Email Drives Daily Deal Websites

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Daily deal sites love social media, but they live and die by email.

Those that want to live in an intensely competitive market are going to have to get better at delivering tailored, relevant messages to their audiences, email service provider StrongMail argues in a report released this week.

"Email and social really complement each other. In reality, email was the first social media, the original one-to-many medium," said Greg Bettinelli, senior vice president for marketing and product at HauteLook, a division of Nordstrom. Sure, HauteLook would love for recipients to forward the message or post something about it on Facebook or Twitter, but it all starts with "seeding of that message to a lot of people at a specific time."

The timing is particularly important to HauteLook, which operates on a "flash sale" model of limited time offers. Every day at 8 a.m. Pacific time, HauteLook blasts out offers to everyone on its list within a 5-minute window, so that they will all have the same opportunity to act on that offer. HauteLook also wants to get customers in the habit of looking for messages at the same time every day. HauteLook is a StrongMail customer and relies on the service for rapid personalization and high-volume email delivery.

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"We've had a number of daily deal sites coming to us looking for a solution to their needs," Kara Trivunovic, senior director of strategic services at StrongMail. StrongMail's daily deal report is based partly on its experience working with those customers, as well as research on how others in this market are using email.

The report is divided into discussions of the two broad categories of daily deal sites: group buying operations, exemplified by Groupon and LivingSocial, and flash sale sites such as ideeli and HauteLook. While each of these businesses has its own twists on the model, essentially group buying sites are built around the concept of giving consumers access to a deep discount, provided that enough people sign up for the offer--incentivizing members to spread the word in order to pump up the volume. Flash sale sites also offer a deep discount, but here the key parameter is the limited time offer.

"What we found was that some of these sites are doing really great things with their email program to deliver relevant communications in a timely manner, and others aren't," Trivunovic said.

The report concludes that group offer sites could be doing a lot better. Groupon is the leader of the pack, the company that famously, passed on Google's acquisition offer late last year in order to move ahead with plans for an initial public offering. However, Groupon reportedly is delaying the stock offering, partly because of the state of the stock market. Many observers of the industry also see the daily deals market as an overcrowded one that will produce only a handful of survivors.

StrongMail gives Groupon highest marks for the welcome message it sends when someone first signs up. "Not only does Groupon welcome the new subscriber, they also provide the ability to take three mutually beneficial actions: 1) tell your friends about Groupon, 2) provide preference information for the deals you want to see most and 3) the ability to tell Groupon who you would like to see deals from. Including a mechanism within the email for Groupon customers to have a voice makes it a two-way communication. Instead of talking 'at' subscribers, they are establishing rapport and conversation," the report states.

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However, while Groupon asks users for their preferences, it's not clear "whether or not Groupon actually uses this information to improve their offer targeting," according to the report.

In general, the flash sale sites seem to be doing more with personalization and customization of messages, Trivunovic said. Typically, they send the same assortment of offers to all recipients, but the featured offer might be different for a new mother, as opposed to a single young professional. The data driving that personalization can be either preferences recorded in a profile or observed behavior, such as the types of offers that customer has responded to most favorably in the past.

To do that well, you don't want to be too heavy handed, Trivunovic said. "This is where a lot of marketers get it wrong," she said, by making customers feel like they're under surveillance. By making the suggestion a little more subtle, you can deliver offers that come across as a pleasant surprise. "You want them to say, 'Oh, gosh, that's just what I'm looking for,' by creating offers that resonate with the customer, without freaking them out."

Bettinelli said another way HauteLook personalizes messages is by varying the inclusion of 100 different messages it has defined for different stages in the "lifecycle" of a customer. "The messaging will be slightly different for everyone, where if they're early in the life cycle maybe we tell them more about shipping and returns," he said. On the other hand, for longtime members who are already familiar with those policies, the emphasis can be more directly on what's on sale tomorrow, he said. If the system detects you've been responding to messages from your iPhone, he said, it might also slip in a message saying, "Hey, did you know we have an iPhone app?"

Nordstrom paid $270 million to acquire HauteLook in February, but HauteSuite continues to operate as a separate business, not merely a channel for remaindered items from Nordstrom stores. Although flash sales may have started as a way of selling excess inventory, they are increasingly recognized as worthwhile sales channel in their own right, Bettinelli said.

A recent New York Times article supported the idea that flash sales can build long-term brand equity.

While it's true that there a lot of daily deal companies, "there are only a few really good ones, and the really good ones are getting a lot better," Bettinelli said. One of the ways HauteLook will keep getting better is by refining its email strategy, he said. "A thousand days ago, it was just about how big your list was and how many messages do you send. As the space becomes more crowded, customer expectations rise. You need to have a relationship with every member. It isn't just about getting an email every day."

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