definitive merchant guide to deals, discounts and offers

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Deals Deconstructed: The Definitive Merchant Guide to Deals, Discounts and Offers Deciphering the Exploding Deals Marketplace to Deliver the Right Offers and Build Brand Advocates Presented by Sponsored by

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Page 1: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed: The Definitive Merchant Guide to Deals, Discounts and OffersDeciphering the Exploding Deals Marketplace to Deliver the Right Offers and Build Brand Advocates

Presented by Sponsored by

Page 2: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 2

Today’s consumers are focused on finding a deal on everything

they buy. According to Google Trends, searches on “coupons”

and “deals” have increased more than 300% since 2004. As

many as 74% of consumers search multiple coupon sources

each week, according to a survey from Coupon Cabin and

Harris Interactive.

The rise in deal and coupon searching isn’t limited to the home

or workplace. Today, it’s common to see shoppers standing

in a store using their mobile devices to research deals about

products in a competitor’s store or online. In fact, more than

half (52%) of smartphone-enabled consumers are using their

devices to help with purchase decisions in-store, according to

The Pew American & Internet Life Project.

Consumers’ growing interest in searching for deals has caused

a fundamental shift in how we find and buy products, and

given birth to a new kind of shopper — one who thinks “deal

first.” Armed with the devices and know-how to find deals

anywhere, anytime, deal-first shoppers are no longer loyal to

particular retail brands, and are savvy enough to price shop

and channel hop to find the best deal.

In response to this shopping paradigm shift, merchants must

deliver promotional programs that appeal to consumers’

“deal desire.” Yet the choices can be overwhelming.

Drowning in a flood of new deal options — such as daily deals, flash sales, eCoupons and check-in deals — many merchants are struggling to choose the best types of deals that deliver new customers and build loyalty in a way that is profitable and sustainable.

The pressing questions around deal choices are: What are the

benefits of the different deal offerings? Which offers are suited

for online vs. in-store sales? And which deals drive one-time

sales vs. sustainable growth?

This E-book will lay out the deal landscape and help retailers

determine which deal strategies can drive measurable,

sustainable results by examining three specific topic areas:

52% of smartphone-enabled consumers use their devices to help with in-store purchase decisions.

- Pew American & Internet Life Project

I. The Deal Landscape — Today’s deal offerings

feature a variety of choices, from the traditional to

the digital. eCoupons, daily deals and card-linked

offers are just a few of the possibilities. More recent

additions to the ever-changing variety of discount

offers include flash sales, gamification and check-in

deals.

II. Deal Delivery Dissected — Beyond mass media,

such as newspaper, radio and TV advertising, a

multitude of other deal marketing options are

available to today’s merchant including web search,

social media and mobile apps.

III. Deal Benefits & ROI — Retailers must determine if

their deals and offers fulfill their business goals. Do

deals add new customers? Boost revenue? Help

retain current customers?

Page 3: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 3

In order to utilize deals most effectively, retailers

need to understand the lay of the land. Originating

with the printed coupon, which dates back to the

1880s when Coca-Cola offered a free beverage,

the deal landscape has been morphing with the

times. Over the past few years, an exploding crop

of deals has burst onto the scene. From daily deals

and flash sales, to check-in deals and deal games,

to 24-hour sales, to online scavenger hunts, today’s

shopper is immersed in new ways to save and earn.

To use deals effectively, retailers need to understand

all deal options and then determine which deals fit

their businesses and suit their customers. Hence flash

sales, which are quick and have tight deadlines,

may work for happy hour on Friday, but not for an

upscale steak house, fashion boutique or travel

agency. Scavenger hunts on foursquare may

appeal to Generation Xers after work, but won’t fit

for the local florist.

Coupons Still Pack a Punch

The granddaddy of all deals is the old-fashioned

coupon providing a discount at the point of sale.

