6 Daily Deal Predictions for 2012
Posted by kevinbeatty in Daily Deal Software, Industry Updates, Launching a Daily Deal Site, Marketing, Mobile, Social Media on Dec 13th, 2011 | Comments OffThis 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.
Why are Facebook and Yelp shutting down their deal programs?
Posted by admin in Daily Deal Competition, Launching a Daily Deal Site, Social Media on Aug 30th, 2011 | Comments OffPosted Originally on Dailydealmedia.com by Jimmy Hendricks, Co-Founder and CEO, Deal Current
Facebook did not make a full entrance into the industry. The reality was they were testing out aggregation, something that Yahoo, CitySearch, and what a dozen others are doing currently. Facebook was not sourcing their own deals. They were an affiliate partner of other companies like Zozi, Groupon, LivingSocial, and several others. Deal quality is what wins in this space. Facebook’s deals were not theirs, and the company was transparent with consumers that the deals they featured were not their own. As such they were not able to create a following. It would be as if you created your own Facebook page, but just had 10 other people comment and update your posts for you. Of course, it’s only a matter of time before people realize what’s happening and just ignore your posts altogether – or unsubscribe.
The other reason why it makes sense for Facebook to temporarily shut down their deal program is because of the old adage saying “local advertising is sold, not bought.” Groupon and media companies need an aggressive outbound sales teams calling or in market street sales team. This doesn’t fit Facebook’s model. They are a technology company, not a sales company. Facebook was planning for deals to be self-setup and the evolution of the market says this may not happen or it’s far off – there are many examples of this.
Yelp seems to have shut down their program for a different reason. Yelp realized that offering increasingly great deals is the only way to win in this game, not just more low quality deals. Also my guess is, one of their troubles is that their sales force is predominantly inside sales and merchants self-manage their ads (like Facebook, another example of a technology company trying to foray into the bloody red ocean where sales companies feed). Deal Current believes the key to success is having an outside sales team who meet in person with merchants.
The Bottom Line: This news is good for independent programs, media organizations with existing sales teams, and software providers because of the following reasons:
1) It shows that the companies that are going to win in this space are the ones with outside sales teams.
2) Not having Facebook and Yelp in the game is a positive thing. Deal sites still leverage social sharing in a big way and use Facebook’s superior ad targeting to drive sales. Now deal sites don’t have to worry about Facebook blocking 3rd party deal sites or being overly selective in approval.
Additional thoughts: Here are some things that we remind our partners on every day:
1) Deal Quality is everything – run good deals, if you don’t have a good deal, don’t run a deal, wait until you have a good deal. This builds your brand.
2) Focus on Deal Match – make sure your deals match your audience. You should have a target customer in mind (age, gender, income, location, interests, etc.), match your deals to them. This builds loyalty.
3) Focus on creating great deals, and promote the heck out of them (not just your program). This creates excitement.
Overall having major players bow out doesn’t mean the market is dying. I believe it proves it’s not as easy as people think and therefore not for everyone, which also makes the strong case that deal sites should partner with a technology provider to build their program.
Wanted Groupon and Living Social Sales Reps
Posted by sarah@dealcurrent.com in Daily Deal Competition, Launching a Daily Deal Site, Management, Marketing, Media, Small Business, Social Media on Aug 17th, 2011 | Comments OffPosted Originally on Dailydealmedia.com by Jimmy Hendricks, Co-Founder and CEO, Deal Current
Every day we all read the same headlines:
- Groupon is losing money
- Living Social is catching up
- Both launch X new markets
- A small local deal company was acquired
- How does the market affect Groupon’s IPO?
- When is Living Social going to IPO?
We can all sit on the sidelines speculating, criticizing, and making assumptions.The reality though, is that these guys have deep pockets and they can’t be out-spent or out-marketed.
You can compete though, and here is how:
RECRUIT THEIR SALES TEAM AND PAY THEM WELL
Over the past year, Groupon and Living Social have both changed their outside sales reps compensation plans.They have moved a repeat sale in-house which means the sales reps who built the business are getting shortchanged. It’s the natural course of business for a company to change commission plans when they experience rapid growth, but this also creates turnover.
