The stellar growth of Groupon and other daily deals sites have been one of the biggest dotcom success stories of the past year. But are they here to stay? Ryan Deutsch, VP Emerging Media, StrongMail, takes a closer look…
In the UK, it is becoming increasingly unlikely to read any article discussing online retail without reading something about Groupon. In just two years, the site has amassed over 2.5 million UK subscribers and has recently turned down a $6bn buyout offer from Google. The Financial Times reports that Groupon’s London office is hiring dozens of staff every month.
Now, some may say I am just bitter, a 12-year email marketing veteran who missed out on the opportunity to be part of the Groupon gravy train. However, I think it is time we all stepped back and asked ourselves about the sustainability of Group Buying and Flash sales business models.
Groupon’s success is built on e-mailing its millions of subscribers with limited-time offers for restaurants, spas and other services. The model has naturally given rise a host of imitators. These include LivingSocial, which received $175m investment from Amazon last year, and Keynoir, a London-based lifestyle buying club which is backed Brent Hoberman’s ProFounders Capital. Google and Facebook have also recently entered the market with similar services. This means that, conservatively speaking, there are hundreds of companies competing for the consumers attention on a daily basis in the inbox.
As email marketers we realise the “ad avoidance” email trend that has been building over the years. Brands with large opt-in audiences delivering programmes only to have 70% or more of their mail go unread. Make no mistake, if the Daily Deals and Flash sales industries do not quickly adopt some of the most sophisticated of email marketing strategies they too will be dealing with massive segments of their recipients becoming “In-active,” resulting in rapidly declining conversion rates on their programmes. Given the low barrier to entry in this space and the massive competition for inbox attention here are some things that every group buying or daily deals site needs to keep top of mind.
Stay Local
The group buying and “Deal of the Day” trend was born from the ultimate vision of localised marketing. The concept makes complete sense; consumers are always interested in deals, but if we are talking about deals with a daily cadence the deal needs to be highly relevant and relate to things that consumer need now, not in two weeks or four months.
Offers from local restaurants and establishments, the places consumers literally drive past on a daily basis, should be at the top of the list for Daily Deal offers. While this is a simple premise, the execution of this vision, at a large scale, is extremely difficult.
Once these businesses get to a certain size it is tough to avoid the draw of National deals that can be launched, in-mass, to the subscriber base. While these deals generate broad interest they are innately less relevant than localised offers. Players in this space will need to create systems that allow for scalable localisation to avoid turning off subscribers with the same deals they see in the Newspaper or on the web.
A recent hiccup between FTD and Groupon in the States is a great example of how things can go bad fast when the Deal of the Day appears to be no better that a deal that can be found on a brands ecommerce site.
Build Loyalty
Perhaps the most troubling part of many Flash and Group Buying sites is the reliance on discounts to drive brand and subscriber loyalty.
If a consumer subscribes to a number of daily deals sites, what keeps them active and engaged in one programme and causes them to be inactive in another? If it is simply the deal and the discount then the entire business model could be a race to the bottom with profits for advertisers and the Groupon’s of the world steadily declining over time.
The trick is for the Deal sites to build loyalty around not just the offers but the subscriber experience as a whole. Email marketers have been doing this for years in their retention marketing programmes. Sophisticated brands create email communications that sell product but also add value with content and insight not available through other communication channels.
Travelocity’s Roaming Gnome Newsletter does an excellent job of educating travelers on destinations and providing access to insights from the travel community first, and selling air, hotel and car rentals second. Mamapedia is another example of a deal site that offers targeted, valuable content to members alongside the daily discounts.
Most notably, companies like Hautelook (recently acquired by Nordstrom’s for 180 million in stock) have developed a brand following within the member base. Customers expect and anticipate communications from Hautelook. Their investment in developing complex segments and product categories that are relevant to their audience almost guarantee ongoing engagement with the subscriber.
Put the Subscriber in Control
Another pillar of successful email marketing has been the desire to put the subscriber in charge of subscription options, email frequency and even digital channel preference.
As consumers have more options for Daily deals the site that allows the consumer to customise their experience should win out in the long run. It is unlikely that a consumer will personalise a profile for more than one provider and the provider they select to set preferences for will have the advantage of better insight into consumer interests.
It is up to the deal sites to use these assets to create highly relevant communications. While the use of preference centres is widely believed to be a “best practice” among email marketers very few brands have executed and implemented meaningful preference management capabilities. This could be an opportunity for Deal of the Day, Flash Sales and Group Buying sites to leapfrog many traditional email programmes.
At the end of the day there are simply too many players in this space and consolidation will start sooner rather than later. Those that thrive will do so by moving beyond the deal and building loyalty within the subscriber base by staying local, relevant and putting the consumer in control of the relationship. Not new concepts for retention-based email marketing, but completely new territory for email acquisition strategies.
By Ryan Deutsch
VP Emerging Media
StrongMail
www.strongmail.com
