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Why Groupon’s Daily Deal Scheme Would Work Better For Mobile Operators

Topic: Mobile Commerce | Author: Lisa Ciangiulli | Date: June 23, 2011

daily deal spamMobile and social is a powerful combination. Add discount offers to the mix and the result is social shopping where interactivity with retailers, brands (and members of our social networks) is the rule. But does a lack of relevancy limit the chances for Groupon, LivingSocial and other daily deals in mobile? Lisa Ciangiulli looks at how companies like Groupon (and more importantly, mobile operators) could leverage permission marketing to deliver us mobile offers we really can’t refuse.

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The tidal wave of interest and activity around the deal-of-the-day model popularized by voucher vendors like Groupon and LivingSocial would indicate a business model built around delivering people good bargains is a great idea.

And it would be – if we would turn the model on its head.

Groupon, Living Social and the many clones springing up around the world are following a push model in world where pull has become the rule. To borrow a page from the landmark book aptly titled The Power of Pull (written by John Hagel III, John Seely Brown and Lang Davidson): Pull puts each of us, individually and together, in the position to find and access people and resources when we need them.

What does Groupon and the others actually do? They make it possible for local businesses to pitch heavily discounted deals to customers. The result: daily emails on our PCs or smartphones that are supposedly a great match. Not quite.

Take my own personal experience. It started out with a friend, who knew I was interested in yoga, forwarding me a Groupon offer he got for a discounted lesson at a yoga center near to where I live. So far, so good.

Then I got a flood of emails for discount offers that range from irrelevant to outright ridiculous. Ballroom dancing lessons a’la Fred Astaire? Fail – full-stop! Discount on wall murals (advertised as the opportunity to have a renaissance painting of peasants)?  Doesn’t match my contemporary interior design and shows once more that the service knows nothing about me.

Hmmm. And don’t we generally regard offers that have nothing to with our profiles or our preferences as spam? Yes, we do. I personally am annoyed and now dismiss most of these deals as spam.

Out of control

Unfortunately, Groupon and other daily deals appear to have a push mindset, a model that will most likely backfire once people realize they have little control. Sure, the service asks a few vague questions about our interests and our zip code (in order to deliver somewhat relevant deals), but the service doesn’t enable us to take an active role in deciding the offers we get.

There is no feedback loop or mechanism that allows us to say ‘more offers like this, please’ or ‘definitely strike me from this category altogether.’ The service simply pumps out and pushes emails to us, and we are in no way empowered to direct it so we receive truly relevant discount offers we would genuinely appreciate.

Put simply, there is no element of pull. There is no customer engagement and we have no voice.

This is a fatal flaw in the Groupon model, and one that swings the door wide open to companies pursuing business models that understand — and have harnessed — the power of pull to engage with consumers.

Serious shortcomings

But before I examine the ways the Groupon model could work for companies (particularly mobile operators), I think it’s important to examine how (and why) the current push approach falls short from the perspective of both the consumer and the merchant.

People aren’t programmed: In addition to the fact that deal-a-day emails now resemble spam, these offers condition consumers to want only discounts when what we really want is offers that are relevant and useful to us as individuals. Yes, there will always be a few bargain hunters among us who make a sport out of pinching pennies, but this minority is hardly representative of the vast majority of consumers who want what they want – the way they want it — and are willing to pay for that extra value. (Case in point: fashion. What’s new and in style is what’s hot. It’s not just about discounts. Fashion-conscious consumers care about their clothes and pay for the perfect fitting skinny jeans, platform sandals or oversized sunnies.)

Competition on price doesn’t pay: Companies are not in business to clinch a one-time deal. (It’s not a sustainable business model and customer acquisition costs alone would spiral out of control.) Merchants want customers that come back. The chance to engage with customers (via text, for example) would turn a one-time broadcast offer (push) into an ongoing conversation with customers (pull). And there would be ample opportunity for cross-sell, up-sell and other approaches that significantly grow the lifetime value of the customer.

