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This document summarizes the daily deals industry and how Groupon and LivingSocial operate within it. It discusses how the companies use social media, tailored marketing, and humorous copywriting to engage subscribers and promote local merchant deals. The business model of offering daily discounted vouchers for goods and services is sustainable as long as the companies continue to provide value to subscribers and merchants. The fast growth of the industry shows its potential, especially as consumers increasingly search online for deals.
This document summarizes the daily deals industry and how Groupon and LivingSocial operate within it. It discusses how the companies use social media, tailored marketing, and humorous copywriting to engage subscribers and promote local merchant deals. The business model of offering daily discounted vouchers for goods and services is sustainable as long as the companies continue to provide value to subscribers and merchants. The fast growth of the industry shows its potential, especially as consumers increasingly search online for deals.
This document summarizes the daily deals industry and how Groupon and LivingSocial operate within it. It discusses how the companies use social media, tailored marketing, and humorous copywriting to engage subscribers and promote local merchant deals. The business model of offering daily discounted vouchers for goods and services is sustainable as long as the companies continue to provide value to subscribers and merchants. The fast growth of the industry shows its potential, especially as consumers increasingly search online for deals.
Discounted Certifi cates (Process ng pag account ng vouchers)
Sales of discounted certificates and product vouchers, often referred to as deal of the day vouchers, are not subject to Wisconsin sales and use tax at the time the certificate or voucher is sold because these sales are considered nontaxable sales of an intangible right. Tax applies when the certificate or voucher is redeemed by the merchant providing the goods or services. Under a typical scenario involving discounted certificates or product vouchers, a merchant enters into an agreement with a promotional company to have that promotional company sell, at a discount from face value, certificates that may be redeemed for the face value of the certificate when purchasing goods or services from that merchant, or to have that promotional company sell vouchers that may be redeemed for a particular good or service that is furnished by the merchant to the holder of the voucher. In either situation, the retailer can identify the amount for which the certificate or voucher was sold to the customer. In the case of a discounted certificate, the merchant who accepts the certificate in exchange for goods or services has receipts from the sale of such goods or services in an amount equal to the amount for which the certificate was sold by the promotional company, plus any additional amounts it receives from the person using the certificate as payment for the goods or services purchased. The merchant is the retailer of the goods or services sold because the merchant is the person actually transferring the goods or services to the purchaser. The merchant's sales price of the goods or services includes all consideration received by the merchant for the sale, without deduction for any expenses incurred by the merchant and paid to the promotional company for its services of advertising and selling the certificates. The merchant's sales price of the goods or services does not include the difference between the face value of the certificate and the amount the purchaser paid the promotional company for the certificate. Assuming the difference is not reimbursed or paid to the seller by a third party, this amount is specifically excluded from the retailer's sales price as a discount allowed by the seller and taken by the purchaser. In the case of a product voucher, when the customer redeems the voucher for particular goods or services, a sale of those goods or services has occurred and tax will apply to the sales price of the voucher if the goods or services being sold are taxable. The merchant accepting the voucher is the retailer of the goods or services because the merchant is the person actually transferring the goods or services to the purchaser. The merchant is liable for tax on the basis of the sales price of the voucher, provided the good or service represented by the voucher is taxable. The merchant's sales price of the goods or services sold using the voucher includes all consideration received by the merchant for the sale, without deduction for any expenses incurred by the merchant and paid to the promotional company for its services of advertising and selling the vouchers.
2. Coupons of the 21st Century: The Golden Age of The Daily Deal Industry Groupon and LivingSocial, founded respectively in 2008 and 2009, feature discounted gift certificates and coupons to local or national companies. In order to reach consumers, these sites use special marketing techniques intended to match the needs of their target markets. Additionally, both companies rely on the benefits provided by social media sites such as Facebook and Twitter to actively reach consumers on both a local and national level. Groupon and LivingSocial utilize social media sites as a public forum, posting the daily discounts and promotions, and as a relationship-building tool to maintain communication with consumers (Arasbshahi, 2010). Groupon, headquartered in Chicago, serves over 500 markets and 44 countries. The company was launched in 2008 by Andrew Mason and now has over 10,000 employees located throughout the world. According to its website, We want each Groupon purchase to feel too good to be true, from the moment you buy the deal to the day you use it (Groupon, 2012, p. 1). A unique feature to the company is its tailored Groupon Now service as well as its Groupon VIP program. Groupon Now is a smartphone and tablet-friendly application that allows users to push an Im hungry or Im bored button to view the best and closest deals for food and entertainment. The Groupon VIP program, launched in February 2012, offers members access to deals 12 hours earlier than non-VIP members at a fee of $30 a month (Groupon, 2012, p. 1). Living Social, based in Washington, D.C., operates in over 600 markets across six continents. The company has more than 60 million members worldwide and the numbers of vouchers purchased since the company was founded in 2009 total 63 million. (LivingSocial, 2012, p. 1) The company specialize in daily deals for escape and travel packages, family friendly activities, adventures, takeout and delivery, and gourmet dining. According to its website, We help great local businesses grow by introducing them to high-quality new customers, and give merchants the tools to make our members their regulars (LivingSocial, p. 1).
LivingSocial and Groupon offer a new deal each day to all members who subscribe via email. Both web services email subscribers at least two times a day to promote discounts on products and services offered by merchants at both a national and local level. In terms of local promotions, the deals depend on the geographic region chosen by each subscriber. Through the initial enrollment process, the subscriber indicates their zip code, gender and age. Then, the companies send consumers the most relevant deals based on the information provided through email messages, Twitter blasts, and Facebook posts. Both Groupon and LivingSocial employ a large number of copywriters to draft descriptions of each deal featured by email, website, and social media postings. The promotional text has been seen as a contributing factor to the success and popularity of the sites (Dholakia & Kimes, 2011). More specifically, copywriters rely on a unique mix of thorough fact-checking statistics and witty humor to relate to their target market.
