The Groupon logo is engraved in a glass office partition at the company's international headquarters in Chicago.Scott Olson
Big U.S. brands are striking more deals with online discount sites Groupon and LivingSocial in an evolving symbiotic relationship that helps discount companies combat customer fatigue with new, compelling offers, and helps large conglomerates reach more than 150 million new potential customers.
Typically the turf of small, local family-run shops just a year ago, daily deal sites are increasingly being recognized by national brands as a marketing channel and customer tracking system that warrant exploration.
"At the store level and at the geographic level, this makes brands much smarter about who their customers really are," said Jed Williams, an analyst with BIA/Kelsey. "Whether it's Groupon delivering that in five years or not, that's an aside to what group buying has done to move customers to the cash register. Brands understand there's nothing faddish about that."
Historically, large brands have had the upper hand in negotiations with daily deal companies, often paying little to no share of the deals. The discount companies shouldered the expense as customer acquisition costs, because the brand recognition helped attract and retain new subscribers.
But Mitch Spolan, head of national sales for LivingSocial, said that dynamic was changing.
"The secret about us is that we say 'no' more than we say 'yes'," he said.
From American Apparel to Whole Foods to Unilever, more and more national brands are using Groupon or LivingSocial to target particular geographic areas where customer numbers are low, or to move inventory in a typically slow quarter.
"We've evolved our conversation with national partners from education and awareness to really tactical execution to how we can best leverage this platform," said Lee Brown, head of national sales for Groupon.
Some brands are not running deals at all but rather tapping into the companies' huge customer databases – Groupon's just topped 142 million subscribers – to experiment with new marketing campaigns.
For example, Visa customers in Atlanta who had bought a LivingSocial voucher were offered a second voucher to give to a friend if they agreed to switch the credit card they had on file with LivingSocial to a Visa card, a consumer choice that is usually very difficult to influence.
Microsoft ran a campaign targeted at wealthy educated women who bought family-orientated deals from LivingSocial. After the women had made their purchase, Microsoft offered them $5 to use on future deals in exchange for watching a video about how mothers can use Windows 7 to run their households.
"We wanted to see how we could use Groupon and LivingSocial to extend our existing marketing efforts," said Marty Collins, director of emerging media at Microsoft. "It was a very successful campaign for us, compared to other campaigns in more traditional channels."