What once seemed like a marketing star, coupon marketing like Groupon (Groupon, whose name is a combination of “group” and “coupon,”) and LivingSocial that specialize in providing customers with discounts purchased in bulk may not be as popular with consumers these days.
A Bloomberg Business Week story reports that many small business owners are re-thinking usage of these marketing tools and it seems consumers may be shying away from the daily deals too.
LivingSocial, laid off 400 employees — 10% of its workforce — during the holidays and posted a net loss of $650 million for the year.
Groupon missed earnings estimates for last quarter and its outlook for the next quarter was also lower than analysts expected, sending the stock down as much as 27% in after-hours trading yesterday.
Some companies have been happy with the coupon deals. If you own a service company that can afford to break even or take a loss on coupon discounts in the hope that first-time users will stick around they may be a good marketing tool for you. But for a product-based business with slim profit margins, inbound marketing may be a better alternative.
Many companies had customers who redeemed the coupons but did not return or customers who bought just the coupon amount and nothing else.
Over use can cause big problems. A local Columbus restaurant that frequently used the daily coupons found itself closed for tax problems. While the deals drove traffic, the margins were too small to succeed.
Daily deals may not be the best marketing tool, but smart marketers have found ways to incorporate deal coupons into their marketing plans that work. They use them sparingly to boost website traffic and raise their profiles but negotiate deals that allow them at least to break even on each sale.