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Location Based Marketing – Groupon & Living Social Price Wars

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Neal Lappe   by Neal Lappe March 28, 2011

Much is being written about the success of sites like Groupon and Living Social. A recent blog post expressed concern that these kinds of location-based promotional sites will ultimately lead to merchants competing on price only. An excerpt from the post read as follows:

…due to platforms like Expedia, Travelocity, Orbitz and the like, airplane seats are hard to sell on any basis other than price. Thanks to Groupon, merchants may face a similar, but perhaps even more damaging, fate. Prices are likely to erode as consumers come to expect deals. They will wait for sales to buy, and merchants will find themselves competing ever more fiercely. Meanwhile, merchants' brand power will be eroded as consumers look to Groupon (as they do to Orbitz), rather than to the merchants themselves, for the best deals. The logic is simple: Merchants are encouraged to use the deals to attract new customers, who in theory will return at full price. But, in what seems to be an increasing number of cases, customers come for the deals and then leave for deals offered by other merchants through Groupon. So the number of "new" customers attracted by cheap prices increases, and the number of loyal customers decreases as shoppers prefer to become "new" again for whomever offers the best deal.

While this phenomenon might play out for those merchants who provide an average or less-the-stellar customer experience, I don’t totally agree with this argument. If your company provides a customer experience that creates raving fans, then your promotional activity on Groupon or Living Social will most certainly lead to profitable, long term customers. If you can deliver a customer transaction that is so positive that your customer tells others about you, you will experience an increase in revenue. What you do with that revenue is up to you – I’m talking about profits here.

If you are a merchant, ask yourself the following questions:

  1. How likely will a customer recommend us to others after his/her experience with us?
  2. How can I make my customer experience easier and more enjoyable?
  3. How does my customer experience compare to my competitors and what can I do to have a competitive advantage?

Answers to these questions might reveal opportunities to enhance your customer experience and lead to more repeat customers, higher revenues and raving fans.

 


 

Neal Lappe leads the WebStrategies team of digital marketing experts. Under his direction, the company has flourished, growing more than 400% since its inception in 2004.

 

Topics: Advertising, Local SEO, Social Technologies, Digital Marketing

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