The psychology of couponing: Where ajillitee went wrong

Is a Groupon model the next big thing for B2B? Apparently not. Or, at least, not now, based on an early trial by a Chicago-based consulting firm, Ajillitee. They used Groupon to offer $25,000 worth of consulting services at half price.

It was the biggest deal Groupon had ever offered. Hey, keeping $12,500 in your pocket is nothing to sneeze at. And knowing buying consulting services is not exactly the same as snagging a half-off lunch coupon, the offer stayed open for 3 weeks, giving all potential takers plenty of time to act.

But, at the end of the 3 weeks, the offer disappeared. The result? Nary a sale..not even one. Ajillitee extended the offer on their own website, with the same result.

“We were really trying to test the market,” said Ajillitee CMO Diann Bilderback. “What we learned was that we were early to the game. Groupon’s platform is the platform for this (online coupons), but it’s very consumer-oriented. The rules didn’t align with our kind of sale. Groupon works on snap decisions, but business decisions typically take longer.”

Well, that’s true. But there’s another element at play here. It’s the psychology of the deal itself. Do you really want to buy thousands of dollars of consulting services with a coupon? Even one saving you 50%? Thought not. Pizza..sure! A pedicure? Maybe. Half price Yoga? Sign me up. But critical information systems for your company? No thank you!

Coupons work well in certain markets, and not so well in others. For example, would you use a coupon for a doctor or a lawyer? Probably not, but why? Why a pizza, and not a heart surgeon?

The answer can be summed up in one word: risk. Coupons work extremely well in some well-understood circumstances – to save money on something you were going to buy anyway, or when you want to treat yourself. In a previous series of columns, I talked about how all buying decisions are predicated on a balance of risk and reward. Reward is the gas pedal, and risk is the brake pedal. If risk is very low, coupons can serve to push you past the tipping point and get you to act immediately rather than “some day.” It accelerates latent consumer demand.

Coupons can also sway a purchaser from one brand to another, but this typically only happens where risk is minimal. Coupons work in the world of the “pretty good problem,” where all the options are within a range acceptable to the buyer. Think of laundry detergent, cheese slices or hand soap.

Finally, coupons can reduce the barriers keeping you from an indulgent impulse purchase. Coupons play on short-term gratification, introducing the promise of reward, compounded by the dopamine rush that comes from snagging a great deal. It amps up the “reward” portion of buying motivation so that the “risk” limiter doesn’t stand a chance. Groupon, in particular, pulls out all the psychological stops by throwing in equally addictive elements of geographically targeted rewards, limited availability and elemental crowd psychology. If this is the mental landscape you’re playing in, online couponing can definitely stack the odds in your favor.

But, alas, B2B purchasing, especially big-ticket items like consulting, meets none of the above criteria. B2B is all about risk avoidance, and there is little reward driving these types of purchases. This came through loud and clear when I was researching my book, The BuyerSphere Project. Not only will a coupon offer fail to eliminate risk in these circumstances, it will actually increase risk by raising questions about the credibility of the consulting firm offering the coupon. If the consulting is any good, why are you offering it at half price? Are you that desperate for business?

Apparently, companies like Ajillitee haven’t given up on the concept and a new rash of B2B oriented online couponing companies like BizyDeal and RapidBuyr are jostling each other in a rush to jump on the Groupon bandwagon. If the types of deals offered are targeted to low risk scenarios (copy paper and toner cartridges), they’ll probably work. But don’t expect to get a rush on coupons for consulting services, enterprise level solutions or other big ticket, complex purchases. When the buyer (or buyers) is looking at all risk and no personal reward, using couponing is like bringing a knife (or more appropriately, a spatula) to a gunfight. It’s absolutely the wrong tool for the job.

Orig­i­nally pub­lished in Mediapost’s Search Insider September 22, 2011