Local Deals’ Second Act: Dynamic, Mobile
Michael Boland is a guest author. If you’d like to submit a guest post, click here.
In the tech and media worlds, it’s no secret that local deals and mobile are exploding — both in terms of revenue growth as well as in the attention and investment being lavished upon them. Surprisingly, though, the two elements haven’t yet come together to the degree that they probably should.
It’s clear that mobile content is an opportune area for entrepreneurs, given smartphone penetration and escalating competition amongst providers. The daily deals opportunity, meanwhile, only needs to look at the revenue growth at Groupon, which has been the most rapid of any company in history.
But Groupon’s success has mostly come via desktop, with distribution grounded in good old email marketing — and redemption cycles that can last weeks. The next natural step is to integrate mobile’s location awareness and buying intent to push deals that can be redeemed in minutes. This expands the addressable market by reaching incremental user, (or perhaps the same users at incremental touch points).
Equally important, however, is seizing the opportunity to reach incremental merchants or advertisers. While Groupon has thrived with the nail salon and skydiving purveyors of the world, there are countless other brick-and-mortar businesses with dynamic inventory levels that beg for dynamic traffic levels (of the footstep variety). Think happy hours, movie tickets or clearance sales.
A handful of players in the deal space are already building mobile apps like Dealmap. Most notable, not surprisingly, is the recently released Groupon Now app. Meanwhile, others like Loopt have partnered to distribute Groupon deal alerts to their users.
Foursquare has also begun to go down this road with version 3.0 of its app, launched in March. It includes a templated set of deal types to make it easier for merchants to manage. Some of these are decidedly time sensitive such as “flash” and “swarm” specials.
Groupon’s success has mostly come via desktop, with distribution grounded in good old email marketing — and redemption cycles that can last weeks. The next natural step is to integrate mobile’s location awareness and buying intent to push deals that can be redeemed in minutes.
“We’re in a great position to mine those kinds of opportunities,” Foursquare GM Evan Cohen recently told me. “Flash mobs and group buying dynamics in a mobile atmosphere are behind some of our [v3.0] specials, and certainly we’ll be doing more in the future.”
But in this mobile second act of deals, Foursquare and others will not only adapt the concept to a new format, but will also attempt to fix what was broken during the first act. In particular, it will attempt to solve the problem of deal hunters that don’t come back — thus negating the “customer acquisition” that businesses desire when running a deal.
“There’s a danger of coupons being marginalized if it’s overwhelmingly about the 80 percent off, or $100 spa treatment for $50, and then [the consumer] never comes back.” says Cohen. “We want to help merchants to get people to come five and 10 and 20 times.”
This is built into some of Foursquare’s new Explore features that suggest places and deals based on an evolving set of factors such as past behavior and your social graph (see last column). The goal is for consumer behavior to be influenced by relevance rather than deep discounts.
SCVNGR likewise contends with the buy-once-never-come-back challenge with its mobile deals app, LevelUp. It rewards users with a progression of steeper discounts and prizes for up to three visits. After that, it’s hoped that loyalty is solidified for ongoing patronage at full price.
“From a consumer perspective, I’m getting rewarded with better deals as I come back.” SCVNGR Merchant Liason Christina Dorobrek told me. “From a merchant perspective, I’m not getting those deal hunters that never come back. We’re trying to create a model that breaks through what we call ‘daily deal A.D.D.'”
Loyalty challenges notwithstanding, mobile is the next battleground for the $1.2 billion local deals segment. And Groupon has taught us that there are large localized pockets of untapped user demand for deals — as well as demand by merchants who want to acquire customers.
For the latter, bringing in new customers and paying via margin share has in many cases replaced the comparatively opaque traditional ad buy. BIA/Kelsey data show most SMBs want a simple ROI (i.e. butts in seats). Groupon, and a number of clones, have delivered that.
Enter mobile, and perceived ROI is solidified even further when immediate gratification shortens (and thus solidifies) that feedback loop.
Mike Boland is senior analyst at BIA/Kelsey, where he heads up the firm’s mobile local coverage. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0 and others.