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Sunday, 20 March 2011

What's A Coupon Worth?

We all love a good bargain and in these recessionary days even the most staid and traditional department stores seem to be offering a never ending round of 'sales' to improve their cash-flow.

Customers respond to these incentives and the tills ring a happy tune. It is this same motivation that drive the success of coupons and online daily deals continue to influence retailing practice.

Source:Gordon Borrell

Note the rapid rise for online coupons which highlights how incentive sites such as Groupon will continue to not only survive, but thrive.

52% growth and the second highest face value indicates the importance of online coupons for advertisers.  Remember also that one of the key motivations for visiting a business Facebook sites is to receive offers.

Even Microsoft is reacting to the online coupon frenzy with a new product, Bing Deals.  They are now adding results about special deals to their Bing search engine, accessible both on its desktop and as a mobile version.

The company is promising access to more than 200,000 unique offers in over 14,000 cities and towns across the U.S.

Bing deals assembles leading offers from Groupon, Living Social and (and others), "making it easier to discover, share and search for the best deals in your area – all from one place".

<br /> <a href=";vid=2d427226-041b-40e8-ba91-5c1ae7a8130a&amp;src=SLPl:embed:&amp;fg=sharenoembed" target="_new" title="Bing Launches Deals">Video: Bing Launches Deals</a>

The online coupon craze is also dramatically changing the face of retailing.  A recent New York Times article from Jay Goltz identified these potential threats to small businesses:
  • While coupons can drive an awful lot of people into your store, not every store is prepared for the onslaught. 
  • The daily-deal sites are also training people to expect that they can get a coupon for almost anything
  • For many SME's few of the sales have turned into repeat customers so is there potential damage a daily deal can do to a company’s brand?
  • What of price integrity? Charging some customers full price and others half price makes some happy and others unhappy. 
  • The regulars are unhappy because they feel they overpaid and the discount customers are happy but will probably not return because they have got into the half-price habit.
  • Daily deals train your existing customers to wait for the next coupon
Despite these reservations, the reality is that Groupon and other daily deal coupons are not going to go away so the business model needs to adapt to meet this customer expectation.  Retailers will probably end up with higher percentages for coupon redemption in the future due to competition between the online daily deal sites.

Wedbush analyst Lou Kerner believes there will be about $5 billion spent on LivingSocial and Groupon daily deal-style coupons this year

However a Yipit study shows that people who buy those coupons only redeem them about 80% to 90% of the time. So maybe the worry for small businesses is not as great as first supposed.

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