Groupon Offers Rewards for Loyalty

Discussion
Sep 30, 2011
George Anderson

Loyalty may not be able to be bought, but Groupon is hoping that throwing more discounts at consumers might be able to help them rent it for awhile.

Groupon Rewards will debut next month in Philadelphia and will later be rolled out to other cities. The program, according to the company’s blog, provides consumers with even greater rewards for repeat visits to participating merchants. Consumers don’t need to carry a loyalty card or check-in with a mobile device to receive credit. All that is needed is for the consumer to use the same credit card registered on Groupon to be tracked.

According to the Groupon Blog, “What’s exciting about Rewards is how easy it is for both merchants and consumers. As a shopper, you don’t have to worry about a loyalty card or remembering to check in—we do all the work behind the scenes. And as a merchant, Rewards works with your existing POS system to help you track redemption and ROI while incentivizing future purchases.”

The Associated Press reported that consumers who spend enough money may receive an 80 percent discount on a purchase instead of the standard 50 percent off.

Discount Questions: Will Groupon Rewards succeed in building repeat business for participating merchants? Will Groupon Rewards customers eventually patronize these businesses without the discounts?

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23 Comments on "Groupon Offers Rewards for Loyalty"


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Charlie Moro
Guest
Charlie Moro
9 years 7 months ago

Everyone likes to get something for little effort. Think about all the supermarket reward cards for gas, scan deal and free turkeys. All very un-intrusive rewards built into the shopping experience which lends customers to “gather” as many rewards as a default. No different than hotel and airline rewards. How loyal are we to Marriott or American since that’s where “our points are”?

If this is one more way to make a retailer a default shopping experience and I don’t have to do anything but pay for it…doesn’t get much easier.

Doron Levy
Guest
Doron Levy
9 years 7 months ago

Loyalty is my biggest beef with Groupon. As for the rewards program, I think the customer is going to look for the big deal before they return to the merchant. Customers who normally won’t or can’t afford to eat at a certain restaurant will probably not return if there isn’t another deal presented to them. That’s why I try to warn merchants who want to use this type of coupon mechanism that you will see high redemption (and of course Groupon gets their cut) but very few return visits. Keep it in the family, I always say. Control your own coupon or discount destiny.

Fabien Tiburce
Guest
Fabien Tiburce
9 years 7 months ago

Groupon and Loyalty don’t belong in the same sentence. People have more loyalty to a cab company while they are standing in the rain hailing one, than to Groupon or any of its vendors. If you came for the deep discount, you’re not coming back for 15% off…sorry. Bearish on this particular initiative (and on daily deal sites in general actually).

Bob Phibbs
Guest
9 years 7 months ago

Another way for the actual merchant to become invisible. The rewards are given by Groupon. I wrote about this in my ebook Groupon: Why Deep Discounts are Bad for Business. Ever had someone give you flowers? Who do you remember the florist or the person giving you the flowers? In the case of these rewards, the florist is the merchant, the person giving the flowers is Groupon.

Why would a merchant want to make them stronger at their own expense?

Steve Montgomery
Guest
9 years 7 months ago

The original objective of Groupon was to generate trial. It worked for most retailers. However, merchants complained that they got trial but not adoption. The Rewards program is a value add being offered at no cost to the retailer based on the information on Groupon’s Blog (other than the discount they select to offer their customers). Certainly if a retailer is inclined to use Groupon, being able to offer additional rewards/discounts after a set amount of continued purchases at full retail should be attractive for the retailer.

The underlying issue is if a consumer liked the item/service at a deep discount, will they at full price? To date the reports have said no or not enough of them have. It will certainly work with the retailer’s existing base that took advantage of the Groupon offer, but will the promise of a future discount be enough for the value seekers? Not sure.

Marge Laney
Guest
9 years 7 months ago

Any retailer who buys into this one is not interested in staying in business. Again I ask; how can a business sustain itself selling goods and services for 60 to 80 percent off? Answer: they can’t. And now Groupon is hoping they’ll do it over and over!

I also find it hilarious that Groupon is attempting to build loyalty among the disloyal.

Ian Percy
Guest
9 years 7 months ago

First, our colleague Bob Phibbs has written what I consider THE definitive ebook on all things Groupon — at least from the merchant perspective.

