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Join Our Research Team at DMA 2014
Sep 27, 2006
Case Study

How to Sell Thousands of Gift Certificates to Consumers Who Didn't Know They Wanted Them

SUMMARY: Last year gift certificate ecommerce site Restaurant.com was reportedly on the verge of bankruptcy. Now it's on a sharp upward arc toward unexpectedly high profits.

Discover one of the biggest online tests the site used to contribute toward this turn-around. (Hint: The more personalized interaction you can offer site surfers, the better ...)
CHALLENGE

In the domain land grab of the late ’90s, many companies bet that having just the right URL -- namely a word such as cars or pets -- would generate tons of free and easy traffic, due to both organic search engine listings and because consumers would try typing that word directly into their browsers to get to what they assumed might be there.

So marketers rushed to register URLs such as Restaurant.com before anyone else could.

Did it work? Sort of. Traffic for the popular keywords turned out to be fairly steady, although not mega-huge. Case in point, Restaurant.com wound up with a moderate Alexa ranking in the 10,000 range without much outgoing marketing.

The only problem was in converting that traffic.

The site's business model was selling discounted gift certificates on behalf of nearly 8,000 restaurants across the US. (The restaurants agreed to give the site a commission on every dining gift certificate sold.) So, the site's tagline read, "Slice, dice, and skewer your dining bills."

The only problem was, visitors hadn't expected to find that offer when they typed in the URL. So they quickly abandoned. In droves.

Lesson learned: If your site doesn't immediately give consumers what they're looking for, they won't stick around to be cross-sold on another related offer.

CEO Cary Chessick was frustrated. How could he sell gift certificates to visitors who weren't interested in buying them?

CAMPAIGN

This summer, Chessick decided to test changing strategies from an immediate sales offer to a lead generation path leading to a certificate sale.

The site was rebuilt around what consumers were clearly expecting when they typed in the URL; i.e., lots of content about restaurants, including:

- Easily searchable lists of restaurants in their area
- Menus and wine lists
- Cuisine type and pricing
- Hours of operation
- Address and phone
- Photos and logos
- Virtual tours when possible
- Chef's bio when possible

Chessick’s team naturally placed offers for discounted gift certificates next to all of this content in hopes of converting surfers. The offer was to pay $10 for a $25 certificate, thus saving $15 on your meal. But, he worried that approach wasn't interactive enough to convert at significantly higher rates.

People would search through the content and then slide off the site. Chessick needed an involvement device to get them to continue the interaction with the site even longer … until they were actively ready to say yes to a gift certificate offer.

His big idea -- ask them if they'd like to make a reservation.
After all, it’s the next logical step in a restaurant search.

So, the team added a hotlinked offer within the restaurant listings that read, "Make a FREE Online Reservation."

Now that visitors had gotten so far down the pipeline and would get something of perceptibly personal value, Chessick thought it was a safer place to ask them to register -- thus capturing their contact info and requesting a potential email opt-in.

After registering (or logging in) visitors next wound up on a personal registration form page, conveniently pre-filled with info about the restaurant, the day's date, and a 7 p.m. dining time for that evening. Once the visitor clicked submit to make their reservation they then got an offer for a gift certificate.

At this time, Chessick hoped, the offer would prove so compelling -- pay $10 to get $25 off the meal you just made reservations to eat -- that more visitors would convert to it. As he explains, the pitch was more of an "Oh, by the way," offer than a hyped promo.

However, he was taking a bigger risk than you might expect, because the operational systems required on the back end to support an online reservations system were complex.

Like most local and small businesses, restaurants rarely have online appointment-setting capabilities. Thousands still rely on a human receptionist handwriting notes into a printed reservations book.

In order to connect Internet-loving consumers with thoroughly offline businesses, Restaurant.com's automated systems had to:

1. Convert reservation info into a voice message
2. Automatically call the restaurant in question with the message
3. Send an email to the consumer that the reservation was underway
3. Receive a yes or no answer verbally from the restaurant
4. Phone the actual consumer with a voice message confirming or denying the reservation
5. Send an email to the consumer to that effect as well
6. Allow denied reservations to try a different time or day for the reservation with verbal commands on the phone … and start the process all over again.

Translating text to voice, and back again, as well as integrating email into the process wasn't easy. At launch on July 1, 2006, Chessick braced himself. Would all that technical work be worth it?



RESULTS


Overall, nearly 6% of unique site visitors now convert to buying a certificate -- an extremely high conversion rate for consumers who hadn't intended to buy anything when they visited.

The biggest home run -- 26.8% of visitors who register to make an online reservation have converted to buying at least one $25 gift certificate.

Plus, now Restaurant.com has a growing opt-in email database they have started to test initial promotions to, so site profits will certainly continue to rise.

Useful links related to this article

Creative samples from reservation process:
http://www.marketingsherpa.com/cs/restaurant/study.html


Restaurant.com:
http://www.restaurant.com

See Also:

Comments about this Case Study

Sep 28, 2006 - Alan Charlesworth of University of Sunderland, UK says:
As usual, an excellent case study for others to work from. One little gripe on this one though. You say: “So marketers rushed to register URLs such as Restaurant.com before anyone else could” – the thing is; you don’t register a URL, you register a domain name, which can then be used as a URL. Keep up the good [and free to readers] work.


Oct 02, 2006 - Scott Braden of scottbraden.com says:
A brilliant example of re-engineering the business model to meet the customer's needs! Reminds me of the old "starving crowd" parable. Kudo's to Cary Chessick. Now to the marketers: would your CEO listen to you if you said "we have to re-engineer our whole business model to get more revenue from our existing customers" ?



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