How to Win the Daily Deals War: 5 Key Strategies

Groupon Has 85 Million Subscribers, but the Space Is Changing Fast

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It wasn't too long ago when Groupon, in its infancy, incited oohs and aahs from nearly all of us in the digital space. Ad Age 's own Kunur Patel said the startup had "revived couponing for the Facebook and Twitter generation." This was in 2009, when Groupon had 2 million subscribers.

Today, Groupon has more than 85 million subscribers -- and similar daily deal offerings are a dime a dozen. They've expanded beyond third-party platforms, extending to programs that are internally managed and operated by brands themselves. The landscape is no doubt crowded -- but like any maturing market, it's headed toward critical mass. The survivors of this battle royale will be those offerings that can most effectively capture the "impulse buy" crowd -- or those consumers who are likely to quickly and instinctively snatch up a great deal at the very moment they see it. As the chips begin to fall, here are five points for brand marketers to consider before entering the daily deals space.

  1. Remember that daily deal sites are somewhat unproven as a revenue stream. Many of these services take 20% to 60% commission on sales, so your best bet is to view them more as a promotional tool and less as a driver of profit. Consider how your brand might use a daily deal to entice new customers, or keep your brand top-of -mind with previous customers. As is the case with any emerging platform, innovation is critical.
  2. Let your objectives dictate your strategy and the eventual execution of your promotion. If you want to use daily deals as a branding play, focus on sites that have good brand recognition. If your goal is to get the offer out there to as many people as possible (i.e. to move product, fill seats, etc.), using a daily deal site aggregator, like YipIt, is a better option. If your offer has a specific target or focus, look for a niche, industry vertical provide that aligns with your audience (i.e. Gilt City for luxury brands).
  3. Assess if your business model is a good fit for daily deal promotions. Marketers whose product mix offers high margins have the most flexibility and freedom when it comes to offering deals. Companies with tighter margins will find it harder to benefit financially from these types of promotions. If you're looking at a local daily deal, think about how many you need to sell to make a profit. Have a short redemption period, limit the number of vouchers consumers can purchase and try bundling products for a higher shopping cart total.
  4. Know your customer. This is hardly new advice in digital -- or even marketing on the whole -- but having a deep understanding of your consumers and how they behave online is especially important for marketers exploring the daily deals space. It's also critical to understand the daily deal sites themselves. Certain sites skew younger or older, more female than male, or even toward special interests (i.e., kids, college, bridal, pets, etc.) -- so check with Quantcast or ComScore to determine which sites are best to use to reach the audience you're targeting. Tap into your brand's social communities to get a feel for your fans' interests when it comes to offers. Also, consider time of year for activating the daily deal. If your brand is retail or travel focused, holidays, events and seasonal-peaks could work better.
  5. A long-term strategy is critical to avoid "one-and-done" brand advocates. Oftentimes, people who flock to coupons or special offers can become reliant on incentives for social commerce. Create loyalty by connecting and engaging with consumers beyond the deal -- whether at point of purchase or through social communities.

As the daily deals battle rages on, watch for market leaders Groupon and LivingSocial to potentially cede lower end deals to Google, and for Facebook to emerge as a dark horse entrant with the potential to scale its offerings. In the end, the winners will be those services that most effectively trigger consumer impulse buys. Real-time, mobile and personalization will be the primary trends that drive these platforms' success.

At present, a large number of daily deal offers are large and broad in scope, but expect to see more local, "get it now" opportunities served to consumers in way that is more relevant to them -- the right offer, the right person, the right time. Mobile will be key in delivering this value, especially as technology and mobile-social platforms continue to evolve. For marketers, it's important to experiment now to understand the value that different daily deal sites can bring, and to understand when and how to use them in ways that will help them meet their specific business objectives.

Sarah Hofstetter is senior VP-emerging media and brand strategy at digital agency 360i. She blogs at 360i's Digital Connections and can be found on Twitter at @pezmeister1
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