Earlier this month, when Groupon’s first big-ticket deal for $199 for $500 toward a new car at a Detroit area dealership failed, it didn’t only make for amusing headlines (“Groupon Hits the Skids,” for example). It also got people asking whether the daily deal model can work for big-ticket items.
As a company that provides the technology and services to help its clients localize big-ticket retail online, Blueport Commerce takes the stance that daily deals can work for big-ticket items if executed correctly. The Groupon car deal was not.
Why Conventional Daily Deals Work
Daily deals are so popular, because they are great deals. Groupon’s subscribers expect a significant discount on the goods or service being sold. Half off a dinner? Wonderful, and I’ve been meaning to try new places!
So far, successful daily deals have been somewhat simple and often for items subscribers were likely to spend money on anyway. Salon services at 70% off? Well, I do need a haircut anyway.
Lastly, the offer is usually concrete. I will pay X and get Y. Any variables in what I spend beyond what I paid for the Groupon are easily in my control.
So What Was Wrong with the Automotive Offer?
The offer was to buy $500 that could then be used toward a new car. A quick look at the dealer’s website has cars starting around $16,000. So someone who bought the deal is only getting at most a few percent off his final purchase.
Among the things that makes daily deals so successful is the easy spontaneity of it all. You only have a short amount of time to choose this deal, and then it’s gone. But it takes people some time to research a purchase like a car.
A recent article from The Atlantic, points out that one issue with this deal is that car price is negotiable. The piece quotes Ben Edelman, an associate professor at Harvard Business School as telling Reuters: “This voucher is for a very small portion of the cost of a car or lease, so it’s basically an agreement to buy or lease a car from LaFontaine. That’s poor negotiating because the dealer could take advantage f that by offering the same car for more money. They (Groupon) need to fix that before this part of the model can take off.”
The Big-Ticket Daily Deal Challenge
Many folks are saying that daily deals won’t work for big-ticket items. Perhaps these are the same people who years ago told us that consumers would not buy furniture online. But people do buy furniture and other big-ticket items online, so eventually daily deals in this arena could take off.
Our client The RoomPlace actually did a successful daily deal with LivingSocial not too long ago. The offer was $150 worth of furniture for $75. This worked because even though the offer was for big-ticket items like furniture, consumers could choose from a large price range and could choose whether they purchase something solely for the face value of the deal or use it toward a larger purchase.
Big-ticket retailers can look to daily deal sites, or create their own, in order to drum up business. For great results, they need to turn their big-ticket deal into something that is concrete for users. Here are a few things to keep in mind:
Copyright 2010, Official Blog of Blueport Commerce
As a company that provides the technology and services to help its clients localize big-ticket retail online, Blueport Commerce takes the stance that daily deals can work for big-ticket items if executed correctly. The Groupon car deal was not.
Why Conventional Daily Deals Work
Daily deals are so popular, because they are great deals. Groupon’s subscribers expect a significant discount on the goods or service being sold. Half off a dinner? Wonderful, and I’ve been meaning to try new places!
So far, successful daily deals have been somewhat simple and often for items subscribers were likely to spend money on anyway. Salon services at 70% off? Well, I do need a haircut anyway.
Lastly, the offer is usually concrete. I will pay X and get Y. Any variables in what I spend beyond what I paid for the Groupon are easily in my control.
So What Was Wrong with the Automotive Offer?
The offer was to buy $500 that could then be used toward a new car. A quick look at the dealer’s website has cars starting around $16,000. So someone who bought the deal is only getting at most a few percent off his final purchase.
Among the things that makes daily deals so successful is the easy spontaneity of it all. You only have a short amount of time to choose this deal, and then it’s gone. But it takes people some time to research a purchase like a car.
A recent article from The Atlantic, points out that one issue with this deal is that car price is negotiable. The piece quotes Ben Edelman, an associate professor at Harvard Business School as telling Reuters: “This voucher is for a very small portion of the cost of a car or lease, so it’s basically an agreement to buy or lease a car from LaFontaine. That’s poor negotiating because the dealer could take advantage f that by offering the same car for more money. They (Groupon) need to fix that before this part of the model can take off.”
The Big-Ticket Daily Deal Challenge
Many folks are saying that daily deals won’t work for big-ticket items. Perhaps these are the same people who years ago told us that consumers would not buy furniture online. But people do buy furniture and other big-ticket items online, so eventually daily deals in this arena could take off.
Our client The RoomPlace actually did a successful daily deal with LivingSocial not too long ago. The offer was $150 worth of furniture for $75. This worked because even though the offer was for big-ticket items like furniture, consumers could choose from a large price range and could choose whether they purchase something solely for the face value of the deal or use it toward a larger purchase.
Big-ticket retailers can look to daily deal sites, or create their own, in order to drum up business. For great results, they need to turn their big-ticket deal into something that is concrete for users. Here are a few things to keep in mind:
- Be sure that a consumer could leave your store or website with an item or service for the value of the deal.
- Consider offering a specific item at a steep discount rather than following the voucher model.
- Once the consumer cashes in on the deal, be sure you do what you can to keep in touch, such as offering an at-register email sign-up or customer survey.
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Copyright 2010, Official Blog of Blueport Commerce
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