Daily Deal Fatigue

Putting the Bloom Back on the Rose

December 6, 2012

After an explosion onto the marketplace a few years ago, daily deal sites are floundering. We got together a number of recovering daily deal addicts to understand why the excitement is gone and to offer strategies that could win us back and reap the resulting rewards!

NETTING IT OUT

There is a lot of news lately about how daily deal sites are faltering. What could help regain the excitement—and hoards of participating consumers and vendors—that this relatively new business segment enjoyed just a few years ago? We believe that some of the following strategies could help revive the failing business sector:

  • More personalization of offers
  • Wish list fulfillment
  • More information on merchants
  • Flexibility of offer details
  • Longer window before offers expire
  • Allow merchants to “own” the relationship with the customers

DAILY DEALS ARE DYING

According to CBSNews.com Money Watch, “only a few years into its existence, the entire online coupon business is struggling, with top players still trying to learn how to grow quickly and profitably enough to satisfy investors. The question is not how much more consolidation can go on so much as how many companies might be left to consolidate. According to trade publisher Daily Deal Media, in the last six months of 2011 alone nearly 800 daily deal companies closed their doors.”

Smallbiztrends.com agrees in Groupon and Daily Deal Sites Faltering, which pulls together a series of third-party blog posts which point out the problems with the current business model and customer relationships and offers alternative marketing strategies that can replace and improve upon daily deals.

There are a few moderately positive viewpoints. In her post, Crisis or correction for daily deals?, Teresa Novellino, Entrepreneurs & Enterprises Editor, asks whether the “dark days for daily deals, what with Groupon CEO Andrew Mason dealing with calls for his ouster and LivingSocial letting go of 10 percent of its staff” signals “the beginning of the end of this once-hot sector?” She reached out to Boyan Josic, founder and CEO of Daily Deal Media, who commented that the sector is going through a correction into a period of adjustment. And one of the adjustments that both Groupon and LivingSocial are doing is expanding into new business sectors, including retail offers and food delivery services. However, even that optimism is tempered. According to Novellino, “Josic sees the expansion into new areas as problematic. ‘While I believe it's important for Groupon and Living Social to continue innovating and exploring additional revenue avenues on the investment they've made, I'm concerned by the number of investments and business models they're trying that aren't directly related to their main business. Are they trying to 'replace' their current business model or 'complement it'?’”

While these business minds look at what’s going on vis à vis the online daily deal businesses and their merchants, I turned my thinking to the customer perspective (when do I not?) to figure out what’s wrong and what might fix the problems for the consumer and revitalize this failing market.

SUFFERING FROM DEAL FATIGUE

Confessions of a Former Addict

Hello, my name is Ronni, and I was a daily deal addict. Note the past tense. I have signed up for at least five different daily deal offers (that I can remember), including:

  • Groupon
  • Living Social
  • KGB Deals
  • Amazon Deals
  • Boston Deals

I used to start my day reading through all the daily offers, getting more details on at least two or three, and often buying one. I think I bought at least one a week—usually restaurant deals, but also deals for merchandise, especially as gifts.

Then about four months ago, I realized that I was deleting more daily deal emails than I was opening. I just didn’t have the time or the inclination. I realized I was suffering from deal fatigue.

What Changed My Behavior?

I thought about this for a while and realized the following:

  • Pressure to Use. I felt a lot of pressure to use my deals before they expired, Even though the amount paid is good forever—for example, if you pay $10 for a $20 restaurant meal value, even after the “use by” date, you still have a $10 credit towards that restaurant. Somehow, not getting the deal discount was so depressing that I found I never used expired offers. The agitation I feel during the last week a deal is valid is very real—and very unpleasant. I spend a lot of time trying to find someone to go out to dinner with me on short notice—even when I don’t feel like going out at all!
  • Repeat Offers. The same restaurants and merchandise were being offered over and over by the same “dealers” and, often, by multiple “dealers.” (Last winter, I received three different offers for touch-screen-friendly gloves, each at a different discounted price. I ultimately bought them for $9. As the weather turns cold, the offers are starting again.) So the excitement of trying something new (restaurants) or getting something cheap (merchandise) has become diluted.
  • Buyer’s Remorse. I have suffered from buyer’s remorse when I realize, after I’ve made a purchase, that I really didn’t want that item or to try that restaurant. I realized that I was pretty much throwing money away. It wasn’t a lot, but it added up.
  • Trouble Redeeming. Sometimes merchandise is too hard to redeem! Especially items that are offered from overseas “superstore” etailers of tons of items (such as Dillyeo.com). The instructions on how to redeem are sometimes unclear or even wrong; it often takes about five steps to redeem once you’re on the etailer’s site; and there is generally confusion among customer service organizations from the deal company and the merchant site as to which company should be providing support to redeemers.

