Dull Daily Deals
Are consumers going numb to the plethora of deals coming their way on a daily basis?
“There is definitely a risk of oversaturation with these daily deal programs,” Kit Yarrow, a professor of psychology and marketing at Golden Gate University, told MainStreet. “Consumers can develop an increasing tolerance to that sense of the thrill of a bargain, and eventually it just stops being thrilling.”
According to Prof. Yarrow’s research, consumers are getting eight to 10 deal emails a day.
“I think consumers are approaching a new normalcy for bargains where they have come to accept the bargain as being the standard price, reducing their impact,” Prof. Yarrow told MainStreet. “After all, if everything is always on sale, then the sale price becomes the new full price.”
LivingSocial, one of the major daily deal sites, reported that it sold more than four million daily deals between April and June this year. The company pointed to massages, Mexican restaurants, yoga classes, pizzerias, mani/pedis and golfing vouchers as being the daily deals that consumers signed up for most. LivingSocial, as a ClickZ report pointed out, did not say how many of the four million deals were redeemed.
A new site is looking to eliminate any boredom associated with daily deals by finding offers that are relevant to the individual tastes of members. KoalaDeal is said to use information gleaned from a consumer’s past purchases and interests to find matching deals on other sites.
According to Springwise, “Users begin by teaching KoalaDeal about their tastes and interests; they can choose categories manually or simply let the site automatically scan their past purchases in Gmail or their interests as indicated on Facebook or Twitter.” KoalaDeal then uses the information provided to go searching for deals.
- Deal Burnout: Can You Have Too Many Discounts? – MainStreet
- FORE! – LivingSocial Identifies Americans’ Deal Obsessions – LivingSocial/PRNewswire
- Massages, Burritos and Botox: a LivingSocial Sales Snapshot – ClickZ
- Deals site scours the web for personally relevant offers – Springwise
- KoalaDeal – ‘Create Account Walkthrough’ – KoalaDeal/YouTube
Discussion Questions
Discussion Questions: Are consumers beginning to tune out daily deal sites? What can be done from the merchants’ point of view to make these types of offers more effective?
Like all new technologies, daily deals took off largely on novelty. After all, crazy promotional prices have been around for a long time. Professor Yarrow is absolutely right. If it’s always on sale, the sale price becomes the new retail and the novelty wears off, leaving a lower margin.
KoalaDeal is on the right track by using the technology to zero in on the preferences of the user, although this is basically just another application of CRM.
Competing on price has always been a footrace to the bottom and wrapping it in whiz-bang technology doesn’t alter that fact.
The answer to the first question is simple. Yes they are getting overwhelmed.
The answer to the second question is much more difficult. The key is going to be relevance and timeliness.
Well duh. If you have meatloaf every night for a year, how excited are you when it comes time for dinner? This is like expecting someone to get excited about a “sale” at JoS. A. Bank! Wait an hour, there’ll be another one.
It’s in our cultural DNA to overdo everything to the point of neutralizing or killing it. We’re also the biggest “Me too!” country in the world, with the exception of Mexico. We’d rather copy a good idea than come up with an original one of our own. Can you spell “Best Practice?” The little coastal town in Mexico where we have a condo is struggling; tourists aren’t buying much. What the people don’t get is that there are dozens of shops on both sides of the street all selling exactly the same thing! If just one shop would do something different they’d own the town in no time.
Come on America–let’s innovate rather than imitate. There are new possibilities waiting discovery that will put you in your own blue ocean!
I was bored with Groupon in about one week. Seriously, even I was surprised how fast the excitement wore off. At the end of the proverbial day, customers want to buy what they want to buy (more or less), not what companies are trying to sell them. This model might work better if there was more discretionary spending (then again if there was more discretionary spending, people wouldn’t flock to deal sites in the first place). All in all, the electronic deal business may turn out to be largely a flash in the pan.
Like many people, I signed up for a few to see how they worked and what they were offering. I quickly discovered that most of the offers were not relevant to me. I also realized I didn’t need more emails on things that I may or may not want and dropped out of the few I had tried. Would consumers continue to utilize one or more of these daily deal systems if the offers were more relevant? The short answer is yes, even if the deals came less often.
The short answer is “yes.” Retailers have leapt with both feet into the discount death spiral and, as a result, price integrity is going the way of the buffalo.
How does an addict recover from their addiction? The simple answer is that they stop practicing the addictive behavior. Of course that often requires an intervention and I don’t see hordes of consumers and/or manufacturers rushing in to save the retail community from its compulsive and self-destructive behavior.
The answer? One day at a time. In this case building consistent pricing and price integrity back into your operation. This requires offering competitive prices but knocking it out of the park in terms of product, service and/or experience.
Consumers may love those deep discounts but they’ll never respect the retailers in the morning. There are a lot of ways to build loyalty but buying it isn’t one of them.
Wouldn’t it be nice if retailers offered a deal on an exciting retail experience instead of just a price off a product? I’d like to see an offer for a seminar at a retailer that teaches shoppers something.
For example, Ethan Allen could have an event to teach shoppers how to mix fabric patterns with confidence, and offer a discount on a piece of furniture.
Lowe’s could offer a seminar on how to compile and complete a checklist for a self-managed home energy audit for the winter and offer a deal on the caulk or something similar.
Value is a shopper concept that extends far beyond the price. I, like many other retail consultants in this space, fail to understand why there is not more action in testing experience offers by way of these technology tools that could in fact offer far more significant value in a relevant manner.
