Groupon is going public and providing some good basis for analysts to provide their insights. Wedbush’ Lou Kerner believes that what Groupon represents, Deal Commerce, is about to become as relevant for online commerce as AdSense was for monetizing online traffic. Wedbush points to the amazing growth of Groupon and the industry in general, and goes as far as to claim that “… every major retailer and media company will need to have a Deal Commerce strategy and will be fighting for their share of the Deal Commerce revenue pie.” But talk to people in the digital industry, and most will certainly have an opinion that they are simply not interested in deals because they are tired of being bombarded with them (certainly based on my small sample of 50+ people I have discussed the topic with), or that it only appeals to bargain hunters who are typically not the customers you want. The problem – and solution, is all about relevance. How do you provide relevance in deals in a way that will make this take off for the deal offerer? Interestingly the mobile phone holds the key here.
1. Relevance in time and place
I may see a great deal about a Napa wine tour, but if I am not in the market for it right now, it is quickly forgotten. The deal needs to be relevant for me right now right here, and the mobile phone is the best tool to provide this information. Groupon has launched Groupon Now which uses your location as the basic premise for the deal being offered:
Using the basic premise that I am on the move, and that there are certain needs to be fulfilled by the merchants around me (food, entertainment, shopping) coupled with the time of day (i.e. do not offer me a breakfast deal at 5pm), should increase the chance of it being relevant and me taking the time to check it out.
2. Relevance in interests
Personalization has always been the mantra of online commerce, but few outside of players like Amazon have mastered it well. Recommendation engines and contextual engines are often simply too rudimentary (anyone say Genius music finder?) or prove to be too intrusive so people get turned off. Outside of basic demographics though, one of the key data points for predicting likelihood to purchase something is based on your purchasing pattern. And this is where mobile payments hold the key. By knowing your spending pattern combined with your location and time of day, the likelihood of getting a deal right increases. I.e. whether I get a deal to Pizza Hut or Gordon Ramsey’s restaurant matters to my whole perception of bothering with deals.
In the deal commerce space, you will also increasingly see the emergence of niche focused deal players or “channels” as Wedbush points out. The problem for me as a user is navigating this space, as the niche I belong to is based on context and will vary over time. Context provided by my spending, location and time of day will help mitigate this (start-up idea: create a mobile niche aggregator app that does just this. You can mail me the check on IPO).
3. Relevance in value
Even if the deal is spot on for my interests, and potentially relevant for where I am, the benefits it provides to me needs to be really good in proportion to the discount I get, which are the two factors in the value equation. Nowhere is this perhaps more evident than in the roll out of one of the premises for true local deal commerce to succeed – i.e. mobile payments. While the premise of mobile payments seem great, most consumers still do not see the value in using it, even in advanced markets like Japan:
So what can some of the drivers be for take-up for mobile payments? Using your mobile to pay for mass transit is one. If your mobile can help you save time on public transport in busy cities, you will surely start using it. The benefits are very high, and the cost to consumer the same as paying with any other payment method – which translates into a high value.
Similarly, deal providers need to figure out how to not only address the price/cost saving side of the value equation but also the benefits, and it can take many shapes. A “gaming” element like short term deals, where proximity and being first matters will appeal to some, others may be driven by status, accomplishment, experiences, etc. The key is finding out what the triggers can be beyond just saving money, and getting data on the user is key, which again will be facilitated by mobile payments.
Then all that remains is solving the problems of repeat purchase…
Disclaimer: The views expressed on this post are mine and do not reflect the views of any clients or companies I am currently working for or have worked for.
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