Westfield, Google and Groupon all sell the same thing. They all sell traffic. All these businesses pitch a certain story to consumers, accumulate traffic, then sell the traffic to businesses, argues CEO and founder of Kogan.com and speaker at disruption event, Daze of Disruption, Ruslan Kogan.
Traffic is the lifeblood of every business because all traffic, at its core, is just “potential customers.” Traditionally, businesses have acquired traffic by renting a store in a retail strip or shopping centre like Westfield. For your rent money, you were basically guaranteed a certain amount of foot traffic — usually the more you paid in rent, the more foot traffic you would receive from the higher profile location.
The Internet has given rise to a new kind of traffic — virtual traffic rather than foot traffic. As the retail and marketing landscape changes, businesses need to keep up with the changes and ensure they optimise the type of traffic they are purchasing.
Whether you’re selling a fast moving consumer good to the mass market, a niche product to a select few, or a business-to-business service, the way you court traffic must continue to adapt for your business to continue to thrive.
Although Westfield, Google and Groupon all sell traffic, they all sell a very different type of traffic, and some is better suited to certain businesses than others.
Westfield sells very active traffic — these are people who are willing to choose to go to a shopping centre with a clear aim to consume and purchase products and services. Usually, these shoppers are not time poor and are willing to interact with sales staff and spend a bit of time browsing around. Over the years, we have seen that these customers are very active. You’ll rarely see someone walking back to their car at a shopping centre parking lot empty-handed.
Google sells very targeted traffic — these are people who have just searched for exactly the type of product or service that you sell. Google is one of the only platforms in the world that is able to capture intent en masse. This means that they are likely to be well into the decision-making process for your type of product and your chances of converting one of these potential customers into a real customer is very high. It is a marketer’s dream to be able to purchase traffic with the targeting precision that Google has.
At Kogan.com, a large portion of our marketing budget is spent on Google AdWords and this contributes to efficiency in our business.
Groupon and group buying sites sell a very opportunistic type of traffic — these are customers that will not transact with the business unless there is a heavy discount on the normal price. With this sort of marketing, it is important to consider the potential customers you may win, and whether they will return to purchase from your business at your everyday price. You must weigh up whether they will be loyal to your brand and if it’s worth the effort.
I think the fact that the customer purchases from these sites suggests that they are less loyal to any one business and will just take whichever deal comes along. A friend of mine only washes his car once there is a coupon deal for a car wash. Not only is he not loyal to any particular group buying site, he is not loyal to any car wash. He has not once paid full price to wash his car ever since all the group buying sites popped up.
Because you’re diminishing your brand value and eating into your profit margin (in many cases entirely eroding it) by buying this type of opportunistic, disloyal traffic, it’s unlikely to be sustainable for any business. In fact, there are horror stories of businesses in the US — where the group buying fad started — going under because they could no longer afford to offload their product or service below cost price to customers who have no intention of returning for anything resembling market prices.
Group buying sites aren’t the only ones selling opportunistic traffic. Price comparison sites are another example. If you win a customer who comes to your site from a price comparison engine, guess where that customer will start their purchase decision next time they need to buy something?
While I’m yet to see a single small business flourish from using an online coupon site, there may nevertheless be times where it is appropriate to purchase opportunistic traffic. As with any marketing expense, it is important to understand the traffic you are purchasing. In the same way you would evaluate which print magazine to advertise in – How many readers do they have? What is the demographic? Why do people read it? You must ask similar questions from any source that you buy traffic from – How do they get the traffic? What are they interested in? Why does the traffic interact with this business? Answering these questions will help you decide if your business needs active, targeted, or opportunistic traffic.
See Russell Kogan speak at digital disruption event, Daze of Disruption.