What’s the Deal with LivingSocial? – Case Solution

Another benefit passed onto consumers from LS is that they go for a quality over quantity approach to delivering deals to consumers’ inboxes, unlike Groupon, as LS relies heavily on geographic location and personal profiles and preferences to generate the most relevant and likely-to-purchased deals possible.

Experiences, like some of those shown in Exhibit 1, also differentiate LS. However, while LS does provide many differentiating benefits, there are some flaws for customers.

First, as with any deal business, the risk of getting a discounted service to go with the discounted price is real; customers might not get preferential treatment since they aren’t fully paying customers.

Also, LS’s merchants’ portfolio might not appeal to all customers, so subscribers might be trapped into getting deals from only a select number of brands while missing out on others they might like more.

Finally, customers might get too many offers to sort through as the daily deals market gets flooded, so it would be harder for LS to stand out.

What are the advantages and disadvantages of LivingSocial for merchants?

Another main component of LS is adding value to merchants’ current business model and attracting new customers. LS is very good at providing a comprehensive and targeted ad campaign for merchants that require no down payments, so merchants would only have to pay LS back after pulling in revenue from their enhanced promotion.

Businesses can also acquire customers easily this way, as these daily deal companies can have greater reach, more popularity, and resources; for plenty of small companies, LS can make up their marketing strategy.

Compared to the main competitor (Groupon), LS’s effectiveness and business model allows them to generate more revenue per coupon ($24k to $13k).

Additionally, LS was better catering to the 34 and older crowd, health and fitness services, and those on the East Coast, which can be either a pro or con depending on one’s own business needs (Exhibits 4, 5, 6).

Another drawback for merchants is that as consumers use the deals more, they will associate their purchase with the discount and not with the actual company, which will reduce their repeat purchase probability and won’t help the business much.

Current customers would also be cannibalized as the LS deal would give them even more savings for a product they would’ve bought anyway.

LS does not have the same social lift that Groupon does, as according to Figures 1 and 2, not only is Groupon consistently getting more mentions, but they are receiving greater strength and reach scores, too. Merchants would likely be willing to pay more to get greater exposure and viral marketing, which Groupon seems to do a little better.

Finally, in 2013, LS was hacked and had over 50 million users’ passwords, preferences, and personal info compromised; this security breach could be a detractor from both merchants and users using LS as they wouldn’t want to be put in a risky situation like what LS faced (Figure 3).

Can you think of the next “killer” product or service that LivingSocial could offer that would benefit both consumers and merchants and serve as a point of differentiation from the competitors?

I think the next “killer” point of differentiation for LivingSocial would be through the application of virtual reality (VR). Though the technology is in its infancy right now, I think it is something that will integrate itself into many people’s lives and become an important customer experience to be tapped into.

For example, and excuse my lack of knowledge on the topic. Still, if someone uses a VR application linked with LS, they could be walking down the street and immediately get pinged with a deal if they walked past a store and looked at a certain item for an extended time.

While VR tech is likely targeted at the more affluent, partnering with LS could increase the onboarding of both services, all while benefitting the merchants receiving the new customers. The customers would get deals for products they enjoy and can afford.

Though this tech is probably not coming to the general public in the future, it could be a creative and unique use that would add a new dimension (if not literally) to the customer experience and their business model. As one that prides itself on staying edgy, innovative, and smart, virtual reality ties into all three of those.

Appendix:

Figure 1

Figure 2

Figure 3

Reference:

Article: https://money.cnn.com/2013/04/26/technology/security/livingsocial-hack/