On Branding and the Deal

Branding may not be  the first thing that comes to mind when discussing the daily deal industry.  Getting a deal or a discount would seem to erode branding efforts given the degree to which consumers associate price with quality.   But as the industry begins to mature, the branding issue may be more complex than we think.

It helps to first understand what “branding” actually means in the daily deal context.   In our view, there are three established components, all of which blur together to some extent.  The first is a level of branding communicated by the deal site itself, in the form of copy, UI (e.g., are you using stock images?) and overall tone of the site.  The second component of branding is inherited from the types of offers, and the types of merchants, that are featured on the deal site.  The third component of branding is driven by the degree to which deals are “curated” by the deal site, which is really just another way of talking about the relevance (or perceived relevance) of the deals to subscribers.  By curating, a deal site adds value by picking and choosing deals that it thinks you’d be interested in, based upon its determination that a given merchant fits a special interest or is inherently interesting or “cool” (see, e.g., Thrillist Rewards).  The discount becomes almost secondary to discovery, and is replaced by the feeling of being an insider, or having access to exclusive shopping experiences.  In this way, sites that heavily curate are better able to shed the stigma of discount shopping and the quality perceptions that come along with it.  Curation improves branding because, as offers are more tailored, the deal site appears to have put more effort into finding such offers for subscribers. Finally, there’s a fourth branding element that may be emerging as well, the discount “halo effect”.  One such survey on travel deals that picked up on the halo effect was recently discussed in Forbes:

Those travelers using promotional channels [i.e., daily deal sites] for selecting hotel brands are more likely to recall that brand top of mind on an unaided basis than guests who used other channels. In addition, they are also more likely to stay at the hotel again and recommend that brand to friends, compared to those who used other channels.

“What we may be seeing is a ‘halo effect’ of the deal,” explains Rob Duboff, CEO of HawkPartners. “Consumers like the deal and, as a result, the brand.”

While the positive associations of getting a deal impact perceptions of the actual product being offered in the deal, it seems obvious that these associations would also impact perceptions of the deal site brand itself.

It should be noted that the above applies equally to merchants, as they also understand that deal site branding rubs off on those who work with them.

Enter Groupon Reserve, a recent product extension from Groupon, which aims to offer exclusive, high-end deals to loyal Groupon customers (and to attract high-end merchants who might be reluctant to work with them).  The very first thing you’ll notice about Groupon Reserve, which is invite-only, is that its UI  bears an uncanny resemblance to Gilt City, a well-known, luxury-oriented deal site.  Groupon Reserve’s deal inventory is also very similar. But it’s unlikely to be that simple to tap into the high-end market, given the way consumers perceive the Groupon brand at this point. In the traditional retail world, once you have an established brand, it can be exceedingly tough to jump to a new end of the retail spectrum.  Imagine, for example, the challenges that Wal-Mart or Target  would face if they attempted to extend their brand into the luxury market?

Target, in particular, makes for an interesting comparison.  Target has had some recent success attracting higher-end shoppers by launching low-cost lines by luxury designers.  It’s unclear, however, whether this is really a case of Target improving its brand or luxury designers lowering theirs.  But does it really matter? Target may simply care about attracting a new retail segment, regardless of its impact on overall brand perception.  Groupon may have a similar perspective on Groupon Reserve.  In addition, the relative youth of the daily deal industry and the fact that Groupon is exclusively on the web may make consumer perceptions more malleable in their case.

As the group buying industry grows and morphs, it can be overwhelming to keep track of deal purchases across different sources. That’s where we come in. Sign up for a free account today at Couptivate.com and we’ll organize your deal purchases for you.

We also continue to analyze both internal data and industry reports in order to provide a broad range of strategic advice and insight. Please contact us at analytics@couptivate.com to learn more and follow us on twitter @couptivate for the inside scoop on what’s happening in the daily deal world.