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Keeping Up with Groupon: Three Ways to Build Loyalty

Social couponing services such as Groupon know so much about us as consumers; yet seem to do little to inspire our loyalty.

Groupon’s decision to turn down Google’s $6 billion acquisition offer was one of the more interesting business stories of 2010. It certainly raised many eyebrows and got folks wondering if the giant e-coupon company known for its daily deals could sustain its phenomenal growth particularly with new competitors emerging every day.

As operators of North America’s largest coalition loyalty program—the AIR MILES Reward Program, it got us thinking about the social couponing model and the role loyalty marketing can play in ensuring the established players such as Groupon maintain and grow market share while helping the start-ups create a point of differentiation.

First consider Groupon’s story. They’ve stood apart by maintaining their vast database with such eloquence—and irreverence—that no single competitor has yet to serve as a serious threat. But with so many small social coupon companies emerging daily, expect consolidation—and with that will come scale and strength.

To continue to stand apart and foster loyalty, Groupon needs to do the following three things well:

  • Woo Them: Groupon should continually recognize the consumer’s relationship with the service, and demonstrate that this engagement is as important to Groupon as its carefully selected offers are to consumers. Personalized thank you notes go along way, for instance.
  • Wow ‘em: Groupon should lavish its loyal followers with the unexpected—a free Groupon “pass” for a Groupon offer, for example, or an accumulation of points that can be redeemed toward future Groupons.
  • Win Them: Groupon has the data and it has the mass not only to identify its most profitable consumers, but also what motivates them. And Groupon is asking some members to fill out additional short surveys to get a better picture of each of them. These pictures can be used to better tailor offers, get more buy-in and contribute to an added sense of a partnership.

Groupon has the advantage of already knowing much about us as consumers. It reportedly counts north of 40 million members in more than 300 markets globally. About 19 million of these subscribers live in North America, according to a recent report in Advertising Age, and Groupon knows the name, age and gender, residence, purchases preferences and payment methods of each. It also knows that all its members are highly desirable consumers—mostly college educated, 18 to 34 years old, with two-third making $50,000 to $100,000 a year.

It only makes sense Groupon is testing a loyalty plan. In the test, members automatically earn points, called “G’s,” which can be used toward free Groupon coupons. Top members, or frequent users, also can earn invitations to special events. (Separately, Groupon also offers $10 in “Groupon Bucks,” to members who refer a friend.)

By converting that consumer mileage into miles, or points, or some kind of reward, not only will Groupon benefit by learning more from its members, they will benefit by receiving richer, more relevant offers.

Bryan Pearson is President of LoyaltyOne, a global provider of loyalty strategy and programs, customer analytics and relationship marketing services.

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