Its a new era for Los Angeles bargain seekers with a constant stream of strongly discounted coupon offers: 40% off a Princess Cruise ticket, 55% off a facial, or $125 worth of laundry and dry cleaning for $60.
Entrepreneurs, venture capitalists, and big corporations are gambling that the new discount coupon promotional services represent a tectonic shift in consumer trends, and a profound new way to pull in new customers.
Last year, Groupon, one of the largest players, turned down a $6 billion acquisition offer from Google, and LivingSocial, the Web site that distributes daily deals for restaurants, spas and retail outlets, added $400 million to its coffers last week as investors continued to funnel money into the fast-growing company.
Even the megalithic facebook is launching a Daily Deals program to test the waters. And Yahoo announced the launch of Local Offers program recently and is partnering with websites like Groupon, LivingSocial, Gilt City, and others to provide a wide selection of local deals and coupons from nearby restaurants and other local retailers.
So what’s the scoop here?
Can these help or hurt a small business?
Reports Scott Kirsner at Boston Globe –
Salespeople from Groupon, BuyWithMe, LivingSocial, and other coupon services are eagerly calling small businesses to get them to offer deep discounts on products and services. “People call you daily,’’ says Bob Schwartz, director of marketing at Boston Duck Tours. “And once you offer a deal with one service, all the others will call you assuming you’ll do a deal with them.’’
But could all this excitement about a new way of circulating coupons be an unsustainable blip?
Here’s how things work. Deals are offered for a few days only, and you have to pay up front with a credit card. You print a coupon to bring to the business, or, in some cases, show your mobile phone screen. As with old-fashioned coupons, there’s an expiration date.
These services emphasize they can help introduce new customers to a company without upfront outlays for advertising. Some of those customers may come back, or spend more than the coupon value on that first visit, executives at the services say.
And all is not golden as Forbes writes –
Groupon looks to be suffering the death of a thousand cuts—paper cuts, that is, from class actions around the terms of its deals, state regulator cease-and-desist letters around its marketing of alcohol and the me-too business plans of 425 competitors that have flooded the marketplace. As Groupon preps an initial public offering rumored to value it at $15 billion, the question is: Are these problems just annoyances or signs of a more serious struggle to transform its cult following into a sustainable business for the long run?
At Dellaria Salons & Spas of Allston, some of its 26 salons attracted repeat customers after offering coupons through EverSave and LivingSocial. But other locations just “really seemed to get deal-seekers who buy the coupon and jump from place to place,’’ says marketing manager Hayley Goff. We call those customers the “couponeros” and they really take some of the luster out of the concept.
Tips For Businesses Using Daily Deal type coupon marketing –
To avoid the plunderings of the “couponeros,” Marketing pundit Tom Muse suggested that businesses offer structured deals that spread out the coupon’s discount over several visits. For example, instead of a one-time coupon that offers $30 worth of services, the business should offer a deal that includes three coupons that are each worth $10 in services. Doing so may help develop a rapport with the customer to encourage return visits and increase the probability that the business would make a profit with their deal promotion. Other suggestions include offering discounts on specific items rather than the total bill, cross-selling products and services to customers, targeting less popular product or service items, and setting coupon redemption dates to increase off-peak or seasonal traffic.