With consumer spending still in the doldrums, it's hardly surprising that businesses have been tempted by dynamic deal sites like Groupon, which promise to transform footfall and fill restaurants. So why is it that these hyper-portals are suddenly falling out of favour, considers Charles D'Oyly.Consumer deal-of-the-day sites like Groupon have been making the headlines recently, but increasingly for less than positive reasons. This is a shame, as these mass coupon portals have captured marketers' imagination, providing a glimpse into the future with the promise of time-sensitive and geographically specific offers pushed to consumers' mobile phones.
Merchants have begun to realise, however, that digital coupons are not a panacea for sluggish sales in a difficult economy -- however hyped-up they might be. In fact, used over-zealously and indiscriminately, they can create more problems than they solve -- attracting the wrong kind of business in the form of unprofitable one-off sales to fickle, deal-hungry customers whose longer-term purchasing habits are unlikely to change, certainly once the given promotion has expired.
It is this realisation that has caused use of mass market deal sites to fall off in recent months. According to
Experian Hitwise, Groupon's site traffic has halved since July, a sudden and sharp decline which the marketing press is now busily dissecting. Increasingly, reports are emerging of retailers that have been overwhelmed by excessive take-up while failing to deliver profits because the 'giveaways' have been too generous and the customers too flighty to hold onto. Consumers, too, are becoming jaded because of misleading offers and their inability to redeem promotions as expected. Take responsibility and ask for help
New digital coupon technologies are exciting and compelling propositions. However, as with anything new, participants need to be aware of the risks. These risks need to be understood and managed, perhaps with help from couponing professionals, before rushing headlong into decisions that may not have the desired effect. Making big mistakes can be expensive for valuable brands in terms of revenue and reputation.
There is certainly no justification for consumers to be exposed to questionable terms and conditions; or for merchant offers to be cynically limited to minute volumes; or for misleading headline prices to be allowed. Such situations are simply a result of consumer deal sites failing to look after the interests of their subscribers.
Such deal-of-the-day sites should also help merchants, especially those new to couponing, to plan their campaigns so that they meet their objectives and are encouraged by the results to come back again in the future with more great offers.
In short, many of these sites are letting down consumers and not helping merchants and brands achieve their promotional objectives.
It's now time for this new sector of the industry to take a step back, slow down and catch its breath. Vouchers and coupons have been a welcome and highly effective inducement technique since 1886. Indeed, thanks to various loyalty programmes, the UK market still boasts some of the most sophisticated and successful coupon and voucher programmes in the world. Last year alone, more than 2,000 brands used coupon promotions, UK shoppers redeemed in excess of 500 million coupons with a value of more than £500 million, and vouchers and coupons were accepted by more than 50,000 merchants.
Coupon promotions depend upon trust; trust between the consumer confident the offer will be honoured; the merchant certain that they will recover the discount; and the coupon issuer who expects to pay only for coupons that have been redeemed.
This trust is underpinned by intermediary agents, who ensure the system works for the benefit of all parties. These agents play a vital role in the success of the paper-based voucher system and their experience and expertise is also essential in the digital coupon environment.
Online voucher and coupon sites add an exciting spin to an established and much valued marketing mechanism, and one that is striking a strong chord with consumers in these tough economic times. It would be a great pity if such deal-of-the-day sites created a bad reputation for all coupons just when digital coupons were about to come into their own.
Charles D'Oyly is the MD of Valassis UK & Europe.
