Oh, what a difference a year can make. At the dawn of 2012, the estimated value of the daily deal market was $873 million, and according to BIA/Kelsey, it would only get better, reaching $3.9 billion by 2015. But that was then. Today, the top daily deal sites, Groupon and LivingSocial, are dealing with less sunny realities. Last month, Groupon’s stock prices plummeted to less than $3 per share — an 89% decrease in IPO price from one year prior — leaving CEO Andrew Mason to scramble to appease the company’s board members and defend his own abilities. Living Social, meanwhile, made headlines last week when it announced layoffs of 400 employees, or 10% the company’s workforce. In response this news and in despite of the year’s earlier projections, analysts were quick to point to the obvious shortcomings of the daily deal business, namely its unproven long-term viability. Still, neither Groupon nor LivingSocial (nor any of their smaller, niche competitors such as Bloomspot and Gilt) seems ready to toss in the towel. Last week, Groupon’s events branch, GrouponLive, announced an exclusive deal to offer major steals to Major League Baseball fans. More relevant to marketers, though, is the company’s decision last month to shift away from the daily deal model toward one that offers consumers deals 24/7. Groupon offers — currently totaling some 27,000 deals — are now browsable, searchable and never go away. Oh, what a difference a year can make, indeed.
Maybe I’m just blogging out loud, but it seems like deals can no longer be here today and gone tomorrow. For brands to keep pace with the changing market and shifting economy, successful promotions need to work double-time.
A report published last year from analytics firm ForeSee said that 44% of shoppers who purchase daily deals do return to brands and retailers for future purchases. The report also said: 40% of daily deal buyers are existing customers to the brand offering the discount; 26% are infrequent customers to said brand; 29% have either never heard of the brand or had never purchased from the brand before; and 5% are former customers with no plans to purchase from said brand again. In short, promotions via Groupon, LivingSocial and their counterparts can bring substantial new business. In light of aforementioned negative press, then, it seems the challenge for Groupon, LivingSocial and marketers alike is the same challenge all brands face: building brand passion and loyalty. With daily deal sites, that passion may not be as brand specific as category specific. So, businesses and marketers are dealt another challenge: predicting the future of a shifting game.
For my Vertical Marketing Network colleagues and me, one thing’s for certain: come this time next year, things will surely look different.