It has only been three months since they opened shop in Richmond, but two online coupon sites are becoming a favorite local advertising avenue.
Business owners seem enthusiastic about the response they’ve received to their use of Groupon and Living Social to advertise “deal of the day” discount vouchers.
The businesses, which include restaurants, retailers and services, say using the sites is cheaper than traditional advertising and delivers results. But it’s unclear just yet whether customers who use the coupons come back later and pay full price. It’s also too early to say whether the sites are cutting into sales of more traditional advertising venues, such as TV, print, direct mail and radio.
Cheeburger Cheeburger was featured last month on Groupon, advertising a $7 coupon for $15 worth of food at their Midothian, Glen Allen and Henrico locations. They sold 1,029 vouchers.
“This was the first time we used it, and you can definitely tell. When the Groupons are used, days are much busier,” said Colin Schoenhaut, general manager for the Midlothian Cheeburger location.
James River Massage Therapy sold 681 coupons for a massage in one day when it was the recent featured daily deal on LivingSocial. The deal was for a one-hour massage for $35, which normally costs $70.
“We were able to get a lot of exposure up front at no cost to us,” said owner Jennifer Vaughan. “We’ve already seen a surprising number of re-bookings.”
Both sites feature a different business and deal each day. The coupons can only be purchased during that 24-hour period. (You can read about how both added the Richmond market in an RBS story here.)
The concept seems to be a quick and easy way for small businesses to advertise, especially if they can’t afford or are unsure about other forms of advertising.
“We don’t do a lot of direct advertising,” said Cheeburger’s Schoenhaut. “With the times being the way they are, this helps people who can’t afford to spend a lot of money.”
Xtra’s Café in Carytown hasn’t been open long but on Monday offered a coupon for $10 on LivingSocial that’s good for $20 on food or non-alcoholic drinks.
“We’ve only been open for three weeks and haven’t had a chance to advertise in print yet,” owner Xtra Moore said. As of Monday evening, Xtra had sold 153 vouchers.
There was another sign this week that such services are catching the attention of the more traditional sources of advertising around town. Media General, which owns the Times-Dispatch, announced Monday that it is teaming up with Groupon this week in hopes of increasing website views and getting a second source for revenue. The publishing company offered Groupon deals on the Richmond Times-Dispatch website called the “Richmond Daily Deal” where people can sign up for email alerts about the deals. They plan to expand to six other markets by next year.
And Virginia Living, a Richmond-based glossy magazine, also came out with their own daily deal this week, Virginia Living Daily Deals. Similar to Groupon, readers can sign up for e-mail updates through the site as well as via Facebook and Twitter. A $25 voucher from Chadwick & Son Orchids for $50 worth of orchids is the opening offer.
LivingSocial.com was founded in 2007 by Tim O’Shaughnessy and has grown to more than 80 million users.
Groupon launched in November 2008 in Chicago and now serves more than 90 cities. They have over 13.7 million subscribers and have sold 12.9 Groupons.
Amy David is a BizSense reporter. Please send news tips to Amy@richmondbizsense.com.
It amazes me how many companies jump on this deep discounted band-wagon (35,000 businesses ar in line nationally for Groupon), yet they ignore proven long term services like Valpak or even offering loyal customers the same bounce-back offers to increase purchase frequency. Another marketing leverage tool many fail to truly understand and utilize is barter through a professional exchange. Take http://www.jamesrivertrade.com for example, has advertising media (radio, print, online, and more…) members ready to accept trade dollars to help merchants drive cash sales to theor doors. Yet, merchants are willing to discount their own products/services 50% then give deal-a-day sites 50% of that revenue. So instead of bartering at full retail they discount 75% in hopes bargain hunters return or get upsold to a more profitable product. Seems odd to me. Sure I get that they get exposed to 1,000′s of people with email push, but how many of those will remember if they don’t buy that specific deal. I think people will tire of deal-a-day trial of new businesses/purchases and instead begin to look for more VIP customer appreciation ‘deals’ from their favorite businesses of choice.
*Disclosure: I am a member of James River Trade & currently seeking investment partners for new savings ‘deal’ business model that combines online, print, auction, and user selected VIP offers. I have also worked for ValPak and researched multiple Deal-A-Day sites not mentioned above.
