During and after the recession, many consumers became more savvy and conscientious about bargain shopping and searching for deals. Innovative entrepreneurs like Groupon and LivingSocial, developed business plans to satisfy the consumer’s seemingly insatiable thirst for a deal. These websites deliver daily emails to consumers that are tailored based on consumers’ preferences, shopping habits, and locations. Millions of subscribers have signed up for varying deal sites and enjoy significant discounts and exposure to new products and services.
The initial success of the online deal website had many investors and businesses clamoring to participate; however, with consumers receiving an average of 10 deal related emails a day, many of these discount programs run the risk of oversaturation. Consumers are now beginning to experience a type of bargain burnout and the discounts don’t seem as appealing any more.
Marketers have often used buzzwords like “for a limited time” and “significant discount” to encourage immediate spending and build a sense of urgency. Yet, many consumers are no longer feeling this sense of urgency when so many competing deal sites are offering similar “significant discounts” on “limited time” merchandise. In addition, consumers have become somewhat inoculated to “bargains.” What consumers considered a bargain before the recession, no longer has the same appeal. Consumer expectations of what constitutes a good deal have changed rapidly over the past several years.
In order to combat this consumer complacency about bargains, researchers suggest that retailers become more random with their price promotions and lose some of the predictability. With so many retailers doing the same things and participating in the same daily deal sites, consumers are seeking retailers who will do something different.
- How do Groupon and other online discount websites work?
- Do you think Groupon and similar deal sites have long‐term staying power? Defend your answer.
Seth Fiegerman, “Deal Burnout: Too Many Discounts?,” The Street, August 8, 2011.
I am not absolutely positive how Groupon other online discounts like Groupon work, but I would say that they combine efforts with popular, or not so popular, companies to make great limited time deals for customers. Groupon is able to get so many customers to view their deals, so companies choose to go through them instead of offering the discount directly as that may not be able to accomplish as much. In the end, Groupon gets a certain cut of the deal offered, and the company gets business. The company then hopes to establish further loyalty and future business from those customers Groupon was able to bring to them.
I do believe that Groupon and other online discount websites have the ability to be long-term businesses, whether they will stay in business long-term may be another issue. Groupon has definitely established a name for themselves, and many people around the world are signed up for constant emails from them to hear about the latest deals in their area, including myself. People trust that Groupon will consistently update them about their marked down packages, and as long as Groupon is able to communicate effectively with both businesses and customers, I think they have a very good shot at long-term staying power.
Sarah Whitaker said:
I do believe that coupon sites like Groupon and Living Social do have the ability to stay in the market and do well long term as long as the sites do not fill up with too many “not so good” coupons. If consumers go to the website thinking that they are going to get a significant discount and can only find coupons for things that they do not want, or that they feel like the sale price that is given on-line would be the same price of the item is in the store, consumers will be turned off of couponing web sites. The television show “Extreme Couponing” does show how it can pay to use coupons, and shows like this turn people on to going to on-line coupon websites. For this reason, I think that popularity of coupon websites can only increase.
William Weimar said:
I have never personally used a website like this, but from what I understand, they are very useful and should be able to maintain long term success as long as they refrain from oversaturation. Consumers will not want to receive five emails a day about deals. Amazon frustrates me with their constant emails about recommended products for me to buy. I think that these emails are useful on occasion, but consistently sending them out can be counterproductive. Consumers will always be looking for a deal in today’s society, so they do not need to oversaturate the market because the consumers will come to them. Groupon is consistently realized as one of the best sites for getting local coupons, so they can ease off their barrage of emails and let the consumers come to them. Smaller, up and coming coupon sites will not be able to sit back and let consumers come to them. I feel like it is going to be a hard market to break into because it is difficult to differentiate from what is already given, and the only way to increase consumer knowledge about the site is to send out annoying and consistent deals. This gives the first arrivers, such as Groupon, a significant advantage.
John Rioux said:
I would have to disagree with Nicole above. Groupon, Living Social and the likes are on their way out. Here’s why:
These sites make their money taking a percentage of revenues. Some take 50%, other 45%, still other 40% and below. Here lies the problem. Smaller players who were late to the game cannot bring the same value to businesses as, “I have a mailing list of 5 million like Groupon,” so instead they have to compete on price. So these little guys offer to only take 25%, then 20%, then even 10%. Pretty soon, they can’t make margins, and are driven out of business. Meanwhile, Groupon, in an attempt to compete, draws down their percentage, then Living Social does the same and so on. The cycle is endless. New daily deal companies have no chance, and Groupon will drive themselves out of business trying to be better than the next guy. Buy the group deals while you can, they won’t last long.