Did you blink and miss the whole daily deals rise to stardom and now wondering what happened as the segment enters the twilight phase?  Just further evidence that the mobile industry is fast paced and changing every hour.

Recent studies including one by Kantar show a decline in traffic for both industry leaders Groupon and LivingSocial.  Combine that with Facebook dumping their daily deals altogether and Yelp Deals downsizing and the tsunami of daily deals is entering a new phase as quickly as it rose.

Consumers learnt very quickly that signing up for multiple deals providers and even subscribing to the emerging aggregators enabled them to leverage the best of all providers; customer loyalty is non-existent.  But the narrow scope of deals isolated predominantly to beauty, restaurants and some travel simple alienated the masses and retained the hoarding bargain hunters.

As competition grew and the challenge to attract varied and different offers became more difficult the margins began to get squeezed and consumers were leaving in hoards feeling disappointed and uninspired.  How many spa massages, dinners and weekends away can one individual really afford or want.

My experience with a restaurant voucher was far from positive.  Firstly, the fine print was ambiguous and only two outlets of this chain restaurant were involved and so I had to drive over 25km for the meal offer.  The restaurant was clearly overwhelmed and had no way to track vouchers.  They demanded a print out not a mobile version and were unable to verify duplication.  Service levels were terrible due to the chaos and to be honest, a promotion intended to generate new customers achieved the opposite.

I had a similar experience with a weekend away where the small hotel was almost annoyed we were using a voucher and the interaction was bordering on rude and disrespectful.  The room was ordinary and I was disappointed with the weekend even at the highly discounted price.

In current economic times the bargains seem to be oriented solely towards highly discretionary spending and has seen mainstream consumers depart leaving those customers that were likely to be paying full price anyway.  The lack of creative real value to mainstream consumers and the rising cost of source of offers  due to the competitive landscape are delivering very challenging times for the daily deals players.

Very simplistically, due to the number of companies offering daily deals the cost of acquiring offers means more sales staff and reducing fees.  Then add the rising cost of acquiring and maintaining a very disloyal customer base that now have significant choice and the business model for daily deals intermediaries is no longer the ‘cash cow’ it used to be.

There is no doubt that real world businesses have seen daily deals as a great way to attract new customers.  But the restaurant example shows that the deals process needs to be able to deliver more real time control to turn on and off based on traffic.  Deals need to be more localised and immediate and need to be moved away from the “soft cost” services market of discretionary spend items like haircuts, spa treatments, restaurants and holidays and start delivering deals on staple goods like groceries, clothing and even electricity!

So where does mobile fit and what are some of the brave experimenting with to change the downward trend of profitability for daily deals companies?  There are a number of interesting trends I’ve been lucky to be exposed to in the US and in the UK.

What do we know about daily deals?  Firstly, they do have the ability to generate significant activity which if managed can acquire new customers but if not planned can swamp a retailer and undo all the good.  It is also clear that the role of the intermediary (the daily deals companies) may not be as protected as first thought.  Reaching a large audience with an offer and acquiring a mailing list is nowhere as challenging as it used to be especially when smart use of Youtube, Facebook and Twitter can generate a large audience reasonably quickly.

In both the US and the UK there are a number of retailers and service providers now offer the ‘daily deals’ vouchers and coupons direct without involving intermediaries.  Interestingly in the UK there are a consortium of aligned but non competitive business now sharing the task of managing their own channel of offers.

Consumers have demonstrated that they are more than willing to join multiple lists and subscribe to almost any channel offer benefits.  So retailers and service providers can generate a following reasonably quickly and can manage their own offers and deals and remove the middle man from the process.  I even saw an article in New York claiming that direct merchant ‘daily deals’ style programs will exceed third party management companies by the end of the year.  I think that’s a bold claim but what’s interesting is that agencies are starting to realise they can take back control of their clients brand and manage ‘daily deals’ campaigns direct with the brand rather than having sales dudes from intermediaries step inside the loop and disintermediate the agency.

Direct merchant offers are also seeing ‘daily deals’ move to ‘hot deals’ that are less frequent but better value, managed directly and more diverse in terms of what consumers actually need rather than frivolous spending.

There are two other very interesting trends emerging; localisation driven by mobile and ‘momentary’ offers varying in real time adjusting to the capacity of the retailer; especially important for service industries.

Without disclosing too much as I was involved in reviewing a new service not yet released, let me explain how mobile is changing things by giving control back to the supplier and real benefit & relevance back to the consumer.  In many regards, its the merging of ‘retail vouchers’ and mobilised marketing offers with daily deals concepts of extreme savings.

Think about social networks and other on device tools which display all the vouchers and coupons on offer within your immediate location.  This is nothing new; FourSquare, Facebook and many other products allow you to ‘check in’ and search retailers for coupons nearby.  However, the extension is to now expand the ‘free donut with a coffee’ to more ‘daily deals’ style discounting.  A large shopping plaza in California has engaged all the retailers to create their own daily deals platform enabling a shopper to log into the specially designed mobilized website, geolocate themselves and get delivered extreme benefits.  Not the traditional two for one type low value free coffee type coupons but super savings as has been pioneered by ‘daily deals’.

