In early 2010, a common friend arranged for dinner with then new startup Beeconomic's founder. And admittedly I gave an opinion about how deal sites would never work out in Singapore. Coming from a years of experience in consumer loyalty and rewards systems, I've (wrongly) assumed that all marketers/marketing professionals held the same view about discounts as I did. My experience with a 5 star airline, discount is kind of a bad word. You only gave a discount when you were desperate, in fact on some flights, the airline would rather fly empty than to offer a discount on the seat. And I must say very wisely, we have now been conditioned to book our flights earlier rather than later because we all know that flights only become more expensive closer the flight date.
This topic of Groupon and what it does for customer loyalty surfaced again on Linkedin Group Loyalty 360. "Is Groupon a loyalty company?..." The answer is almost a unanimous no amongst fellow (savvy) professionals. Everyone, some more elaborately than others, have voiced the disadvantages of discount marketing, not to mention paying an agent for discount marketing? So if marketers are collectively agreed in not buying into the system of Groupon, how then did the company get to it's 5 billion dollar offer by Google? (I suspect bankers at work) Who are the buyers of discount marketing services? Smaller retailers or the less savvy marketers? If so, did the company just managed success based on mass ignorance. Well, that would be bad cause it will almost die an instant death when everyone realises that discount marketing doesn't work. (Another reason for the rush to IPO? Get out before it blacks out?)
However it's not all dark and gloomy in the discussion of the latest sensation and rush into the group buying discount business. Mashable has convered a relatively positive side to this idea.
For the fact that deals undoubtedly attract the attention of consumers. Groupon is a lead generation system and platform, how the marketer uses it in context of their own engagement campaign is not the company's problem. You can't blame the butcher if you can't cook the meat.
My personal opinion is that discounts are perhaps the worst way to attract customers. Once you go down that road, you not only attract "worst" customers but also you are building loyalty upon price and that's not customer loyalty at all. Any wise marketer wouldn't be going down that road. If I wanted to give a 90% discount, I wouldn't need to go through a site like Groupon, all I need to do is offer it to my existing customers. That will do the trick. It will spread even better. Let the advocates choose who they want to bring to the sale. It's cheaper and just as viral, not to mention the engagement levels with the customer is a lot higher.