According to a 2011 study conducted by CGT/

Cognizant, coupons still prevail as the major form

of promotions, constituting approximately 80% of

all deals. Coupons were initially marketed through

newspapers, weekly store inserts and direct mail

(and still are), but increasingly are delivered as

eCoupons and redeemable electronically. Store-

specific eCoupons can now be electronically

loaded on or linked to customers’ loyalty cards,

with savings automatically included as part of

the transaction. In addition to store-based loyalty

eCoupons, a number of third-party eCoupon sites

are available to shoppers, such as Cellfire.com,

Upromise.com and SavingStar.com.

Daily Deals Deliver an Uptick in Shopper Traffic

While coupons continue to be effective for some

target audiences, particularly the 40+ age group,

younger shoppers expect offers to be faster, easier

and more fun. The daily deal has emerged to meet

this need. Daily deals typically are opt-in programs

for consumers looking for a substantial percentage

discount on desired items or services. The deal

offers are sent via email and often require a group

purchase threshold to be met to “activate” the

deal. Sites such as Groupon and LivingSocial, which

control approximately 73% of the deal-a-day market

according to Yipit, have become major players in

this new billion-dollar market. More recently Google

joined the fray with Google Offers, which was live

I. The Deal

Landscape

Page 4: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 4

in 40 local markets by January 2012. Due to the

large, often unprofitable discounts and questionable

attribution data for new customer acquisition, many

merchants are hesitating to renew daily deals.

Card-Linked Offers Connect Deals to Cards

One of the limitations of Daily Deals, and most deal

types, is the complexity of redemption. The hassle of

finding a digital coupon code, remembering a punch

card, or printing a voucher can limit the effectiveness

of deals for merchants and consumers. Card-linked

offers solve this issue by automatically rewarding

consumers for regular purchases, right back on the

cards they use the most, in currencies they already

like to collect. Consumers get card-linked offers from

their banks or loyalty programs, and “redeem” them

just by swiping their favorite credit or debit card.

Merchants fund rewards only after consumers buy,

don’t have to deal with vouchers or their own

loyalty cards, and get actual transaction data

to prove results. Some of the added value

from card-linked offers includes the ability

to track customer acquisition, obtain order

values, promote repeat purchases and garner

new customers. Currently, Cartera provides

card-linked programs to three of the four top

bank and card issuers, and all top five airlines.

Flash Sales Provide Limited-Time Offers

Several upscale web sites such as the Gilt Group

and Gift Man offer flash sales, a limited, time-bound

online sale. A report by Ypartnership noted that

these deals frequently offer discounts of as much as

50% off from retailers looking to unload off-season

inventory or liquidate unsold stock. These deals

typically are offered only to subscribers, bringing

cachet and exclusivity. Limited time frames motivate

consumers to buy quickly, spurring interest.

Gamification Adds Fun to Deal Delivery

To capitalize on mobile deals, companies like

foursquare and Scoutmob are using gamification ―

turning deal redemption into a game or scavenger

hunt. Smartphone-carrying consumers can find

rewards waiting for them when they reach a

destination. For example, once consumers reach

An exploding crop of deals has burst onto the scene…today’s shopper is immersed in new ways to save and earn.

Page 5: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 5

certain restaurant or retailer, they press a button on

their smartphone and obtain deals as email coupons,

such as a two-for-one dinner or 25% off coupon.

Check-in Deals Simplify the Offer Process

Not all shoppers are looking for an adventure; some

prefer to simply check-in online or on a mobile

app to obtain deals and rewards. Retailers offer

these check-in deals on sites such as Google+

when consumers search for information on their

establishment or product. Consumers can keep

the deal private or disseminate it to their friends,

maximizing exposure for the retailer.

Loyalty Cards Speak to Brand Enthusiasts

Simple and effective, loyalty cards appeal to

consumers’ desires to get something back for

each purchase they make in the form of rewards

points, cash or miles. According to recent research

from Colloquy, there are now 2 billion loyalty

memberships in the U.S. To maximize the value of

rewards and earn enough points to redeem for

items of real value, however, consumers are focusing

their earning power toward a primary credit card or

airline frequent flier rewards card. That’s why credit

card, debit card and airline frequent flier programs

now make up more than 750 million of the 2 billion

loyalty memberships. This trend has made it more

challenging for merchants to use their own loyalty

credit cards to attract new and repeat customers.