A 25 year old sales person shouldn’t make $30k a month signing up 10 restaurants to run a Groupon, which is why Groupon and Living Social are reworking their compensation plans. If you can offer these sales reps a better opportunity and maybe some stock options, then your company has an opportunity. It’s all about the dream of helping build a company and seeing it take off, and the early Groupon and Living Social sales reps made a killing. Use this to your advantage, just like a startup tech company does when getting started.
People will work for less when there is a vision and they have purpose. Now is your opportunity to recruit these sales people and bring them on to your team. The key is to pay them well and make them a part of your organization. A great sales person brings experience, training, and most importantly a rolodex. Have them teach you how to compete and if you are lucky, how to beat Groupon and Living Social in your local market.
In closing, here is the ad I would run on Craigslist:
WANTED: Groupon or Living Social Sales Reps
We are a local grown successful daily deal company and we want you to help us build our army to take down the big guys.
We are the David going after Goliath and here is what we can offer:
A better compensation plan
Leadership experience
A management title
Stock options in our company
Then include the normal “Responsibilities, About Us, Contact Info”
Short URL: http://www.dailydealmedia.com/?p=12362
5 Tips for Group Deals Success
Posted by sarah@dealcurrent.com in Daily Deal Competition, Entrepreneurship, Management, Media, Social Media on Jul 25th, 2011 | Comments OffThis post originally appeared on the American Express OPEN Forum and also on Mashable.com.
While many small business owners have considered offering a group deal, only 10% have actually run one, according to recent research from MerchantCircle. And while the results have been promising for these early adopters — and 77% say they would run another one — group deals don’t work for everyone. Among the people who said they wouldn’t offer another deal, 42% said it was not effective in customer acquisition, and 24% said they lost money.
Given these mixed results, it is critical that entrepreneurs do their homework before embarking on a group deal to make sure they’re positioned for success.
Here are five tips to help you get the best results:
1. Shop Around
While Groupon and LivingSocial may be the most well-known group deal services, there are now a wide range of services to choose from. Yelp, Facebook and Google have all tossed their hat in the ring, as have a number of daily newspapers and newsletter services.
While all can get your business in front of consumers who’ve expressed an interest in daily deals, these services “can vary widely when it comes to terms and conditions,” says Brent Harrison of marketing consulting firm SmokeJumper Strategy, who has tested out more than a half dozen group deals services for his Mountain View, Calif., wine bar and shop Savvy Cellar.
For example, Harrison notes that “with Groupon you’ll get the biggest volume, but also the least attractive economics and control. Groupon typically wants a higher share of the deal price, and they also spread out payments to the merchant over a period of months.”
Another issue related to volume is audience targeting. “With a high-volume provider, you’re essentially deep-sea fishing with a driftnet: You want the valuable salmon, but you’re going to get all sorts of less attractive life forms while you’re at it,” adds Harrison. While high-volume services may be a good fit for larger, more established businesses, he suggests that new or niche businesses test out a few smaller, more targeted services to see which one brings in the right clientele.
The good news is that there are many vertical and niche deals sites to choose from. There’s Daily Gourmet for foodies. There’s Yuupon and TripAlertz for travel. There’s even a deals site for dog owners called “Doggyloot.” There are also business-to-business deals site such as RapidBuyr. Before choosing the first vendor that calls you, do some research into which ones offer the right terms and audience for your business.
2. Put Time Constraints on Your Deal to Manage Demand
With most group deals services, you won’t have much control over the timing of when your deal hits — this can make it difficult to service the increased demand and could lead to bad reviews from new customers and existing patrons alike.
“People who redeem your offer are likely to follow your usual traffic patterns and come in when you’re already at peak capacity,” notes Harrison. “At Savvy Cellar, I’m typically looking to fill in the downtime such as Tuesday evening, but without constraints on my deal, I know that most people will come in Friday or Saturday night, which could put a strain on my operations.”
For this reason, Harrison recommends putting time constraints on your deal when possible. “Think about making your offer valid Monday through Thursday, or running a special event on a specific day with a limited number of spaces available,” he suggests. You can also set up your deal so that the value of the discount is greater on your slowest days or during off-peak times. If your business has significant seasonality, try just running deals during your slowest months.