Groupon, in particular, uses creative, humorous and witty content to relate to subscribers on a friendly and lighter level. Each company scripts artistic content through poetic and humorous word choice to entice subscribers to purchase deals. Groupon, LivingSocial and other companies in the daily deal industry have potential for growth and expansion. If daily deal websites continue to relate to its audience on a national and local level, communicate with subscribers through humorous and witty messages, rely on social media sites to provide open and honest feedback with users, they will continue to see success in the coming future. The business model used by both companies will be sustainable as long as they continue to offer value to both subscribers and businesses involved in the daily promotions. According to Arabshahi (2010), Almost 88.2 million people, half of all U.S. adult Internet users, will redeem an online coupon in 2011, and this number should increase to 96.8 million by 2013 (p. 6). At the end of the day, consumers are always going to search for the best deal, thus, fueling the long-term growth and sustainability of the daily deal industry.
3. THE DAILY DEALS INDUSTRY: A CASE STUDY The daily deals industry is one of the fastest growing industries that have emerged in the 21st century. New daily deal sites are being launched almost every day, and the flurry of activity is attracting investors like honeybees to stake a claim in the profits. Groupon, the industry leader, offered its first deal in 2008. Today, Groupon has an estimated 150 million subscribers. Groupons main competitor, LivingSocial, has over 72 million members. The most attractive and successful deals are marketed to consumers with the right demographic, offer quality discounts, and are well managed by the merchants who must be prepared for an increase in the volume of traffic. Daily deal websites must be careful which deals are run on their websites, matching them with the interests of their audience (The Rise of the Daily Deal, 2011). In the beginning, daily deal websites focused on offering deals for restaurants and spas only. However, with the growth in the number of websites, now estimated at over 600, the array of products and services offered has also expanded greatly. Almost any consumer good or service can be discounted and advertised on a daily deal website.
The mechanics of the daily deals industry parallel the advertising industry. Both seek to attract customers to the merchants they represent. As with the advertising industry, while interest elicited among the customers is important, the eventual success is measured by the impact on the merchants with whom they partner. In this three-way arrangement, it is clear from the growing number of subscribers that customers are apparently satisfied. Thus, success is not hinged on whether customers will buy. Rather, the success of the industry is dependent on the willingness of merchants to buy offers from the daily deal providers (Jacobs, 2012, 2013).
Consumers have turned to websites such as Groupon and LivingSocial to save money at local businesses. Some offers give better deals to coupon buyers who recruit other buyers. This approach makes more people aware of the deals available on the daily deal websites through word-of-mouth. There are millions of subscribers who receive deals from a rapidly growing number of websites. Many of the websites hire recruiters in different cities to encourage small, local businesses to use daily deal promotions. These recruiters typically would have spent many years in the town or city, and are aware of the trends among local people.
Groupon promotions provide small businesses an opportunity to advertise their products and services to a large number of people. The goal of the promotion is to attract new customers to visit the business to redeem a coupon on a product, and then convert them to repeat customers. The promotions are thus used as a source of revenue as well as an advertising tool. Although some small businesses may not make a profit on a daily deal coupon redeemed, they find that there is enough value in attracting a new customer base to take a loss on the promotion. Many businesses that run profitable Groupon promotions find that a large proportion of the coupons are never redeemed. In such cases, it is to be inferred that the unredeemed coupons did not help the business create new repeat customers. Finally, a business should be adequately prepared for the promotion and be sure to provide a quality product or service to every customer, whether or not they use the promotion. This is especially true for services. Sometimes, a business takes a loss on the transaction simply because the coupon is worth more than the profit received from the transaction. In these situations, the employees and owners might be tempted not to offer the customer the same experience as they would a customer paying full price. It is important to remember that the goal of the promotion is to create repeat customers and gain the company a positive exposure. Satisfied customers will be more likely to return and spread the word about the business. The best way for a merchant to make profits from Groupon promotions is to attract new customers, and then turn into repeat customers.
LivingSocial defines itself as a lifestyle website. It not only wants to save its customers money on everyday goods, but also provide them with unique experiences. LivingSocials Escapes provide deals and discounts on travel. However, unlike Groupon, instead of offering a discounted hotel alone, it bundles the deal with local activities. By creating an experience, merchants using LivingSocial do not have to cut prices as steeply as they would if they were simply cutting the price on one item. LivingSocial does not consider itself a daily deal website, but rather a local commerce or advertising website.
Daily deal promotions are most useful to businesses that need exposure. To run a profitable promotion, they must attract new customers and convert them to loyal, repeat customers. Yet, there is always the chance that a customer who was previously loyal to a company will purchase the deal. This means that the customer who normally would have paid full price for the item or service is now only paying part. Businesses can improve profitability by following some guidelines. They should offer deals with high dollar values, but low percentage discounts. They should also restrict the time period in which a customer can redeem their coupon and limit the amount of coupons available. There is room for improvement and greater profits in the industry if daily deal websites are able to make this promotion more attractive for businesses.
4. Social coupons as a marketing strategy: a multifaceted perspective The success and popularity of online daily deal coupon sites have brought attention from several other companies in the newspaper and publishing industries. Companies such as Angies List, a business review website, and leading newspapers, such as The New York Times, The San Diego Union-Tribune and the Atlanta Journal Constitution to name a few, are following the lead to attract more revenue to their businesses. In fact, it is reported that The San Diego Union-Tribune is now making more money in deals than in interactive advertising (Patel 2011). Therefore, it is clear that social coupons are a popular shopping tool for consumers and an attractive customer acquisition tool for businesses.
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