One key question about the future of daily-deal giants Groupon (GRPN) and Living Social is whether the product the companies sell–daily deals–are excellent marketing for their customers… or a gigantic waste of money and time.
The anecdotal reports on this are mixed.
Some customers have a good experience and are eager to use the services again.
Other customers have a terrible experience.
(In a recent survey we did, only half of Groupon customers said they would use Groupon again).
One of the main reasons for the bad experience is the realisation by some merchants that the people who use Groupon and Living Social coupons often don’t become regular customers. They’re just penny-pinchers who go from deal to deal. The merchants’ regular customers, meanwhile, get a 50% sale on stuff they would have bought anyway at full price.
We just got an amusing note from a New York entrepreneur who owns two companies. He tried Living Social deals for both of them. And he feels like an idiot and swears he’ll never do it again.
Given your interest in Groupon, I’ve been meaning to tell you that I did a deal with Living Social for my restaurant about a year ago. We kinda sorta tracked whether LS customers ever came back. My staff thought basically none of the 300 ever did. They did recognise some regular customers who were happily (if a bit shamefacedly) eating their usual fare at half price.
From this experience, I realised that only lousy businesses such as my restaurant would ever do a deal with LS. Shake Shack [a popular New York restaurant] doesn’t need to give away burgers at half price. LS mates lousy businesses (like mine) with cheap arse customers who never have any intention of coming back and paying full price. Why should they? They are busy stuffing their maws with half-priced Sushi, Mexican, etc from the other deals they bought.
So, me not being the sharpest tool in the box, I decide to do a deal with [my other company] and Living Social. My reasoning was: Fine. These cheap asses don’t need to come back for my food. But, once these cheap asses realise that my diapers are cheaper than Diapers.com (or anywhere else in the universe) and they can get a gallon of milk for a dollar less than Fresh Direct and four pounds of Oscar Meyer bacon for $10 less than Fairway, then these cheap asses will be mine forever. My company and Cheap Asses United Forever!
Wrong again! 95% of LS customers never have ordered again. 95% of all other customers – business and residential – who have found my company through any other way do order again and again and again.
But, it gets better (worse). LS customers are arrogant cheap arse pains in the arse. They think they are God’s gift to consumerism. I (almost) never get complaints from real customers. And, when I do, they are invariably polite and constructive. I fume all the time about LS “customers”. I hate them. Which is not so healthy for my mental state or for my business. I don’t want to make them happy so they return. I either want them not to order or to order once and just leave me alone. I’ll take all the losses just so that I can leave planet LS and reside on the planet of the good customers.
I really think there is a fundamental difference between a “sale” – which can easily create customer loyalty – and a “deal” – which seems to find the bottom feeders.
I am sure that Living Social (and I presume Groupon) is doomed. It is inconceivable that any business would ever do a second deal with them.