Punch Cards and Rebates Allow Retailers to Set Limits

An alternatives to a loyalty credit card, punch

cards and rebates — either physical or digital — are

standby deal options for local merchants, such as

coffee purveyors and sandwich shops. This loyalty

scheme offers shoppers a free item after a threshold

is reached, such as a tenth purchase or basket

size more than $100. New online services, such

as Stampt, are bringing punch cards into the 21st

century by merging them into smartphones, making

it easier for consumers to track and redeem, and

easier for the merchants to track results and ROI.

Page 6: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 6

Today’s deal choices can seem endless: games,

cards, rebates, check-in deals, card-linked offers and

more. Retailers want to stay one step ahead of their

customers, not fall a step behind. And staying one

step ahead these days involves moving beyond the

printed voucher or coupon and entering the world of

digital offer marketing and redemption through the

web, smartphones, mobile devices and social media.

Deals can still be delivered in old-fashioned

ways including store sales signage, a coupon

in a newspaper or magazine, TV and radio

advertising, or via direct mail. But technology has

changed the landscape of deal delivery. Deals

can now be offered via email on

PCs and mobile devices, banner

and search ads, and mobile ads on

web sites and mobile apps. Groupon,

LivingSocial and other daily deals sites

distribute thousands of deals online via

email, filling up consumers’ in-boxes

with dozens of offerings daily.

As a result of the unprecedented influence of Google

and challengers like Bing, search marketing has

become one of the most effective ways to reach

customers, since it targets a consumer who has

already expressed an interest in a specific product.

Additionally, when a shopper is searching via

mobile phone, a merchant can go one step further

and identify the person’s exact location via geo-

targeting, then push an immediate and relevant

localized offer to that consumer. This and other types

of location-based services are providing the ability to

better personalize the retailer-shopper interaction.

The more specifically a marketer can target and

market a deal to an individual consumer who

has already purchased or expressed interest in

a product, the higher the probability of a sale.

That logic also translates to social media; retailers

can garner additional sales from fans who visit a

company’s Facebook or Twitter. Sending coupons to

a company’s enthusiasts can lead to repeat business.

Encouraging them to send the coupon to friends can

trigger new business through referrals.

Additionally, with the card-linked offer, merchants

can deliver deals to shoppers through some of the

most “trusted” online sources: the banks or airlines

consumers already do business with regularly.

This can be a win-win-win for three players — the

consumer gets an automatic deal just for using the

cards he or she already has; the merchant gets a

quick and easy way to offer deals to shoppers and

track redemptions; and the bank boosts customer

engagement and card-spend.

II. Daily Delivery

DissectedWith the card-linked offer, merchants can deliver deals to shoppers through some of the most “trusted” online sources: the banks or airlines consumers already do business with regularly.

Page 7: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 7

Merchants trying today’s new deal and delivery

channels must remember to choose options that

drive both top-line and bottom-line growth by

helping them attract new customers and drive

loyalty from existing customers. For new customers,

the goal is to motivate them to choose one brand

versus another. And for current customers, the goal is

to build brand loyalty and increase

overall purchases.

For retailers, wading through all deal options to find

the ones with the best ROI can be daunting. Each

type of deal or offer may appeal to a particular

target segment, or deliver on a specific retailer

goal. One-shot daily deals from sites like Groupon,

LivingSocial and Google Offers can spark business

and bring in new customers, particularly around

one-time sales events. But some merchants are

finding that these heavy discounts — if not properly

executed — can backfire, cause customer service

issues and damage brand image.

