Deals of a Feather Flock Together

Chances are you’ve seen, at some point, a daily deal featuring a well known, national merchant that was too good to pass up.  These national, mass appeal deals unfailingly sell quickly and at a high volume.  Some examples include the Gap offer (445K sold) by Groupon in 2010 and the Amazon (1.1M sold) and Whole Foods (1M sold) offers by LivingSocial in 2011.  Besides massive sales numbers, theres’ something qualitatively striking about these deals: the typical merchant value proposition doesn’t seem to apply (more on this later).

Just how dominant are national, mass appeal deals?   We took a look at a random sampling of our own internal purchasing data* to gain further insight.

Unsurprisingly, the most purchased deals by our users involved national, mass appeal merchants. What was surprising was the extent to which these types of deals dominate, and perhaps skew, the daily deal market as a whole.  The deal most purchased by our users represented 4.3% of all purchases in the sample, while the top 20 most purchased deals cumulatively made up 20% of all purchases in the sample.  To put this in perspective, out of the 13,000 different deals run by deal sites in our sample, just .15% represented 20% of all purchases.

What’s happening here? An understanding that national, mass appeal deals are a different animal altogether begins to explain this phenomenon.  These deals are  run as loss leaders, typically with brand name merchants that have little incentive to offer such discounts.  It’s likely that deal sites themselves are financing a large portion of the cost of these deals in an effort to drive subscribers, PR and brand equity.  But there’s also something more subtle happening.  As we have discussed before (see here, for example), relevancy and targeting are the holy grails of the daily deal industry and a key component of continued success.   These mass appeal deals represent the concept of targeting turned on its head.   Instead of targeting users based upon individual tastes, deal sites improve relevance by looking at the aggregate tastes of the population and selecting the most popular, broadly appealing items.

There’s a downside: If you’ll recall, the daily deal industry has positioned itself to merchants (and users, to a lesser extent) as a discovery tool.  In a mass appeal deal, however, the merchant is so well known that there’s little to no discovery actually happening.   While not fatal to the discovery benefits / function of daily deals in the aggregate, it’s important for actors in the industry (investors, merchants, competitors etc.) to understand the major distinctions between mass appeal deals and normal deals and to contextualize such distinctions when evaluating a deal site or a particular deal strategy.  Besides skewing hard data, there’s an unquantifiable danger that mass appeal deals may train consumers psychologically to expect (and seek out) brand name offerings, particularly if a consumer first subscribed to a deal site in order to participate in a mass appeal deal.

National, mass appeal deals tend to sell out fast and we constantly monitor these great purchasing opportunities for our users so they don’t miss out.   We also continue to analyze our data to provide deal industry players with a broad range of strategic advice and insight.  Please contact us at analytics@couptivate.com to learn more.

Sign up for a free account today at Couptivate.com where you can easily keep track of your deals and follow us on twitter @couptivate.

*We looked at 35,000 randomly selected deals imported by Couptivate users.