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Why online coupon sites might be bad for your brand

July 7, 2011

In this article called “why daily deal sites are here to stay” John Amato lists three reasons why daily deal sites are here to stay:

  • Consumers Will Always Want a Deal
  • Smart Businesses Will Reap Rewards, Despite Losing Money on Deals
  • The Market Is Still Maturing

Starting with the last one, I agree the market is still maturing. Coupons aren’t new though. Online coupon are simply a different distribution channel for a deal.

People like coupons, and always have. This is giving them value in an interesting new way. GrouponLivingSocial, Woot, Eversave, Gilt City, etc are still figuring out what they want to be.

Smart businesses can make money

Smart businesses can earn eyeballs by making some good deals, even if they lose money. But, there is a risk. The risk is in devaluing the brand. In a new post that you should read called “How Marketing Works“, Nigel Hollis does not talk about coupons.

Nigel argues that at the core, “Marketers create rewarding experiences that encourage people to pay more for a product.”

It’s the opposite argument that coupon sites make. Coupon sites promise “Offer an amazing deal to people looking for deals and you’ll generate trial.” (I’m paraphrasing).

Apple would not have a Groupon deal. Apple doesn’t devalue its brand through coupons, it adds value to the brand through marketing.

See what I did there? I took one of the most iconic brands to prove a point. I’ll concede that most brands aren’t going to be Apple, but that doesn’t mean a brand shouldn’t try to be.

When a brand coupons for trial, it isn’t adding value, it is devaluing the brand. Coupons, as illustrated in point #1, feed into a mentality of looking for the deal.

Put people are loyal to brands in spite of the fact that they can buy something else in the category for less.

Marketing creates experiences around the brand that allow for people to get added value out of it. Think of the people who pick Coke over Pepsi, Taco Bell over McDonald’s, or Starbucks over Dunkin Donuts. These people might be swayed away from the brand of choice by a coupon, but they won’t stay swayed. The brand is stronger then the deal.

The risk to a brand is this: people aren’t loyal to the brand, they are loyal to the deal.

In other words, Groupon or Woot or whatever might work once, but will it work for repeat purchases at full price?

Again, look at #1. If consumers are chasing a deal, and you get them running after yours, what’s next?

The Facebook page social media problem: 

This dynamic is hitting social media. In the early days, brands used the Groupon approach to social media. Fan our page and we’ll give you stuff. Eventually the stuff stops, and the fans are disengaged. Efforts to re-engage fans are widespread, but the simple reality is, fans weren’t engaged in the first place. They were chasing the offer, not fanning a brand.

All that said, this isn’t an anti-coupon post. Coupon sites can create trial and add value. As part of a larger plan to generate a sticky consumer, coupons and promotions could ‘work’. But it is important to understand the cost.

Daily deal sites are here to stay. But brands need long-term plans too.

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13 Comments leave one →
  1. July 7, 2011 10:09 am

    Some great thoughts here, Matt. I was thinking on this precise thing today. I get a lot of these daily deal offers every day – 6 or 8 at least. I filter them into a folder and then at some point skim through them for anything I want. Some of the deals ARE jaw-dropping – a gym membership for a month WITH a personal trainer for $29??? How much can a business afford to lose? I bought 5 softcover photo books for my blog posts for $5 each, and then another company did similar, so I bought from them… no loyalty here…

    Anyway it occurred to me that the companies that do these promotions are a perfect target for my business (email marketing primarily, at least for now…) They’ve paid a premium to get the customer in the door. They’ve got their email address – email marketing is a chance to remind them how much they enjoyed the product or service and entice them with more realistic special offers… I see a lot of them are total internet marketing newbies – have a facebook page, but no website… Oy!

    Anyway – Thanks for the good read…

    • July 7, 2011 10:53 am

      You’re right, the people who jump on the deal of the day are prime candidates for a nurturing campaign. The problem is, the nurturing campaign (via e-mail or soc networking) will have to separate the brand loyal from the deal loyal.

      The numbers will never really mesh, so it will be important to set those expectations. Don’t promise to turn all e-mails into loyal customers, instead pick a percentage. But yeah, you’re right. Businesses need to think about the next step, whereas the coupon sites only think about the next business.

  2. Anonymous permalink
    July 7, 2011 7:13 pm

    (This is Sean, I’m not giving wordpress or anyone else info just to post a comment.🙂 )

    Let me say a bunch of stuff about things I’m not qualified to talk about:

    The gym membership for a month or HBO for three months or other such free/cheap trial of a reoccurring service are much more sensible strategy. There you really want to get someone to try your service with the intention that once they do, they will love it. Most importantly, you can also do it without cheapening your brand. The strategy there is “once you try it, you’ll know why it’s worth paying so much for it.” And there you really are targeting people who otherwise would not be spending money on gym membership or HBO or whatever. It’s not like many people who go to gym hop from trial membership to trial membership to get their gym fix.

    Apple does in fact hand out lots of free stuff. They’re just very good at not letting the free stuff they hand out diminish their brand. So they can still get away with $40 proprietary cables instead of using standard usb on the iPad, for example.

    The “we’ll give you a free/cheap thing that you hardly ever use” or “we’ll give you a cheap/free offer of an ubiquitous product” doesn’t seem to be a winning strategy.

    So I have a 50% of coupon for a particular shampoo that makes it the cheapest shampoo of acceptable quality. Yay! Next time when I don’t have that coupon I’m still looking for the cheapest shampoo of acceptable quality. And this time I don’t have your coupon so I’m not buying your product.

    Getting people to be repeat purchasers of an ubiquitous product is about selling them on the brand and qualities of the product. A once off deal will never turn them into regular purchasers.

    • July 8, 2011 1:06 pm

      Thanks Sean, I think you’re right on a lot of levels. For a gym or a zoo, a groupon could be awesome. Expect people will also think of their membership as the groupon membership, which might mean the brand has to work harder to retain a member.

      Again, I’m not saying a brand shouldn’t use groupons. Just that there’s a cost over and above the loss of revenue on the thing.

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Trackbacks

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