Daily Deals Go DEALER-CHIC

I’ve written my share of negative posts about daily deals, including this one about “deals dying a slow death.” I still believe there is an over-abundance of Groupon look-alikes and that a shakeout will occur. That seems all the more likely now that Groupon has gone public, generating some $700 million after raising the size of its IPO. Groupon was the largest IPO by a U.S. Internet company since Google’s IPO in 2004.

What may be more significant than Groupon itself, however, is the fundamental impact it is having on the consumer market. The excitement over daily deals will eventually quiet down, but in its wake will be a new marketing environment that all of us, like it or not, will have to deal with.

Daily Deals to be Expected

Trendwatching.com, a firm that keeps an eye on global trends, calls the phenomenon “DEALER-CHIC” in its latest briefing, suggesting that deals “are becoming a way of life” for consumers. Make no mistake, this is a significant trend, not just in the U.S. but worldwide, and it dovetails seamlessly with the economic angst that consumers everywhere are feeling.

But as Trendwatching points out, while consumers are latching onto deals and discounts in droves, the deals will not drive consumers to purchase inferior merchandise or visit poor quality merchants — because part of DEALER-CHIC is the reality that consumers “are able to instantly check reviews and ratings before they make a purchase.”

Opening Doors

This is a key point; a marketer might think of the deal as the solution to sustaining its business, but the reality is the deal is merely a door-opener. If the business is not prepared to make good on the deal and fulfill it with a quality product and quality service, the deal could be deadly, because reviews could be negative, and ratings could plummet. Not only will the business lose money on the deal itself, but the big payoff of return business and referrals (the ultimate purpose of participating in a deal in the first place) will evaporate.

That’s why it’s interesting to see the deal marketplace broadening. Daily deals are not just for local merchants like restaurants and salons — they are being implemented by upper-echelon players as well. Never is this more apparent than in the travel market. Groupon and LivingSocial have gotten into the travel business. About a year ago, the well-respected travel site, TripAdvisor.com, launched its own private online travel deal service called SNIQUEaway. The service lets members know about limited-time deals that can save 50 percent or more on rooms at exclusive high-end hotels and resorts. One recent deal even offered a half-price voucher good towards a vacation to Italy.

Acquire At a Loss, Renew at a Profit

Why would high-end hotels, resorts and travel companies participate in such deals? Very simply, it is a way to generate trials from travelers who could become repeat customers. There’s an old saying in direct marketing: “Acquire at a loss and renew at a profit.” This is exactly what these higher-end deals are all about. A resort will take a loss on booking that first visit, because it is banking on the fact that the traveler will (1) spend additional money at the resort, (2) tell friends about the place if they like it, and (3) return sometime in the future if they have a positive experience. If even one of those things happen, the loss of income at the point of acquisition will pay off at the “renewal” stage.

With all this in mind, it seems marketers are destined to deal with consumers who are committed to looking for deals. According to Trendwatching, in the coming year, there will be “an even bigger ‘deal ecosystem’ ” as the deal-driven market matures. Consumers “will become even more conditioned in expecting deals for anything.” Deals will become more sophisticated because they will be targeted to consumers based on their specific interests, much like the move towards interest-driven advertising. Trendwatching says deal-makers like Groupon will focus on loyalty — “using deals to attract new, loyal customers (and reward existing ones). This will further reduce (or even eliminate) any stigma attached to brands that offer deals.”

Fine-Tuned Deals

In fact, Trendwatching makes the point that there is likely to be a real opportunity for online services that can create highly relevant or tailored deals, or help consumers find deals fine-tuned to personal interests. The firm cites such examples as “Link-Like-Love” from American Express, a service that feeds cardholders deals based on their likes, interests and social connections on Facebook, and KoalaDeal, a service that offers users a customized list of daily deals based on input they provide about their specific tastes and interests.

For brands, Trendwatching says:

“DEALER-CHIC is not about giving everything away or wildly slashing prices. The PERFORM OR PERISH message still holds true. Instead, brands should be thinking about the ways in which DEALER-CHIC enables them to reach out to (new) audiences, engage with them in novel ways, and help them do the things they want to do at a lower cost.”

How you deal with DEALER-CHIC may be one of the determining factors in your level of success in 2012.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

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