MAKE DEALS MORE APPEALING TO CONSUMERS

So I’ve given quite a bit of thought to what would make daily deals more enticing and get me excited again. I asked friends who are also daily dealers to give me ideas. And I think we’ve come up with a good set of innovations that would put the bloom back on the daily deal rose. Note that these are ideas that are appealing to consumers. We didn’t examine how they would impact the merchants. However, we believe that having more consumers excited about purchasing and using daily deals is always good for the providers of the deals’ products.

Personalize

Currently, many of the daily deal companies ask you your preferences on types of deals, such as:

  • Restaurants
  • Sporting events
  • Entertainment
  • Health and fitness
  • Travel and hospitality
  • Beauty and relaxation

But these categories are very broad! What if customers could submit a more detailed list of things they are interested in? For example, not just “Entertainment,” but “Ballet;” not just sporting events but NFL games in New York or even specifying down to Jets only or Giants only. Let me tell LivingSocial that I like Indian Food but don’t like Pizza. Let me specify that I want deal offers on gym memberships but not for health additives (e.g., vitamins or weight loss supplements).

PERSONAL PROFILE OF PREFERENCES. Each customer should be able to create a detailed profile of preferences that filter out inappropriate deals, so that the daily emails only contain offers that are likely to be attractive.

Of course, each email should have a link to “all daily deals” in case the recipient is planning on giving a gift or expanding his entertainment comfort zone (“maybe I will try the opera…once”).

And it goes without saying that the companies offering the deals would need to pay attention to these preferences. I have told several of the daily dealers that I don’t want offers for stays at resorts (I’m just not likely to use them), yet I’m still sent these offers regularly from several sources.

It would also be great if the customer were able to maintain a single profile and have it accessed by multiple deal providers, but that is very unlikely. These companies are, after all, in competition with each other.

Of the deal companies I am signed up for, Groupon has the most complete preferences list. And Groupon is currently updating that preference profile feature to offer some more flexibility, but it still doesn’t offer me the granular level of personalized preferences that I would like. (See Illustration 1.)

Groupon Preferences Are Part of Your Profile

 Groupon Preferences Are Part of Your Profile

© 2012 Patricia Seybold Group Inc. and Groupon

1. Groupon allows customers to pick categories of deals that they prefer. Recently, the company did some fine tuning to the categories. When a deal is offered, it shows the categories it fulfills. If you have selected any as favorites in your profile, that category shows a red heart versus a grey heart.

Wish List/Gifting Destination

Perhaps this thought has come to me because the holidays are approaching, but I would really like a daily deal provider to help me with my gift giving. Wouldn’t it be wonderful to...


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1 comment


  • Patty_author
    Patricia Seybold on December 6, 2012 at 4:07 p.m.

    Ronni--Great insights! I wonder if the beleagured CEOs of the Daily Deals companies will read this!

    I also came across this article from the MIT Technology Review--describing a paper by Ayman Farahat at Adobe Inc, Nesreen Ahmed at Purdue University in Lafayette, and Utpal Dholakia at Rice University in Houston in which they look at the correlation between hidden factors that lead businesses to offer daily deals and hidden factors that lead to business failures. They point out that, while there IS a correlation, these vary by the type of business. Essentially, a high variable cost business, like a restaurant -- where your costs are tightly correlated to the number of people you cook meals for -- has less to gain from a Daily Deal than a low variable cost business, like a spa--where you have less variable costs. Yes, you need to supply a masseuse for each client, but those are scheduled; not walk-in. And the rest of your overhead is more constant.

    "Farahat and co say that other work has shown that restaurants are not well suited to daily deals because they have  high marginal costs, low fixed cost and are generally unable to schedule the arrival of daily deal customers.

    But spas are much better suited to daily deals because their marginal cost is low, they have high fixed cost and they generally have the ability to schedule daily deal customers.

    So the decision to offer a daily deal must be a more desperate measure for a restaurant than a spa."


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