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Author Topic: Brick and Mortar Merchant Impressions- Part 2  (Read 2832 times)
Jessy Kang
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June 16, 2011, 04:35:47 PM
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I have been accepting Bitcoins for seven days and now have some Analytics stats to go on. My web monkeys usually run campaigns for at least a month before drawing any conclusions but we'll work with what we have. Much of this comes from the marketing people I work with, and the conclusions from professionals who advise me- but they've served me pretty well over the years and I share their conclusions.

First off- since adding Bitcoin overall sales dropped roughly 20% ±5 from normal deviation over three years. Wait- before any knee jerk Bitcoin defense read why.

In retrospect we saw that sales dropped for some good reasons and it illustrates the need for serous multi-variant market testing with Bitcoin- because at the moment there is simply no data to go on.

I have a fairly well tuned text pitch on pricing, multi-variant tested over about 15 generations. For non-merchant types in it's simplest form this means running "Just $90" "Only $90" and "Price: $90" in rotation for a few hundred sales, then picking the one that performed best (made the most money) and refining it further. The results can often be surprising, guesses as to what will make people buy often wrong. Multi-varient testing is pretty much the most powerful tool in the marketing toolbox due to the Kaizen principle and...yawn. Anyway multi-variant testing = good.

So I have this well refined, high conversion cost pitch there now, and I got the web monkey to plaster in below it:

"We offer a 10% discount for sessions paid in advance with Bitcoins."
(except "Bitcoins" opened the video in a lightbox)

This is a good, honest offer- but it is totally unmarket-tested. There are any number of reasons it could detract from gross sales- customers see that others are getting a discount so resent paying full price, 10% sounds like too little compared to "$20 discount", or even "Just 9 Bitcoins", too many
pricing tiers (we already have several) and sales crash because it looks like am upsell scam. Could be any one of dozens of things- the problem is not inherent with Bitcoin- it's inherent in trying to market something new without any data to base it on or any existing, large successful merchants to take a hint from.

There already a pretty large body of published data on effective copywriting using dollars, credit cards etc.  I can hire a decent copywriter online in an instant to do that. Not so much so with Bitcoin- the marketing language has not be written yet. We can start with logical fallacies to get a starting point for potential lines of attack- but there is still the need for high volume, long term multi-variant testing.

This is actually *good* news as it creates what Warren Buffett refers to as a "moat"- raises the barriers for entry for our competitors. Based on what
I am seeing, Bitcoin is not going to just be something any e-commerce site can profitably "drop in" anytime soon, it's not just about exchange rates.

Should Bitcoin stay viable, the process of learning how to market, process and fulfill in Bitcoin will represent intellectual property that the merchant owns, that will give him a lead over competitors who come to the game later. Obviously this lead will last only so long as the basic body of information stays out of the public domain, but it is promising for smaller merchants.

I understand that much of the above will be denied by the dogmatic, but I'm not trying to dissuade potential merchants. I'm trying to say that for an established business it's not simply a matter of adding a currency conversion script and if they buy with bitcoin- bonus, if not then no harm done. It's more complicated than that.

As far as traffic goes. Having a link to my website in my Bitcoin.org signature resulted in about 90 visitors the first day, then leveled off to about 4-5 a day with active posting. The Average Time on Site from Bitcoin.org traffic was 3:14, 40% less than the overall site average of 5:28. This indicates they were most likely simply curious and not prospective customers. This is consistent with the Bitcoin.org audience of 18-34 year old men, versus my sites 35-54 year old crowd (Alexa).

No directory I submitted to, including my listing in the Bitcoin Wiki, sent any traffic. I offer a niche service in a single city and the Bitcoin community is still small so this is hardly surprising. I think eventually, if Bitcoin is successful online directories could end up being very lucrative. Bitcoin equivalents of Eros-Guide.com and Backpage.com that were equally Adult service provider friendly could represent a potential goldmine.

For the time being, brick and mortar merchants should not expect any sudden influx of customers- we are talking hard stats not wishful thinking. For B&M businesses the advantages Bitcoin has to offer will largely only be realized by evangelizing the currency to their existing client base.

Simply put, if you are accepting Bitcoin, you are marketing Bitcoin. Most established Bitcoin users are holding their currency at the moment- they have every incentive to hold Bitcoin and buy goods and services with USD- and that's what most are doing. The Bitcoin market right now is largely about exchange and speculation- purchases are still a novelty for most. So if your business accepts Bitcoin and you actually want to get Bitcoin rather than just have a sign in the window- you will have to be an evangelist and market the concept of Bitcoin to your existing customers.

