Why are you paying to distribute digital coupons?

I've been reading a lot of stories lately about the popularity of online coupon sites like Living Social and Groupon.  As a consumer, I can see why these sites have value.  Who wouldn't want to get substantial discounts at local and national retailers, restaurants, theaters and other businesses?

But do online coupon sites have value for the advertiser?  According to some articles, small businesses that have used the sites are questioning the benefits of offering big discounts in the hopes of converting prospects into customers, when the costs are so high, and their level of control is so low.  Living Social and Groupon charge a huge fee for posting discounts on their sites.  To generate a measurable return, businesses need to start with large margins and/or hope that a significant percentage of consumers who redeem the offers will return at some point ready to pay full price.  The retailer also needs to hope that the coupon offer doesn't alienate the business' loyal customers who are already paying full price and are not being rewarded for doing so.

As a business, one of the competitive advantages of using location based social media platforms like Foursquare or Places is that a retailer can offer digital coupons, at no cost, to anyone who happens to be near one of its locations.  Additionally, the retailer controls the amount of time the discount is offered, how many coupons it wishes to distribute and whether or not it wants to require the user to "check in" multiple times before he or she can access the coupon, thereby significantly increasing the possibility of repeat business. 

While coupon sites like Groupon may presently have more members worldwide (35 million), they don't offer the geographic convenience of geo-based sites like Foursquare.  Granted, Foursquare offers aren't delivered directly to the consumers email inbox, but by simply logging onto a geo-site through a smart phone, a consumer can immediately identify any retailer in his/her vicinity that is offering a special. Therefore, any perceived inconvenience with redeeming the coupon is mitigated by the retailer's proximity to the user.  And there is no 24 hour wait for the coupon download.  It pops up on a smart phone ready to use.  Additionally, if the consumer wants to share his or her experience with friends, they can easily do so on geo-sites; a benefit that sites like Groupon and Living Social don't provide.

So if you're interested in distributing digital coupons to drive new business, don't be misled.  Big coupon sites like Groupon, WOW and Living Social aren't your only options.  Nor are they necessarily your best options. It's only a matter of time before burgeoning platforms like Foursquare or Places become the preferred digital coupon distribution channel for small businesses...and probably even large ones.

Foursquare, Places, Gowalla… Geo-marketing: Are you there yet?

For years, we’ve been hearing the business and real estate mantra: ”Location, location, location”.

For marketers this is truer today than it has ever been, but not for the reasons you might think. Geo-marketing through platforms like Foursquare and Facebook Places is the next trend in super-targeting for marketers.

By identifying where customers and/or prospects are during the day, marketers can get a better idea of consumer interests and patterns that will give them a competitive advantage in the battle to increase customer loyalty.

I have recently been studying geo-marketing more and more as Goodwill of Greater Washington considers whether it would enhance our present marketing strategy.  DC Goodwill is already developing another Goodwill first: an iPhone web app designed to allow donors to locate the nearest Goodwill retail store, donation center or donation bin through geo-coding, while also allowing the user to more easily communicate with us via our blogs and social media sites. The more value we can provide to our shoppers and the more convenient we can make the donation process, the more likely we are to build customer and donor loyalty.  Geo-marketing might allow us to take this a step further.

Imagine the loyalty programs that can be created if we begin incentivizing donors for giving their used goods to Goodwill (and checking in when they do so) versus another charitable agency; or provide them with incentives for every 10 visits to our retail stores. How about cross promotional opportunities with partners to incentivize visits to each partner’s locations?

Certainly these types of promotional and customer loyalty programs are available now through more traditional means, but geo-marketing significantly reduces the cost of execution and management, while also allowing us to track the geographic and shopping habits of our customers.

Don’t get me wrong, while I view this burgeoning trend favorably, it does have its challenges. First of all, one doesn’t actually need to be in the location at the time they are checking in. They only need to be nearby. Second this is one way communication, so I wouldn't eliminate other forms of social media and/or market research in favor of geo-marketing exclusively.

Much like the web, this too will require some experimentation before a solid and measurable strategy evolves. However, it is still another means of engaging consumers and converting them into loyal customers and advocates, which in and of itself provides a tangible benefit to any business on the leading edge.