6 Daily Deal Predictions for 2012

This blog post was originally posted on our Director of Strategic Partnerships, Kevin Beatty’s website: www.kevinbeatty.com.

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Daily deals, local offers, coupons, gift certificates, check-in specials,  and the list goes on for ages.  Who would have thought that the discount landscape would look like it does today?  In 2010 there was 3.3 billion traditional coupons clipped and redeemed.  This doesn’t take into account for the multi-billion dollar daily deal industry that crept in like the Trojan horse.  Obviously when the economy is turned upside down with financial instability it drives consumers to seek for ways to save.   Or it is?

I know that with my direct network of friends, colleagues and business associates sometimes finding a great deal is more than just saving a few dollars.  It’s almost a competition at times to see who is aware of the smoking hot deal from the best excursion in town.  I’ve been immersed in the daily deal industry ever since I first heard about Woot back in 2004.  It wasn’t until three years later that LivingSocial would start: cataloging people’s interests on Facebook.  YES, that’s not made up – there was a time.  They didn’t enter the deal space until Groupon entered in late 2008.  Building Deal Current from the ground up has given me the distinct privilege of building a scalable technology platform that’s helped launch over 200 programs throughout North America.  I was there from the first shovel in the dirt and boy as I look back I hardly recognize the space anymore.  I’ve learned a lot about consumer trends, technology capabilities, merchant resources, UI flaws, and failure and success consistencies.

• Where is this industry headed though?
• Will we continue to see consolidation in the near future?
• Who will lead, who will survive, and who will vanish?
• What new products will we see?  Here’s my predictions on all of these.

1. The Mobile Explosion

We all know that mobile phone adoption will continue to play a large part in our lives.  My mom is now addicted to her iPhone 4S and actors are getting kicked off airplanes because they can’t put down Words with Friends.  Estimates show that already 90 Million people in U.S. own smartphones.  I’m assuming by now you think my prediction is that every daily deal program will have their own mobile application.  That’s NOT entirely the case however.  Although I do believe mobile will continue to play an important role in the local commerce space it needs to be done correctly here.  Just to have an app to have an app is a naive move.  Geo-targeting, LBS, and NFC will be a must if you want to actually have people use your apps.  If you don’t know what LBS and NFC are – well, do some research and rethink your concept.  LBS is location based services and NFC stands for near field communications.  These technologies eliminate the need for users to turn on their phone, click the app, and hope to find a deal local.  We’ll see more and more deals will be PUSHED directly to consumers.  Foursquare’s recent launch of Radar is the first step in the this direction.   Today it’s primary function is to automatically push notifications directly to users as they enter the vicinity of a location they previously marked off on their ‘To-Do List.’  With foursquare’s partnerships with Gilt, LivingSocial, Zozi, AT&T Interactive, and Scoutmob you can be assured that push notification deals will come about in the 2012.  Aggregation apps like Yipit and 8Coupons will certainly implement push notifications for the deal programs they aggregate.

2.  Merchant Marketing

Borrell Associates recently did a survey to small and mid-sized businesses and the results showed that they’llincrease their online ad spending by 29% this year, compared to 4.5% increase for their offline ad budgets.  If SMB’s are going to increase online advertising where are they going to spend it.  My prediction is that they’ll spend it with platforms that will yield the most positive results with quantifiable metrics that are easy to implement.  If they need to think about how to use your service or how they’ll track it’s effectiveness, you’ve already lost them.  Daily deal programs will need to place significant emphasis on consumer retention tools.  How can you automatically connect a merchant with a customer who purchased a daily deal previously to their business?  Additional marketing tools such as targeted online ads, follow up email campaigns, repeat offers and appointment management apps will all become necessary components of the landscape.  Groupon announced their appointment scheduler today.

