Daily Deals Sequel: Groupon Hangover And Mobile App Madness

Almost two years ago I wrote a blog about the growing online coupon business. At that time the frenzy was in full swing: Groupon was the media darling, copycats were everywhere, and the future was so bright, they had to wear shades (half-off of course). There were, however, naysayers calling out problems with the daily deal model: they were putting small businesses in the red, they only made money for greedy Groupon-types, daily deals were just a phase. They were right. But not completely.

Fast-forward to September 2012: Consumers still love saving money (DUH) and deals are here to stay, but in different incarnations. Groupon has become to online deals what Kleenex is to tissues, but there are major shifts in the landscape.

1) Groupon went from a rock star to has-been: As the deals market became more crowded with me-toos, combined with the “thrill is gone” from consumers. the daily deal concept itself became stale. Groupon tanked after its initial IPO at $20 a share in November 2011 (at last check, its price was a paltry $4 a share) which coincided with the domino effect of lackluster social media company IPOs. LivingSocial, Groupon’s biggest competitor with a sizable ownership by Amazon, has also been steadily eating into its market share. The most recent blow was Starbucks choosing LivingSocial for its daily deal, which sold out immediately and was the biggest revenue generator yet for the company.  Yelp and OpenTable  still offer deals but scaled back on promotion and rely on their core businesses.

2) Alternative deal sites, niche markets and buy outs, oh my: As the daily deals market became saturated, Groupon and other companies started hawking national and local offers with a longer shelf life. New business models and after-markets also popped up; sites curating a city’s “best of” deals such as Dealery and Yipit, or expiring, unwanted deal sites such as Couprecoup and FatWallet. There were also many companies renamed, bought, funded and vertical niche start ups in clothing, food, and other services, as seen in this 2011 Deals InfographicMarqeta, a different concept altogether, uses a discount card that rewards loyalty to its vendors.

3) Mobile apps rule: No surprise, smartphone apps is the fastest growing area in the deals segment. Location-based apps such as Mobsav, Yowza and others offer national and local deals but most consumers are still uneasy with companies tracking their whereabouts. Companies already on mobile-friendly turf, like Foursquare and Facebook Check-in Deals (formerly Facebook Deals), have a built-in advantage. Some location-based apps combine offline shopping habits with mobile apps to discover discounts when a consumer is approaching that desired item. These apps all operate differently but the premise is the same: Vendors like Swarm and Spotzot knows who you are, what you want to buy, and will “activate” when you are near the location of your holy grail. Not ok with Deal Big Brother watching?  Scoutmob offers free half-off deals (yes, FREE!), a cheeky brand personality, and entertaining, useful e-newsletter. Scoutmob only charges the vendor on redemption, so it’s a win-win for the deal-bearer and the consumer. Credit card companies like American Express are also getting in on the action and benefit from having a solid social media presence. Groupon and LivingSocial have added mobile apps to their menu but operate the same way as the website.

So what’s next?

Deals will continue to transform with new technology and consumers’ behavior and preferences. The market will also continue to shake out: Some deal apps and sites will thrive while others will go to the coupon cemetery. A glaring weakness and missed opportunity for all of these companies offering deals (other than location-based apps) is good target demographics —sounds counterintuitive but true. Knowing subscribers well would arm companies with a goldmine of data to offer relevant deals. In a recent experiment I did, Groupon is the only company that asked for even the most basic information. Either these companies are not marketing-savvy enough, worry that consumers will bail if there is an avalanche of questions, or are too busy focusing on the bottom-line to pay attention to their customer. All. Bad. Ideas. Having subscriber access to email is a privilege and a gift. If the balance of interest tilts, these companies could lose their coveted spot in subscribers’ in boxes.

And like all good marketing campaigns, closing the loop on deal usage is the next frontier. Deals present tricky ROI math: companies may know how many deals were sold but not how many were actually used, or redeemed by a mobile app but not tracked, or sold on a website. Or any other number of scenarios. A recent deal by Coca-Cola and Auntie Anne’s hopes to trailblaze this path but it will take long-term data to show true bottom-line value to both the company offering the deal and the vendor distributing it. The ROI results could provide compelling data that could easily shape future deals for customers.

In the meantime, I’m still waiting for a deal to upgrade my site on WordPress.


