Today is really an interesting day in the history of the ... emerging and proliferating and maturing and consolidating and ... someone probably arguing dimishing or even demolishing ... industry. I mean, the daily deal industry.
Early in the morning, Ipsos Reid released results of its most recent Canadian study with a title that would catch any marketer's eyes, "Ipsos Study Shows Online Group Coupons Can Help Build Brand Loyalty". The numbers found in the survey are quite encouraging. However, unfortunately, investors don't seem quite encouraged. In response to Groupon's Q4 results released late yesterday, its stock price today dropped as much as stockholders' heartbeats speed up. Question being asked is not just where Groupon heads, but whether daily deal is marketer's new weapon or another money burning firepit.
How do they make money? Consumers buy vouchers from Groupon at 50% off. The price they are paying is shared between Groupon and the merchant, usually at 50-50 split.
What are the costs? Not reading from the annual report, but understanding from the business model, Groupon relies on a large sales force everywhere they have 'local' deals. Someone has to negotiate those deals with the neighborhood restaurants and mom and pop stores.
Are they making money? Apparently, no. People invest in Groupon because they believe in its future.
Is there a future? Ipsos Reid says yes, or maybe, while Forrester sort of disagree. If merchants give up deep discounts to buy customer loyalty, Canadian businesses must be luckier than their counterparts south of the border. Ipsos Canadian research says 62% of those who had bought an online coupon have then gone back to make a full priced purchase. In US, a Nov 2011 Forrester research shows that consumers have been trained to search for deals before purchasing and become not willing to buy at full price. In addition, 82% in Ipsos survey said they bought coupons to try something that they would not have otherwise. Foresster shows over half people said they would have bought any ways even without the discount.
How should marketers action? No matter if marketers are achieving the client acquisition and loyalty goals they set, online daily deals are becoming a consumer routine, at least for a consumer segment. It's not a question about whether to use it or not, but more of how to leverage it as a new marketing tool. One thing nobody could question is that this is a pay per performance tool. If 75% off is too big a cost for small merchants, it is much more affordable for larger retailers, as this could be just a very insignificant portion of their marketing budget that they are already considering how to reallocate from traditional media to more measurable vehicles.
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