The "holy grail" of advertising is to show direct results to a consumer sale. Groupon may have figured it out. More about that in a minute. Advertisers complain "50% of advertising is a waste, we just don't know which 50%". Making a direct connection between an ad or offer and a specific sale is nearly impossible. TV, radio, and print advertising struggle to show correlation between advertising and improved sales, and have no way to actually prove it, or connect it to a direct sale.
Cost per click (CPC) search ads changed everything - The Internet made online advertising easy. Search ads made it effective by showing a direct connection between a consumer clicking on an ad, visiting the web site, and purchasing the product or service. Search ads are a huge billion dollar business because they can make this direct connection better than any other form of advertising. But, this only works well for online sales. What about the billions or trillions in sales that happen offline in the traditional retail store?
Groupon connects online marketing to offline sales - This simple innovation, the holy grail of advertising, has propelled Groupon into a billion dollar company in just 2 years. The Groupon daily deal delivered online through email, paid for in advance by the consumer, and redeemed at the point of sale in the store, elegantly closes the loop between online advertising and offline sales. Awesome! But, can retailers afford 50% off deals? Do they really result in long term customer loyalty and increased sales?
Grocery Groupon uses loyalty cards to track post sale behavior. Wow! This solves several problems. Groupon already makes the connection between online marketing and offline sales. But now, with loyalty cards, advertisers can track the customer buying behavior beyond the ad or offer, to see if it really does result in additional sales.
How does Grocery Groupon work? It works like regular Groupon but with a special twist, loyalty cards. Most grocery stores already have loyalty or rewards cards. When a consumer buys a Grocery Groupon they enter their loyalty card number. Rather than get a Groupon certificate, the deal is automatically loaded onto their loyalty card. They simply scan their loyalty card at checkout and the item is already paid for.
Big Y, a grocery store chain in Massachusetts, is the first to use Grocery Groupon. Customers can buy a $39.99 seafood grill pack with lobster tails, clams, mussels and other seafood for $24, a discount of 40%.
Groupon is working with HaloEffect for marketing and Incentive Targeting for loyalty analytics for the Massachusetts pilot project. “Consumers in the US spend over $550 billion a year on groceries, and CPG companies devote $35 billion annually to marketing and promotion,” said Tom Schneider, President of HaloEffect, in a press statement. “We see this partnership having the potential to revolutionize the grocery marketing landscape.”
Ben Sprecher, founder and VP-marketing at Incentive Targeting, said using loyalty cards solves lots of problems around coupon fraud, and allows the advertiser to see the longer term results of the ad campaign.
If Grocery Groupon works it could be a billion dollar bonanza for Groupon. If it doesn't, the whole concept of 50% off deals to attract new customers is exposed as a myth, and Groupon fails. A billion dollar gamble.
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