The daily-deal landscape

More businesses—including B2B marketers—are jumping in

Like millions of other consumers, several offers from daily-deal sites like Groupon and LivingSocial arrive in my inbox each day. While other marketing channels have struggled through the economic downturn of the last few years, these sites have turned consumers’ penny-pinching into a winning marketing format. The next trick will be figuring out how to leverage it for B2B marketing.

The daily-deal players

The leaders of the pack are Groupon and LivingSocial. These two got the wheels rolling on the bandwagon in late 2008, amid the collapse of the housing market and economy, when consumers were really beginning to tighten their purse strings. The invention of the daily-deal email paired tried-and-tested geographic targeting—employed by direct mail marketers for years—with the more social environment of the digital scene. A limited number of deals were offered, in a limited time frame.

To say the concept took off is an understatement.

The estimate of the number of current daily-deal sites in the market today varies widely, with some sources estimating 350, others as many as 500, and some even estimate that there are 3,000 globally.

And the landscape is changing daily. Yelp recently announced that it would cut its Yelp Deals sales staff by half, and Facebook retreated from the daily-deals market entirely. On the other hand, Google is just getting its feet wet: it promoted a local offer on its home page on August 31 for the first time. Google Offers is only available for nine cities right now, but interested consumers can already sign up for many additional cities (including Indianapolis) that will be rolling out soon.

Groupon continues to flex, as well—for the first time, an offer for reduced tuition for a course at National Louis University in Chicago hit inboxes this week.

Then there are the niche players: for every potential target audience, there’s a daily-deal site to serve it. There’s Daily Deals for Moms (self-explanatory); DealChicken, from Gannett, which uses its local media outlets; Gilt Groupe, for the designer fashion/accessory crowd; blissmo, for the eco-conscious among us, etc.

You’ll notice that the vast majority of these players have one big thing in common: they cater to business-to-consumer marketers. Few sites have figured out how to successfully leverage the trend for the B2B market, but one—Groundswell Health—is trying. This San Francisco company is bringing collective buying to healthcare practices and other purchasers of medical supplies and equipment.

B2B targets aren’t often able to make purchasing decisions with the same speed that the daily-deal model has capitalized on, but I could see this being leveraged for things like conference passes (which already offer early-bird registration deals), office supplies (want to buy eight pounds of coffee today for half price?), and other purchases that are on the smaller side of the business-purchase equation. It wasn’t specifically targeted to businesses, but MB recently bought and used a Groupon for our favored lunch-catering service, so there’s certainly a market out there.

The pros and cons

For a company considering a dive into the daily-deal pool, there are arguments on both sides of the coin. The decision needs to be made strategically, with your overall business and marketing goals in one hand and your budget in the other. What are some of those pros and cons?

Pros:

  • Leverage local, geographic targeting in your market, meaning less potential waste of a marketing dollar.
  • Through a niche site, target your audience based on their specific interests, rather than just geography.
  • Increase brand awareness, especially for new businesses looking to spread the word about their entrance into a market.
  • Reach potential customers who aren’t currently in your database but have opted in for your offer.
  • More competition among the players leads to better negotiating leverage with the site. Groupon’s cut of every deal at one point was 50%—but with more competition, it’s having to back off a little, so you get a better share of your revenue.

Cons:

  • The majority of daily-deal customers don’t become repeat customers (though with a proactive retention strategy, you could increase your chances of getting return business).
  • Overwhelming response and volume have led to many unprepared businesses providing unsatisfactory customer service, being forced to place products on backorder, or even ending up on the losing side of the profitability equation. A Rice University study found that only about two-thirds of companies who offered a Groupon promotion turned a profit. Less than half said they would participate in a daily-deal promotion again.
  • The flip side of the last point on the Pros list above is that participating companies are only getting about 50% of the revenue from their daily deal. If your business can’t handle a margin that low, a daily-deal promotion is probably not the best idea for you.

This is just a short list. Check out the links at the bottom of this post for a couple articles that offer some good tips for marketers considering a daily deal. Also, take 25 minutes and listen to NPR’s Planet Money podcast, “Groupon! Monty Python! Price Discrimination!” which offers a great history of the coupon trend and includes stories from businesses who’ve tried it.

My personal experience

As a consumer, I loved Groupon at first (I signed up in November 2009). I liked that it introduced me to many locally owned, lesser-known small businesses in my area, in addition to having the chance at unprecedented offers.

But now? Very few offers come through Groupon or LivingSocial that interest me. As soon as the national brands jumped on board (who are understandably better set up to absorb the low margins), the sense of exclusivity that made it fun diminished, and it began to feel like yet another expected email advertisement.

Nevertheless, I’m still a subscriber. The potential offers are too good for me to ignore. And I continue to sign up for niche services that seem more targeted to my interests.

The takeaways for a business contemplating making an offer? Do your research, consider the opportunity strategically, and put a solid customer-retention plan into place before making your own daily-deal offer.

Take your time; this opportunity won’t expire in 24 hours.

 

Now, let’s hear from you: Has your company tried this? Are you considering it? Where do you think this daily-deal trend will go next?

 

Further reading:
A Marketer’s Guide to the Daily Deal Market Beyond Groupon and LivingSocial
5 Tips for Social Couponing Bliss
Groupon! Monty Python! Price Discrimination!

Previous posts:
How valuable is your customer?
Podcasts: Why you should be listening


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