The Deal
Most people with an internet connection and an email address are familiar with daily deal websites like Groupon or Living Social. These websites, with their extensive voluntarily-submitted email databases, send out daily digital coupons featuring one [tooltip text=”Or at least ‘heavily marked up to be heavily marked down’. The proverbial X% off MSRP marketing mentality.”]
“deeply discounted”[/tooltip] product or service from a local business.
In general, a subscriber will have the opportunity to purchase the coupon at a dollar amount lower than the perceived value of the good or service. The revenue from the consumers’ purchase is then (most often) split 50/50 with the coupon agency (Groupon, Living Social, HalfOffDepot, etc.) and the local retailer. The consumer then may redeem the coupon before the given expiration date and under the terms of whatever restrictions the retailer and daily deal site agreed upon.
The mentality here is simple. The consumers win because they are receiving a good or service at a discounted price. The daily deal sites win because they are collecting commission off of what is largely an automated service. And the local businesses win (usually) by garnering a new, large and immediate surge in consumers. While most businesses aim to simply break even with their daily deal, striving to make the coupon as attractive as possible, the biggest end goal is to profit off the new customer base through repeat business, up-selling & cross-selling.
That being said, the continued inability of retailers to actually profit off “Grouponers” through repeat business, up-selling, and cross-selling has largely led to the stiff decrease in new sign-ups for the increasingly competitive business of online daily deals.
Urgency
Get them in the door. Get them calling your phone. Always be closing.
Too often, an advertising message (no matter how enticing or clever) is lost at the heels of preoccupation. “Yeah, I’ve been meaning to buy me a [widget], I’ll have to remind myself to do that next I get the chance.”
Won’t happen. Consumers are on their own schedule, and
you need their business now. If they don’t exchange money for your product or your service at
this moment, their refrigerator
will break down tomorrow. Their washer and dry is going to need replacing. Before too long, there
will be an even more pressing (and most likely more responsible) way to part with their money.
John Clarke & Bryan Dawe are satirical comedians who often do short video sketches on the economy, financial system, credit crisis & the Australian government. There’s
a funny video about the financial system they did a while back that always stuck with me about advertising:
Bryan: “Do people need to be buying these things?”
Dawe: Well obviously they think so, Bryan. These things are advertised to people as very necessary, very important, and deeply deeply attractive.
The, in my humble opinion, beautiful missing element in this equation is the element of urgency. More precisely,
perceived urgency. The urgency of a sale, for example. It’s the element of urgency that:
- Gives advertisers “reason for promotion”
- Facilitates impulse purchases
- Creates a strong demand for credit & financial services
Unless you
work at Goldman Sachs however, we’re only truly concerned with the first two.
Urgency to Buy
The offer is quick. It’s not a printed piece of gloss paper sitting in your street mailbox, and then on your kitchen counter for three weeks. The coupon comes in by email. There is (usually) a 24 hour buying window before the deal expires. Consumers feel pressured to make a decision. “Well, I’m not in the market for this good or service at the moment; but I just might be in the coming month or so–best not risk losing the deal now.”
And here’s the best part: there’s a minimum requirement of coupon purchasers for the coupon to ‘activate’.
Genius!. If a consumer really wants the deal, they’ll have increased incentive to purchase the coupon early to give it momentum. If few people have jumped in the boat by the end of the 24 period, other potential consumers are discouraged from jumping in as well. It’s the bandwagon effect.
Consumers respond to urgency. Businesses, advertisers, and marketers are constantly striving to move consumers through the buying cycle before they can find another, more pressing way to spend their money.
Urgency to Redeem
For businesses, the benefits to a group deal is the surge in new customers. The sooner a customer comes in the door, the sooner a business can ‘sell’ that couponer on the benefits of becoming a return and habitual patron. As with all coupons, a visible and prominent expiration date is a must.
From personal experience, I might also note that running a coupon with additional, conditional incentives are a great way to promote up-selling and cross-selling. For example, in a instance where a customer can buy your deal worth $X, it’s very common that a consumer will redeem the coupon for as close to $X as possible. Their goal is to fork nothing out of pocket if at all possible. This is fundamentally at odds with what you, a business, are trying to get out of the customer.
However, a few words in the fine print:
“Spend $3X in our store at time of coupon redemption for deal to be worth $1.5!”
Surely, a graduated coupon structure may be warranted by a increase in revenue per coupon redeemer?
