Recently, my inbox, and I am sure yours too, has been filled with great deals – tis the season, no big surprise there. But it's not just the deals I get from those retailers with whom I have an ongoing relationship. Those are a given. They know what I buy, when I buy, and how I buy and that knowledge in a successful communication often inspires an impulse purchase. At least the consumer part of my brain thinks it's an impulse. The marketing part of my brain knows that there is a model deep in Nordstrom somewhere predicting the likelihood of my conversion. Its odds are good.
What is interesting about the new influx of deals in our inboxes is their origin. Many of the deals are coming from deal sites or deal aggregators that represent a small number of limited-time, hyper-local, super-promotional, group-buying opportunities. Their ranks are swelling well beyond the most well-known, Groupon.
In my hometown of Philadelphia, some of the representative deal sites include:
Many of these deal sites are national efforts with a local skin. Another popular business model is the aggregator who collects and communicates the deals booked through multiple deal sites, including:
Group-buying deal sites leverage the buying power of the crowd and work similarly to regular deal sites but with that extra twist of peer pressure to encourage sharing. Some samples of local group-buying deal sites include:
Recent deals I have received included massages and yoga classes, travel deals, jewelry, baby products, restaurant promos, and organic fruits and vegetables. The list is diverse and endless, but is primarily made up of retailers or providers I am not familiar with, mostly in my home city or close by, and some online. I am a new customer to them and therefore potentially valuable; worthy of a sensational deal in the hope that they will one day win my loyalty in the way that Nordstrom has. Most are coming from deal sites or deal aggregators that I have signed up for, but the pass-along rates are high as family and friends who thought a particular time-sensitive, locally-focused, fabulous offer merited my attention.
The second difference is that many of the businesses are mainly offline businesses. The transaction may begin online but in most cases you have to visit a small store or other location to receive your free massage with pedicure or consume your half-price meal. It is a small risk for these businesses as they have coupon breakage on their side of the equation and a cost-efficient marketing channel for them to use to spike demand. It is another entry marketing tactic now available to them to use the Internet for a specific business goal (hopefully) without hiring an agency to devise a locally-focused online marketing strategy that will likely exceed their budget.
The foundational strategy of using deal sites and the power of group buying to gather new customers and gain attention is sound. Part of the benefit to the smaller, local businesses is in the advertising reach and effectiveness. The e-mails get opened, the sites get visited, the tweets get noticed and retweeted, the offers are relevant (at least geographically), and the heretofore unknown business gets legitimized by association with the deal site.
It makes sense that during the busy and highly promotional Q4 we would be seeing a lot of businesses trial this new approach. This is a strategy that is accessible to mom-and-pop local businesses who want to drive store traffic and create awareness within the deal-conscious, online-savvy audience that receives these deal alerts. It is also, however, another avenue for big brand marketers who may want to drive traffic to a hosted coupon on a campaign site to support a promotion or local campaign goals.
While everyone loves a deal, businesses will need to ascertain how the deal seekers convert (or not) to customers that can be maintained with a reasonable profit margin. Most likely, deal sites and deal communications will continue to play a supporting role akin to other promotional activities online but the market for this business approach will be helped as the deal mania plays itself out and a smaller number of strong players emerge to reduce consumer confusion, increase reach, and support investment in technological advancements.
What has been your experience with deal marketing?
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March 19, 2014