Each of the retailers have agreed to provide a single ‘extreme discount’ to the program at least once a week for a minimum of 4 hours.  Retailers have the ability (again via a specialized mobile website) to add, remove and change offers in real time based on the immediate response.  So instead of being overwhelmed by hoards of bargain hunters in a single hour, the retailer can make offers valid for the first 10 people, specific hours or until they turn them off.  This immediacy enables ‘extreme deals’ to be offered during quiet periods to increase foot traffic and turn them off during peak times.

The whole program was engineered by the shopping plaza media agency and built in partnership with a specialist mobile web and messaging company.  And there is no ‘clip of the ticket’ fees; it was paid for and is now ‘owned’ by the collective store owners and the shopping plaza.

During the simulation trials (all of which was a simulation for the real first week of consumer testing) I was offered a pair of name brand jeans for $10 but had to be in store and checkout within 30 minutes and had to buy a t-shirt as well.  I then received a meal offer at 11.30am obviously by the restaurant trying to start lunch service early and then another at 2.30pm by another trying to extend the normal meals trading hours.

But the most interesting ‘daily deal’ which was less momentary than the other time based deals as it was for the whole day, was from a mixed supermarket style business.  I won’t give the name but it was one of those outlets where you can do your grocery shopping, buy clothes and even get your printer cartridges and alcohol.  It was for a slab of leading brand soft drink for $1.  But the conditions were intriguing.  I had to spend at least $20 on other times, had to collect the goods from the shelf myself and simply had to show my deal on the mobile which also displayed my mobile number which was entered into the POS.

This is where the agency claimed ‘daily deals’ are headed.  The supermarket example was offering staple products but engaged me to spend more and even required me to do the ‘pick and pack’ process.  The offer was apparently funded by both the supermarket and the supplier as a joint initiative and clearly would create some consumer loyalty based on the excitement of what next I can get for such extreme value.  And all run without the involvement of an intermediary ‘daily deals’ organisation.

For a ‘mobile geek’ I was intrigued with how the agency (shopping plaza) leveraged the mobile.  They used a combination of push messaging avoiding SMS costs, localisation with GPS, mobilized website to register and track for both consumer and retailer and even leveraged Facebook by using a unified login.

The combination of technologies appeared clumsy but as a consumer it was easy and certainly worth the small learning curve given the savings.  And not a free donut, second free coffee or a 5% discount but real world, basic needs items at extreme savings leveraging the daily deals model.

So what’s the insight?  There are a couple of important things to take from these emerging programs.  Firstly, agencies and brands should start being more creative with deals and offers and can take back control of how they’re managed and offered to deliver benefit to both retailer and consumer.  Embracing mobile enabled localisation, drove consumers to bricks and mortar businesses and engaged the consumer with real savings, real benefits and created a loyalty opportunity unseen in the daily deals competitive landscape.

The final message is more abstract.  The web moved fast and mobile even more quickly.  Back in 2007/08 I used to enjoy boasting about Australia’s leadership in so many aspects of mobile and mobile marketing.  But despite engaging early agencies and brands have failed to leverage and drive the medium.  We are now well and truly overtaken by creative thinking internationally.

Part of the challenge is the ‘wait and see’ attitude.  No one wants to be the first and attitudes towards other technology has tainted the ability to be creative and innovative.  With new POS terminals, new and different digital signage and even automated checkouts and other scanning products, retailers typically ‘wait and see’.  they let someone else test and try and avoid the risk.  But with mobile you can’t afford to ‘wait and see’.  Launch into new ideas and be creative.  Those waiting to see if they should do a traditional ‘daily deal’ have missed the boat.  Those waiting to see if QRCodes would work have lost the opportunity to be first, create intrigue and take advantage of a consumer willing to try new and novel executions.

I can only imagine the ‘head spin’ created with the pace of change for brand managers, marketing directors and retailers on the whole.  I am in the industry and am consistently staggered by what’s happening in the market.  Wait till ‘SNiiP’ gets released or for the first supermarket to enter the ‘daily deals’ program.  Get creative, get in, succeed and then move to the next idea.

Joe Barber
BY Joe Barber ON 24 October 2011
Joe Barber is a 25 year veteran of technology companies with the last five years focussed on mobile and retail. He is currently CEO and founder of Edge80.com with other notable start-ups under his belt being Third Screen Media, Sniip and Planet Internet. Joe has lived and worked in the US, Malaysia and parts of Europe and talks at numerous trade events worldwide.
  • HalaDeals

    Business in our community (Egypt) tend to do similar mistakes like you pointed, especially the negative treatment of customers as soon as they show their coupon! We’re trying our best to explain to businesses that this is the worse thing to do, and that, if you have to treat customers differently, then preserve the best treatment to the ones with coupons