It’s hard to escape the flood of daily deal offers in pop-up ads and your e-mail in-box. You can’t swing a mouse without hitting a daily deal from Groupon, LivingSocial, or one of hundreds of other sites. Millions of consumers see these deals every day, and they don’t pay a dime unless they decide to buy the offer. So why would anyone pay $30 a year for access to such deals?
Groupon’s theory is that there are consumers who want to be treated special, who don’t want to be lumped in with the millions, and who are willing to pay for it. A new Groupon VIP service is currently being tested in a handful of markets, including Tampa, Fla., and Hampton Roads, Va. Select Groupon subscribers in these communities have received a message offering the service for free for three months. After that, it’ll cost $29.99 per year.
What do you get for the money? There are three key components to Groupon VIP membership:
• Early access to deals: VIP members can see (and buy) deals 12 hours before the non-VIP (unimportant?) masses do.
• Access to a “Deal Vault”: VIP members will be able to buy certain deals even after they’re sold out, and after the normal purchase-by date has expired.
• Easy refunds: VIP members can trade in unused daily deals for Groupon Bucks (credits for other deals) at any time, even after the deal’s use-by date has expired.
That’s it. Obviously, this is a product that would only appeal to hardcore Groupon users. In the Chicago Tribune, the company’s spokesperson described Groupon VIP as “a must-have for Groupon addicts.”
So if you’re rarely impressed enough with daily deals to actually purchase them, paying to become a VIP is just silly.
Will daily deal diehards find it worthwhile to pay? We’ll have to see how the test goes. LivingSocial also has a VIP-type product in the beta stage. Called LivingSocial Plus, it launched in late 2011 and costs a lot more than Groupon VIP: $20 a month ($240 per year), compared to Groupon’s $30 annually.
But customers get a lot more with LivingSocial Plus, which is more of a prepaid bonus than a membership fee. With each monthly payment of $20, Plus subscribers get a $25 credit that can be applied to any LivingSocial deal that month. To help sell members on the value of Plus, LivingSocial has been showing the cost of deals after the credit has been applied—any deal would automatically be $5 cheaper by signing up for Plus.
While these programs obviously want to raise revenues via monthly fees, an even bigger goal is to get shoppers more into the habit of visiting their sites. As best demonstrated by Amazon Prime, Amazon’s $79-per-year service that includes unlimited video streaming and free two-day shipping, when customers are paying a monthly or annual fee, they tend to want to make the most use of it. In Amazon’s case, that means buying tons of stuff at Amazon.com.
As for daily deals, subscribers who pay a special membership fee will want to get the most for their money—and that’ll require them to buy plenty of deals. Creating a loyal army of shoppers who buy deals early and often is the primary goal, and any monthly or annual fees are bonuses.