The In Group

20 02 2012

There is no doubt in anyone’s mind that upstarts like Groupon and LivingSocial have upset the retail apple cart in the last two years. It has put local media on notice that companies that are “not from around here” can have a local presence, and effectively siphon off marketing dollars. In Amarillo alone I have seen the newspaper and at leas a couple TV stations launch counterattacks with similar efforts.

The basic idea (once again, for you cave dwellers) is this: Daily deals are offered (mostly via email, but some by web and/or print) that try to entice people to buy at what appears to be an insanely low price. But you must act quickly, because the model dictates the short-term nature of the promotion. And in the case of Groupon, a vendor-determined minimum number of people must buy for the deal to tip.

Of course, such promotion-heavy inducements can also create deal-prone consumers. I should know, for I am one. I have purchased eight Groupons for canvas photo prints, each at 50-60% off list price. Groupon’s take in all of this is 50% of the sale price, which means that the vendor is selling items or services for about one-fourth of list price.

Yes, you better be careful in this arena. You may wind up giving the store away.Worse yet, while the intent is to try to introduce new customers to your shop (in hopes they will return later to purchase at regular price), there is no guarantee that all Groupon et al have done is create a new bargain-hungry class, as in folks who will never return…unless there’s another Groupon.

But now Groupon and LivingSocial are raising the revenue bar by offering premium memberships. In Groupon’s case, $30 a year gets you first dibs on promoted items, overrtide privileges on sell-outs, and other benefits. LivingSocial’s premium package is quite a lot more expensive ($20 per month), but offers similar perks.

OK, everybody step back from this for a sec. Where have we heard of this before? Oh yeah…Sam’s Club, Costco and BJ’s. Membership shopping clubs. You pay for the privilege of having access.

And if enough people bite, this stands to greatly improve Groupon’s bottom line. After all, it’s pretty much pure profit, and that from the people most likely to spend more in the first place. Can anyone say Bazinga?

Having never been shut out of a Groupon, nor so obsessed with what is coming tomorrow, I just can’t say that the new VIP program is for me. I have never suffered from any Groupon angst, and am in fact quite happy with my bargains. One more thing: I have yet to purchase a canvas photo print at full price. Call me a cheapskate, but I have learned that this offer will make the rounds about every two months. I just keep my photos organized, and am ready to pounce.

But if Groupon and LivingSocial can pull this off, I tip my camera. Any time a marketer can convince its best customers to pay more just for the privilege, it’s something to write home about.

And that’s a picture the stockholders all love to see.

Dr “Say Cheese” Gerlich



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