Interestingly, many merchants are having doubts about the real long-term value of offering 50%-75% percent discounts. Some businesses have even gone bust as a result of Groupon. As this worthwhile blog warns marketers: “Your Groupon deal could change your business. It could dismantle your loyal customer base. It could lead to the degeneration of your brand identity.”

Clearly, the Groupon model is in need of a rethink, some fine-tuning that would allow it to deliver value to both empowered consumers and merchants who want to succeed (not just survive).

Permission mobile marketing opportunity

This is where permission marketing makes business sense. For one, permission marketing is the textbook example of marketing with pull.

Permission mobile marketing requires the permission of the individual (via opt-in) first. It then uses simple text messaging to ask some personal details such as hobbies and interests, information that ensures the delivery of relevant mobile marketing messages. But it’s not just about putting people in charge of their advertising; it also facilitates a two-way and ongoing conversation between people and brands/advertisers who are genuinely interested in what they have to say.

This is very different from the model pursued by Groupon, LivingSocial and the others, one that delivers daily emails (not dissimilar to spam) which emphasize push (not pull) and one-offs (not ongoing customer engagement).

And let’s not forget the overall customer experience. The middleman (in this case a voucher vendor like Groupon) takes the lion’s share of the credit for the good customer experience the merchant delivers. As Bob Phibbs (also known as the Retail Doctor) observes in his must-read blog: “The customer loyalty is going to their pages, their offers, their friends – not yours.”

To be clear the Groupon model shifts the permission opportunity of true consumer engagement away from the brand. Instead of building your client base organically, the service sends a flood of deal-hungry customers your way – most of whom will disappear down the drain like your profits.

Close encounters

As I pointed out at the start of this column, there is a very real opportunity for a company to turn the deal-a-day model on its head and reap the benefits. It would appear that Loopt is on to this. In fact, the Wall Street Journal blog reports Loopt will launch an app this week with a new feature called u-Deals that effectively lets customers ask for daily deals from businesses.

It’s an interesting concept. However, a raft of research tells us the opportunity isn’t just open to start-ups like Loopt.

Mobile operators are particularly well suited to take a central role in the ecosystem emerging around the delivery of deal-a-day offers.

One, mobile operators already have what it takes to play a central role in the mobile marketing ecosystem, delivering opted-in inventory (subscribers) to brands that value the opportunity to engage with their target audience. In fact, that is why solutions like Optism are sharply focused on enabling mobile operators to become a full participant in the mobile advertising value chain and reap a share of the revenues generated.

Put another way, inserting mobile operators into a Groupon-like model would even benefit merchants since the operators would broker deals between merchants and customers without diluting the brand experience or taking all the credit.

Two, operators enjoy our trust. A recent survey of 2,000+ American adults commissioned by Upstream found that consumers are more likely to engage in mobile marketing from operators than third-parties. Specifically, 70 percent of smartphone owners said they were interested in being notified directly by their operators with suggestions for discounts, special offers and other personalized services. The results echo the findings of an earlier survey of consumers in the U.K. There 59 percent said they would like to be contacted by their operator with these offers.

Connect the dots, and consumers in both the U.K. and the U.S. place more trust in mobile operators than the likes of Groupon and LivingSocial. That’s good news for mobile operators, particularly if they have put permission marketing at the center of all they do.

About Lisa

Lisa Ciangiulli OptismLisa Ciangiulli, Director of Marketing for Alcatel-Lucent Global Advertising Solutions, where she has been instrumental in the development and marketing of Optism™, Alcatel-Lucent’s powerful permission-based mobile advertising solution. In this role, and throughout her career, Ciangiulli has spearheaded efforts to encourage cooperation between players across the ecosystem with the ultimate goal of enabling closer communication with the consumer. In May she was named to the Mobile Marketing Association (MMA) North America Board of Directors. You can follow her on Twitter (@LisaCiangiulli).


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