What’s the Deal with Deals?

by Colt Stander

A number of LTV classmates had a recent twitter conversation concerning how Foursquare could finally monetize while providing additional value to its members.  The strongest response was for advertisers to push deals to the users, leading consumers to these businesses.  With that, we all assumed this provided value and left it at that.

Upon checking my email this morning I was greeted by 30 emails from deal websites with their daily offerings.  Between Gilt Groupe, Living Social, Groupon, Jack Threads, RueLaLa, Restaurant.com and the number of other fashion, local, restaurant, and tech websites, can you guess how many I actually opened, let alone purchased anything?  Zero.  I came to a realization this morning that I am so bombarded with deals every morning that I don’t even bother to look at them.  I now beg the question, am I so cheap that I am no longer interested in products, even when they are on sale, or are we becoming so flooded with these offers that each is quickly losing its relevance.

If we are in fact being overexposed to deals, we need to consider if we can keep creating more sources of these discounts for consumers in able to commercialize our sites and more importantly, what will happen to the markets we are serving as we continue to offer their products at a fraction of the normal price.  While we can imagine that discounts will always be popular, relevance will be the key to winning this game.  Knowing this, websites like Groupon will need to reconsider their shotgun approach, which is tough to do when they are the Walmart of discount sites.

While the fear of being relevant and competitive is real, more important is how long these actions can persist.  At a recent lunch concerning fashion with HBS Professor Mukti Khaire, she expressed extreme concerns of the effects on the fashion industry by sites such as Gilt Groupe.  As Gilt suddenly makes inaccessible brands accessible at lower price points, it is destroying brand equity, exclusivity, and profitability of these brands.  Other deal sites like Groupon have similar destruction patterns with the claim that they bring new follow-up business to these businesses.  At a certain point, these consumers will be able to shop exclusively with deals, eliminating any follow-up business.  At some point, businesses will figure this out and either refuse to buy into the deal game, or their businesses will no longer be viable.  Either way, the long term perspective doesn’t look to be a good deal for anyone.

If giving a deal to the masses isn’t going to be a viable option eventually, how will they stay relevant? And what does it mean for groups like Foursquare which may only find monetization in this way?  As for Foursquare, I propose they look for another way to be relevant by using their information to lead you to places you LIKE, not just one that will give you a cheap meal.  But that is just one of a hundred things to do with the mountains of data they have on each of its users.  I’m looking forward to seeing the direction they take the service and hearing other ideas from readers.


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