3.  Emerging Verticals

Last fall, the top 2 categories for daily deals were Spa & Beauty and Restaurants, which contributed a combined 53% of industry revenue.  Not surprisingly a year later, the combined shared of these categories has fallen to 36%.  This is actually despite the fact that revenue from these 2 categories increased by 549% over the same span of time.  This is due to the trends we’re seeing that anyone with a product, service or widget can essentially use the daily deal concept as an additional promotion.  We’ve already seen several new verticals open up in 2010.  Groupon Getaways, Living Social Escapes, and Gilt’s Jetsetter really have paved the way for travel and tourism deals.  In August 2011 alone Groupon Getaways generated $9.6 million of revenue and LivingSocial Escapes kicked out $6.7 million.  My thoughts are that in 2012 we’ll begin to see Home & Auto, Nightlight & Entertainment and Concerts & Events really take off.  The question is who will lead the way?  Live Nation and TicketMaster have yet to really leverage the deals vertical (despite LiveNation’s existing partnership with Groupon).

 4.  Affiliate Networks Activate

Affiliates and ad networks play a critical role in all online advertising but the deals space haven’t seen it develop quite yet.  Of the clients I’ve worked closely with we’ve established affiliates relationships that are driving close to 18% monthly revenue.  Groupon and LivingSocial both have affiliate systems but they’ve never released the financials generated through those strategies.  Daily deal aggregators will continue to build their email databases as the desire to only receive one email will continue to trend high.  In markets like New York City, where there’s over 150 deal programs, how does one filter through all of the noise?  Smart filter technologies will continue to show up on aggregator and affiliate sites – as personalization will reach an ultimate high in 2012.  Distribution channel partnerships can change the game as well – so look out for affiliate marketing programs like Commission Junction signing key partnerships in the industry.

5.  Credit Card Automation

There once was a time where it was normal to purchase a physical gift certificate for someone.  Maybe you would drive to their favorite restaurant and pick up a nice envelop with a worth $50 certificate inside.  Again, those times are of the past.  Regardless of how easy it may or may not be to redeem daily deal vouchers, I still believe that we’ll see simplified methods of redemption.  From QR code capabilities to credit card automation – a faster universal system is upon us.  All major credit cards will be required for this system to really take flight.  You may or may not be aware of the partnerships that American Express has secured from their Facebook Link Like Love campaign to their foursquare sync program.  Consumer purchasing behavior metrics will come out of this automation and can really fit well with the merchant marketing needs of the future.

6.  Consumer Loyalty

In all of the data I have access to what we’re finding is that consumers are not entirely brand exclusive.  CityPockets reports that 54% of daily deal buyers have bought 11 or more vouchers across multiple sites in their lifetime.  Consumers are merchant loyal, but not brand loyal.  The reason is there’s really no added benefit to purchase the same merchant deal from Gilt City vs KGB Deals.  Groupon at one time tried to implement a badge system and they’re in the process of resurrecting that concept as well.  In 2012 you will see more and more programs develop consumer loyalty programs, VIP programs, subscription services for higher discounted offers and more.

When you dive deep into this industry (as with any other) you’ll see that there’s many moving pieces.  The most financially secure and foreword thinking groups will be first to implement the above mentioned predictions, but they will come true sooner than later.  If you’re a consumer of deals you can expect to save more on services, products, concerts, and travel more than ever.  If you’re a merchant you can expect to receive data on who really are your customers better than ever before.  This will allow you to spend your online and offline marketing dollars wisely.  And daily deal platform owners – well, it’s your job to satisfy both of those groups while trying to remain different so you don’t get swallowed up by the competition.  I see their being clear and sunny skies ahead in the deal space….just wait.

Creating a Blue Ocean in the Highly Competitive Daily Deal Landscape

This industry is highly competitive, you don’t need me to tell you this.  Everywhere you look you can find a  new daily deal site or another media organization that has recently started to offer local discounts and deals on a regular basis.  Groupon has now gone public and is stabilizing their footprint in the public arena.  In some markets it’s a bloody battle for new user acquisition and market share.  Something we preach on a regular basis to our partners is developing a blue ocean strategy and create ways of differentiation.

As a platform provider for over 200 deal publishers we are constantly looking at the business and asking ourselves 2 critical questions: 1) How can we help our clients remain competitive and drive additional in this industry and 2) How can Deal Current Network differentiate ourselves from other platform options.  Each product enhancement, technology update and strategic partnership secured has this (as well as other important factors) taken into consideration.

