DMS ’10: The Rise and Rise of ‘Deal a Day’ Marketing Phenomenon
Moderator Peter Krasilovsky, Program Director for BIA/Kelsey’s Marketplaces advisory service, kicked off this panel on the explosive “deal a day” marketing phenomenon. Topics included the current state-of-the-art, and the likely evolutionary path of the daily deal format. Panelists were two leading innovators in this increasingly-crowded space:
• Tim O’Shaughnessy, CEO and Cofounder, LivingSocial
• Perry Evans, Founder and CEO, Closely
LivingSocial, now in about 65 different markets, has raised $40-50 million in financing. In addition to their regular offerings, LivingSocial just launched a family version (oriented to families and children) in four test markets. A high-profile example of the family initiative involved renting out National Stadium in Washington D.C. for family recreation (LivingSocial is based in Washington D.C.).
Another twist LivingSocial has added to the basic daily deal formula is a partnership with the Washington Post newspaper. Post salespeople sell promotions on LivingSocial under a revenue sharing arrangement (which O’Shaughnessy acknowledged is still being refined).
Still another distinctive aspect of the LivingSocial formula is that it has “feet on the street” in each of its markets, which gives them a “hyperlocal” presence. They don’t do any telemarketing.
Next, Perry Evans, an industry ambassador, described the model being pursued at Closely, of which he is founder. Evans said that Closely is looking at this space from the perspective of the “small business out”. Broadly speaking, Evans believes that the daily deal format is teaching SMBs the value of social media and demand generation.
Evans said that their research indicates there are four types of SMBs, in terms of their response to the daily deal format:
• Love daily deals
• Curious about them, and willing to give them a try
• Don’t like daily deals, and see them as a bad precedent (“truly evil”)
• Think daily deals are OK, but doesn’t work in their particular segment
Evans opined that there are two fundamental values for the SMB from daily deals, and they’re both quite easy to understand:
• The simplicity of getting customers (as opposed to something less tangible like clicks or exposures)
• The customer is prepaid; there’s no media risk involved
At the same time, the key frustrations with the model are:
• The deep margin cuts that are necessary for the business to sponsor a daily deal
• The aura that this is just a ‘rent a customer’ model, attracting customers who are driven by discounts, and isn’t likely to become a loyal customer
Closely’s approach seeks to tie together the daily deal model with social marketing, to provide an integrated “demand management” solution for SMBs.
The Closely platform sits on top of Facebook and Twitter, and pushes daily deals out through these networks. Closely provides a dashboard to create and manage these promotions. Once a promotion is created and logged into the Closely system, it can be reactivated at any time. Among other things, the system also creates a live landing page for each offer, which gets attached to the Facebook or Twitter feed.
Finally, Evans talked about how the “discovery process” for daily deal offers will expand way beyond email distribution (the primary modality currently). Going forward, he said deals will be integrated into mobile and search feeds, so that they’ll be discoverable by consumers much more widely.