The best deals the future has to offer

The voucher codes and daily deals sector has boomed during the economic downturn but once the economy is back on track, how will brands persuade consumers to pay full price?

Above: SecretSales provides discounts on designer brands. The aim is to create long-term fans of these brands 

The use of voucher codes and daily deals has not waned but can brands maintain these discounts as more consumers begin to expect them as standard?

For daily deal sites in particular, reports that the booming industry is losing its appeal could have been premature.

A new study by YouGov shows that 82 per cent of Britons have used a discount or voucher, with shopping and dining being the two key categories where people spend them.

Groupon is listed as the site with the most awareness and usage and this is also mirrored on social media. It has the highest share of voice on Facebook and Twitter – at 64 per cent – when compared to other sites such as Vouchercodes.co.uk and Wowcher, according to social media monitor Brandwatch.

However, the use of these discounts can have negative and positive effects on consumer behaviour.

More than four in 10 consumers who have visited high street dining outlets using vouchers or discounts in the past will rarely or never pay full prices again and that figure rises to almost three-quarters for those who have booked hotels or accommodation using vouchers or discounts, the research from YouGov reveals.

It also shows that 42 per cent of consumers shopping for travel now expect a deal or discount. When buying beauty brands they expect 38 per cent, 27 per cent for dining and 23 per cent for shopping.

“There has been a real change in how people behave: they rarely pay full price and they expect to get some kind of deal,” says Louise Vacher, consulting director at YouGov.

Brands should be conscious of why they are issuing the codes in the first place and how they can use it to meet their needs

“At some point, the brands and the retailers are going to have to wean people off voucher and discount codes. As the economy picks up, retailers are not going to want to keep offering these kind of discounts and that will be a challenge for them.”

Dominic Lavan, managing director of Pubtokens.com, which supplies gift vouchers and works with pubs across the UK, says there is a need to make sure that the original offer is profitable, because the customers who are attracted through heavy discounting will dine out somewhere else depending on where the best offer is.

Lavan says: “Once consumers get used to eating for half price, it is very difficult for them to switch back to paying full price and so long as pubs and restaurants continue to offer these promotions there are a growing number of consumers who may be lost entirely as full value customers. I am not convinced that these consumers are suddenly going to revert to previous behaviours once the economic outlook improves.”

It is estimated that there are 600 daily deals available for UK consumers to buy in any one day, according to daily deal aggregator Bownty, which also found that on one day in June this year, Brits spent £1.3m on these deals buying 56,000 deals across different deals websites.

The popularity of daily deals and discount codes is evident. One positive use for brands is that it lets people try out their services, however, the challenge is to keep them coming back.

Max Jennings, co-founder and marketing director of deals website Vouchercodes.co.uk, says: “Brands should be conscious of why they are issuing the codes in the first place and how they can use it to meet their needs, whether it’s promoting a new product range or opening a restaurant group or a new menu to try and incentivise people.”

LivingSocial-ad-2013-460
LivingSocial considers itself to be a full-service marketing platform and not just a daily deals site

This is also a way for the daily deal and discounting sites to differentiate from each other. SecretSales provides discounts on designer brands and as consumers become more savvy with buying online and expect a deal to start off with, it can be the entry point for brands looking for new customers.

“The price point barrier to entry is removed,” says Robert Moss, chief marketing officer at Secret Sales. “It’s a trial exercise which then results in the consumer being a fan of that brand, assuming that it is of a certain quality. It can lead into a long-term relationship with that brand and not just on a discount basis.”

The YouGov study, which involved over 2,000 panelists, reveals that over half of the respondents used a travel brand they would not otherwise have tried without a voucher. Forty-two per cent tried a beauty brand and 38 per cent went to a new restaurant or shop as a result of the discount.

Jennings adds: “Businesses are becoming more switched on to vouchers as a marketing tool and how they can sit as a marketing channel. They have got much more attuned to providing stronger offers within the market.”

Indeed, voucher site LivingSocial is moving towards being a broader platform, says Nigel Clarkson, its head of sales for the UK and Ireland (see viewpoint below). “Rather than considering ourselves a ‘daily deal’ site, we see LivingSocial as a full-service marketing platform. We put local and national businesses in touch with millions of members every day at no upfront fee to the businesses we partner with.”

At some point, the brands and the retailers are going to have to wean people off voucher and discount codes

Targeting, especially in email communications, is one of the negative barriers listed in the YouGov study for consumers using the discount sites. One in four users say they get frustrated being bombarded with offers.

Becky Spurr, head of communications at Invitation Digital, which runs VoucherCloud, DealCloud and GiftCloud, believes that using vouchers is a useful tool for getting people to switch brands but also insists that discounting should be refined and done in the right place to the right audience by increasing targeting.

