MerchantCircle: ‘Zero Customer Acquisition Cost’

The not-so-stealth small business platform-cum-CRM tool-cum website substitute, MerchantCircle, officially launched today. (Here’s the release and here’s CEO Ben Smith talking about MerchantCircle on video: “Use Google to fight back against the big guys.”)

Smith likens a business profile on MerchantCircle to MySpace, and argues it’s an effective alternative to “managing a complicated website.” MerchantCircle has pre-populated the site with standard SME database data (I believe InfoUSA) and has developed a range of viral techniques to encourage local businesses to sign-up for the service.

There are various pricing package that offer different options, including email newsletters and ads appearing on Google and Yahoo! (at $99 per month). Smith told me when I spoke with him that they had tested various customer acquisition methodologies over time and had achieved a “virtual zero-cost” strategy. This was a response to the now-perfunctory question about the capacity of sites to “pull” local businesses online without a YP-like local sales force.

Even though consumers will discover MerchantCircle’s business listings on search engines (and so will local business owners searching for themselves), the site is not intended to be a consumer destination (you can’t do category lookups for example). If it succeeds, over time it could become one by default however. Putting that aside, the idea here is to offer a rich, structured landing page that substitutes for a website and additional marketing tools, including blogging.

Many local businesses don’t want to build sites (even with the aid of templates, which often look to them to be too “generic,” as the owner of my gym recently told me). Rather a structured, professional looking landing page is all that some businesses require. So what’s the difference between a templated, “generic” website vs. a standardized landing page? The difference is the SME’s expectation. If they’re paying for the site they want something more customized. But if the landing page is free or very inexpensive the expectations are different.

Here’s MerchantCircle’s “showcase” of businesses that have adopted the site and related testimonials. Smith said that they were having considerable success in non-Silicon Valley secondary markets, which suggests that they’re doing something right. For example, here’s a listing/site for one of the featured businesses, Blonde Bear Bed and Breakfast, which is located in Alaska. In this case, the B&B’s own site is number one on Google, but MerchantCircle’s page is the third listing.

SEO-friendly design is part of MerchantCircle’s strategy, both to drive traffic and to acquire merchants. Local businesses are using search engines to see where they show up online (a variation on the behavior of looking up one’s YP ad in the print book). And finding the MerchantCircle listing will drive some number of customer sign-ups, especially given that the most expensive option is essentially $100 per month – not much of a risk. The basic listing is about $30 per month, the cost of a local phone line.

What’s different about MerchantCircle is the composite dimension of the offering – web presence + search marketing + CRM tools (newsletter, blog). Another interesting aspect of the offering is the “request a deal” feature. Consumers can essentially ask for a deal/discount, which makes it like a coupon. Businesses can be ethical or unethical about this (pretend retail or regular price is the deal), but this feature also aids in “tracking” where leads came from.

I believe that getting small businesses’ attention is the hardest part of the sale. Getting that attention and the marginal support that’s offered by an in-person sales rep. is the value that the local sales force brings. But I also believe that once the culture changes to the point where everyone must have an online presence – and we’re only about three years away from this – merchants will be more actively seeking out options.

With each new small business offering, some friction seems to go away. And local businesses are by the day becoming more interested and more sophisticated about the Internet. That doesn’t change the fragmented nature of the market and the patchwork of strategies required to bring more of these merchants online.

As someone who is having a small business website built, I can tell you it’s a complicated and far too painful process. To the extent that MerchantCircle has found a simple way to bring local merchants online – it says it has 5,000 already – and to cost-effectively market them through search the company will find eager adopters.

MerchantCircle and others represent a challenge to yellow pages in several ways, but most immediately in terms of price. Yellow pages are selling print and Internet and search marketing. And while those products may be quite effective, especially in reaching a more and more fragmented consumer market, they can’t compete on price with an offering like this.

Yellow pages may argue that the local businesses that would adopt a MerchantCircle aren’t going to put pressure on them because they would represent a “bold listing” at best. However if content falls out of the print book, in favor of a MerchantCircle, that will accelerate consumer abandonment of the print directory. And usage is where the yellow pages is most vulnerable right now. We’ll see.

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Here’s more from

SiliconBeat and Peter Krasilovsky’s LocalOnliner. I’m corrected that the db provider is Amacai rather than InfoUSA.