With the “daily deals” craze in full effect, small businesses from all over the globe are rushing to cash-in on this innovative discount platform made popular by Groupon. If you are reading this, you probably know the gist. Consumers are offered products or services at a deeply discounted price (usually 50% or more) through a website. Typically, each deal will only be available for a day or two, and a deal isn’t active until a predetermined number of consumers purchase the discounted deal. This concept has come to be known as “group buying”. If the promotion is successful, the business that had a deal featured, will gain brand awareness, as well as, see a temporary increase in sales volume as a result of the deals sold through the website service. In return, the website service (ex. Groupon) receives a percentage of revenue for deals sold.
Seems like a great idea, right? Everybody wins. Consumers get to know new businesses & save money on purchases. Small businesses generate new customers. The group buying service provider receives a fee for connecting consumers to businesses. Win-Win-Win. Many companies are beginning to realize the potential of Group Buying services and are building their own Groupon-clone websites.
With individual entrepreneurs to big-name companies such as AOL and The New York Times developing services almost identical to Groupon, the marketplace is quickly flooding. Enter LevelUp, a web-based Group Buying service created by Seth Priebatsch CEO of SCVNGR. LevelUp is similar in concept to the Groupon model, but provides services above and beyond, which may prove to be more valuable to small businesses who run promotions through LevelUp.
LevelUp is looking to fulfill a need that was born from the current Group Buying model that Groupon has been so successful using. Groupon is setup as a one and done system. It helps drive a new wave of customers into a small business, but doesn’t help retain them. This is where LevelUp excels. LevelUp users are able to purchase a deeply discounted deal online from XYZ Business similar to the Groupon process. However, after purchasing the first deal from this small business, buyers unlock the ability to purchase the Level 2 deal offered by XYZ Business. Purchase Level 2, and Level 3 is unlocked. As a consumer progresses through the levels, the deals improve. This process gives the small business the ability to make three separate sales, as well as, to engage this new customer 3 times in order to help convert him/her into a repeat customer.
LevelUp Vs. Groupon – LevelUp advantages over the traditional group buying model
Game-Like Buying Process: The concept of unlocking a new level for a customer with each purchase they make creates an exciting, engaging experience. The challenge motivates a customer to visit a business numerous times which helps turn prospects into customers, and customers into repeat customers. Groupon shoppers have been called “one and done” customers, a stigma LevelUp is trying to avoid.
Multiple Incentives: With LevelUp, consumers can receive a deep discount not once, but up to three times from a single business.
Creative Discount “Packages”: Groupon has comic descriptions written for each deal. LevelUp puts their creative effort into designing numerous levels of discounts which work together to entice a consumer to come back. For example, a recent group of discounts featured by LevelUp for a high-end Philadelphia restaurant were themed after romantic relationships. The Level 1 deal was named “First Date” and offered $50 worth of entrees for $25. Level 2 was called “Double Date” and awarded the purchaser $80 worth of entrees for $40. If one made it to Level 3, called “Meet the Parents”, they could buy $120 worth of entrees for $60.
Increased Accessibility for Consumers: LevelUp deals run for seven day periods, as opposed to the shorter buying windows offered by Groupon. This allows more time for consumers to come across each deal, potentially increasing the number of sales.
Zero Percent Revenue-Sharing Requirement For Businesses On Level 1 Sales: As opposed to Groupon’s 50% cut of revenues collected from each sale, LevelUp allows businesses to collect 100% of Level 1 deal sale proceeds. It is not until Level 2 and 3 deals are sold that LevelUp begins taking a cut, which is 25% at both Level 2 and 3. Simply put, unless repeat sales are made, LevelUp gets nothing.
As with any web service of this nature, the initial challenge for LevelUp is in building a substantial following of consumers who would ultimately buy the promoted deals. Currently, their site is testing the waters by offering deals only in Boston and Philadelphia. We feel if LevelUp can clear this hurdle, they will become a viable player in the competitive daily deal market. Given the success small business owners have had using Groupon, LevelUp is definitely worth keeping an eye on. If your small business is able to afford selling deeply discounted products or services as well as handle increased volume, LevelUp may prove to be a great way of gaining new, repeat customers. Small Business get started on LevelUp.