• by Ryan Deutsch , March 17, 2011

Being from Chicago, it is almost impossible to open the business section of the newspaper without reading something about Groupon.  Almost singlehandedly, the brand has elevated the mass of technology entrepreneurs in this city towards the euphoric heights of Silicon Valley.  Now, some may say I am just a bitter, 12-year email marketing veteran, living in Chicago and yet somehow missing out on the opportunity to be part of the Groupon gravy train.  However, I think it is time we all stepped back and asked ourselves about the future of the group buying and flash sales trend and what it means for email marketers.  

 A Feb. 13 article in the Chicago Tribune, "Cheap thrills: Chicago long a hotbed for online coupons, discount deals," stated that Chicago is home to 43 such online businesses.  That means, conservatively speaking, there are hundreds of companies competing for consumers' attention on a daily basis in the inbox.   There's no question that the business model is hot, but this influx of sites also brings with it the risk of oversaturation, with consumers eventually tuning out the messages. Furthermore, brands need to consider whether use of such sites will create a segment of customers who are loyal to discounts and not the brand.

The way to combat both problems is through the adoption of sophisticated email marketing strategies that foster engagement and loyalty. Given the low barrier to entry in this space and the massive competition for inbox attention, here are some basic principles that need to be followed to ensure long-term success.

Build loyalty.
One of the potential perils of flash and group buying sites is the reliance on discounts to drive brand and subscriber loyalty.  If consumers subscribe to Groupon, LivingSocial, Mamapedia and Joss & Main, what keeps them active and engaged in one program could easily cause them to be inactive in another. If the only driver of these sites is the deal and the discount, then the entire business model could be a race to the bottom, with profits for both the companies and advertisers declining over time. 

The trick is for the deal sites to build loyalty around not just the offers but the subscriber experience as a whole.  Email marketers have been doing this for years in their retention marketing programs. Sophisticated brands create email communications that sell product -- but also add value with content and insight not available through other communication channels. 

Travelocity's Roaming Gnome Newsletter does an excellent job of educating travelers on destinations and providing access to insights from the travel community first, and selling air, hotel and car rentals second.  Mamapedia is another example of a deal site that offers targeted, valuable content to members alongside the daily discounts.  Most notably, companies like HauteLook (recently acquired by Nordstrom's for $180 million in stock) have developed a brand following within the member base.  Customers expect and anticipate communications from HauteLook.  Their investment in developing complex segments and product categories that are relevant to their audience almost guarantees ongoing engagement with the subscriber.

Put the subscriber in control.
Another pillar of successful email marketing has been the desire to put the subscriber in charge of subscription options, email frequency and even digital channel preference.  As consumers have more options for daily deals, the site that allows consumers to customize their experience should win out in the long run.  It is unlikely that a consumer will personalize a profile for more than one provider, and the provider they select to set preferences for will have the advantage of better insight into consumer interests.   It is up to the deal sites to use these assets to create highly relevant communications. 

While the use of preference centers is widely believed to be a "best practice" among email marketers, very few brands have executed and implemented meaningful preference management capabilities.  This could be an opportunity for Deal of the Day, Flash Sale and Group Buying sites to leapfrog many traditional email programs.

The Future of the Industry
At the end of the day, there are simply too many players in this space, so consolidation should start sooner rather than later. Additionally, it won't be long before some forward-thinking brands decide to cut out the middle man and offer daily deals on their own. With the right email partner to ensure real-time delivery of their sales event messages, brands can join the fray without too much difficulty. The companies standing at the end of the consolidation will be those that have moved beyond the deal and begun building loyalty within the subscriber base by staying relevant and putting the consumer in control of the relationship -- not new concepts for retention-based email marketing, but completely new territory for email acquisition strategies.