What’s Next for Daily Deals After Groupon CEO’s Ouster?

Discussion
Mar 04, 2013

Last week’s firing of Groupon founder and CEO Andrew Mason set off a fresh round of speculation over the future of online and mobile deal coupons.

Mr. Mason’s exit followed November’s news that LivingSocial had laid off nine percent of its workforce amid slowing consumer interest in daily deals. While Groupon has ventured into discounted online goods and mobile payments, those efforts haven’t paid off enough. However, many articles exploring the viability of online offers also offered some potential solutions to revive daily deals:

The Expected Shakeout: With ease of entry, Groupon’s early success led to a herd of copycats. Offers quickly flooded e-mail boxes. Over-marketing by Groupon and others to drive up subscriber rates led to spam and burnout for consumers involved.

With the daily deals marketplace maturing, a shakeout could lead to a less-competitive playing field and more tailored offers from those that survive. It’s unknown whether Groupon and LivingSocial will benefit from their first-mover advantage or if, in the end, more niche, specialized upstarts will be better positioned.

A Relevant Menu of Offers: Initially, daily deal providers showcased only a few special deals a day with a 24-hour limit and often a cap on participants. The limited choices often left consumers challenged to find any they were interested in. Also, seemingly exotic deals, such as bungee jumping, Botox, or teeth whitening, to stir attention often only appealed to a small crowd.

Groupon as well as others such as Scoutmob has shifted gears to offer a wider range of offers — including many instant deals — in what CNN.com describes as "more of a buffet and less of a blue-plate special." With some conditions, the searchable inventory of deals are generally always available and don’t face 24-hour buy limits as much.

A Business Benefit: Headlines showing dissatisfaction by business owners over daily deals, particularly with the ability to drive repeat business, kept other merchants from using the service. The jury still appears to be out since other reports have shown business owners satisfied with their daily deals experience.

More recently, deals are seeing more success when formulated to focus on timing and limiting cost. For restaurants, for instance, many deals now only apply to off-peak days (Sunday through Thursday) or hours (i.e., brunch or late afternoon). Many also have a savings limit (i.e., 50 Percent Off, Maximum Discount – $20.00).

In an exit memo aimed largely at Groupon employees, Mr. Mason wrote, "You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy we’ve shared over the last few months, and I’ve never seen you working together more effectively as a global company — it’s time to give Groupon a relief valve from the public noise."

What do you think of the long-term viability of daily deals through third-party sites such as Groupon, LivingSocial, etc.? What, if any, is the formula for success? Are there alternative daily deal models that you think have a greater upside?

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12 Comments on "What’s Next for Daily Deals After Groupon CEO’s Ouster?"


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Bob Phibbs
Guest
8 years 4 months ago

Wall Street is always willing to pump billions into disruptive technologies like Groupon as there are huge costs to undermining the status quo.

As I recently wrote, merchants have willingly let these companies in, and in many instances, the strategy has knocked the pillars out of their brands.

The formula for any retail business is to be profitable first and foremost, not chase the discount crowd, no matter what the PR says about VC funded disruptive technologies.

Max Goldberg
Guest
8 years 4 months ago

Daily deals will continue to be viable. As the companies and retailers that offer them learn more about what does and does not work, they will further refine their offerings and better target potential customers.

The key to success is for retailers to offer significant savings to well targeted consumers in a way that truly benefits the business. This requires both the retailers and daily deal firms to better mine data and strategically hone their deals.

Tony Orlando
Guest
8 years 4 months ago

Many stores are now doing their own versions direct to their customers, eliminating the need for outside companies. The future is not good for Groupon, and many others will be weeded out, just like any other industry.

Kurt Seemar
Guest
Kurt Seemar
8 years 4 months ago

The value that Groupon and other online daily deals bring to the table is their consumer base and audience. The current consumer base is much to discount and deals oriented which in turn limits the value to merchants of reaching that customer. The future viability of Groupon rests in being able to reach a more attractive consumer base.

