Being from Chicago, it is almost impossible to open the business section of the newspaper without reading something about Groupon. Almost singlehandedly, the brand has elevated the mass of technology entrepreneurs in this city towards the euphoric heights of Silicon Valley. Now, some may say I am just a bitter, 12-year email marketing veteran, living in Chicago and yet somehow missing 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 future of the group buying and flash sales trend and what it means for email marketers.
A Feb. 13 article in the Chicago Tribune, "Cheap thrills: Chicago long a hotbed for online coupons, discount deals," stated that Chicago is home to 43 such online businesses. That means, conservatively speaking, there are hundreds of companies competing for consumers' attention on a daily basis in the inbox. There's no question that the business model is hot, but this influx of sites also brings with it the risk of oversaturation, with consumers eventually tuning out the messages. Furthermore, brands need to consider whether use of such sites will create a segment of customers who are loyal to discounts and not the brand.
The way to combat both problems is through the adoption of sophisticated email marketing strategies that foster engagement and loyalty. Given the low barrier to entry in this space and the massive competition for inbox attention, here are some basic principles that need to be followed to ensure long-term success.
One of the potential perils of flash and group buying sites is the reliance on discounts to drive brand and subscriber loyalty. If consumers subscribe to Groupon, LivingSocial, Mamapedia and Joss & Main, what keeps them active and engaged in one program could easily cause them to be inactive in another. If the only driver of these sites is the deal and the discount, then the entire business model could be a race to the bottom, with profits for both the companies and advertisers 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 programs. 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 guarantees 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 consumers to customize their experience should win out in the long run. It is unlikely that a consumer will personalize 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 centers 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 Sale and Group Buying sites to leapfrog many traditional email programs.
The Future of the Industry
At the end of the day, there are simply too many players in this space, so consolidation should start sooner rather than later. Additionally, it won't be long before some forward-thinking brands decide to cut out the middle man and offer daily deals on their own. With the right email partner to ensure real-time delivery of their sales event messages, brands can join the fray without too much difficulty. The companies standing at the end of the consolidation will be those that have moved beyond the deal and begun building loyalty within the subscriber base by staying 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.
Great article Ryan. I was planning on writing something in a similar vein - as I think you've touched on a huge issue. But it goes beyond just flash and daily deal sites to how companies are increasingly relying on email with 15% off and free shipping, Facebook Deals (check ins), Twitter-based deals, etc.
Now discounts, promotions and sales will always be a part of commerce. But as these tools for discounting explode, is it becoming too attractive to companies to take the easy discount route? Rather than focusing more on building better products and providing a better value proposition and customer experience than competitors - Apple, Nordstrom, Zappos, Southwest, et al.
Thanks for starting the dialog with a great column.
Excellent article and I completely agree that the daily deal space will reach its capacity sooner rather than later. Every city has more daily deal sites popping up every day. It will be interesting to see how the publications like the New York Times, Philadelphia Inquirer and the like - will fair in the space, since they are incorporating their own daily deal sites into their newspapers.
I'm not sure if you have seen, but savvy companies are already starting to bypass the middleman companies, like groupon, through their own websites. Gap recently launch a website, where consumers can literally barter with the brand - AD AGE: Gap Invites Shoppers to Make a Deal - http://bit.ly/hqpW9u
Also of note is that Groupon was just valued at $25 BILLION!!! - Bloomberg: Groupon Is Said to Be Discussing IPO Valuation of as Much as $25 Billion - http://bloom.bg/fkpNJw
Daniel M. Schwartz
Ryan, in Adelaide South Australia, LivingSocial has grabbed a huge slice of this market. BUT and it is a big BUT businesses are still not using this discount forum wisely. For instance I bought into a local Pasta Meal deal a few weeks back. When collected the owner complained how much money they were losing on the 1000 deals they sold. No attempt to get my details to keep selling to me. An Indian (we call them takeaways here not takeouts) seemed to get it right when they asked if I would like to join their email list. "We send out weekly specials." I was told. That was a month ago. No emails have been forthcoming. The fact is these discount offers do play a part in a businesses' marketing mix BUT only if they are a part of a larger marketing strategy. Continually discounting ones goods and services is not a great business model. Regards Kurt Johansen Australia's Leading Email Marketing Strategist to Small/Medium businesses. www.kurtjohansen.com
Very good points.
Problem most businesses face is that they don't have the marketing budgets or staff to continue to engage with consumers after they run a Daily Deal. This causes them to "drop the ball" and not get the full value of running this kind of loss leader campaign. Like you said, loyalty is crucial, but ongoing engagement is how to win the game.
Referencing back to your point about empowering the subscriber, it won't be about "The Deal" as much, but giving control to the consumer. More "pull" rather than "push" marketing.
Business need to educate themselves on how to socially engaged with their customers and show them the value of being loyal to their brand and/or service.
I look forward to more articles.
"An Indian" ? , Kurt ?
Great article and thorough points.
Here is a list of additional sample sales online sites to add to the above list