The Ebb and Flow of Daily Deals and Online Coupons

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More consumers are using daily deal sites and online coupons than ever before, but are they really here to stay? Businesses weigh the benefits and disadvantages of slashing prices and giving the deal site a cut in their overall  marketing strategy.

Online Coupons

Close to 50% of all online consumers will redeem digital coupons this year. Sunday coupon clippers are still the norm, but online and mobile coupons are growing like wildfire. The advantage for small business owners is that offering coupon codes online is an affordable way to get new customers, and the adoption of mobile coupons is cost effective and appeals to the tech-savvy set. eMarketer

Even the smallest business can use couponing as part of its marketing strategy. By incorporating mobile coupons and web versions, small businesses can reach a wider audience with their discount strategy than with traditional print coupons found in the Sunday paper. Entrepreneur

The Race to Win

While Groupon may have been the first out of the gate to connect small businesses with consumers through its daily deals, LivingSocial is quickly closing the gap. While LivingSocial has over 4 million monthly unique visitors to Groupon’s 29 million plus, LivingSocial offers deals in nearly double the cities as its competitor. LivingSocial may be a bigger draw to small businesses too: the deals site takes only 40% of the deal’s profit, versus 50% by Groupon. Online Marketing Trends

With as many daily deal sites that have sprouted up in the last year, it should be no surprise that Amazon wants a cut of the multi-billion dollar industry. The online retailer currently offers deals for entertainment, restaurants and services in 30 markets with its recently launched AmazonLocal service. What makes it better than the competition? It’s unclear, other than the fact that Amazon.com can heavily advertise it in conjunction with the products it sells on its site. The New York Times

Do Daily Deals Cannibalize Brands?

While many restaurants and storefronts are seeing higher traffic by offering daily deals, the end result might not be as bright as they hoped. In offering steep discounts on services and meals, businesses may be lowering consumers’ reference price that they expect to pay. Once the deals are over, they may be less likely to come back as repeat customers, and may instead shop solely on price. While sales pour in with the initial deal, they have proven to dwindle after the fact. Harvard Business Review

Despite the flurry of deals for everything from flowers to yoga classes, the daily deal industry has declined over the past month. Yipit, a deal aggregator, did a bit of research and discovered that industry revenue declined by 7% from June 2011 to July, moving from $144 million to a measly $134 million. The cause is unclear, but may be due to the deluge of deal sites, or a typical summertime slump, such as what is seen in other industries. TechCrunch

With so many small businesses losing money with the daily deals they offer, it’s clear that there needs to be better marketing strategy surrounding the price slashing. Small businesses should be picky when choosing a daily deal site to work with, and should prepare for a flood of business just after the deal. Not every deal is a good one, especially if you lose money. Make sure to cover your profit with the cut the deal site takes. SBA

New Approaches

As consumer grow weary of daily deals emails flooding their inboxes, the sites look for new ways to connect with customers. One effort in this direction is partnerships with location based services like FourSquare. LivingSocial and now Groupon have partnered with the mobile app company that allows users to check in to locations for discounts. The assumption is that users will get deals based on their location that offer the deep savings that the websites offer. Will small businesses latch onto this any faster than they did offering deals directly through FourSquare? Time will tell. The Wall Street Journal

Those funny little boxes on the corner of magazine pages and on museum signs are starting to catch on, it seems. QR codes are popping up in stores, restaurants, billboards and museums, and they’re proving multifunctional. While consumers scan the codes with their mobile phones out of curiosity or to get more information about a product, the majority, 46%, scan QR codes to get a discount on a product or service. As more innovative uses for QR codes pop up, we may see a decline in print coupons. Bob Kaplitz Blog

Conclusion

Just like every new industry that comes along, we’re becoming oversaturated when it comes to group deals and online coupons. Everyone, including Amazon, wants a piece of the pie. But when the slices get cut too thin, we’ll see many deal sites fade away and just a few players rise to the top. For small businesses, this may mean they need to take a wait and see attitude, and see which opportunities will actually result in smart marketing and profit. Today Money

 

12 Comments ▼

12 Reactions

  1. I recently launched a website that provides feedback on the coupon sites called couponadvisor (www.couponadvisor.com.au) that provides a voice for consumers. With the massive growth of coupon sites has come less than reputable sites that promise but dont deliver. The site I launched was a way to raise those issues. As a commercial lawyer, I thought it was important to hear all views.

  2. This is the same kind of thing that happened when the social networks first started to become popular, there were tons of social networks at the beginning but only a few big user friendly ones survived. The same thing will happen with the deals sites, only a few user friendly ones will survive after the dust settles.

  3. The author has clearly nailed both the growth aspects of the online coupon industry, as well as the downfalls of the current implementation of the “daily deal” business model. Weaknesses arise because the local owners, who are already losing business from having to discount their items at least 50%, have to then turn around and pay Groupon or LivingSocial another 40% to 50%. This service should not have a mandatory fee associated with it. Touchcoupons.net is an additional option that provides all the same coupon perks and more for free.

  4. “Close to 50% of all online consumers will redeem digital coupons this year” – i think it’s going to be a lot higher because of the economy we have today. and i think this will be a good thing because it will increase the competitiveness between the company’s and we will win discounts even bigger :D

  5. “Printapon” is a deal-of-the-day website that is localized if a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day.

  6. I think daily deal sites and online coupons are here to stay, but I think the companies that provide the coupons are wising up on how to utilize the platform. To me, these high discount coupons are like loss leaders. Without some type of campaign in place to continue to spread the word about a product or service, then the business is just throwing money away. The coupons give you great exposure, but it’s up to you to maximize that exposure to increase your business.

  7. As I mentioned in another comment, it might simply be the case that the period of profiting from the low hanging fruit is ending (or has ended). Daily deal companies no longer have queues of merchants waiting to advertise and consumers are no longer eagerly checking for the latest deals.

    This doesn’t mean that consumers are not interested making purchases or merchants don’t want to advertise/sell. As always, with innovative ideas, the smarter companies will simply stay at the top of the marketing curve.

    All the best, Andrea

    • Good point, Andrea. There’s also a lot to be said for having “first mover” advantage as a deal site. You don’t have to be literally the first, but the earlier entrants will find it easier to gain a brand and loyalty foothold in the consumer’s mind. The later the entrance, the harder that becomes.

  8. I prefer coupon blogs to commercial coupon sites that send you to other sites for stuff that you are not interested in. I like to be able to select what I want and get educated on how to find coupons. I like to find real savings with coupons.

  9. Online coupons and daily deal sites make great business sense when you consider that is where the potential customer is spending his or her time. However, you bring up an important point, there is no money in honoring a coupon, the money is in converting them into a repeat customer or in an upsale.

    Part of the problem stems from the business owner. They have the responsibility to wow the coupon customer so that they do want to come back at full price.

    However, the daily deal companies do need to address the sharing of information with their clients. There is one “dail deal” type of company that is sharing their database so that their customers can continue to market to their new customers they get through the coupon deal. It’s been making a big difference in the overall success of running a coupon, which is, of course, getting new long-term customers.

    Great article.
    Best Regards,
    ~Robert

  10. The market is becoming saturated with a lot of daily deals born almost everyday,and it has become like an integral part in the consumer’s life. And small businesses can actually tap daily deal sites for visibility but just have to be careful that it won’t go overboard or way beyond one can handle.

  11. Whether i’ts worth it or not Deals are here to stay. Consumers seem to just flock over them. if you own a small business I think it’s more beneficial to offer deals than not.

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