Some group deals services are actually beginning to give merchants more flexibility and control over when volume comes in, so it’s something to ask about when choosing a vendor. For example, Groupon recently launched a “Groupon Now” product that lets you put out more modest deals around a certain item or timeframe.
3. Understand the Costs
In many cases, group deals don’t result in an immediate profit and may even result in a net cost to the business. Make sure you’ve done the math ahead of time to minimize costly surprises.
Here’s the basic formula: your group deal needs to be offered at a steep discount to the regular price — let’s say somewhere around 50%. You will then need to share revenue from the deal with your service provider, at rates as high as 50% or more. So if your spa is offering a $200 service for $100, and you have to pay $50 of that to your service provider, you’ll end up with $50 for your $200 service. If it costs you more than $50 to provide the service, you’ll actually lose money on the deal — and the better the deal does, the more it will cost you.
Even if you do make a profit, if your business has a limit on capacity (such as a restaurant or a spa), deal seekers may be edging out regular customers who would have paid full price.
But there are other ways to benefit from a group deal besides an immediate profit. A successful group deal brings new customers in the door and gives them a taste of your business. There are up-sell opportunities once they’re in your shop. Plus, your company’s name gets in front of thousands of local consumers through the service providers’ marketing of your deal.
4. Make the Most of the First Customer Visit
Given the economics of group deals, there’s a lot riding on getting new customers to spend beyond the initial deal, but according to recent Rice University study, less than 20% of deal users return again to make a full-price purchase. In order to improve these odds, it is essential to make the most of each new customer visit.
This means that in addition to making sure you have enough capacity to serve both new and existing patrons, you should also think about developing special up-sells for people who redeem your coupon. For example, a dentist could offer new customers $5 off a Sonicare toothbrush at the end of their appointment, or a yoga studio could offer a discount for new patrons who book a series of sessions before leaving the studio.
Also make sure to capture people’s information when they redeem their coupon so you can continue to stay in touch with them. Have a sign-up sheet at the check-out counter for people to register for your email newsletter, encourage people to “check in” at your establishment on Facebook Places or Foursquare, and let them know how to follow you on Facebook or Twitter.
5. Measure ROI
If you don’t make an immediate profit on your deal, how can you determine if it was a success and thus worth doing again? David Rangel, former Head of Merchant Services at Groupon and founder of gourmet food e-commerce and deals site Daily Gourmet, recommends that you build these basic considerations into your ROI calculation:
- How many buyers are new customers? While it may be easier for some businesses such as dentists or spas to identify new customers than others (such as a restaurant), try to figure out which people redeeming your coupon are visiting you for the first time — it may be as simple as asking this question each time the coupon is presented.
- How many new customers came back, and how much did they spend? Rangel recommends capturing information on each new customer in a database if possible and tracking their ongoing patronage and spending over time.
- How much money was spent above the voucher amount? Rice University found that 36% of deals customers spend more than the voucher value when visiting a merchant. Rangel suggests that you actually structure your deals to encourage this additional spend; for example, a restaurant whose average bill is $50 could issue vouchers with a value of $35 to $40.
- How many coupons or vouchers were not redeemed? Not everyone who pays for your deal will end up redeeming it — the Rice study found that average coupon “breakage” is about 22%. Depending on the laws of the state and how your service provider structures the deal, you may be able to keep this money without ever delivering goods or services.
Have you offered a group deal? What was your experience? Share your thoughts in the comments below.
How to Build a Facebook Landing Page with iFrames
Posted by sarah@dealcurrent.com in Launching a Daily Deal Site, Media, Social Media on Jul 25th, 2011 | Comments OffWe have had inquiries about how to create a Facebook landing page for your daily deal program. There are some great resources out there that offer information about how to do this. Please take a look at the following blog to learn how to create a Facebook landing page:
http://socialmouths.com/blog/2011/03/16/how-to-build-a-facebook-landing-page-with-iframes/
http://socialmouths.com/blog/2011/03/25/how-to-build-a-facebook-landing-page-with-iframes-part-2/
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