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With its stock continually reaching new lows, Groupon is going to greater heights to find customers. The daily-deals site is now advertising deals to customers via Gogo’s in-flight wireless service. (Disclosure: I have puts and several wagers relating to Groupon.)
One of my long-time criticisms of Groupon has been that it delivers unqualified customers. Customers who are willing to drive 25 miles to save 50% are unlikely to return at full price, resulting in a loss for the business. The Gogo deal just makes this problem worse. (LivingSocial also advertises its deals on Gogo.)
The Gogo move reflects the two-sides of Groupon: On the one hand, it tells merchants that they should be extremely aggressive with low pricing in their deals because these are valuable customers who will come back often. On the other hand, it sells the deal to anyone who will buy it, without doing any sort of qualification.
The screenshot above shows what I saw on my flight: Ads from Groupon, Gilt, StubHub, and OpenTable.
“What merchant is going to turn down an incremental customer, even if they’re from out of town?,” Groupon spokeswoman Julie Mossler said. “Customers spend beyond the value of the Groupon when they come in. There’s value there. This has no effect on a merchant’s ability to attract local customers — rather, it’s a bonus for them.”
One of the deals advertised on my flight was $29 for a chiropractic and massage package. (Listed at a $600 value.) That’s exactly the kind of deal that’s designed for local customers who will become repeat visitors. It includes a 50-minute massage. There’s no way I would sell that for $29 to an out-of-towner.
There’s nothing wrong with advertising services to visitors, but price levels need to be higher in order to make up for the fact that they are much less likely to become repeat visitors.
The same Gogo screen shows other ads that make a lot of sense to visitors — and the businesses doing the advertising.
StubHub shows events that are scheduled for the next few days. Not only is this a great marketing opportunity, it’s also great content that can help to complete a trip. These tickets are sold at market rates; no discount required.
The OpenTable ad allows people to book restaurant reservations, again at full price. That ad isn’t the most compelling — I would prefer that it have a list of top restaurants that are available tonight or other contextual information instead of a generic banner.
But that’s still better than what Groupon is doing. For the sake of its merchants, Groupon should ground its ad campaign.