If you go to a merchant driven only by the discount, why on earth would you go back again without yet another discount? Was the restaurant food, the massage, the art class, the teeth whitening or the balloon ride just so miraculous, so breath-taking, so life changing that you’d pay anything just to have the experience again? Give me a break. Frankly I think people use the coupon and walk out feeling a sense of victory that ‘we put it to the man that time!’

We just refuse to wake up to the craziness of: “We’re losing money on this product — let’s sell more of them!

Dr. Emmanuel Probst
Guest
Dr. Emmanuel Probst
9 years 7 months ago

That initiative comes across as a quick fix (if not a desperate move), as LivingSocial, Amazon and other competitors are making good progress while Groupon’s website traffic is suffering. Let’s regroup in 6 months and see if their ‘non-traditional metrics’ convinced investors.

Richard J. George, Ph.D.
Guest
9 years 7 months ago

Groupon is a discount card and should never be confused as a tool for building so called “customer loyalty” (a term which I abhor). These are continuity of purchase vehicles, not loyalty enablers.

I have seen no data that Groupon develops repeat purchase. As noted in the article, the customer is “rented” while the coupon is in effect. By their very nature, Groupon users are deal seekers and not necessarily prone to purchase the product or service at full price.

Al McClain
Guest
Al McClain
9 years 7 months ago

For most retailers, I agree that Groupon is not probably going to be a winner. But, for retailers and services looking to generate trial, who are confident that they have a winning product or service, I think it can work. A 50% Groupon could be used to gain the initial visit, where the customer is given a 25% coupon for the next visit and signed up for a loyalty program. If the new customer loves the product/service, I’d think they would come back.

I’m not sure the Groupon loyalty program is a great idea for retailers, as it would seem to conflict with the retailer’s own loyalty program. But, it seems that Groupon is into the “throw it against the wall and hope it sticks” mode now, after turning down the Google buyout and with the shakeout that now seems underway in the daily deal market.

Matthew Keylock
Guest
Matthew Keylock
9 years 7 months ago

I’m not sure Loyalty and Groupon are words I would have associated that closely.

I can see the mechanic can be applied in this way, but for it to be work for any business as a loyalty mechanic they first need to have a loyalty approach and philosophy … otherwise it’s just more sales promotion

Ben Ball
Guest
9 years 7 months ago

Groupon (and daily deals in general) seem to have become the marketer’s corollary to the sales person’s trade deal — “when only instant gratification (volume) will do.”Loyalty in not part of this program in any ongoing manner.

Al McClain makes a valid point however. How many CPG marketers have enthusiastically embraced “Free Sample” or “Free Coupon” offers to induce trial of a new product?

If Groupon becomes a delivery vehicle for effective trial generators, fine. But if the way my household uses the services is typical (“Where do you want to go for dinner tonight?” “I don’t know — what’s on Groupon?” “Naahh, that doesn’t sound good — what’s on LivingSocial?”) that is not how consumers are viewing the service. Bob Phibbs is right — it is Groupon that is sending the flowers.

Kimberly Nasief-Westergren
Guest
Kimberly Nasief-Westergren
9 years 7 months ago

Groupon should have taken Google’s money and walked away. This sounds like a short-term fix for the financial reporting conundrum that’s been publicized. While repeat visits are obviously what retailers want, repeat couponing isn’t the way to do it.

Gene Detroyer
Guest
9 years 7 months ago

A rewards program changes nothing. As with the original concept of Groupon, there is no sustainable advantage. The one participant who might have a sustainable advantage in this business is Amazon and that is because they are Amazon. For the retail participants, all they accomplish is dropping the value of their offering.