As far as the technology itself goes, I believe shoppers should be able to set relevancy filters and avoid what they could care less about. The daily delete, delete, delete behavior we are forced to do every day is ultimately diminishing the brand value for many of these services, especially Groupon.
I know I delete Groupon more often than not. A lot of the offers I have no use for, so maybe Koala can fill the niche need for my area. You’re right, because the saturation of daily deals just doesn’t do it for me anymore. Good article to think about.
The daily discounts are fun for awhile. Then the discounts need to be greater and greater to be attractive. Then comes the day I need to make a purchase and there are no deals for it. Another sale may pop up so the question is do I wait for the next sale or make a purchase? Then, especially if I do find a sale, do I really want to spend time looking through all the deals or just wait until I need something and look for a sale? Maybe it depends upon how much free time I have or how I want to spend my free time….
If consumers haven’t started tuning out daily deal sites yet, they inevitably will. This doesn’t necessarily mean doom for daily deals; nobody gets excited about shopping online anymore. But they are continuing to grow at a rapid pace. The best way for retailers to make daily deals stand out is by targeting them and upgrading them for loyalty members.
It’s worse than just deal sites. Ever since ’08, just about every major retail brand (except the very strongest) has emphasized price in some way, shape or form. Now, consumers are left to choose between several brands in whatever category that claim to have the best every day low prices (EDLP). The home improvement category is a great example; not a day goes by when you don’t see an ad from one of them claiming that they have the best prices than the others.
It’s time for retailers to think of something other than price (quality? design?) to differentiate because, ok, we get it, you’re cheap! What else makes you better?
We have had several discussions regarding Groupon in particular. Not too long ago, there was great hoopla on its value. My comment then was that it is overvalued. It has no Sustainable Competitive Advantage. Just a few months later, that is pretty clear.
What can the merchants do to make these offers more effective? Don’t do them. They are nothing more than a pricing down of a service they offer and revaluing the service in the consumer’s eyes.
Are people tuning out? Not likely, but they are focusing more on buying deals on services they would normally use anyway. I would very much like to see the conversion statistics for trial or customer switching that results in these deals. My guess is that they are very low.
For those who regularly use salons or dine out, it would not be unreasonable to never pay full price again for these experiences.
Of course, it’s too much. I agree with the poster who said the sale price becomes the standard price. Then the thrill is gone.
Consumers know how to react to a good thing when it becomes too much. They tune out.
Part of the challenge is around the business model for these solutions. In general, each deals provider sources and executes the offers, and this is where they make their money and control targeting and measurement.
Each solution in isolation looks good and makes sense, however when you look at it from the customer (shopper/consumer) view you see it in a different light. Customers are probably being bombarded by duplicate and conflicting offers all the time and are seeing first-hand the incredible inefficiency and waste in the system.
This is compounded by the fact that most engines are optimized for short term response and therefore short term solution provider (and probably brand) rev-gen, rather than optimized for the customer. They are about doing things “to” customers not “with” or “for” customers.
Ultimately this doesn’t look good for the providers, the brands that are overly exposed to duplication/conflict, and even retailers that support multiple providers. In the longer term they may suffer because of it.
Wouldn’t it be great to see a customer-first approach to all this with some effective horizontal (customer) integration. The trouble is that requires all these competing businesses collaborating, and businesses thinking about the customer first. For many, that’s a long way off.
Of course, there’s too much of everything on the net (including business-related blogs…we’re just lucky RW snapped up all the bright minds first!).
I consult for a company about to launch a “deal service” that is highly targeted and limits the deals to just nine very, very relevant offers at a time. And if there are only three available offers that are very, very relevant, they’re the only ones sent to the shopper. No trash, such as the “Let’s give a Coke coupon to everyone” mindset that causes most of Catalina’s poorly-targeted Checkout Coupons to be thrown in the – you guessed it – trash.
I’ve been Grouponed and Aliced for some time, now, and have yet to receive an offer that moves me.
I don’t believe consumers are tuning them out, but they’re starting to become work in managing them. That’s why smart companies like Dealgator.com are offering a service that makes them easier to manage in a single email.
Of course that then commoditizes the offer…which is a commodity itself…which means they have even less value and impact.
I think for most retailers it’s just not good business to do them.
Consumers have been inundated with deals in recent months and years. Today’s consumer has been trained to shop on price to the point that price-cutting has become so commonplace that it is threatening brand equity and quashing profit margins. And, with inflation predicted to continue throughout 2011 and well into 2012, designing “the right” deal, one that will drive purchase behavior while maintaining margin, will only become more difficult.
This certainly carries over into “the daily deal.” The key to finding success with the daily deal lies in ensuring that the deals are relevant to key shoppers and to high-potential consumer segments. This requires a consumer-centric approach – an approach that is in lock-step with the most pressing needs and wants of these shoppers, and an approach that is continually reevaluated to ensure ongoing relevance. These are the deals that will win the attention and share of wallet across today’s conservative shoppers.
Hi Folks-
I’m new to RetailWire, but really impressed at the level of conversation here. I appreciate all the good thoughts.
If you have thoughts on the site or our value proposition, I would invite you to reach out to us.
I have a couple deal sites send me emails on their hot items daily. I’m sure I’m not the normal consumer (I am numbed to these offers) because the person whom steered me to them just thinks they’re the coolest thing out there. Bottom line, there are still coupon clipping groups across the country run by pockets of interested shoppers.
I don’t think too much time should be spent on these discount vehicles, since there are so many other ways to build traffic. This is just one more channel, and it will settle down into a routine with minimal redemption, just like paper coupons have.