Posts Tagged ‘$GOOG’

Monday’s Musings: Auction Sites Such As Deal Umpire May Level The Playing Field Among Daily Deal Sites


Merchants Must Break Free From Daily Deal Site Hysteria

Following up on the April 4th post about the damage caused by daily deal sites such as Groupon, merchants continued to send feedback about the challenges they face.  Those who use daily deal sites express the following:

  • Peer pressure to participate. Customers and prospects flooded by daily deals try out competitors.  Merchants afraid that lack of participation will hurt the business. A large restaurant chain VP noted, “Dammed if you do, dammed if you don’t.  We need to raise awareness above the fray, but the prize for winning is a losing business model”
  • Attraction of a low value, price sensitive customer base. Instead of attracting brand conscious, high value customers, merchants end up with bargain hunters.  Over time, merchants have had to raise prices to make up for losses with daily deal sites.  A high end spa owner complained, “I’m attracting the wrong customers and aggravating my loyal customer base.  Everyone now wants a bargain and we’ve got no more margin to give”
  • Inability to negotiate favorable terms. A lack of transparency on terms results in higher takes of percentage of revenue. Merchants lack visibility and expertise to secure better terms.  CMO of a large hospitality chain stated, “The terms for the deals stink.  We need some pricing pressure to move the pendulum back towards the center”.

New Daily Deal Auction Sites Create Win-Wins for Merchants And Daily Deal Sites

Auction sites such as Deal Umpire provide a market between merchants and daily deal sites.  These market places, if successful, will deliver two key benefits for merchants such as:

  • Visibility in deal terms among various daily deal sites. Deal site profiles include key information such as revenue split, payout terms, subscriber reach, subscriber demographics, deal site business model, credit card fees, media coverage, marketing materials, and when a deal can be featured.
  • Competition for daily deal business. The market place concept brings together multiple deal site programs into once place.   With competitive forces in play, merchants can drive pricing pressure on daily deal sites for lower revenue share and more favorable terms.

Merchants using a market place benefit with:

Monday’s Musings: Mastering When and How High End Brands Should Use Daily Deal Sites Such As Groupon


Daily Deal Sites Claim To Bring New Customers

Chicago, Illinois based Groupon, is a consumer oriented commerce site that brings consumers looking for the ultimate deal to businesses seeking new customer bases.  Local based targeting, fun cheeky copy, and a reach in almost 600 cities powers the frenzy behind the “daily deals”.   Customers pay upfront.  Groupon takes 40 to 50% of the deal.  Businesses  supposedly gain new customers.  Other start-up competitors in the digital coupon “daily deal” space include Bloomsot, BuyWithMe, LivingSocial, Scoutmob, and Tippr. Established brands Google, Facebook, Microsoft, OpenTable, Yahoo!, and Yelp all have similar offerings in play or planned.  The idea makes sense at first on a few counts for businesses with:

  • Immediate inventory items. Perishable food items, overstocked goods, closeout merchandise.
  • Unused service capacity. Unbooked hotel rooms, open spa appointments, down time at a bar.
  • Instant gratification offers. Quick promotions, fast deals, quick foot traffic.

However, Most Orgs Face Massive Pricing And Brand Dilution

After talking to over 50 high end, high profit customers, we’ve unveiled a growing resentment with how the current model works.  Despite the advertised 95% of merchants who’d use Groupon again stats, the numbers fail to tell the story.  In fact, the top three complaints we personally heard in our informal 51 high end organization survey include:

  • Brand value dilution. The novelty and brand promise not appreciated by new customers.  Brand value not fully communicated or achieved by customers.
  • Downward price pressure. Overall perception on pricing trends downward due to lack of scarcity.  Customers now see a new price for an existing luxury service.
  • Loss of profitability among existing customer base.  Existing profitable customers wait for deals instead of pay full price.  Loyal customers feel cheated.

The Bottom Line:  Use The Customer Profitability Matrix To Determine Your Strategy

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