Dan Frechtling
Guest
9 years 7 months ago
There’s a large gap in today’s daily deal and coupon marketplace and that gap is repeat buying. Just 1 in 5 deal redeemers return to make a full-price purchase, according to Utpal Dholakia of Rice. But simply giving a discount trains the shopper to expect a deal every time. Merchants should bear in mind a few cautions with programs like Groupon Rewards: 1. Get away from 50-80% discounts, which focus shoppers on how much they spend. Look for high perceived value (e.g. free tooth whitening for dentists) that focus shoppers on what they receive. 2. Rather than creating a continuity program, which breeds entitlement, surprise loyal customers with offers, which generates delight (like Panera Bread). 3. If the Groupon-like card-linked programs can’t see purchase history (others can), at least allow shoppers to provide their preferred items so retailers can make offers that are behavior-relevant. Note none of these require Groupon per se. Groupon is the most recent and well-known provider of a repeat incentive (for an earlier innovator, see theLevelUp.com). Rewards programs better serve the… Read more »
Jonathan Marek
Guest
9 years 7 months ago

Really — an 80% discount instead of a 50% discount? Plus, the consumer will never have to buy anything at full price? Wasn’t the whole (bad) theory of Groupon that a merchant invests to generate new customers and they love the merchant so much that they come back at full price?

Groupon’s problem has always been that the economics just don’t work for their customers. While you may be able to fool your customers for a little while, you can’t grow a sustainable business that way. It’s a flaw in the basic business model, and this doesn’t solve it.

Groupon is a fish out of water — thrashing and struggling to do anything to survive.

Tim Henderson
Guest
Tim Henderson
9 years 7 months ago

Once the buzz created by the launch of Groupon Rewards evaporates, I don’t see this program making any difference in customer loyalty among Groupon’s participating merchants.

I still have concerns about the sheer number of daily deal programs. And, I still believe that the brands consumers have been loyal to for many years stand a better chance of succeeding with daily deals vs. third-party sites that simply aggregate deals from multiple brands. There also seems to be little differentiation here, given Groupon rivals also have loyalty programs.

As the Colloquy article notes, the thinking behind Groupon Rewards seems to be more focused on hard dollars vs. customer relationship equity. Retailers have been trying to drive long-term customer loyalty with loyalty programs for years. And very few have met success. I don’t expect Groupon to do any better.

Larry Negrich
Guest
9 years 7 months ago

I give Groupon some credit for trying to address the most common knock against their service: whether Groupon promotions drive repeat business. The best-case consumer sequence played out would be: 1. Buy initial Groupon 2. Use Groupon 3. Enjoy interaction enough to return a number of more times without any incentive, beyond great service/product. 4. Receive a Loyalty Groupon…rinse and repeat.

The mostly small businesses that execute this process would then need to analyze their results (via Groupon’s analytic portal and then against their own P&L) to understand if this activity was profitable over time or not. Few retailers of this size have the time or capabilities to do this type of analysis…and still run the business.

Herb Sorensen
Guest
9 years 7 months ago
Groupon has been a shooting star that may or may not have long term viability. Couponing in general is an economic disaster. See, “No, the customer is not always right!” Paying customers to buy something (that’s what a coupon is,) is a brain dead marketing strategy, largely built on the false presumption of the “predatory” shopper. The ultimate predatory shopper is the person who can regularly buy $200 worth of groceries, for example, for $20. Can this be done? Sure. But it takes a lot of time and attention to do it. It’s just like card counting in the casino. Can you win by counting cards? Sure. But doing so won’t be allowed by the casino, and most people are looking to have fun and aren’t that invested in winning. A parallel principle RULES at retail. Shoppers are not shopping to save money, in general. It doesn’t mean that they are opposed to saving money, but the reality is that saving money is a miniscule factor on a day to to basis. For the long… Read more »
Max Goldberg
Guest
9 years 7 months ago

This is a good step for creating repeat business for retailers that use Groupon. The ease of use will appeal to customers and retailers alike. It makes sense for Groupon to develop this type of program. Now they have to populate it with rewards that have a high perceived value.

Bill Hanifin
Guest
9 years 7 months ago

Has Groupon reverted to compete directly in the registered card, merchant-funded market?

Are they changing their model to move away from a single focus acquisition oriented offer set to recognize that continuity might bring better benefit to the merchants they serve?

Interesting move that confuses the market in my opinion more than opens doors.

Verlin Youd
Guest
9 years 7 months ago

The “behind the scenes” approach will be an innovation compared to most loyalty programs, something that is sure to be replicated by others if they can pull it off, both from a technology, legal, privacy standpoint. I applaud anyone realizing that making me work more to be rewarded for loyalty is not encouraging loyalty. Is someone going to talk to the airlines?

John Crossman
Guest
John Crossman
9 years 7 months ago

Yes. It helps to build awareness and customer loyalty.

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