If you’re currently in the industry but looking for ways to increase revenue and create differentiation I highly suggest you setup a quick 5 minute call with a Business Development Expert at Deal Current to discuss what we’re working on here and how that can help you grow.  If you are still considering on entering the space, ask yourself how you can get to market quickly but effectively and how will your program will be different than other players in your space.

Here is a quick snap shot of how Deal Current Network is creating a blue ocean of competition. 

1.       The Deal Current Network helps you build your email list  –  though various methods including our proprietary contesting platform Artistic Hub – a opt-in conversion tool used by billion dollar deal companies like Zulily.com.
2.       Instant deal inventory  –  Our recent partnership with a deal inventory company gives our clients and partners access to over +4000 deals in 600+ US Cities at the click of a button.  You can read more about this partnership on Yahoo Finance.
3.       Automatic aggregator integration- The Deal Current Network is already integrated with the top daily deal aggregators; which push more traffic to our client’s offers with the click of a button.  This helps drive additional distribution and will ultimately increase sales.
4.       Deal Current Network provides the most robust training in the industry  –  With Deal Current University each client and partner has exclusive access to the industry’s most robust compilation of training and program strategy to crush the competitors.  This consists of over 20 hours of live training and ongoing training webinars run on a regular basis.  Why learn on your own dime when you can partner with the experts?
5.       Local Offer Portal- Create your own Local Offer Portal, which enables you to feature instant coupon offers in various categories, price points, and more. Give your advertisers another way to work with you so you’re not the one-trick pony that so many deal programs are.
6.       Affiliate Network- Currently over 1000 local affiliates are promoting our client’s offers.  Incentivize, track, and enable local affiliates to push 20% more sales by utilizing these tools.  The Deal Current Network is exponentially growing on a consistent basis.

What does the Google & DealMap Acquisition mean?

Evaluating Daily Deals For Your Media Organization

As a media group evaluating if you should integrate a daily deal program it’s important to know the TRUE value and benefits of having a local offer program.  Media organizations such as print publication groups, online communities and television and radio stations are a natural fit to implement a local offer program to co-exist with their existing advertising solutions.

As part of your evaluation you should avoid making your decision off  how other local deal sites are performing.  Like any business, several things need to be taken into account to understand the performance and financials of other programs.  The success of a daily deal program relies on many moving pieces, but mainly depends on deal quality matched with deal distribution.  A purchase rate off a daily deal email list is on average roughly 1-2%, which means that an email opt-in list of 20,000 should yield about 1-200 sales a day.  Another consideration is deal quality.  Great offers from incredible businesses will see much higher conversion ratios vs. unattractive deals from less than appealing merchants.  Some of Deal Current’s clients that are developing niche programs are experiencing as high as 4% purchase rate.

Here’s a list of some of the most important points to consider when determining if your media organization will implement a local offer program:

• Understanding Audiences: What works for one daily deal site doesn’t always work for another.  What’s unique to these marketing programs is the demographics a specific program will attract.  It works exactly like a radio station; it appeals to a certain consumer and doesn’t appeal to others.  A rock station will attract a particular audience and advertiser than a christian radio station.  Same with daily deal programs.  As a media organization looking to develop their own local offers program – it means that they have FULL control on what merchants to feature.  This will also provide more value back to the end-user and consumers of your media group.

• Creating Campaigns: Combine daily deal offerings into existing advertising campaigns inclusive of radio spots, online presence, in print promotion, and a daily deal feature.  Daily deals need to be looked at as a way to compliment an existing advertising campaign – not something that cannibalizes other advertising efforts.

• Sign NEW Paying Advertisers: This can attract NEW advertisers that do not have the budget for print, online or on-air advertising.  Many media clients have used daily deals as a way to get new paying advertisers.  You could also apply the revenue generated with a daily deal towards future online or on-air ad campaigns.