Evangelizing Bitcoin is a bit of a tricky topic and there are other threads on the potential pitfalls of advertising Bitcoin. I linked directly to weusecoins.com- a wonderful site that in my mind represents the face that Bitcoin should be presenting the the public. I've not had a single potential Bitcoin customer stop there, they start digging, they read more- we all know how fascinating it is. Unfortunately that's where things get messy and I've had a mix of positive and very negative feedback, when honestly I'd rather not piss any of my customers off.

As I said, the issue of the politics of Bitcoin is being addressed in other threads- just be aware that as a merchant your customers will, in all likelihood see your decision to accept Bitcoin as a political statement and respond accordingly.

I sat down with my lawyer, a few other people and discussed the overall benefits and risks. With the Bitcoin community focused on their political message over attracting established businesses it is unlikely that any merchant coming to the currency will have opportunity for knowledge sharing and collective problem solving- thus more labor and higher entry costs. This is reflected the the structure that has been chosen for Bitcoin.org with Political and Off-topic forums, but not a single Vendors or Merchants forum. Vendors are not a priority at the moment and should not anticipate any particular support simple by virtue of adopting the currency.

My own state of New York is the home state of the Senators whom are seeking to outlaw Bitcoin. The combination of marketing hurdles, low demand for Bitcoin services, potential illegality, unwanted political affiliation, and limited community support, make in my opinion openly advertising the use of Bitcoin a poor decision at this time for any brick and mortar business.

I have removed Bitcoin from my site. I, and the people I go to for advice could be wrong- but I don't see a lot of established brick and mortar vendors lining up under the current conditions.

That being said I'm not all doom and gloom on Bitcoins- that would be foolish. The above is just an account of my experience and impressions of Bitcoin as a fairly average small businesswoman. Crypto-currency is here to stay in one form or another but like physical coinage it will be subject to revision and improvement. Currently Bitcoin is carrying a lot of unneeded baggage which it is going to need to shed if it wants to see mainstream adoption. If it does not, then we can all look forward to having an edge when it successor comes along based on our experience as early adopters here.



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June 16, 2011, 05:00:14 PM
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You've hit on Bitcoin's biggest current problem, that is that it's too difficult for merchants to get started and/or to continue to accept Bitcoin.

I especially appreciate your insight regarding writing copy. A merchant definitely needs copy that converts well (and doesn't scare off people who don't yet use Bitcoin!). At first glance it would seem that Bitcoin would work fairly well for your particular business, though I say that from the perspective of knowing how Bitcoin works and what advantages it would confer to your clients. Since most of your clients don't yet know this, then you would indeed have to present the benefits of using Bitcoin in the context of your business, making you by default an evangelist.

Effective copywriting for Bitcoin is easy compared to the political issue. Bitcoin has properties that make it attractive to people of a certain political persuasion, as well as people who want to conduct various business which some governments frown on. Many of these people are quite vocal about their strong opinions, and many of those have never learned the art of tact and diplomacy. What I find sad about that is that those people would realize their goals much faster by toning it down a lot and working on mainstream Bitcoin adoption.

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June 16, 2011, 05:29:29 PM
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Jessy King I wish you and your business the best of luck and expect you to implement bitcoin into your business again in the future
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June 16, 2011, 08:44:18 PM
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nice perspective, given me a lot to think about.
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June 17, 2011, 03:45:51 AM
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Jessy, I do admire your efforts, and I would like to suggest some other approach:

Do you want your customers to use bitcoins? Then give them some.

Instead of a 10% discount for BTC payment, give them a 10%-20% BTC coupon for select items, wherever you know that your risk is not that big. Example, a customer buys a special offer item for 50$ and they get 0.25 BTC as a gift, plus a nice booklet explaining what is Bitcoin and how they can get started easily. Mention in the booklet that soon (2-3 months) you will be offering Bitcoin-only special deals.

I am sure you can expand on it. I am the proud owner of a nearly bankrupt B2B store in a nearly bankrupt country with nearly bankrupt banks, and time is running out fast. Just found out about Bitcoins a few days ago, and my mind is trying to find ways to do my business with it, as normal business with fiat is out of the question at this time.

Cheers.


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Jessy Kang
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June 17, 2011, 06:26:27 AM
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Effective copywriting for Bitcoin is easy compared to the political issue. Bitcoin has properties that make it attractive to people of a certain political persuasion, as well as people who want to conduct various business which some governments frown on. Many of these people are quite vocal about their strong opinions, and many of those have never learned the art of tact and diplomacy. What I find sad about that is that those people would realize their goals much faster by toning it down a lot and working on mainstream Bitcoin adoption.

