Marketing executives sound off on daily deal craze
Daily deals have become one of the hottest marketing stories around — but lately, they've been making headlines for all the wrong reasons. August proved the cruelest month for this darling of real-time marketing, with both Facebook and Yelp pulling the plug on their daily deals programs. Meanwhile, the 800-pound gorilla of the digital coupon world, Groupon, delayed its much-anticipated initial public offering. CouponHq, a provider of data about daily deals, reported that in August Groupon's daily deals revenue fell 4.8%, while those of another player in the space, LivingSocial, slipped 1.8%.
It would be an understatement to say that this is a field in flux. Direct Marketing News asked some of the category's heavy hitters to weigh in on issues now facing daily deals such as market saturation. While a recent Rice University study indicated that 73% of 324 businesses either profited or broke even from daily deals, others say the pacts cost them because the commissions are too high. Meantime, Forrester Research has recently predicted that consumers will come to overdose on daily deals.
Here's some of what executives at Groupon, The Body Shop, Forrester Research and Thrillist Rewards had to say.
Lee Brown , SVP of national sales, Groupon
On building customer loyalty for marketers: Groupon works with merchants before, during and after their deal runs, becoming a partner for the long term. Our merchant services team advises companies on ways to convert Groupon customers to their own, from collecting email addresses on-site to ongoing communications to build strong relationships.
On financial viability for marketers: Groupon should be looked at as a marketing expense, in the same light as local marketing efforts that small businesses spend money on. Many merchants see website traffic on the day of their feature that's 20 times the usual. These are impressions that translate into traffic and repeat sales over the long term.
Jason Feldman, VP of commercial and new channels, The Body Shop
On saturation of the market: What makes a daily deal exciting is the impulsive reaction by the subscriber tempted to try something unknown, or possibly a known offer so unusually valued that it is irresistible. If the same content is served across multiple dealers in the marketplace, fatigue and abandonment will make it difficult for brands to find value in promoting offers.
On building customer loyalty for marketers: The only reason to leverage daily deal sites is to drive brand recognition and ultimately loyalty. The deal sites need to find ways to allow customers to "like" their favorite brands so the brand can speak directly to the customer with customizable offers that help drive future conversion.
Sucharita Mulpuru , VP and principal analyst, Forrester Research
On saturation of the market: There's just not enough supply of good merchants willing to discount their products to justify the number of players all chasing this space.
On financial viability for marketer: These types of deals fundamentally are best for the daily deal provider when it's an attractive merchant. That type of merchant is exactly the kind that doesn't need to do daily deals. The commissions will go down for the attractive merchants and daily deal providers will start to use them as customer acquisition opportunities for the daily deal business. Fees will be charged for the less-known merchants, making daily deal providers email-list-rental services.
Mike Rothman, General Manager, Thrillist Rewards
On building customer loyalty for marketers: Most merchants in the deal space are small business owners who lack the bandwidth or the savvy to structure an effective prepaid program. Most of their marketing decisions are made based on what they hear and what the most recent person they met with advised them to do. Deal sites can start serving this community better by meeting those folks face to face.
On financial viability for marketers: The commission paid to publishers is but one of a list of factors that contribute to the profitability of a deal. All factors should be weighed together including offer price versus the retail price and offer price relative to the average order or check size.