Which brand has the customer loyalty?

Small businesses finding that paper and mobile coupons not workingThis isn’t some sort of journalistic expose that will bring any industries to their knees, but it is something the coupon & deal industry doesn’t want you to know. Coupon clippers hold no loyalty to your brand. In fact, many businesses are getting tired of the coupon customers.

I’ve seen similar signs at many businesses. From Entertainment books, and Money Mailers, to the internet deal sites like Groupon. One restaurant I spoke with said they have become hostages of their direct-mail coupons. They tried buying space in a coupon mailer to get new customers, and they did get customers with those coupons. When they stopped advertising with that mailer company, the customers disappeared as well. They went back into the mailer, and it eroded their profits until they were forced to move to a smaller, cheaper location.

It’s not just the old-fashioned paper coupons that can hurt your business. Merchant Circle’s latest Merchant Confidence Index survey found that “55 percent of people who have run a daily deal campaign said they would not do so again.” One small business owner explained the sales pitch he received. The promise was that new customers would discover their business through the deal, then would love the product and come back to pay full price.

It doesn’t happen that way.

Coupon users are subscribed to the “deal” service. Whether it be an email, text message, or in the case of direct mail there are customers who faithfully open the envelope rather than sending it straight to the recycle bin. These customers have a loyalty to Groupon, Living Social, and Money Mailer, not to the advertisers inside. They check the daily deals for something that looks like a great deal to them personally, and make their purchases based on the advertiser at that time.

In fairness, this is not to say there is no value of the deal websites and services. I ran a special offer with one site for a client which resulted in a significant lift in sales, with no noticeable erosion of profits. However, it has to be done right, and for the right reasons, not simply because a salesperson told you it was a great promotional tool. Think of Groupon and similar services like a power tool, they can be helpful when used properly, but they can also slice off a limb if you’re not using them carefully.

When customers need a similar product next time, they will go wherever the next deal is offered. They are, and will continue to be loyal to the coupon, not your brand.

  • http://twitter.com/ryankendrick Ryan Kendrick

    Great post. Deal sites like Groupon do wonders to bring customers in the door, but do little to encourage brand loyalty. But I blame that more on the businesses than I do Groupon. Groupon isn’t responsible to provide the experience–they’re there to get people in the door. What you do with your customers to encourage a great experience is up to you as the business owner, which is exactly what you alluded to above.

    As a business owner, if you decide to offer one of these deals, you had better be prepared for the onslaught of customers that will result. I’ve seen many brands actually tarnished because they provided awful service to customers because there were so overwhelmed with the volume. It actually ended up hurting their brand.

    I think the key to this is three-fold: only offer the number of coupons you feel your business can handle (Groupon allows caps to be placed on deals), staff-up to handle the increase of customers and provide a solid experience, and upsell as much as you can when the customers are in the door. I bought a bike tune-up on Groupon, and the bike shop was smart enough to be holding a clothing clearance sale at the same time. I ended up spending about $100 bucks with them that day that I otherwise wouldn’t have had I not bought that Groupon deal.

    • http://www.brandsanatomy.com/ Nick

      Bingo! That’s why you need someone helping you with ALL marketing activity that understands the possible dynamics of every offer. Like I said, I ran a deal for a client, & it resulted in massive earnings with no discernable downside. It reached new customers. I knew exactly what I was doing.

      Sadly, as I watch the daily deal sites (for science only), I can see one business after another who are going to lose big time. True, it’s not Groupon’s responsibility to provide the experience, but having heard from many owners how the sales pitch is presented, they are misleading the masses. Business beware.

  • Anonymous

    Bingo! That’s why you need someone to help you with marketing activity to understand the dynamics can each offer. As I said, I ran into an agreement for a client and it resulted in massive gains with no perceptible disadvantage. It reached new customers. I knew exactly what I did.
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