Daily deal sites like Groupon and LivingSocial began in the early 2000s and grew rapidly in the late 2000s. They allow local businesses to offer discounts to customers through these third party sites. While revenues for daily deal sites are projected to continue growing significantly, the business model faces challenges in retaining customers and merchants. Experts disagree on whether the largest daily deal companies like Groupon will survive long term or need to change their strategies to be sustainable.
1. Daily Deal Sites
By: Avery Bowser, Kaleigh Morrison,
Julia Rosenberg & Mary Wilson
#SMdeepdive
2. How It All Began
•2001: Vente-privee.com
•2004: Woot.com
•2006: over 100 daily deal sites in United States
•2008: Groupon
•2009: LivingSocial
•2011: Scrounge
•Facebook attempted daily deal feature, but canceled due to
lack of success
•According to a study released by BIA/Kelsey, gross revenues
are projected to grow from the current $873 million to $3.9
billion by 2015
3. What is Social Couponing?
● Local businesses team up with social coupon sites
● Social couponing site informs members of the
deal in their city
○ zip code
○ specify interests
● Social aspect:
○ need minimum number of deals
○ referrals=benefits for you
4. Most Common Sites
● Groupon
● LivingSocial
● TravelZoo
● Yipit
● BuyWithMe.com
5. LivingSocial
Founded in 2007
Employees from Revolution Health Group
Started with small apps on Facebook
–Visual Bookshelf app
–PickYourFive
–BuyYourFriendADrink.com
Daily deals is highest grossing aspect
LivingSocial Escapes
6. Groupon
Launched in 2008
500 markets
44 countries
Owns international sites
–MyCityDeal (Europe)
–Beeconomic (Singapore)
Groupon Getaways
Groupon Now app
–“I’m Hungry” or "I'm Bored"
Financial troubles
7. High Grossing Deals
•LivingSocial and Amazon.com offered members a
$20 gift card for $10
–voucher attracted 1.4 million purchases
•LivingSocial offered two tickets for $9 via
Fandango’s ticket service for any movie
–Sold 1 million tickets in 2 days, 780,000 on day one
alone
•Groupon offered a seven-night resort stay for $399
–2,752 bought
-73% discount
8. The Days of Coupon Clipping are Gone!
● LivingSocial commercial
● Groupon commercial
○ Super Bowl
○ Controversial
10. When to use Groupon
● Excess inventory
○ Clear the warehouse
● Excess capacity
○ Fill the cruise boat
● Repeat sales
○ Hope they come back for
more
11. ● Additional sales
○ Tempt them to buy more
● Attract a young demographic
○ 68 percent of users are aged 18 to 34
● Generate buzz
○ Expose your product to new customers
12. When not to use Groupon
● Unprepared for large influxes
○ May generate demand you cannot meet
● When you never have repeat sales
○ Make sure the investment’s worth the cost
It’s easy to get swept away by trends and
promises of future earnings but Groupon is
not for everyone.
13. Calculate the Repercussions
● You will reduce your product or service by
at least 50%
● Groupon gets between 30% and 60% of
that reduced price
● When will you breakeven?
14. Case Study: Posies Bakery and Café
Groupon Gone Wrong
“Using Groupon was the single worst decision I’ve made as a
business owner thus far.”
Jesse,
Owner
15. What Went Wrong?
● Publicity didn't compensate for hit to
profit
● Average sale: $5
● Groupon: Pay $6 for $13 of product
● Groupon took 50%
● Minimal training
● Sold 1,000 Groupons, valid for 6 months
● Fraud
● Opposite of yield management
● Lost $10,000
● Yelp ratings fell
16. Interview: Sucharita Mulpuru
● @smulpuru, Analyst at Forrester Research
● Many consumers subscribe but don't buy
● Half of deals expire unused
● Aversion to more emails
27. Will Daily Deal Sites Survive?
•Local businesses have dwindling marketing choices – old
forms are slowly dying off (ex – Yellow Page directories?)
•Daily Deal companies skip a risky step for merchants:
advertising
28. The Breakdown
•Groupon: “Too big to fail right now,” but expected
to fade out (think MySpace)
•LivingSocial: Less successful than Groupon, but
runs “great deals” and maintains good relationships
with merchants
29. A Positive Outlook on the Future
@saparra14, representative for Scrounge: "a lot
of savings for college students. Since they are still creating
awareness and a customer base I think it will get really big in
the year to come if they offer students coupons that will be
used"
30. On the other hand ...
@erichsparks, Ambassador of Social
Response for @uncollege: "These companies are so young
and the business model is still years from being
sustainable. I don't know if they'll be able to do it. I think
they'll switch from catering to "coupon customers" and
focus more on retaining existing customers. At least that's
what I would do."
31. Sites May Need to Change Policies to
Increase/Continue Success
•Market is becoming over-saturated (Groupon, LivingSocial, Google
Offers, etc) – companies need to distinguish themselves
•Companies that focus on creating functional and emotional bonds
have higher retention rates (84% vs 30%)
•Companies should pace themselves
32. Companies Collaborate
•Google Offers distributes deals from 15+ other sites (Gilt
City, Juice in the City, kgbdeals, etc.)
•Groupon dismissed offer of $6 billion – now pitching IPO
of $11 billion to potential investors