If you haven’t noticed, dead tree marketing (newspaper, print, ValPak, etc.) just is not working as it used to.
Almost everyone I know throws the ValPak in the trash when they get it, maybe it was useful at some point in the past but now it consists of nothing but tire rotation, re-ordering checks (which no one uses) and DirecTV flyers. These online sites are a better deal for the consumer, why wouldn’t they be more popular?
Thanks for sharing the article. As a Richmond startup, and pseudo-competitor to Groupon, I think it’s important to note that, while it can be very successful for merchants in the right situation (looking for a big-splash/loss-leader), but it’s extremely expensive. There are a lot of stories being written of merchants who are not nearly as happy when all is said and done.
Here’s a link to an article I wrote last week on this very topic – “What’s the Deal with Deal of the Day Sites”:
http://offeretti.wordpress.com/2010/10/05/whats-the-deal-with-deal-of-the-day-sites/
Great post Amy. 35,000 businesses in line? Wow! (Intersting post too, Scott). Cheers!
Scott, your article was spot on – and I actually saw it before you posted here. Well done sir. As for those commenting on Valpak/paper being dead and useless in the marketplace… it’s not quite the case. The numbers support otherwise. As more families tighten up budgets, the industry spend and advertisers shift a bit towards main stream and long term business players – who ultimately win out if they stay the course or advertise more. Why? Simply put, less competition in the ‘pack’ and a great consumer acceptance of the media itself. Sure, 2 in 10 people pitch the blue envelope without looking inside – but for those 8 in 10 that don’t who look for pizza coupons, haircut deals, or whatever – they get exposed to other larger ticket items like driveway or roofing services. One or two jobs for these companies can make or brake their payroll – and usually cover the cost of advertising in the envelope itself. It’s why you see the best companies implementing regular mailings as part of their entire marketing plan. My point above was that for small inexperienced companies ‘deal-a-day’ offers could hurt as much as help – if they don’t capitalize on the traffic. If a shop goes into a deal offering they just need to be prepared for cash flow expenditures NOW, have a mechanism to data capture those new customers (and re-market to them), and look at other ways to leverage their cost-of-goods sold through JV (joint venture) relationships outside of this band-wagon gold rush. The funny thing of it is, company’s like International Dining Club have been quietly making millions from businesses willing to give 50% discounts all day long. The Entertainment Book is a multi-billion dollar model that does the same thing. These are the companies that missed the social/electronic boat in the early days. I applaud Groupon and local companies like Virginia Living for helping drive customers into the doors of their clients in a down economy. The platform is tractable and of value if done for the right reasons. List building and marketing brilliance when you see Groupon selling $11,000,000 of GAP gift cards and keeping 1/2 – wish I had an email list big enough to earn that kind of dough for hitting ‘send’. My challenge to local business owners willing to wait for their turn in line is simply one of why wait? Make it happen now… If you are a restaurant and willing to give 50% off a meal, why not stamp the bill (like Starbucks does for treat receipt) and build your own customer loyalty ‘deal program’ – or better yet, hand the stamp to the retail shop owner next door and authorize them to advertise and stamp any sales receipt over $50 to receive $25 OFF $50 meal at your place within 3 days of purchase. The restaurant owner just saved the 1/2 they would be paying for a large email push to random people – and could reciprocate for the retail shop on their bills. That was my point… the ‘thinking behind these sites’ can be applied anywhere; be it trade leverage, JV partnerships, or internal ‘thank you marketing’ to one’s own customers. Sometimes the pizza maker needs people like us to show them the way. Speaking of which, I’d be happy to put the pieces together for a cut of the earned revenue if anyone reading this doesn’t want to do the legwork. Does that make me a ‘deal-of-the-day’ broker pimp, or leverage consultant? BTW – I’m not writing these comments to get business, but instead help business owners think through their decisions (the why’s) a little longer, and not just jump on the hype. I enjoy business and the great feedback I get on RichmondBizSense from like minded entrepreneurs and business folk. RBS needs to launch a biz-to-biz deal of the day offer; I’ve yet to see anyone tackle that market place.
-Chris
PS: Valpak is rolling out their deal-a-day site in November also. They won’t stop the blue envelope mailings, but meet the demands of local business owners who want to spur new traffic. Smart to diversify any business offering if you can support the sales and technical implementation.