Groupon: Just Say NO to Ad Agencies

Apple. Think Different.

Today’s AdWeek features a story about the Internet darling of the moment, Groupon. Groupon’s Deal of the Day offer has managed to capture a significant share of voice, largely as a result of its inherently viral nature. Those elements, coupled with a struggling economy, deal-seeking consumers and businesses that need to sell more stuff to more people in order to survive, have literally made Groupon and other similar businesses (LivingSocial, Gilt Groupe, etc.), overnight successes.

Groupon’s success is impossible to deny – with its $1 billion valuation, Forbes calls it “the fastest growing company ever” and the startup is purportedly on track to see $500 million in revenue this year and suspected of doubling that in 2011.

In the same category, sites like zip2save (my favorite) that aggregate good deals, coupons and offers and actually help customers do the research and find better deals on products they seek are making great inroads in both the online and brick and mortar shopping experience.

Bottom line: at this particular moment in time, deals matter. Consumers need them and brands do too. But it always amazes me how quick people are to throw ad agencies under the bus.

Groupon’s staffers proudly claim that they don’t have any need for Madison Avenue and that they are perfectly capable of great success – all without the wisdom and capabilities that an agency traditionally brings to the table.

I think that’s great. The whole concept harnesses the magic of collective buying power, much like Costco and Sam’s Club did when they stormed into the retail marketplace.

But here’s the rub. Brand loyalty matters. Sure, I love Groupon and quickly glance at their deals as they land in my inbox daily. But I have no brand loyalty. If LivingSocial has a deal that appeals to me, I’m as apt to buy from them as I am from Groupon. And when local players like Lucky Monkey or DealBug show up, I’m even MORE likely to buy from them than I am from Groupon, because supporting local businesses matters to me.

DealBug is particularly interesting, because they allow consumers to tie their purchases to a select school or not-for-profit at the time of purchase and then contribute a portion of sales to those groups. For consumers, feeling as if their purchases can make a direct impact – on things they care about – is often a big selling point.

My point is this – consumers are fickle. Especially when they’re in the market for a deal. I don’t think they really care if they get the deal from Groupon, Living Social, DealBug or anyone else. A deal is a deal is a deal. And the companies who offer them are a dime a dozen. So, strategically, or at least in this ad agency owner’s book, there is a need to focus on the things that matter to us boring old agency people. Things like strategically building solid brand identity, creating a loyal customer base and communicating a unique selling proposition. Think Apple and the iPhone. The smartphone category is beyond crowded. AT&T service sucks. Yet people camp out on sidewalks overnight in order to buy their products.

Don’t get me wrong, I’m not knocking Groupon or their success. Groupon and its clones are lucky. Right now. They’re at the right place at the right time and growing like mad as a result. The fact that they don’t feel they need the services of traditional ad agencies – now – is terrific. And good for their bottom line. Do note, however, that they are utilizing traditional advertising as part of their integrated marketing strategy — which is an important component of their success.

In my experience, Groupon and the like are the exception rather than the rule. Most businesses benefit from the services of an experienced marketing consultant or ad agency team — large or small. I’d venture a guess that at some point, when there are more competitors in this space than you can shake a stick at (and there will be), these kinds of businesses will ultimately decide they’ll be more successful when they combine the inherent social nature of their brand with the smarts that an agency brings to the table.

The BIG Question: What will they do to become the Apple of daily deals?

  • givinguponperfect

    So interesting. And true. I subscribe to LivingSocial AND Groupon, and it doesn't matter one bit to me which one I purchase from. I'd say their best bet would be to offer outstanding customer service AND get deals from the best vendors. Until then, I'll take the deals wherever I can find them!

  • ShellyKramer

    I completely agree, Mary! They aren't creating any “stickiness” … and that's a problem. Thanks for coming by.

  • http://twitter.com/cherrywoodburn Cherry Woodburn

    I certainly know I'm fickle and typically buy on price or whim except for a few things… and each one of those things, or businesses or services have built brand loyalty in me.

  • Paul

    Well said Shelly … sticky is as stick does and outside of DealBug with it's local charity hook, they are all a pretty slick bunch.

  • http://www.alyssonfergison.com Alysson

    You know, this is a conversation I had recently with a family friend about DailyDibs.com. The importance of creating a point of difference and developing brand loyalty can’t be underestimated. As the market becomes more saturated with these deal sites – as has happened with the seemingly endless number of coupon sites, consumer demand will shift away from just finding the best deal to finding the best deal AND [fill in the blank].

    Whomever creates the most appealing [fill in the blank] will have a means to develop their point of difference and set themselves apart from the countless other deal sites out there. And, as advised in this post, ad agencies and consultants can be particularly useful in accomplishing those goals.

  • Danielle Smith

    I have to agree – I will get deals where I can – be it Groupon, Living Social, Rue la la, ideeli or elsewhere. I scan them daily, but don't feel particularly loyal until I have a series of positive experiences – which include, not only the coupons but customer service (as I have with ideeli). Thanks for the thoughtful post, Shelly.

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  • Alex

    Shelly I really needed to read this post–I am intrigued by the Goupon phenom and this really helped me get up to speed. Thanks.

  • ShellyKramer

    Hey Alex,

    I just read an even more interested article about Groupon this morning. Not sure at all that it's a good thing – and few people are talking about the downside. Stay tuned.

  • ShellyKramer

    Hi Danielle,
    Thanks for giving me some new sources for good deals. And thanks for coming by.

  • ShellyKramer

    Slick. That's a well-chosen word, Paul. And I'm not sure it is all that good, for lots of merchants looking to grow their businesses. We shall see. Thanks for coming by – and we'll be watching your DealBug folks — hope they do well!

  • ShellyKramer

    That's an interesting POV, Cherry. And if you're loyal to them, at such an early stage, they must be doing something that inspires that feeling in you. I wonder what it is?

  • Paul

    Yes Shelly, slick as in smooth, high in viscosity. They earn about as much brand loyalty as a greased pig. Stickiness is a hard thing to attain in today's world of choice. Most marketers long for the days when they could “tell” consumers what they wanted instead of the other way around. Now consumers are telling brands what they will buy, when they'll buy it and for how much! Mountain Dew just let consumers choose a new flavor and others are following suit in an effort to get “Schtickay” … Aren't you just glad to be part of the paradigm shift?

  • ShellyKramer

    Aly, for some odd reason this got stuck in my moderator panel. As usual, excellent feedback. And I completely agree. So many times these brands are rushing to market – which I applaud, but are not focusing on a strategy to differentiate themselves, build loyalty, etc., Seems to me to be the earmarks for a flash in the pan. But then, what do I know?? Thanks for coming by and sharing your brain cells. I do so love 'em, y'know!

  • Sophielhoste

    I agree with you that recognition and brand loyalty matter at least as much as good deals. I know they do to me as a consumer and I notice it also in my clients' behaviour.

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