Social Coupons: Should You Follow the Mob?

August 31, 2010

Technology is bringing virtual customers to life at retail.

Technology is bringing virtual customers to life at retail. Online promotional programs like Groupon, Yipit and Scout Mob can lead customers to your doors, but do these services ultimately lead to long-term loyal customers? 
The Lempert Report sees an evolution in this particular form of marketing -- some of which is already under way -- bringing the marketing efforts local, focusing on neighborhoods and finding additional support from the companies selling the technology. Overall, feedback from the companies using these tools is that while they work well to introduce a new business to consumers in a particular neighborhood or city, they are not suitable for building long-term loyal customers. Many who buy into the deals live in neighborhoods far from the retail locations. For grocers, this evidence would speak against signing on for the deal programs. 
Practically unknown a year ago, social coupons are booming. Groupon and its competitors build buzz by sending out a daily e-mail alerting subscribers in a city to a local bargain.  But it takes skill to create a deal that serves the retailer in the end. Dozens of social coupon Web sites have sprung up in recent years offering deals on everything from sporting tickets to dinner on the town. 
La Cachette Bistro in Santa Monica, California, took advantage of the site Groupon, offering a $50 discount for $25. General manager Fabrice Lorenzi said they sold nearly 1,300 deals. “I am glad we did not sell 5,000 of them,” he says, adding if they sign up for the program again, he would limit the number of available deals.
“We signed up with Groupon back in April when Groupon was starting new neighborhood-oriented promotions,” Lorenzi explains. “They were launching the program with the Santa Monica Chamber of Commerce and, as a new business, we believed it would be a good idea.”
While Lorenzi says the response was good, he doesn’t believe the promotion brought them loyal customers. Instead, he feels that users are after the deal, and once they close on one, they’re onto the next. Still, overall he’s happy with the decision to get involved because, as he explains, it brought them a great deal of attention as a new business. 
Many of these social couponing sites are personalizing their programs to make them more advantageous for businesses. Among the new approaches are computer programs to better target consumers with personalized deals and staff on the ground to help merchants. Groupon has reported that 22 percent of its customers make a repeat visit to a business after using its coupons. The company is rolling out new filters in six of its markets, focusing deals subscribers see based on their gender, buying history and interests, among other things. With more focused efforts, these programs could be an interesting service to grocers with discounts targeting a specific demographic group.
Janea Boyle, owner of Atlanta, Georgia-based specialty food store The Merchantile, signed on for to introduce her new business to the area. Close to 600 users claimed the deal during the launch of Scoutmob early this year. [Scoutmob operators note the site is seeing a 500 percent increase in claims today over deals from that same time period.] Scoutmob bridges the gap between two of the hottest trends right now -- real time location-based mobile apps and daily deal e-coupons. All deals are free for consumers. Scoutmob doesn’t accept payment on its site; it receives payment on the back end when the customer checks in at the deal location. Scoutmob competitors manage their pay model with upfront buying. Its most successful deal was with kitchenware retailer, The Cook’s Warehouse, when 4,285 customers claimed the deal. 
Boyle was pleased with her results, chalking the 45 percent discount she gave users to her advertising and marketing budget. Boyle worked the deal by preparing her staff for the introduction of the deal to personally speak with customers, teaching them about the store and getting them to sign up for the store newsletter. By capturing shopper data on hundreds of shoppers, it was easier for her to justify the discounted bottom line sales.
Her deal went out in January, a typically slower month for retail. She signed on in order to promote her young business, saying it was a challenge to get the word out and build foot traffic. Scoutmob, she felt, would attract the right demographic of young, affluent, adventurous consumers.
“We made a lot of new friends and also found some regular customers bringing in their deals, which told me my demographic profile was on target,” Boyle explains. “We got a lot of foot traffic when the deal first went out and a small rush when it was about to expire. It was fun, and it generated a buzz. For us, it was all about staring a conversation with new guests and building relationships. I really think this is the next generation of paid advertising.”