Moss at SecretSales believes it is about being open and honest with customers about how the business works. The site launches six new sales a day and allows customers to set a preference for how they receive deals via the site.

Vouchercloud-app-2013-100
VoucherCloud says vouchers are a useful tool for getting people to switch brands but the targeting must be spot-on

The industry is still in its early days and if it is to be seen as a marketing channel by brands and consumers, it will need to continue to innovate. A separate study of 2,000 UK consumers, by Vision Critical, shows that overall, 88 per cent of users are very satisfied with the service of daily deal sites although 26 per cent of people believe the promotion of vouchers can taint a brand and damage a company’s reputation. This in turn has an effect on the brands that partner with discount and daily deal sites.

Time limits on vouchers and deals are also listed as negative. Almost a quarter (23 per cent) of the people in Vision Critical’s study say they have paid for their vouchers but have not had time to use them.

Remo Gerber, chief operating officer at Groupon believes that the industry will move into ‘instant deals and immediate needs’ (see Q&A, below). Some brands are also turning to social media as a channel to distribute deals and discounts.

Danone worked with digital coupon provider Coupons.com to release a competition via Facebook this month for its yoghurt brand Danio. Runners up to the main prize got a coupon for a free pot of Danio and a competition via Twitter also included print at home coupons for a free pot.

Trust also plays a part and it often related to the delivery of the deals in a way that suits the consumer.

Jennings at Vouchercodes says: “Trust is a really important thing, at the core you have got the have the best offers in the market. Behind that, it’s on the delivery of those offers and making it as easy as possible for consumers to get the saving, whether it’s a responsive website, improved mobile solution, suite of apps on android and IOS, or delivering both online and in-store.”

Q&A

Remo Gerber
Chief operating officer

Groupon Northern Europe

Marketing Week (MW): The use of daily deals and discount vouchers has not waned, according to new research by YouGov. Why do you think this is?

Remo Gerber (RG): Groupon sees itself as the destination to go to for people who want to try new and exciting experiences and this is what we focus on: great experiences for our customer, which is why they continue to use our site.

MW: What do you see as the key areas that consumers use your site for?

RG: For our consumers, it’s all about discovery; getting quick and easy access to the most interesting experiences in their local area. We are continuously evolving our offering, having branched out in goods and products with Groupon Shop, travel with Groupon Getaways and more recently gigs and ticketing. That said, there is still a lot of growth in the local ecommerce market and local businesses will remain at the heart of the Groupon offering.

MW: How do you encourage repeat users to the site?

RG: We keep the Groupon model simple and invest heavily in our mobile experience. We sell stuff we would want to buy. Getting a good deal is only half the battle. No matter what the price is, it still has to be a great product or service to entice someone to try something new. If you get something interesting sent to you every day you will continue to open it and engage with it.

MW: What do you think the future holds for daily deals sites?

RG: We predict daily deals sites will move toward more highly targeted content based on preferences, location and age. We also think sites will focus more on instant deals based on immediate needs as well as a move toward mobile.

These are all areas in which businesses need to be developing their skills if they want to survive in what is becoming an increasingly crowded market place.

MW: One of the negatives from the research is that consumers do not want to be bombarded with offers. How is Groupon ensuring its emails are targeted?

RG: We are working on a number of tools that will not only open up all these local experiences but tailor them for each consumer and provide all the detail they need to make that purchasing decision, whether that be on their mobile or online. We are focusing on the development of our apps that will enable our customers to stay up-to-date with our offers without emails.

MW: What steps is the company taking to build up the reputation of the brand?

RG: At the core of what we do are our merchant partners and customers and we continue to focus every day on extending these relationships. We are doing this by really looking into how our partners run their businesses, working to provide them with tools and technology that not only makes redeeming their vouchers easier but that help them to run their businesses more effectively and thus ensuring a better experience for our customers.

Viewpoint

Nigel Clarkson, head of sales at LivingSocial UK & Ireland

In our fast growing and constantly developing industry, innovations can be split into technological developments and strategic developments.

Strategically, we have seen significant developments in the business model over the past few years from a single deal in each market available for 24 hours to the more diverse, customer-centric deals today. We continue to see an evolution as the industry turns towards local and national content (offers) that are available for customers and businesses alike for longer.

There are opportunities to develop into a destination site for consumers hungry to experience the best in their local area and further afield, making it an exciting time.

Technologically, mobile search and payments, improved audience targeting and greater involvement from national brands are all areas we should see some interesting developments over the coming years.

As a relatively young industry, it is important to remember we are still seeing strong trends of learning and development industry wide.

One trend we see strongly at LivingSocial is a growing relevance to and interest from more national brands.

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