2012 Marketing Wishes and Caviar Dreams

It’s that special time when self-anointed marketing experts look at the biggest trends of the year and give their unadulterated snarky opinions, and marketing sages look into their logo’ed crystal balls and predict what will happen for 2012. But alas, enough about other marketers. From my slightly jaded journalism-cum-marketing POV, here is what I want and don’t want for 2012. And the soothsayer in me knows that none of these will actually  happen…or  will they?

QR Codes Should Be Banned Until They are Easy (and Worth It):  Everyone and their marketing mother was talking about QR (Quick Response) codes in 2011 as if they were going to reach Facebook proportions, but it’s clear now that their stickiness factor is weak (by the way if you don’t know what a QR code is my point is made). Several reasons they haven’t taken off: (1) Many people still do not know what they are (2) When they do, motivation is not high enough to scan the code since it takes some effort. Even though QR codes are plastered everywhere from posters to mailers to web sites, T-shirts and more, reading QR codes is still not an automatic function on mobile phones and users have to download an app typically. QR code readers need to be built in. Humans are essentially a lazy bunch and won’t bother otherwise, including moi. The second part of the equation is that whatever is at the end of the QR code scanning process is worthy of receiving, but that’s a whole other marketing wish (more here on my earlier QR Code blog post).

Social Media Tipping Point: Even Klout Lost its Clout: Let’s face it, most marketers are pretty fascinated with social media. It’s enabled a whole new sandbox to play in, but we also need  to show some restraint: Just because there are the tools out there doesn’t mean every company has to engage on Twitter 24/7, Facebook feed overload, and YouTube mania. Marketers should pick and choose carefully those social outlets that resonate with their audience (and test, test, test). Also stock those outlets with the freshest, greatest content possible on a regular basis. Which reminds me…

Learn How To Write For the Web: It pains me both as a former journalist and a freelance writer to see all the growing, embarrassingly poor prose on web site copy, online coupons, email campaigns, blogs and just about every other orifice of the web. I’m not sure how the most global opportunity for the written word could be hijacked by so many atrocious, mangled sentences. I think it’s wonderful that the web provides a platform to reach so many but it should be used with care, and most importantly some training.  For those without formal training, enroll in a writing class. If you have an employee that is a horrible writer and can’t change, fire him or her (ok that’s harsh, maybe they’d make a better editor? or html coder?) And lastly if you are not happy in a writing job yourself, make it your new years resolution to do something you enjoy. If you care about your readers, you won’t let us suffer your pain as well.

Big Corporations Acting Like PR Idiots:  Think Netflix. I mean Quikster. I mean Netflix. Or Lowes removal of an ad on a Muslim family reality show.  Or Bank of America’s $5 transaction fee.  PR (and plummeting stock) disasters are usually the fault of the company itself. It typically a involves a predictable four-step recipe: 1) Make a big mistake 2) Don’t admit the mistake 3) Make yet another mistake to try to recover from the first blunder such as blaming consumers, investors, the media, or anyone other than your own company 4) Admit guilt with your PR tail between your legs and apologize after you have been flailed about by aforementioned-blamed. And with social media helping to spread consumer unhappiness like wildfire, companies must learn to do this and quikster. I mean quickly.

Make Marketing Proud in the New www (Wild West Web): This was a banner year for web marketing:  not only social media but mobile marketing, gamification, online deals, you name it. As someone from the traditional marketing times, I am personally overwhelmed learning all the technologies, trends, and “new rules” but enjoy that we have such great room to grow in this new frontier. It’s exciting and also offers the chance to produce better, more layered and sophisticated marketing programs using a hybrid of online and offline strategies. Marketers have more opportunities than ever to be creative, explore ideas, measure successes, and yes, also produce complete flops. So let’s take the time and energy to do things right.

Don’t Forget Who the Boss is:  No, not the woman or man with the windowed corner office — the person who buys your products or services. They are also the king and queen of your world. This is why you are racking your brain to come up with campaigns to engage with them, keep them happy, and treat them like gold.  And lest we forget, our customers and prospects have never had such a panoramic platform to display their happiness or unhappiness, be it on your company’s web site, review sites, chat rooms, or blogs, which means we are more accountable than ever.

Let’s make everyone–most of all ourselves–proud in 2012 and have a happy marketing new year!

