Still paying retail for stuff? If you’re plugged-in (i.e., Internet savvy) –
shame on you! The Internet, as we all know, has been responsible for several
consumer revolutions already, but the biggest revolution – call it a coup
against full-price shopping – is only just beginning.
That coup is being
led by Groupon www.groupon.com), which is to shoppers what Facebook is to
teenagers. Groupon is a combination coupon/deal/ advertising site that helps
businesses recruit new customers, while providing significant deals for
Each day, Groupon features deals in various categories (many
of them related to food/leisure/services/travel), with the “big deal of the day”
offering consumers discounts on whatever is being offered – up to 90 percent
off, in some cases. Consumers who want the deal buy the discount coupon in
advance and redeem it at the business.
The catch: Groupon offers a set
number of coupons (say, 200) for the product/service. If the minimum number of
people buy a coupon, the deal is “on.”
If not – everyone who paid gets a
refund, and the business goes back to the drawing board.
started by in Chicago by now 29-year-old entrepreneur Andrew Mason in November
2008, at the height of the recession. (First lesson of Groupon: Don’t ever let
anyone tell you that you can’t make it, even when times are tough!) Today,
Groupon provides deals in 150 markets in the United States and in four other
countries – and that doesn’t even include the dozens of Groupon clones, both in
the US and abroad.
Groupon started out with $1 million in funding, and
several weeks ago the company rejected an estimated $6 billion buyout offer from
Google! A healthy percentage of those Groupon clones are to be found right here
in Israel; I counted at least a dozen (at www.dailyd.co.il, which aggregates the
deals from each of the Israeli group-buying sites).
There’s even a site
that appeals strictly to English speakers (www.groopbuy.co.il), with most of
their deals located in Jerusalem. The biggest Israeli group-buying site is Deal
Hayom (www.dealhayom.co.il), which features deals in five Israeli cities: Tel
Aviv, Jerusalem, Haifa, Rishon Lezion and Beersheba.
While the Internet
is worldwide, and certainly national, the trick with group-buying sites –
including Deal Hayom and Groupon – is to give it a local flavor, says Dr. Eyal
Felstaine, CEO of Deal Hayom, with whom I discussed the whole group-buying
Group-buying sites have to give incentives to both consumers
and businesses to get them on board, he says, and the way to do that is by
micro-targeting the consumer and matching his or her need to the businesses. And
that means building a good, old-fashioned mailing list.
biggest asset, and I am very careful not to misuse it,” he says. “Everyone who
signs up gets an e-mail a day with a deal tailored to their needs.”
he tries to sell a business on offering a deal, Felstaine says, he tells them
it’s not a discount they’re offering; instead, they’re actually entering into an
“I offer them a guaranteed audience for the product
or service they’re targeting,” he says. “Remember that if all the coupons aren’t
sold, the deal doesn’t go through and everyone gets a refund. Thus the
businesses are getting exposure to many new potential customers who will
hopefully come back again, after the coupon expires.”
That’s one reason
why the deal services work on the local level, Felstaine says.
business or service has to be convenient to consumers, otherwise they won’t
bother,” he says. “We can target potential customers by several methods – the
most important being address. Residents of Beersheba, for example, might use a
coupon for a restaurant in Tel Aviv on a one-time basis, but if they get coupons
for Beersheba, they are much more likely to return to that restaurant in the
The question of whether customers will return once the deal is
over – the loyalty question – is one that is asked by many business owners, not
to mention computer journalists. When it comes to supermarket shopping, for
example, even loyalty programs where the customer signs up for a credit card
issued by the market fall by the wayside unless the store keeps the deals
coming; if consumers see the store as too expensive, they just won’t
The loyalty question is a real issue for businesses, Felstaine says,
and that’s why he doesn’t work with businesses that are not going to benefit
from the group-buying model.
“A store that sells Levis jeans, for
example, is not going to benefit from this, and we wouldn’t even try to sell
them on the service,” he says. “The loyalty is to the jeans, not the store. But
it’s different for a business like a restaurant or a spa. If you want to go out
with your spouse or friends, you are more likely to go to a place you’ve been to
before, or that you’ve heard about from friends. You want to know the route,
more or less, what to expect, whether there is parking, etc.”
business that caters to leisure needs, group couponbuying is an excellent
resource,” Felstaine says. “It’s like advertising for them, and for all I know,
many of the people we work with may be using their advertising budgets to pay
for expenses associated with their deals. The return on investment per user is
100 percent: the coupons are sold in advance, so the advertiser knows it
For years, Internet advertising was considered effective only for
big-name, national and international businesses; it was just too difficult to
sell to small businesses.
The best a local business could do was to use
Google Adwords to target users and hope for the best. But it seems that Groupon
and company have broken the code.
(Groupon is said to have about 35
million users, and Felstaine says Deal Hayom sells NIS 12 million a month and
has 110,000 users.) People are going to go shopping, deal or no deal, so why not
take advantage and save some money? digital.newzgeek.com