Deals Sites Compared: Groupon v. LevelUp

Perhaps you’ve heard of Groupon, the $6 billion dollar group buying program with a business plan problem. Well, let me introduce you to its business friendly (and I say that with a smile) cousin – LevelUp. It acts very much like a typical group buying site, but is structured to ensure repeat visits and less initial costs for business. Sound good? Read on.

For those of you who don’t know how traditional group buying sites, it goes a little something like this:

Groupon LogoStep 1) A business contacts a group buying site looking for mass publicity.
Step 2) The business is forced to offer AT LEAST 50% off their regular retail price of a good or service.
Step 3) The Group Buying website then will take half of those profits, or half of what the business will now make, leaving the business with 25% of their regular revenue for that product or service.
Step 4) The user buys the coupon, comes in to use it, and may or may not come back again. There are no further incentives for the user to come back.

As you can see, the main issue here is two-fold. Businesses are often forced to mark down their goods and services to below-profitable points. If your good or service is truly valuable, then why would a business think that this is good? The reason: repeat customers. However, what little data can be gathered suggests that most people don’t convert to long-term customers. Most deal-site shoppers are looking for a “quick fix” for cheap, visit once, and are done.

This is where LevelUp (and it’s rival – Amex) comes in. Here’s how they work:

Levelup LogoStep 1) Consumers who sign up receive a daily deal email much like every other deals site. However, this deal is FREE for the user to use without any expiration date. These deals are often $5-20 off depending on the good/service.
Step 2) Users visit the store and show their LevelUp Card or mobile phone to pay. This digitizes records and can potentially let you capture more information for future marketing.
Step 3) This isn’t really a level, but there are no coupons! Scanning the phone and paying with LevelUp automatically applies a discount to the purchase. Visit that store enough, and the user will progress towards unlocking more credit at that place.

See? It’s a lot simpler, isn’t it? Instead of marking down your product by half, then losing half of that to some ginormous company, LevelUp makes it simple. Offer a low reward to new customers to come in and try your store, and let them “LevelUp” to new and better rewards the more they frequent and the more they spend. On top of that, it’s a way to go green, track your customers more efficiently, and leave the hassle of physical coupons behind! Businesses will gain long-term customers and not be hurt be huge markdowns!

If you’re interested in what group sharing websites have to offer, give us a call and we’ll help you sort through the mess. Even Groupon may be right for some companies (can you say economies of scale?), although I think we can say fairly confidently that LevelUp is the Winner here (we should also mention that Amex has a partnership/competing idea with LevelUp).

Have you or your company thought of doing a group coupon? If you’ve done it, share your experience below. If not, why haven’t you?

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David is an avid social entrepreneur and Boston sports fanatic. He founded Diversified Data Technologies way back in 2009 and stuck around to see it grow. His party quarks include unnecessary dancing and being an overly hospitable host. When looking, he can be found capturing the twitterverse at @DLanphear, being professional on LinkedIn, or bouncing around town with Foursquare.

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