Tag Archives: daily deals

Are daily deal sites taking the blame for marketing ignorance?

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6 months ago everyone was a fool for not being in daily deals, today you’re a fool for using them, or so says loads of commentary and research that have come out as Groupon reportedly nears its IPO.

While I’ve expressed my concerns on deal sites many times, I can’t help but wonder if the SMBs businesses buying into deals themselves are getting a free pass in the equation. Today I’m asking a simple question: After the deal gets signed and the customer influx starts up, are daily deal businesses doing anything to insure their own success or merely blaming their marketing partner for a bad deal?

When a customer self selects a business there’s an interest and a good experience may be enough for them to reselect, come back and build loyalty – motivation builds affinity. But when you offer 50% off, the bets are off, people are “discovering” but they’re not discovering new passions, they’re discovering deals and if they’re smart, hoping around in a 50% off world from experience to experience.

With few exceptions, the deal I see all share a common problem — there’s no basis for a relationship. Everything is a onetime purchases wrapped up in the justification that customers will “discover” something, fall in love with it and return time and time again. Businesses are buying into a long term customer model but not doing anything to get the customer back.

When a business complains about a daily deal we shouldn’t let them off on the excuse that the economics, sales people or backend payment sucked. Those are probably all true but more often than not, it wouldn’t make a bit of difference if they were good.

Instead we need to ask them where their program was to segment the non-tippers from the chatty customer raving about the wine. We need to ask why they’re giving 5 free ice creams at once instead of over 5 visits. Why is the climbing gym giving a one day lesson instead of a month long membership. Where’s the guest card to encourage a yelp review so others find the business? If there’s no hook, no loyalty building and no engagement it’s no wonder a hundred new customers aren’t all coming back.

The lesson from daily deals has been spelled out well: SMBs, stop believing in miracles and start creating your own. Whether it’s a coupon, a daily deal, a facebook page, tweets or any other hyped up marketing tactic it’s not about making people walk in the door, it’s about what you’re going to do when they step in to get them to come back.

Where are the social deals? Daily deals in a social media driven world.

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Daily deals are this year’s hot thing in social. Problem is they aren’t social.

When daily deals first launched,  hitting the minimum participants to “activate” the deal wasn’t a given and that made them social as people would have to bring friends in to get things going. Years later Groupon, LivingSocial and other leaders have too many users to have to worry about “qualifying” thus the social aspect is gone & deals have become glorified coupons that you just buy into.

Now don’t get me wrong. I may have critiqued the relevancy of daily deals in the past and am now joining others in questioning their business viability but I don’t doubt the potential of deals as a gateway for discovery, and value service to consumers – they just need a little network power to get to exciting. So as we watch Facebook prepare to roll out its deal offering, Google move into social & deals and Groupon and LivingSocial battle for control of the current market, I thought I’d take a crack at what the future could look like.

Deals are better when they’re done together [rhyming not intended]

Late one evening, a few weeks back I got a text from a friend (let’s call her “Sally”) asking if I wanted to jump in on a LivingSocial deal for White Water Rafting. Sally, knowing I raft frequently, wanted to put together a group trip and saw the deal as as great opportunity. To me that’s exactly what daily deals are for: great offers on services that people were considering, and now have a tipping point to take action on — together.

Problem is, it was 10pm, the deal expired in 2 hours and we all had to commit to make it work – no one wanted to take the first plunge and the deal was missed.

Risk stops purchases; but what if you could remove it?

What if, rather than a mass text, followed by a lot of hoping and messaging back, my friend, had been able to set the whole thing up as a group deal contingent on her network participating:

- Sally decides this deal is for her, looks at the calendar, picks an available date, creates an event and invites 20 people who she’d like to have show up… It hits their email, sms, facebook wall or twitter handle, their call.

-The threshold on the deal is also set based on the offer type. For white water rafting its one full boat – 6 heads. More can join but without 6 the deal is not on. Other services could have a threshold as low as 2 for a spa day or 4 for dinner out, but always a group.

-Sally’s friends get an alert that there’s a deal expiring in a few hours with the right details – the time, the place and the cost. Since they already have accounts they can confirm it right from their iphones but there’s no risk, the deal only goes if the threshold is hit.

-5 people are excited to try out rafting and convince #6 to join via a Facebook group message. The deal is on. Go Sally!

Whether it’s white water rafting, learning to rock climb, or a spa day, deals are overwhelmingly for services people do together but the current systems drive individual purchase and does nothing to address the fear of being the only one to go in.

By flipping the model back to its roots and enforcing a commitment minimum, not from all participants, but from a network of friends the risk is gone and there’s a whole new motivation for people to buy.

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Update: as of 8/26/2011 Facebook has announced they are closing down their deal service. In my opinion they had the best shot at truly creating a discovery tool by leveraging what no other deal site really has: relationships. But ultimately it’s a peripheral service and without enough attention, likely never got the legs to have a fair shot.

Calling all daily deal sites! Can I please get an offer I’m actually interested in?

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Today I’m on a mission this morning, a hunt for something very illusive, something which millions of my fellow citizens are also hoping for – a daily deal I actually want to use. While Groupon, LivingSocial, and all the other standalone and integrated daily deal sites compete fiercely over membership growth and media attention for having the most impressive features and biggest deals, I can’t help but wonder what happened to a much simpler, and yet far more profitable concept – offers that people really want.

