Coupon capers

The cyber age and social media are set to make super savers out of everyone as enterprises like Groupon revamp the way we consume.

By DAVID SHAMAH
groupon team_521 (photo credit: (Tim Boyle/Bloomberg))
groupon team_521
(photo credit: (Tim Boyle/Bloomberg))
One thing you learn rather quickly when you move to this country is that there are no bargains here. That old joke about making a small fortune in Israel by bringing a big one is no joke.
In America, several times a week, coupons for food, groceries, cleaning products and all sorts of other things appear in the local paper. Apocryphal stories even tell of super-shoppers who know how to play the system to the extent that they actually make a profit, getting back more than they spend, because of the coupon specials. Whether those stories are true or not, let’s get one thing straight – it just isn’t going to happen here. However, there are some new ways to save money – and one of the most up and coming is through the new “Groupon-style” coupon club sites that have taken the country by storm.
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The sites are based on the model invented by the American site Groupon, which was started 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). Groupon started out with $1 million in funding – and several weeks ago rejected an estimated $6 billion buyout offer from Google.
Today, Groupon provides deals in 150 markets in the US and other countries. Its success in the US and its premier competitor, Living Social, has inspired knockoffs and new twists not only here, but around the world; last month, for example, Jordan got its own groupbuying site, joining Beirut, Dubai, Abu Dhabi and other cities in the Arab world which were already on board. China, of course, with its hundreds of millions of consumers, has long been a center of group buying; in fact, the concept, called Tuangou, originated there, and at last report there were more than 1,000 sites in the country.
While the Internet is worldwide, the trick with group buying sites is to give them a local flavor, says Dr. Eyal Felstaine, CEO of Deal Hayom. They have to give incentives to both consumers and businesses to get them on board – and the way to do that, he says, is by micro-targeting the consumer and matching his or her need to what businesses are offering.
He does that by building a good, old-fashioned mailing list – and that, essentially, is the secret of group-buying site success. “My list is my biggest asset, and I am very careful not to misuse it. Everyone who signs up gets an e-mail a day with a deal tailored to his needs,” Felstaine says.
Of course, there has to be something in this model for businesses to get them to offer the deals. When he tries to persuade businesses to offer a deal, Felstaine says, he tells them it’s not a discount they’re offering; they’re actually embarking on an advertising campaign. “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.”
As such, the group-buying services work best on the local level – within commuting distance for the consumer. “The business or service has to be convenient to consumers, otherwise they won’t bother. We 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 future,” Felstaine says.
The question of whether customers will return once the deal is over – the loyalty question – is a real issue for businesses, says Felstaine, and for that reason he does not work with businesses that are not going to benefit from the group-buying model. “A store that sells Levi’s jeans, for example, is not going to benefit from this – and we wouldn’t even try to sell it on the service. 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. When you choose a destination, you take into consideration several factors; how convenient it is to get to, what you can expect, whether there is parking, etc.”
A discount coupon encouraging new customers to try out a business gets them into the car, onto the road and into the door – addressing customer concerns, and making it more likely that they’ll consider that business again.
“For a business that caters to leisure needs, group coupon buying is an excellent resource. It’s like advertising – 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,” Felstaine adds. “The return on investment per user is 100% – the coupons are sold in advance, so the advertiser knows it works.”
NEARLY ALL the deals on group-buying sites are for leisure activities, called the “lifestyle” sector in local retail jargon. They include life’s little “extras,” like restaurant meals, laser hair removal, theatrical productions, midweek getaways to bed-and-breakfasts and the like. Not that those things aren’t important – they’re just not as important as some other things, like food shopping.
Marketers will tell you that, for cultural reasons, discount supermarket coupons that you clip from the newspaper never took off here; instead, in recent years, the “club card” has come into vogue. Supermarket, pharmacy and other chains will offer customers, usually for a fee, a membership card (or more likely a credit card) that entitles them to either specific or global discounts at their stores, knocking off 3% or 5% of a customer’s total bill, or offering a great price on several “loss leaders” to get customers into the store, hopefully buying other regular priced items.
But the power of group buying may yet change supermarket buying habits; at least one site, Group-e (http://www.group-e.co.il), has offered a serious discount at the Yesh chain of supermarkets. Group-e has positioned itself as the group-buying site for the religious public, which is often ignored at the other group-buying sites, says Uriya Ben-Kochav, its director.
“There are now many group-buying sites, and there are likely to be even more as the trend crests,” he says. “The religious public is generally not served by most of the sites, and that’s a gap we try to fill, providing them with not only ‘lifestyle’ opportunities, like discounts at kosher restaurants, but also discounts on basic needs, like food shopping.”
It wasn’t easy to convince Yesh to participate in the program, he said, but after several days in which the coupons were distributed, it was clear that the campaign was a success and that hundreds of potential customers who had never shopped at Yesh before had downloaded the coupon and visited the store.
Ben-Kochav is well-positioned to offer group-buying discounts to religious families; for 10 years, his organization has been negotiating discounts for religious Zionist synagogues and yeshivot on all sorts of products, from school supplies to cellphone packages to vehicle insurance. Involvement in the community, he says, is one way to avoid the inevitable shakeout coming among the group-buying sites.
“It seems that every day there is a new site offering coupons, and there is definitely a danger of overload,” he says. “At some point, it’s not going to be enough to just offer a coupon. Users are going to have too much choice, and are going to be looking at an organization that gives more than just a discount and contributes to the community, like we do.”
That contribution comes in the form of cash grants to institutions, and in helping to make life easier for religious Zionist families. “If another site is offering a coupon for the same restaurant as I am, for example, users are going to want to download the coupon from my site, because of my involvement in the community,” he says.
THAT SHAKEOUT Ben-Kochav referred to could come sooner than many expect. With group-buying a legitimate Internet success story, you have to wonder why the Internet giants, like Google, haven’t been involved in driving this phenomenon – until now, that is.
The popularity of the sites – and the fact they are growing like wildfire – is proof, many analysts say, businesses have figured out the business model that best takes advantage of the power of the Internet; it’s social (remember, there’s no deal if there’s no group), it’s dynamic (there’s a new deal every day, so site users come back on a regular basis), it’s profitable (for everyone involved) and it appeals to that most basic human drive – the great feeling you get when you look around in a restaurant or hotel and know that you paid half what everyone else did.
After its offer was rejected by Groupon, Google announced it was developing its own group-buying service, called Google Offers, to be integrated with its Google Places service, which has coverage here – and although the service hasn’t been officially announced just yet, you can already take advantage of Google Offer deals here .
Google Offers takes a more traditional individualized approach to coupon cutting – in that most of the offers don’t seem to have a minimum or maximum group size – but a deal’s a deal; for example, a 10% off coupon for the Dan Panorama Hotel in Jerusalem (good through December, no limitations/ exclusions specified).
Facebook is testing a group-buying product called “Buy with Friends,” and of course, Groupon has been expanding as fast as it can, buying companies not only here, but in South Africa, Australia and many points in between.
It may take some time for the big sites to totally dominate the group-buying field, though – and until then entrepreneurs have an opportunity to get in on an easy to start-up business. And you don’t need a lot of seed money, either; for $199, you can download a plugin for the Wordpress blogging platform that will put you in the group-buying business (http://groupbuyingsite.com/). With the plugin, all you have to do is find the deals and post them – and then, hopefully, wait until Groupon, Google, Facebook or some other big player makes you an offer you can’t refuse.