By Allan Maurer
Chicago-based Groupon, (Nasdaq:GRPN) the daily deal site, got a share price boost Monday after Morgan Stanley upgraded the stock, which is still trading far from its initial public offering price of $20.
Morgan Stanley said Groupon’s 33 percent first-quarter rise in North American revenue came from better user-targeting. Such personalization could help avoid “deal fatigue and boost margins, it said.
Some analysts also cited Groupon’s better repeat merchant rate of 41 percent as a major plus factor.
Bloomspot says look at customer repeat rate
But San Francisco-based Bloomspot, yet another player in the crowded digital deals space that focuses on connecting high end merchants with targeted customers, suggests that’s not the metric that should interest merchants when they choose daily deal partners.
Instead, the firm suggests that customer repeat rates (how many times a customer returns to a merchant after redeeming an offer) – and spending numbers (how much a customer spends above the ticket price of the initial offer) are the important figures.
Huge repeat business numbers
Today, Bloomspot released internal data showing that 72 percent of its customers return to a business after redeeming their offers and the average overspend was $140.
Across verticals, customers spend beyond the price of the promotion. For example, in the fine dining category, customers have spent more than three times above the original price of the certificate, or $150. Beauty and spa offers demonstrate an average of $174 in spend above the offer price.
Bloomspot also boasts a 54 percent merchant repeat rate, with 87 percent of merchants saying they will repeat.
Unusual business model
Bloomspot’s unusual business model takes credit card data at places where it runs an offer and uses it to predict how much a customer will spend on the offer, guaranteeing a certain level of profitability. If the offer misses the guarantee, Bloomspot makes up the difference from its own commission. That’s something of a no-lose deal for the merchant.
“As a company whose employees work on a commission basis, any special we run needs to attract the type of clientele who do not visit an establishment only when they have a massive coupon, but rather use coupons to explore the market and then return to those companies who best serve their needs,” said Brad Drummer, owner of Washington DC’s Nusta Spa.
“Lucky for us, Bloomspot put us in touch with just such a base of amazing customers that purchased many additional services at full price and scheduled their next visit on the spot. One of our customers bought a $70 deal and has been back 11 times. She’s spent almost $1,000 in-store since we ran! I’m glad we chose Bloomspot to represent our brand.”
Bloomspot has raised about $51 million in venture backing, not quite in the same league as Groupon and Living Social, but entirely respectable.
Many daily deal sites bit the dust
For a while it seemed as if a new daily deal site popped up every week, many in niche markets. But smaller players drop out almost as fast as they are created. At the beginning of 2012, Daily Deal Media said that 798 daily deal sites closed up shop in the last six months. The total number of sites globally fell 7.61 percent in that period.
We’ve seen conflicting reports regarding consumer acceptance of daily deals. In September last year, a study from researchers at Rice University and Cornell University showed that the companies are more popular than ever among consumers.
“The key finding is that there is no evidence of waning interest among consumers of daily deal promotions,” said Rice University’s Utpal Dholakia, co-author of “Daily Deal Fatigue or Unabated Enthusiasm?” “In fact, the more deals purchased by an individual, the more enthusiastic they seem to be.”