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Interesting points. As far as I can tell, offering promotions has three possible benefits: 1. Introducing people to your product that might not have otherwise
by jeffdavis 15y ago
Interesting points. As far as I can tell, offering promotions has three possible benefits:
1. Introducing people to your product that might not have otherwise tried it, or might have forgotten about it. Some of these people may become loyal customers in the future paying full price.
2. Price discrimination: those with lower price sensitivity won't bother with the coupon and will pay full price, while those with higher price sensitivity will still be your customers. This only makes sense if you are making money even at the reduced price.
3. Creating a customer perception that they are getting a better value.
None of these things really works if everyone has ultra-easy access to coupons all of the time.
- JeffL 15y agoPrice discrimination is an excellent point. I guess the trick is to enable price discrimination without lowering the value of your brand, so the coupons or whatever would have to be sufficiently annoying to use so not everyone would use them.
- bitsm 15y agoYour last point is the rub -- Groupon's creating a "heavy discount" mindset with consumers that often transcends product loyalty. Groupon's focus is local service businesses, which, if they're smart, can offset the initial discount with upsells (think liquor in a restaurant). For more commodity type products, there's limited upsell opportunity, so you're very vulnerable to price sensitivity. And price sensitivity, as you point out, will increase if the market is saturated in deals. It will be interesting to revisit this in a year or so, as the economy turns around, and see if Groupon and others have had to change tactics.