Coupons 2.0 Strike Gold But Don’t Lose the Special Sauce

My name is Janice and I am a coupon cutter. Reading the Sunday paper, drinking my coffee and cutting out the $1 off an item normally $6 – that’s good math. Unfortunately, those little pieces of paper usually go in my glove box and never get used. All that has been completely blown away with the current coupon craze: emails delivered to your in box with huge discounts for local businesses. Think: saving 50 percent at that fabulous new restaurant in the neighborhood. Cutting your hair for 60% off the price at the cool salon downtown. Heck ya! These deals are the latest internet marketing darling and it doesn’t take a genius to know that people love saving money and feeling like they got a “great deal”.  And even though there are other coupon models on the web, these new deals have pulled ahead of the pack, combining the best of marketing psychology, financial rewards, and social networking magic. But what makes them special now could be lost in the future.

Groupon,the oddly but aptly named service (Group + Coupon – get it?) is the granddaddy of this coupon trend — that is if granddad can be less than 2 years old–  and has produced a spawn of copycats, all with their own twist to the online deal. The basic premise of Groupon is that a deal only becomes one if a certain number of people purchase it (as they term “Collective Purchasing Power”). Recipients can forward the deal on to friends via Facebook, Twitter and other social networking tools and are motived by free Groupon bucks and other incentives. If interest falls short of the deal “tipping point”, the offer gets canned and nothing is lost.  Given the fact that only 1 of every 7 businesses that apply for the “Deal of the Day” secure that coveted spot and it takes about a month to arrive in an in box, these coupons are clearly desired for many neighborhood businesses.

A beauty supply chain in the bay area recently received 4,000 purchases from their Groupon in the first 24 hours. This number is impressive, but when you apply Groupon math it ends up being a big financial commitment by the business: They are on the hook for half of the profits of each deal sold (in this case the deal was $15 for $30 worth of products so Groupon takes $7.50 for each purchase). It also means that the business has to cover that $15 they gave free to each customer. But here is where old fashioned psychology comes in: a person goes to the store, starts looking around and before you know it, has purchased $50 more than the Groupon. And if they are a loyal customer they will come back. If they are a new customer they may or may not visit the store again. But that’s also one of  the negatives of Groupon, or any of these deal-makers.

There have been cases where a local business offers a deal, gets a huge response, and then has a problem covering the discount, especially when patrons don’t visit them again. Those coupon-buyers just wanted cheap eats for a day, for example. There is a well documented case of a Portland area diner who had to reach into payroll to cover the costs of the “success” of the half off lunch campaign. So businesses should look at the overall health of their finances, who their customers are, and potential of repeat business before going into deep discount land.

It will be telling to see which business models succeed in the coupon craze at the market is flooded with me-toos. Many of them have huge sales forces pushing their programs and some have built-in advantages. OpenTable, for instance, has been very successful with its “Spotlight” half-off email deals since their database is full of foodies that go out to eat a lot and  have a tendency to be receptive to OpenTable communications. Yelp has a tremendous and diverse marketing base and can reach its audience by interests, locations and other data. They’ve also started deals that extend for an entire week. Both OpenTable and Yelp already have a thriving online presence and brand name so the risk is much lower for their foray in the coupon business. Compare this with LivingSocial, which is a straight up copy of Groupon, down to the witty and pithy prose in the emails. LivingSocial may or may not succeed given they are only selling discounts (their name could use improvement though-maybe they used a Groupon for their naming agency?).

And now that the coupon trend is here to stay, Groupon has just recently attempted to add new services to cash in on its astronomical demand and profits. Last week they rolled out Groupon Stores, where merchants can have their own Facebook-like pages to feature deals and consumers can “follow” them. Some online watchers feel that this is a misstep as it will turn Groupon into other coupon pages on the web, requiring consumers to self-serve. What makes Groupon special and successful is that the deals are delivered one-at-a-time to your in box, time-limited, and have ability to pass on the deals to make the price even sweeter.

The pump is primed for success of coupons 2.0: They are a great boon to small businesses, offer excellent exposure, and can help jumpstart local neighborhood economies. For consumers it is a win-win since they can try new businesses or get great discounts at a place they already shop. But only some of these online coupon businesses will succeed long-term by keeping the special sauce…well special.

Image, courtesy of Groupon (note: Boston Harbor Cruise Groupon is one of the most popular to date. And yes a Groupon can get beyond the tipping point and sell out).