Digital Couponing Your Way to Market
Business Models Evolve
Digital couponing became an instant hit when Groupon and daily deal sites introduced their collective buying platforms a couple of years ago. Also known as Flash Sales or Limited-Time Promotions, coupons are a tried and true form of advertising to persuade customers to shop at stores and frequent restaurants.
Coupons, or discount slips, more than 120 years in the making, are iconic to the American lifestyle. In Florida, the coupon-clipping retiree has long been the object of jokes, but the coupon craze is actually a national phenomenon. Now online coupons have gained new popularity over the past couple of years because they can be printed in unlimited quantities. Merchants that deal with Groupon, Amazon, or other sites, benefit when 1000 deals are purchased, but maybe only a fraction are actually redeemed.
Since we reported on digital couponing a year ago, it is still a hot ticket. But mobile coupons are starting to give digital coupons a run for the money.
There has been an increase of 263 percent in the usage of online coupons from 2008 to 2009. The smartphone trend is shifting coupons to mobile phones. Users are downloading popular apps that gather different coupons from across the internet based on geographic locations. This makes all the discount options, from sales at clothing shops to free food in a restaurant, at consumers’ fingertips.
Adam Springer, one of the founders of So Not Retail, a digital coupon site that provides online discounts for popular stores like Old Navy and Kohl’s, has a few thoughts on the daily deal business model and where the future of online couponing lies: “Digital coupon use is still in its infancy. Daily deal sites are on the decline and mobile coupons redeemed on smartphones are trending upward. With mobile coupons, the consumer has the ability to walk into a retailer with their phone and redeem a coupon on the spot, rather than prepaid for a deal that is miles out of the way,” said Springer.
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Following and Questioning the Groupon Model
The Groupon model was practically an overnight sensation when consumers first began getting great deals in their inbox every morning. If enough people signed up for a half price dinner at a reputable local restaurant, the deal became active. Ecommerce retailers, such as Amazon.com soon followed the money.
“Online retailers have the infrastructure already in place, so it was easy for them to copy Groupon,” said Lawrence Lerner, a change agent at RevolutionaryInnovator.com. “Everyone has followed the Groupon model, although retailers have been using online coupons for a long time to drive people into the stores and create stickiness.”
But the daily deal space is changing. Coupon distributors have learned from experience and are getting more sophisticated in their presentation. Lerner said, “One or two years into the model, and they can think about what they have learned and how to target specific markets. With much more data, the marketing experience has become more refined.”
On the merchant side, companies are questioning the value and benefit of the deal and its ability to generate customer loyalty for their establishment. Many local restaurants are reluctant to split the take with Groupon for a one-shot customer that gets a dinner for two at 50 percent off.
As for the end user, some are beginning to find the daily deal somewhat gimmicky without fair value. “I paid $17 for a beading class, but it ended up costing me an additional $60 by the time I got finished buying supplies, something I did not foresee,” said Jane Tobin, a resident of Delray Beach, FL. “The daily deal is not necessarily a bargain.”
Other negative reactions to the Groupon model relate to the loyalty effect. Cody Swann, CEO, Gunner Technology in West Palm Beach, gave this example of a Fine Dining Restaurant that offers a Groupon for 50 percent of a full-course meal value June 4 – June 14.
“The restaurant doesn’t have the capacity to serve the amount of customers that show up with Groupons for June 4 and these customers have to wait an hour for their meal,” said Swann. “You think those are happy or unhappy customers?”
Swann is seeing a huge increase in the opposite direction. How can we get promotions in front of existing customers in a timely manner?
For example, Qdoba Mexican Grill in Orlando may have millions of customers but how can we get them to be more frequent customers? Swann says, “Time coupons. Say, it starts raining, the technology automatically sends a SMS/email, whatever to existing Qdoba customers for a Rainy Day Promotion.”
Niche Markets Thrive
At first, daily deal sites sent out a broad variety of dining deals, leisure activity, fitness, and travel promotions, along with product offers.
