It's Adapt-or-Die Time for Daily Deals Firms

The squeeze is on

For instance, if customers buy dinner at a steak house with their debit or credit card, they might see a special from Applebee’s on the Web page. For offline deals, customers can save the offer to their BofA smartphone app, then use it at a store. If the advertiser is an e-commerce brand, BofA customers can immediately make a purchase with a click. The offers are targeted based on purchase history and location.

More than 4,000 merchants have signed up for the six-month-old program, and they are primarily charged on a performance basis. BankAmeriDeals’ genesis traces back to customer research by the brand over the last few years, per Dave Godsman, Bank of America’s online and mobile solutions lead.

“They didn’t want to go through hoops and over hurdles to get relevant deals,” Godsman says. “We’ve got great participation from big brands like FedEx, AutoZone, Redbox and the Atlanta Braves, but it’s also the dry cleaners and local restaurants getting on board.”

BankAmeriDeals’ move highlights the fact that, in the frothy melee for local digital commerce dollars, the term “daily deals” has been rendered largely meaningless. Offers levied by the various players rarely impose 24-hour limits on consumers, now affording them a week or more to purchase. Some hyperlocal offers are exclusively available via mobile apps thanks to GPS technology. Others award discounts for syncing credit cards to social platforms and then repeating patronage. Groupon and LivingSocial simply can’t keep up with all this competition.

And retailers are happy to try the diverse set of options. ’Wichcraft, a 15-location eatery in New York, is buoyed by the results it’s seen from American Express’ Sync program. It ran two Foursquare campaigns—one in conjunction with AmEx Sync and another solo on Foursquare’s Specials platform—and saw 97,000 impressions and a 22 percent redemption rate. The Sync initiative—offering $5 off for an order exceeding $25—produced the most sales, says Ellen Kim, marketing director for ’Wichcraft. “I am in discussions with AmEx about doing more promotions,” Kim explains. “We want to innovate with companies.”

Other brands have a similar mind-set toward using digital deals to drive foot traffic. Foursquare in late February announced it signed up Visa and MasterCard to extend its card-sync aims, and Burger King is piloting the new Visa/MasterCard program with rebate-oriented deals. Consumers who sign up see the cash back from the retailers on their credit card statements.

New York-based Foursquare says it has about 100,000 specials running daily from mostly small businesses but hopes to land more big fish like BK with the card-sync effort. “From a merchant perspective, it’s entirely frictionless,” says Steven Rosenblatt, Foursquare’s chief revenue officer. “One of the biggest obstacles of running any kind of offer, coupon or special usually involves training the retail staff at point-of-sale. We’ve removed that barrier.”

Card-sync deals have heated up in the last couple of years. Apple’s Passbook, a digital wallet feature on the iPhone, recently helped Build-A-Bear Workshop garner a 5 percent clickthrough rate during a one-week stint. In a campaign led by mobile tech firm Vibes, the brand geo-targeted a campaign offering $5 back on orders exceeding $25, pitching the deal when Passbook users were physically close to a Build-A-Bear location.

Teresa Kroll, head of marketing for the St. Louis-based brand, says the Passbook initiative increased consumer engagement, and “we experienced additional foot traffic from those who received the offer.”

Seeing a lack of traction from its geo-social app, Scvngr created a similar platform to Passbook—a mobile payment/loyalty system called LevelUp that’s been adopted by 5,000 merchants. Small businesses set up rewards to entice customers to pay with the app—awarding a $5 credit for buying anything, for example, or encouraging loyalty by offering a $10 credit per $100 spent. “They can track customers to see real ROI [stats],” Scvngr CEO Seth Priebatsch says.

Further showcasing how the deals space is evolving, Priebatsch’s Boston-based company is marketing a white-label solution so brands can completely own the experience around mobile deals and payments. Sweetgreen, a farm-to-table food chain in Washington, D.C., and Philadelphia, began using the LevelUp solution three months ago, offering regulars $10 off for every $100 spent via the brand’s app.

“I’m very pleased with the progress so far,” says Nate Ru, co-founder of Sweetgreen. “Our app was in the Apple top 10 for restaurants for two weeks when we first released it.”

Sweetgreen soured on the financials of working with LivingSocial after trying the deals platform in its early days to get new locations off the ground. “Looking back, I don’t think I’d do LivingSocial again,” Ru says.

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