David Slavick
Guest
David Slavick
8 years 4 months ago

Geo-located, time-based deals will quickly cause the business model to shift; taking advantage of immediacy to impact use of the service appears more compelling than planning ahead to get 50% off dinner for two or a massage. The challenge as it has been is the temporary nature of the “boost” in business—especially in a perishable, yet capacity oriented business such as restaurants. Sample a location at 50% off and never return as there are so many alternate choices; the buyer waits for the next awesome deal. Likewise, the restaurant does not leverage insight into the diner in order to bounce them back for a 2nd visit.

For seasonal businesses that need to push merchandise through that’s about to go on clearance and services that can manage capacity (hotels), the Groupon deal will always be attractive. Groupon first to market sustains their awareness, familiarity and preference with innovation. Mason’s mistake was not being buttoned up, which caused a loss of confidence. He will be back with new innovations in the next 3 years.

Cathy Hotka
Guest
8 years 4 months ago

Groupon’s former CEO Andrew Mason should have taken the money and run. Everyone’s offering their own daily deals now, including Staples, World Market, Safeway, and a bunch of other smart companies. Now, if we could just get them to send offers once a week, instead of once a day….

Ed Dennis
Guest
Ed Dennis
8 years 4 months ago
Daily deals was a copy of WOOT and Mason was fired because the business model wasn’t working (making enough money). If the “give away a day” concept is actually viable, there will be many imitators. Most of these will be successful online retailers like ecost and macMall who have a solid online business base and run “daily” as an add-on. I can also see many advertisers who have specialized in local markets like ValPak entering this market as a way of giving more value to their advertisers. The real danger here is that the daily deal will become so ubiquitous that they will get lost in the clutter and no site will be able to produce meaningful volume for a merchant. To get “eye time” merchants will have to present outlandish deals to attract any attention and the value to the merchant will diminish to the point that the daily deal will not produce the desired return. The idea that a deal aggregator will survive long term will be jeopardized by an increasing ease of… Read more »
Ed Rosenbaum
Guest
8 years 4 months ago

This is like any other venture where many jump into the water. Some simply can’t swim and others are survivors. This will have a diminishing public interest if the values and windows of usage continue to decrease.

Lee Kent
Guest
8 years 4 months ago

Everybody loves a deal and I do like the concept of third party offerings with bigger reach and not brand specific. I have used Scoutmob while visiting cities to find great dinner spots that I wouldn’t otherwise have tried or known about.

With that said, I think there is a place for the Groupons and Scoutmobs of the world. They simply need to work closely with retailers in order to find the offerings that work best in each case.

Shilpa Rao
Guest
8 years 4 months ago

Being relevant to your target customers is the mantra to success. Daily deals excite you first, but soon the excitement fizzles out if there are too many irrelevant items in the deal.

Matthew Keylock
Guest
Matthew Keylock
8 years 4 months ago

The relevance equation has changed rapidly in this space.

Consumers need to instantly get why the deal is right for them and remove the need to scan or search for good deals. More data is needed to help this and better use of existing data to source and curate the right deals for the consumer.

Improvements also need to be made for merchants. A shift towards greater simplicity and a loyalty focus would be highly beneficial. Interestingly this also ties in with the consumer need for relevance.

A reasonably significant shift in thinking and focus is needed for these companies to continue to be successful.

If they can get this right then some of these companies have some very important foundations for a future in which consumers may control their own data.

Alexander Rink
Guest
8 years 4 months ago
Using Daily Deals can be a bit of a drug for retailers: so tempting to try, likely producing a quick short-term hit, but with potentially very damaging long-term effects. However, when you start using it, it can be very difficult to get off it. What retailers would ideally like to see happen with a Daily Deal is that they will get a massive influx of first-time customers who, once they see and try the retailer, will buy significantly more than the Daily Deal itself, and be eager to return in future with repeat business. In other words, retailers are looking for a high ROI, based on a low customer acquisition cost coupled with immediate cross-sell/up-sell, and a high customer lifetime value. Unfortunately, what we see is often the reverse: one-time, bargain-seeking customers whose cost to serve may have been underestimated, buy the minimum to get full value from the Daily Deal, and who have a low probability of returning at full price. Worse, I know from direct conversations with retailers that some end up getting… Read more »
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