“Conventional wisdom has been that restaurants and service related businesses are best suited for daily deals,” said Jeff Hudson, co-founder of Grocery Coupon Network. “However, from time to time there have been exceptions. For example, the Gap deal on Groupon in 2010, and the Amazon/LivingSocial voucher in 2011.”
Now the success of niche oriented deal sites and private sales are proving that people have special needs and preferences.
“I believe that niche deal sites have much more of a future than groupon clones and competitors,” said Max Librach, co-founder of Gluten-Free Saver. “While many of the daily deal sites have no differentiation, our customers are forced to follow a diet that’s extremely expensive. Other deal sites deal with disposable income and leisure activities. We deal with essential medical supplements.”
Besides niche markets, the digital coupon is being rolled out on non-traditional media. Jordan and Bryan Silverman, college student founders of Star Toilet Paper, were not afraid to try a new medium and tying it to digital. The brothers are focusing on advertising and distributing coupons on high quality toilet paper that is placed in college and academic venues.
The toilet paper coupon model works by utilizing a coupon code on the website to obtain a pdf version of the coupon. It can be printed, saved or shared with friends.
Another way to activate the coupon is to utilize a QR code. The consumer can scan the code and end up on a landing page that has not only the coupon, but also the address, Facebook page, Twitter account, and other useful information to help the consumer use, save or share the coupon. In other words, the coupon with the brand name goes viral. Consumers can print it or show the cashier on their smartphone the coupon they have just received.
Each roll of toilet paper features seven advertisers and each business gets 125 ads/coupons per roll. Instead of being one of 200 companies in a coupon book or traditional advertising, the business will be one of seven on the paper product.
The Silvermans use soybean based ink and a 30 year printing process to ensure that all toilet paper is septic safe, recycled, and comfortable to use. Orders and images are emailed and different coupon designs are available.
Current clients include Ben and Jerry’s, Pita Pit, Smoothie King, and Sav-Mor Pharmacy and other venues such as apartment houses, dance studios and bowling alleys, all targeting the youth market.
Discounting Glitzy Goods
Luxury consumer goods on private sale sites are the basis of another daily deal platform. Private sales have been widely successful with fashion and home décor products. Shoppers have to be registered on sites like OneKingsLane, HauteLook and Gilt, which feature unusual furnishings, antiques, and one-of-a-kind decorative pieces.
Scott Bird works in the private sales section of the industry with Bungolow.com. The site features discounts of up to 50 percent at upscale hotels and resorts in Latin America. “We have definitely noticed substantial growth internally. We think the long term trend in digital couponing is towards more niche focused sites and the private sales model,” said Bird. “Our customers don’t want just a good deal, but assurance that they’re getting quality and fantastic customer service. Sites that provide great service and have a greater value add than just discounts will be the ones that perform the best.”
The State of Mobile Coupons
Will mobile couponing beat out digital coupons? Mobile Couponing is expected to grow eightfold over the next four years, from $5.4 billion to $43 billion by 2016 (Juniper Research).
“Mobile couponing is coming, but right now the reality is the traffic is still primarily web related. I expect the daily deal players to be fully integrated into mobile couponing as the industry moves forward,” said Hudson.
Major retailers are covering all the bases. Target recently started offering its guests the shopkick app via their smartphones so they can earn points that can be redeemed for a variety of rewards.
Shopkick is free and available on iPhone and Android devices. When guests walk into their Target store, shopkick rewards them with points known as “kicks.” Then, as guests shop the store, they have the opportunity to scan products ranging from everyday items like food and cleaning supplies, to specialty products like electronics and toys, for additional kicks.
Kicks can be redeemed for Target gift cards, Facebook credits, dining gift certificates, iTunes downloads, donations to charities, and more. Guests can also receive special in-store deals including coupons and discounts.
In one form or another, coupons are here to stay. We will continue to find coupons in every print publication, on every mobile device, and in our email boxes. For platform providers and marketers to succeed, a strong offer is the way to go. •