After Boom and Bust, How Will the Discount Economy Evolve?

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daily-dealsThe discount industry experienced 2012 as a major turning point. Over the past 12 months, the deal provider landscape shook out even more, with the consolidation of many deals sites and the decline of some industry giants. But one of the most interesting events of last year was the emergence of a new business model for offers, involving syndication and deal sharing.

This network approach has proved, even in its infancy, to be more valuable for media companies than a standalone daily deal platform, and there’s plenty of opportunity for companies to capitalize on this more efficient revenue model.

Given the changed landscape, here are a few predictions for where the local offer and voucher space is headed:

1. Increased demand for performance-based offers from brand advertisers. Given the continuing decline in the effectiveness of display and CPM-based advertising, brands are looking for performance- or action-based alternatives that can be tracked more easily and have a measurable impact on sales. Impressions are not enough anymore, and offers have proved to be an effective marketing tool for advertisers — whether local or national — for the following marketing initiatives:

• Launching new products.
• Liquidating excess inventory.
• Filling seats or space at the last minute.
• Driving foot traffic to a physical location.
• Increasing digital traffic to a website.

2. Offer “platforms” will morph into offer networks and will work more like today’s digital ad networks. Networks have emerged in direct response to the inefficiencies and high costs of trying to duplicate a “Groupon-like” business, which requires hiring sales teams to acquire deals and paying to distribute the deals to customers. Offer networks will succeed because they provide supply for those in need and distribution for those with the inventory. Rather than do it all alone, the players come together within the network, creating leverage. All boats rise and benefit by working together so they do not have to create, own, and operate an offer site with their sole resources, competing with industry giants.

3. Publishers will no longer have to curate their own offers. Today’s offer curation is more art than science: Natural subjectivity gets in the way of providing the optimal product. With the use of big data, networks will be able to decide which offers publishers should provide to their audiences, based on historical and demographic information. Publishers will know exactly what sells on their sites and have the data and ROI to prove it.

4. Automatic offer targeting will increase across web, mobile, and other platforms. Big data will also be used to target consumers across multiple platforms. Preferences as well as behavioral cues will drive which offers users are shown. And this will be automated and customized, much like the way digital ad networks work today.

5. Digital deal redemption models will evolve. The use of paper vouchers will begin to decline as vouchers will be delivered more to mobile devices through services such as Passbook (iOS), Google Wallet, Square, and others. Additionally, card-linked offers will become more pervasive, enabling larger brands that have typically been on the sidelines to use offers as part of their marketing mix.

6. More product and brand offers will emerge. As well as local offers, additional national brands and larger merchants will enter the voucher space. Technology, such as card linking or mobile delivery, will lower their barriers to entry, enabling them to enter the offers game in earnest and providing consumers a stronger diversity of offers and discounts.

7. Mobile will become dominant in transactions and distribution. About 20% of sales happen through mobile-optimized sites, and we expect that trend to continue to rise as mobile phone use continues to command more and more screen time. The more emphasis that publishers put on mobile and geofencing, the higher the opportunity is, especially since the pastures are at their greenest.

8. Ecommerce, content, and marketing will meld more closely together. The marketing and sales funnel will become even more of an integral “one-stop shop” customer experience. A sales model in which the consumer reads about a new set of golf clubs, sees a testimonial from a pro, receives an offer, and makes the purchase all on the same screen will become the norm. Publishers will own far more than just the click; they will begin to merge together interactions, content consumption, transactions, loyalty, and customer relationship management in ways that will win sales and subscribers as well as be convenient and relevant for consumers.

9. New players will enter and old ones will evolve. We’ve already seen shakeouts in daily deals, and we’re not out of the woods just yet. Given the current state of the daily deal space, don’t be surprised to see unexpected competition, new innovators, or the disappearance of traditional players. The space is evolving and will continue to do so.

10. Don’t expect brick-and-mortar players to vanish anytime soon. Let’s face it: Shopping is just plain fun. It involves a choice of where one shops, online or in-store. Still, many shoppers want a local experience. This may come in multiple forms. Big online retailers might appear on local street corners; and shoppers may decide to buy in-store — on their smartphones. It’s already begun. There are apps that allow in-store shoppers to scan bar codes and find better prices online.

The bottom line: You don’t have to do it all on your own. In the words of Henry Ford, “Working together is success.” If you are a publisher with deals to sell, you can sell what you can and receive a secondary revenue stream from sales generated by network partners. If you only have a few deals, you can gain access to inventory that you would not be able to obtain on your own without the overhead of a permanent sales force. It’s a win-win for all players involved in the offers space.

prashant_nedungadiPrashant Nedungadi is founder and CEO of NimbleCommerce, which provides an ecommerce platform and offers network for publishers, deal suppliers, and merchants to find and distribute offers as well as share revenue.