Join the Coupon Crowd: Examining the Social/Coupon Connection

Posted on by Chief Marketer Staff

To judge how hot the social coupon space is now, try this unscientific experiment. Look up an online article on one of the category leaders — say, Groupon or LivingSocial.com — and see how many new start-up social coupon sites are link-spammed in the comments section. (My personal best was mentions of seven other sites, some of which won’t launch until January 2011.)

The social couponing phenomenon has hit, and hard. But what are best practices in the space, and what potential does it hold for marketers?

Like most standard coupons, social couponing sites are usually geo-specific; users visit sites and get email offers tailored to their local markets, usually involving small- to mid-size businesses.

But the deals in these social coupon offers are often much larger than any rebate offered in a paper or web coupon: rarely less than 30% off a list price, and often reduced as much as 50% to 75% or even 90% to draw attention. They also usually run on the website for a day or less to add urgency and get spotlighted as a “Deal of the Day” and conveyed in email alerts for those members who opt in.

And here’s the biggest difference: Users who want to take advantage of these deals pay for them first and then use them. In that way, they’re as much like gift cards as coupons, representing upfront revenue that the marketer usually splits with the social couponing platform. Some platforms split the take right after the deal has closed; others charge the business only when the offer is redeemed.

The “social” component of these deals can vary by platform. Some, such as Groupon, emphasize the crowd-power element by setting buy-in levels. Once a specified number of members sign up to buy the deal — a number that can be set by the merchant — the deal “tips,” that is, goes live, and the subscribers are charged. Businesses, particularly small ones forced to conserve their marketing dollars, get at least an assurance that their deals will go out to a minimum number of takers.

Other platforms integrate social in terms of viral spread rather than raw crowd power. For example, users who buy deals at LivingSocial get their deals for free if three of their Facebook friends then buy the same deal.

How to Deal

Quite honestly, the blogs are full of stories about merchants who underestimated the power of the web to spread their deals and either took a huge loss or wound up getting swamped by demand.

But Tom Cutrone, chef and owner of Savino’s Grill in Belmont, MA, has run promotions on both Groupon and EverSave and says both campaigns drove traffic to his business. “These online coupons have been a big help in a tough time for restaurants,” he says. “[They’ve] helped keep customers coming in so I didn’t have to lay workers off.”

He admits there’s been a learning curve. “For my first campaign on Groupon, I offered a $50 coupon for $25. And a lot of people tried to just spend that amount and get out. That’s not the idea, so we went to $35 and $40 coupons. We won’t make that mistake again.”

Janice Fitzpatrick and her husband marketed their Harrisburg, VA, bed-and-breakfast inn on LivingSocial for the first time last April and sold more than 700 high-priced weekend packages in the space of about 10 hours.

Again, finding the right price point was an issue. Fitzpatrick, whose son works for Washington, DC-based LivingSocial, says next time she’ll charge as much as $100 more for those packages. “I’ve had about 300 people redeem their coupons so far, and I tell them they’ll never get a better deal than that one,” she says. “They tell me they wouldn’t mind paying more.”

Other points to consider in working with a social-couponing platform:

  • Who will write the offer copy? Large players like Groupon and LivingSocial usually create the content in consultation with the merchant, but many smaller platforms let merchants write their own (which has good and bad points).

  • What will you have access to in the provider’s database? Don’t assume that coupon platforms will be able to share the email addresses of the users who’ve bought your coupons. You may well be on your own for acquiring those.

  • What are your aims? Are you looking to tap into a new customer base? Especially if you offer a niche service that’s hard to duplicate, coupons may bring customers who will return.

But be prepared to see plenty of bargain-hunters — and even to find your regulars using social coupons.

Where’s This Going?

Social couponing’s future seems secure, but its direction is still unclear. Consolidation among the platforms seems inevitable, and acquisitions are likely. At press time, both Google and Yahoo are reported to be considering bids for Groupon.

Competitive challenges may rise from other web categories, too. For example, Facebook’s new Deals feature — which links discount offers to merchants’ Places profiles — will drive in-store traffic using discount offers and check-ins, and could reach a much larger audience than Groupon’s 15 million.

And retailer Walmart launched a Facebook feature called CrowdSaver that lets fans vote for which of a handful of deals they’d like to see happen. If a suggested deal gets enough votes in a set space of time, the product goes on sale in Walmart stores for that discounted price.

National brands will increasingly pick up on social couponing. Groupon ran a nationwide promotion for The Gap last August that saw 445,000 people buy $25 coupons for $50 in merchandise.

“They purposely timed the offer to back-to-school season,” says Julie Mossler, consumer marketing manager for Groupon. “And the expiration date was November, so that motivated people to come in and use it right away.”

More

Related Posts

Chief Marketer Videos

by Chief Marketer Staff

In our latest Marketers on Fire LinkedIn Live, Anywhere Real Estate CMO Esther-Mireya Tejeda discusses consumer targeting strategies, the evolution of the CMO role and advice for aspiring C-suite marketers.

	
        

Call for entries now open

Pro
Awards 2023

Click here to view the 2023 Winners
	
        

2023 LIST ANNOUNCED

CM 200

 

Click here to view the 2023 winners!