I agree. But it seems that they are willing to take their marbles and go home rather than play with others. There is no argument that this clearly hurts Bitcoin adoption, it's just that their politics take priority and their intent for Bitcoin is as a means to bring their political message to the public- even if that message destroys it as viable currency.  Huh That's their choice, but neither my, nor most other established businesses is going to carry their sign and chant with them.

When the dollar accelerates its hyperinflation and people discover how inconvenient gold and silver are for daily trading, then more people will be all over Bitcoin ;-)

I think people will be all over some form of work-unit cryptocurrency. My bet is still as a sort of barter analog. There seems to be an overall societal trend for people seeking digital social connections, slapping a fiver on the table is not very sociable.  Wink

I think there are also gender issues here- eg. a women can show off the 20k diamond her fiance got her to her friends at brunch, but not a plastic bag of 20k dollars in mixed 5s and 10s. Or women's greater usage of non-cash currency for safety reasons (checkbooks and creditcard). There are all sorts of interesting facets to look into. It's not just about worth and value, the delivery system affects adoption and usage. This is what will give marketers such an edge.

Do you want your customers to use bitcoins? Then give them some.

Instead of a 10% discount for BTC payment, give them a 10%-20% BTC coupon for select items, wherever you know that your risk is not that big. Example, a customer buys a special offer item for 50$ and they get 0.25 BTC as a gift, plus a nice booklet explaining what is Bitcoin and how they can get started easily. Mention in the booklet that soon (2-3 months) you will be offering Bitcoin-only special deals.

Oh, no problem getting them to use Bitcoin, I suggested the ladies sell their panties- but only for Bitcoin. Got buried in requests. Then those customers go through the process of getting setup on Bitcoin, read what's out there, and I start getting emails like "Really Jessy, you always seemed like such a level headed business woman, I never would have figured you for one of those types..." As another forum commenter put it, Bitcoin is quickly becoming "currency of teh crazy" in the mind of the public- without even any media coverage (yet) casting it as such.

I just have every reason not to take Bitcoin- in brings in almost no new business, everyone is happy to pay cash, there might be future benefit in taking Bitcoin but why be cannon fodder marching in the front of the people who really stand to benefit from my risk? Early Bitcoin adoptees don't give a crap and would leave me flapping in the wind if I got dragged into court over it. I'm not going to be a martyr for their cause.
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June 17, 2011, 10:17:52 AM
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I have removed Bitcoin from my site. I, and the people I go to for advice could be wrong- but I don't see a lot of established brick and mortar vendors lining up under the current conditions.

I don't really see brick and mortar merchants as a big market for bitcoin in the short-to-medium term.  For them, it offers too few advantages over paper cash. 

The first markets to adopt bitcoin on a large scale will those that are in need for bitcoin's unique properties, not those that it shares with other payment methods.

ie.

porn, poker, remittances, MMOGs, mechanical-turk style workers, financial services. 

From there it will slowly expand to other markets.

In fact, brick and mortar merchants will probably be the last to adopt bitcoin. 


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June 20, 2011, 08:46:45 AM
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It occurred me while reading this that the most effective successor to Bitcoin wouldn't be a successor at all, it'd just be a more polished front to the same blockchain that we're already using.

Someone could take the existing client, re-skin it and replace all instances of "Bitcoin" with something else ("emoney"?).  Start their own project forums, exchange, and mining pool, and start marketing them.  Voila, they've got a "brand new" cryptocurrency, without the image problems that Bitcoin currently has, and without having to start from scratch on bootstrapping the value.
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June 20, 2011, 01:05:57 PM
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Another problem for any B&M merchants is the time it takes for confirmations.

It is unrealistic to expect a customer to wait for x confirmations before they can take the product purchased or even start a prepaid service, unless you really trusted them or said the hell with it and took a chance.

So it all must be prepaid.

The easiest way around this is a web storefront where the customer can pre-order then run to the store for their purchases later. Even with prepaids, the planning required by the consumer is an unrealistic expectation as most sales are spur of the moment impulse buys.

It would make the store look bad and bitcoin look like and unviable alternative to cash.

Yes yes I know many of us plan everything. I am the same, but we are not the average citizens of the world.


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"... history disseminated to the masses is written by those who win battles and wars and murder their heroes ..."


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