next, as many consumers are doing with Groupon and its competitors.
Attracting the right kind of customer is a concern for John Duzansky, an account executive at Midwest Promotional Group, a Summit-based company that makes promotional products. After attending a Christmas party where many of the guests talked about buying Groupons, Duzansky started exploring the group-buying model as a possibility for his company. But he is still watching the industry and thinking about how to structure a deal.
“We sell (to) a wide variety of clients,” Duzansky said. “What you’re trying to do is reach the most-qualified, solid ones. We’ve got relationships — we’ve been dealing with people for 20 years here. That’s what we’re trying to build. I look at the (group-buying sites) as being a way to get your foot in the door. But you want to get your foot through the right doors.”
Meanwhile, Bilderback said Ajilitee remains optimistic about group-buying deals as a marketing tool.
“We’ve learned a great deal and we feel there’s a groundswell building,” she said. “This model has legs, and it’s going to become a tool of the small business and eventually the enterprise. I’m sure we’ll be participating again.”