Loyalty Truth

In business, there are things we believe in, things we sell, and things that work.

In a post last week, David Slavick offered advice to retailers on how to prepare and manage a “deal of the day” offer with Groupon, Living Social and others assembling collective buying discounts. That great information will be followed in the next week with a concise go-forward planning methodology useful for any retailer.

Meanwhile, the daily deluge of deep discounts continues to flood our email inbox. I have noticed the range of offer sponsors to be widening, now including Chiropractors and other medical professionals as well as the local newspaper. National restaurant chain Quiznos has created a campaign with Groupon intended to blend the traditional punch card offer with the discounts expected from collective purchase.

The Quiznos campaign is positioned as a way to create repeat business via the Groupon model but let’s see how that goes. If I were privy to the data, I would be interested to understand how many single-use cherry-pickers are converted to multiple-use cherry-pickers.

I’d also like to know if the element of captured loyalty (I’ve paid for 8 subs and had better use them up) results in continued use after expiration of the Groupon or if brand boredom takes hold and these same customers don’t come back for months. It’s all entirely possible.

Amidst all the Groupon-like activity (the term has nearly assumed verb status in the same way as Kleenex, Xerox, FedEx), I received an email from Best Buy touting (gasp!) a 10% discount on a variety of products leading up to the Memorial Day weekend.

I have to wonder openly if a 10% discount, with restrictions by product category that require reading of the “smaller print” are still changing consumer behavior these days. There are a few possibilities:

1. Best Buy is smarter than the rest of us: If your numbers tell you that 10% works, why play the deep discounting game? Doing so would be akin to creating a Facebook Fan page with no idea why you are doing so.
2. Best Buy is weathering the deep discount storm: Hoping that collective buying is a fad that will go away soon, the company could be persevering with proven tactics hoping to preserve margins as long as possible.
3. Best Buy is asleep: Sure, they could be missing the boat, watching as the market moves away from them, but this is highly doubtful. The folks in Minneapolis are very good at their trade and the collective buying storm has mostly been directed at local merchants rather than national chains, Gap a notable exception.

For many retailers, 20% has been the magical number at which consumers give attention and reach for their wallets. 10% is just plain uninteresting in my book and the fact that I have to spend time to understand which products qualify is mildly annoying.

The attraction of coupons to me is clarity – WYSIWYG – but offering coupons is a mercenary game in which the bigger numbers get the most play. It’s also a highly destructive game – to profit margins that is.

Though collective buying is “something we sell” and “something that is working” these days, I’d rather advocate “something I believe in” which is integrated customer strategy that yields measurable results over the long term.

Let me know if agree or disagree. That’s why WordPress includes a comment box!

On the same date of this post, two news items hit that are worthy of an update: Groupon filed for an IPO valued initially at US750 Million and also floated another offer with a national merchant chain, this time Old Navy.