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Marketing & Branding: Pride Goeth: I’m Living Social (For Now)

Coupons? Are you kidding me?

I’d always hated the things, so I never used them. For anything.  Even in my sofa coins and generic frank ‘n bean days, I couldn’t do it. I’d rather go hungry (and Lord knows I did) than risk being judged as “cheap” by some anonymous cashier.  A nosy neighbor seeing me use a coupon to save a quarter on dental floss? Imagine the horror. I carry 20 percent off Macy’s coupons in my wallet knowing full well I lack the will to use them.

Enter the game changers. As we’ve all seen or experienced lately, the coupon concept’s been violently turned on its head for the better, and I’m surprised to admit that my vanity-shrouded head has turned right along with it. That I’ve somehow become an overnight coupon enthusiast has nothing to do with my financial situation, and everything to do with simple, brilliant marketing.

About six months ago, a friend tipped me off to Living Social, one of the top new online coupon sites that have grabbed screaming headlines around the world.  He’d actually just been hired there, and, based solely on his contagious enthusiasm, I promised I’d check out their website. Uh oh.  I was surprised to find myself instantly intrigued. Even more surprised when I signed up and, in no time at all, bought (as in paid for!) dozens of deals. And I mean dozens. Restaurants. Car washes. Pizza joints. Magazine subscriptions. There’s a refrigerator magnet gasping under the weight of all the coupons I’ve bought. And I use every one.

How’d they do that?  Their deals, sent to me each morning, all presented with witty, hipster-ish copy, are often just too good to ignore. Saving 50 percent at a new restaurant I’d been eye-balling?  Where I can use a coupon as payment with no stigma? Where I don’t have to say, “I’m using a coupon,” before ordering?  Where I see other people — who don’t look like your mother — using coupons too? Sold.  A ten dollar oil change?

Done.

Such is the simple appeal of a brilliant concept.

And brilliant it is. A business seeking new customers agrees to issue a coupon at very favorable terms to you, the Living Social subscriber (membership is free). If you want the deal — say $10 for $20 worth of pizza  — just accept it, and you’re done. One click. You’ve just paid Living Social directly. The next day, the coupon arrives in your inbox. You visit that business — which hopefully impresses you enough to return  — and use your coupon as payment. The business then remits the coupon to Living Social for reimbursement. Cool.  And there’s this: If you refer three new customers to the daily deal, your deal is free. What a doubly cool and diabolically smart to build a base. Everybody wins.

But for how long? As cash-rich Living Social and its larger competitor Groupon are rocking, and as industry consolidation through acquisitions of smaller copycats has brought the two giants the lion’s share of the online couponing business with blinding speed, Wall Street’s been abuzz with talk of IPOs and 1990’s-era multi-billion-dollar valuations. Which also means doubters and naysayers are having their day and asking tough questions:  Will Google and Amazon take over the market? Are Living Social and Groupon sustainable concerns or one-hit wonders? Will their client acquisition costs spike as the new industry matures and dam up their spectacular cash flows?  Has all of the low-hanging, high margin fruit already been picked, leaving only smaller potential clients lacking broad consumer appeal  (and I’ve got to admit, I’m starting to see some of that)?

Beats me.  But this week I’m going to be visiting Living Social in their beautiful headquarters and speaking to some of their marketing folks (and maybe playing some ping-pong).  So I’m anxious to hear what they think about all of this.  For now, here’s where I weigh in:  No matter the industry, I always put my money on the players with the best leadership and the most passion, and Living Social’s got passion in spades. The challenge for their leadership will be feeding it. And spreading it.  And running faster than everyone else. And keeping me interested. That, friends, ain’t gonna be easy.

Meanwhile, I feel like chicken tonight. Half off.