Consumers are rushing to group coupon services like Groupon and LivingSocial, spawning imitation platforms and coupon aggregators. The popularity of such services is also prompting traditional coupon distributers, such as Valpak, to launch their own local daily deal programs.
These deal services are dependent on consumers showing up in significant numbers. Group buying sites guarantee merchandising partners a certain number of coupon purchases to provide discounts of more than 50%, said Julie Mossler, consumer marketing manager at Groupon.
“We approach a merchant and ask, ‘At what point is it worth it to you to offer a discount of 60% or 70%?’” she said. “That number of customers is the tipping point.”
If the target number of consumers isn’t reached during the offer period, no one gets to use the coupon. That strategy provides an added incentive for shoppers to share a deal with a friend by forwarding an e-mail, or through Facebook or Twitter. Consumers who purchase a coupon that doesn’t reach the target number are not charged, and neither is the merchant, said Mossler.
“On a more tactical level, Groupon customers buy their voucher up front, essentially locking in a discount,” she said. “Because they’ve already paid for the service, they’re far more likely to go into the business to
Mossler declined to provide revenue growth figures, but said Groupon was “in 14 markets and one country a year ago, and now we’re in more than 300 markets and 31 countries.”
Last month, Valpak, a company best known for its coupon-stuffed mail envelopes, launched a daily deals program in four markets: Long Island, NY; Omaha, NE; Southern Connecticut; and Las Vegas. Deanna Willsey, a director of corporate communications at Valpak, said the Valpak Deals website launch will help the company reach new customers.
“We can now offer local advertisers a valuable service – connecting them with targeted, qualified consumers,” said Willsey. Valpak Deals coupons are daily, but do not require a specific number of purchases to be unlocked.
Local.com, a search engine and network targeting women ages 25 to 45 who have children, aggregates printable coupons, online coupon codes, weekly circulars and national coupons. Raj Mohan, SVP and general manager at Local.com. said the company saw a very respectable 48% increase in the third quarter.
Julie Ask, VP at Forrester Research, said there are negative aspects to using third party coupon distributors, versus creating an in-house coupon offering.
“Ideally, a company would like to have its own user database that it controls or owns – these are my customers, these are their spending habits, this is what they’re buying, and these are the kinds of coupons they’re redeeming,” said Ask.
Frank Shope, owner of two Ace Hardware franchises in Nashville, TN, said the “jury is still out” on the effectiveness of his partnership with Groupon, which is giving consumers a six-month window to redeem the half
off home improvement supplies deal. Shope said his two store locations have received a total of 320 redeemed coupons and attracted 46 new customers.