Because of those issues, some daily deal programs

have been experiencing rapid upheaval. Facebook

launched a daily deal site test in May 2011, then

terminated it four months later, as reported by

TechCrunch. Groupon’s core local deal business

declined in late 2011, down 3% in Q3 over Q2, Yipit

reported. Of the 530 daily sites that operated in

2011, 170 were shut down, according to Yipit.

Merchants also are having issues with daily deals.

A 2012 Practical Ecommerce article reported that

52% of merchants are not planning to renew daily

deals. Retailers complained about having to reduce

prices by 50% to offer daily deals, leaving them with

25% to 30% of the retail price after the deal site’s

commission. Some retailers were selling products

and services at or near cost, sometimes losing

money; some deals only became profitable if the

customer returned for a second visit or purchase.

III. Deal Benefits

and ROIFor new customers, the goal is to motivate them to choose one brand versus another. For current customers, the goal is to build brand loyalty and increase overall purchases.

Page 8: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 8

Besides the daily deal, a number of

different types of deals are appealing to

different groups of customers. Gamification

can attract a younger, more tech-savvy

audience, perhaps ideal for coffee shops,

but not for home improvement stores.

BOGOs and other couponing tactics may

draw in an older, more traditional shopping

crowd, and flash sales can help to move

overstock merchandise while targeting a

specific customer base.

From the retailer’s viewpoint, deals that are linked

to the actual transaction, such as card-linked offers

or electronic punch cards, are proving to be the

most measurable. While protecting consumers’

privacy, new card-linked marketing networks can

deliver retailers actual sales data to see how many

consumers redeemed an offer, how many were

new customers, how many were existing, and the

average basket size for both types of customers.

Card-linked marketing also turns the advertising

payment model on its head because merchants

don’t pay for offers until after consumers buy,

making this new type of marketing truly risk-free.

Card-linked marketing turns the advertising payment model on its head because merchants don’t pay for offers until after consumers buy.

Page 9: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 9

Choosing between the bevy of offers and deals available to merchants today

is a challenging task. Different merchants and different shoppers have different

needs. Daily deals may bring in a surge of customers who decide to try a brand

for the first time, while card-linked deals can help drive sustainable sales growth

from both new and repeat customers. Games, punch cards, check-in offers and

other new types of deals all offer unique benefits for different types of merchants.

Questions to consider include: Which deals will appeal most to your customers?

Which deals can be measured in ROI? Which deals are seamless? Which type of

deals will result in repeat customers and long-term profitability? Merchants are just

starting to find the answers to these key questions, to deconstruct today’s deals

and find the ones that work for them.

Conclusion

Page 10: Definitive Merchant Guide to Deals, Discounts and Offers

Deals Deconstructed • 10

Cartera Commerce is the leading provider of card-linked marketing solutions that increase revenue

and customer loyalty for merchants, banks, card issuers and loyalty programs. For merchants, Cartera

powers the industry’s largest card-linked advertising network that delivers targeted offers to more than

150 million consumers – including 65 million active linked cards – to help acquire and retain customers.

For banks, card issuers and loyalty programs, Cartera provides the industry’s most comprehensive card-

linked offer platform that powers personalized in-store and online shopping programs to build consumer

engagement, maximize card spend and create new revenue streams. Cartera’s platform delivers card-

linked offers via multiple digital marketing channels including Websites, online banking, email, mobile,

social media and browser apps. Three of the top four largest financial institutions, all five of the largest

airlines and thousands of merchant advertisers drive incremental revenue with Cartera’s fully-managed,

performance-based solutions. The company is headquartered in Lexington, MA and has significant

operations in Atlanta, GA. For more information, visit www.cartera.com.

About Cartera

About

Retail TouchPointsRetail TouchPoints is an online publishing network for retail executives, with content focused on

optimizing the customer experience across all channels. The Retail TouchPoints network is comprised

of a weekly newsletter, category-specific blogs, special reports, web seminars, exclusive benchmark

research, and a content-rich web site featuring daily news updates and multimedia interviews at

www.retailtouchpoints.com. The Retail TouchPoints team also interacts with social media communities

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