Keeping Up with Groupon: Three Ways to Build 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.

It got us thinking about the social couponing model and the role loyalty marketing can play in ensuring that established players like Groupon, which is testing loyalty programs, can maintain and grow market share, while at the same time help start-ups create a point of differentiation

Groupon stands apart by growing—and managing—its vast database with such speed that no single competitor has yet to become a serious threat. It has the advantage of already knowing much about its consumers. Groupon reportedly counts north of 40 million members in more than 300 markets globally and it knows the name, age and gender, residence, purchases preferences and payment methods of each of those members. It also knows that all its members are highly desirable consumers; college educated, 18 to 34 years old, with two-thirds of those consumers making $50,000 to $100,000 a year.

But with so many small social coupon companies emerging daily there is sure to be consolidation and with that will come scale and strength.

Here are three strategies that Groupon—and others—should have on its “to do” list to foster loyalty and maintain its strength against emerging competitors.

1. Woo Them Continually recognize consumers’ relationship with the service, and demonstrate that this engagement is important to Groupon. For example, personalized thank you notes go along way.

2. Wow ‘em Lavish loyal followers with the unexpected such as a free Groupon “pass” for a Groupon offer or an accumulation of points that can be redeemed toward future Groupons.

3. Win Them Groupon has the data and the mass to not only identify its most profitable consumers, but also to clearly understand what motivates them. In addition, it is asking some members to fill out additional short surveys to further enrich the existing data. Enhanced pictures of these consumers emerge to better tailor offers, get more buy-in and earn loyalty.

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

By testing various loyalty offers, combined with the three strategies above, Groupon will certainly benefit by learning more from its members who will, in turn, receive richer, more relevant offers.

Bryan Pearson is president of LoyaltyOne, a global provider of loyalty strategy and programs, customer analytics and relationship marketing services. He can be reached at [email protected].