Example Offers as Seen on Groupon's San Jose Page

From the analytics I saw floating around last year it would appear that daily deal sites are hovering somewhere in the 10-15% activation rate (10-15% of sign ups have actually bought a deal) and if this is hugely understated and 35% of sign ups have activated (30MM deals sold, 29MM users, 3x deals each =35% of users ), it’s still a huge opportunity (and probably why Groupon is hiring a Director of Customer Activation with double digit growth goals – sweet job too).

Looking at data from the other side, in a recent blog post, Jeff Bussgang, cites a rumored 3-4% CVR for Groupon. As a leader in the field Groupon should have one of the higher conversion rates as they certainly have many of the top offers and a huge core of interested customers (66% read deals daily!). But unlike a traditional eTailer where a 4% conversion rate is accepted because the vast majority of the 96% remaining users are considered potential future customers (they came to your site for a reason), with daily deal sites, there’s a huge issue – relevancy – which is to say that the traffic is all coming for diverse reasons and, without relevant offers, there’s little reason for conversions to take place.

So cutting to the chase, the issue I see, and keep seeing is the range of those offers. Groupon, Living Social, Yelp Deals, Daily Steals, they can all rake in users with the same deal types (follow a few of the sites and you’ll see businesses recycling old offers as they try different audiences, fee structures) but if what they offer back doesn’t relate to the customer, they leave huge dollars on the table every single day.

Living Social Offer I'd Be Signed up for Twice -- No Wonder Why it's Featured on their Site

Take Living Social’s Amazon $20 for $10 offer that generated over a million sales. The next day my offer was for some sort of premium spa service. I just went from something I really wanted to something I had little affinity for (not knocking spa’s, I just don’t buy their services frequently). To me this is like my sister logging into Amazon and having the entire homepage be filled with table saws – not very useful in her completely managed and very new NYC apartment even if she could use one now and then.

If you look at the demographics of either of the leaders what you see is opportunity. Deals tend to be for health & beauty services, fine dining, and the monthly car wash with an occasional outlier which ranges from exotic dance lessons (demotargeted female of course) to flying lessons. Problem is it’s not just one user type: on LivingSocial (probably thanks to the Amazon deal), 40% of the users are male and on Groupon it’s still 26%. Add to the age – users are young (68% of Groupon is under 34, 36% of LivingSocial) and single (49% of Groupon, N/A by LivingSocial).

Combine these all together and what you get is a dilemma – relevancy vs frequency.

Daily Deal sites have made a promise to deliver something every single day which means rain or shine, good or bad, that offer comes and while anyone can go to the spa or eat a nice meal, the overwhelming focus of the deals are to the same demographic – female, couples, older and for the same types of services (I dare a newly dating, 24 yearold guy to pull out a Groupon code when the check comes and then suggest the same restaurant again for next week). The deal sites know this, Mashable even wrote about it last year: Groupon Eyes Further Growth with Personalized Deals; < http://mashable.com/2010/07/29/groupon-personalized-deals/> but knowing and truly solving are very different as my inbox so aptly shows this morning.

So where do we lie – with opportunity of course.

The daily deal site that gets this first stands to win a lot. Sure the offers they have now may appeal to the majority of their core audience but the majority of their core is already being marketed too left and right by competing services; the generic offer is commoditized. So the site that broads up, ropes in more sales from its younger women (Groupon is doing more and more of this as told to me by several female friends in SF), parents, guys, and even their core demographic who is still seeing many off target offers, the more they stand to capitalize on their existing investment – that giant email database each company has.

If I was sitting in a corner office of one of the independent deal sites right now I’d be pretty concerned about how to up relevancy, and not just to a few major demographic groups but real niche relevancy with offers based on interests (some of us like to read, some of us like to get shot at with paintballs) and the ability to rate ads (oil changes are only for people with cars) and some friendly user reviews (better businesses sell more) to create something like the Facebook feed, but in deal form.

After all, there are a couple competitive businesses – namely Google and Facebook who have expressed great interest in the deal category and have business rolodexes so deep it resembles the size of most company’s consumer database… If they figure it out first you can bet it won’t be hard to get a lot, an awful lot, of businesses churning out relevant offers giving consumers a lot more reason to check with them first.

To sum it all up, daily deals are clearly a huge hit and have brought in revenue at a rate that seems to be unmatched, well, ever. But in a field of competition this fierce there’s a lot of value to users in jumping ship, playing the field, and any other ‘cheating’ metaphor you can come up with. While growing the core, picking up more users and delivering to more locations are all clearly going to help these businesses propel, lifetime value is a win that trumps all other and as Amazon has shown so well, LTV comes best from having something everyone wants, and helping them get right to it time again and again and again.

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As a side note, there there’s a flip side to this for businesses outside the core of the daily deal sites – easy opportunity. While I’ve become less and less diligent about reading my daily deal emails (they all get sorted and put in a folder), an offer outside the box is going to catch the attention of a lot of people who haven’t bought recently, if at all. Perhaps that’s why my local rock climbing gym and the nearest paintball fields are such fans.