Know Your Market (or iterate quickly)
If you use the internet then you’ve probably heard of Groupon, or at least you’ve seen their ads on just about every website that displays ads. The company has been aggressively expanding into international markets and they’ve recently arrived in Perú in September. In a recent interview, Groupon’s country manager stated the company is spending $50,000 a month on Google Ads. $50k!??!?! Well, he also says they’re now sending emails to roughly 50,000 users in the region. Ok, so $1/user isn’t so bad. However, apparently they are only selling an average of 100 coupons per day. Ouch. That’s a lowly 0.2% conversion rate. While I’m not sure what Groupon’s conversion rates are for other markets, 0.2% isn’t something to write home about. So what could possibly be behind this? Well there are a few factors that are pretty specific to this market.
People in Perú aren’t yet accustomed to making purchases online
Minor detail right? Folks here still have an inherent mistrust of e-commerce. The banks here also generally require internet purchases to have a special PIN fob in order to make purchases online. The actual population ready & willing to make purchases online is a small fraction of Lima’s 8 million(ish) people.
Lima’s geography is a unique obstacle
When Groupon first started sending out coupons, they were only available in Lima, Perú’s capital. Lima is a metropolis who’s gangbuster growth over the past 7 or so years has left its infrastructure in the dust. There are not enough highways, not enough roads, and too many cars. There are 30 separate districts (municipalities) that make up the metropolitan area. It can easily take 2 hours to go 5-10 miles during “rush hour” (which is pretty much all the time). And if you need to go from one extreme to the other of the city? Forget about it, it’s a 4-5hr trip! Groupon was promoting two daily offers, and they were coming in from all over Lima. Sure the savings were good as they always are with Groupon, but if I live in one district and the coupon is for a business more than 1-2 districts away, I could be looking at spending an ENTIRE DAY in transit, just to make use of that coupon. If you’ve ever experience the traffic in Lima, you’ll know that no coupon is worth that. Obstacle #1 is a cultural issue that will be alleviated over time as the locals get more exposure to online purchases and more businesses & services encourage their customers to make purchase online. Not much Groupon can do there except keep up the marketing and fighting the good fight. Obstacle #2, however, is a different story and Groupon has already started making changes to adjust for this. They’ve separated their offers within Lima even further with options for “Lima” and “Lima Este” (East Lima). Time will tell if this division is enough to boost sales but it’s definitely a step in the right direction of accommodating the uniqueness of the market you’re entering. The lesson here is that you always need to approach a new market with as much knowledge about the culture and “quirks” as you possibly can. Then you need to be ready to adjust your plan quickly as you begin gathering data on how things are going (or not going).