• Repay outstanding invoices: If you have advertisers who owe money to your media organization for outstanding invoices from past advertising campaigns you can recoup these funds by contacting the merchant to see if you can feature their business on a daily deal.  1) you generate more business for the merchant and 2) your media group recoups the outstanding debt.

• Integrating Marketing Efforts to Promote Deal Program: If a media group is basing their decision on creating a deal program solely off of the revenue being generated – then they are being naïve.  This does not work like the Field of Dreams – where if you build it they will come.  Like any new promotional program – it requires promotion.  If you don’t advertise the program you won’t receive maximum buy in from your consumer base.  A media group that fully integrates this into their existing advertising efforts (online, offline, signage at events, sponsorships, radio spot ads, featured business of the day radio highlights, etc) will NATURALLY see higher revenue numbers than a group that just posts a tiny promotional widget on the homepage with NO call to action.

Overall it’s important to note that a media group fully integrating a daily deal program into their existing mix of products, services, and solutions can attract new viewers, listeners, paying advertisers, consumers, fans, and so much more.  Partnering up with a company that assists with the strategy to successfully integrate this into your existing company is critical for success.  Deal Current does just that and more with every media group we work with.  Many other vendors in the market provide the technology and leave the rest up to you.  So choose wisely.

The #1 Key To A Successful Daily Deal Is Treating Your Merchants Right

With over 300 daily deal programs throughout the US alone, competition is heating up in major markets.  How are you going to differentiate yourself from other daily deal programs in your market. Here’s a few quick tips on ways you can do just that.

It’s commonly said that daily deals provide a win/win/win partnership between customers, merchants, and the daily deal company.  What’s not commonly said is how important small and medium business owners actually are in this equation.  As a daily deal company you should constantly be looking at ways that you can provide more value back to your merchants.   Just like any business you should be aware of what your customers think of your brand and product.  As a daily deal provider, your customers are truly the merchants.

Share the Wealth: As a white label provider of daily deal programs, we’re constantly looking at ways we can improve our technology to help better support our partners and merchants.  After extensive research in the market we identified that the traditional 50/50 pricing model does not work in all instances.  At Deal Current we created the industry’s only tiered revenue structure which benefits the merchants.  The more sales that occur on any given day the more revenue that is distributed back to the merchants.  We encourage daily deal companies to be more flexible on the % commission back to merchants.  Try to develop a commission structure in which the higher percentage a merchant offers up, the higher commission rate you’ll give them.  Mashable recently posted an article that discusses how as Groupon grows, they’re leaving small businesses left behind to fend for themselves – check it out here.  The Mashable article is a great lesson that each daily deal program should take note from.  Groupon reportedly sent a contract to a local business owner who agreed to the terms and sent back the contract.  Shortly before the date of the promotion Groupon reached out to the business owner with disturbing news that they weren’t going to run the deal because it didn’t make sense for them financially.  Try to avoid this situation at all cost because it’ll give you a bad rap.

Preparing Merchants: Preparing businesses for what to expect out of the daily deal promotion will ensure a pleasant experience. If they’re not satisfied with how the deal copy presents their business, then re-write it until they are satisfied.  Does the business know how they should prepare their staff for this promotion?  Upon completion of the deal, ensure that they know how many vouchers were sold and what they can expect over the next few months.  This educational lesson will go a long way in terms of satisfying your merchants.

Converting Customers:  Turning merchants into repeat customers should also be a goal of your program.  Merchants should make several efforts to convert a daily deal customer into a long-term customer.  Employees should ask for the daily deal customers’ email address for future promotions.  Users of daily deal programs are typically very social in nature, so collecting email addresses gives additional ways to generate multiple sales.  Suggest to merchants to also setup a follow-up deal for those specific customers that come into their business.  This gives the customers incentive to come back.

Again, with as many competitors in the marketplace today – it’s crucial that your daily deal program finds ways to treat merchants right.  Share your knowledge with merchants you work with so they can maximize the effectiveness of the daily deal promotion.  And remember, at the end of the day – keeping the merchants happy and excited to work with you again should be a core focus of your program.

Best of luck.