AmEx Wins!

In professor Pham's Marketing class, we were lucky enough to have the CMO of American Express meet with us, and during that discourse he asked us for Digital Marketing ideas. Specifically, he asked us to for potential engagement strategies for customers. Now, we skip ahead 3 months to Introduction to venturing with Murray low, where we are evaluating several technology companies. When we arrive at the group presenting GroupOn, the inevitable question about competitive insulation arises. Specifically, why doesn't AmEx make daily deals, leveraging the natural advantage they already have with our credit data and existing shops. The answer was "because they are a large company, and large companies suck at innovating." Today, we eat those words, because AmEx has released a new deals platform alongside Facebook.

Initial launch partners include big brands like H&M, Sports Authority, Dunkin' Donuts, Sheraton, Westin, Travelocity and Celebrity Cruises. This is a massive rollout, and I think it's brilliant for AmEx to engage customers on the web, a previous weakness of theirs, and for Facebook to gather even more data about its users. The deal requires that you link your Facebook account to your AmEx, which will naturally be the big questionable privacy point, but if you volunteer this data, the rest is easy sailing. The major problem with many of the daily deal sites is the outreach and training required to use the coupons, but because AmEx has an existing relationship with these shops, they can apply the discount without any additional actions from the shops.

This is the natural outcome of the daily deals fad, it is primarily a marketing tool with questionable financials, but now AmEx can fully own that it is a relationship building tool, rather than a bottom line item. I fully anticipate AmEx becoming the dominant force in online daily deals very soon, and the other credit cards should be following suit before the end of the year.

Groupon Vs Living Social – Their Approach to Advertising

At the end of Q1 2011 Groupon had 83 million total subscribers compared to 26 million for Living Social. At first glance it seems that Groupon and Living Social have the same business strategy but the way each company approaches its audience is vastly different. Both companies spend heavily on advertising but rely on different channels to get their message across.

“LivingSocial concentrates the vast majority (73%) of its display ads on the top five U.S. Web properties, especially Yahoo and MSN. Within those sites, the ads run chiefly in email and news sections. The rest of LivingSocial's ads are scattered around the Web. Groupon takes the opposite track, running only 31% of its ads to the top publishers' site and spreading the bulk (69%) across mid-tier and long-tail sites.”

The reason might lie behind the demographic and geographic make-up of their audience. Geographically, Groupon's user base lies towards the Midwest and Pacific regions, while LivingSocial is stronger in the East. Which makes sense as Groupon is headquartered in Chicago while LivingSocial in Washington, D.C.

Demographically, Groupon users are younger than its rival’s (25% Groupon users are in the age bracket of 18-24 compared to Living Social’s 10%). Also while Living Social users are more gender balanced, Groupon users are primarily female.

Another reason for the difference in choice of advertising channel might lie in the retail categories that the companies focus on. More than half 50% of Groupon's offers are for restaurants, while more than 40% of the LivingSocial's deals are for books and magazines.

It is worth noting that both companies heavily rely on display marketing instead of search marketing (SEM or SEO) due to the nature of their business model which relies heavily on interruption marketing.

At the same time the differing strategies of both companies raise the question as to who is smarter and why? And what is the brand impact of these strategies. Does LivingSocial benefit from being more selective about its ad placement or is it just a matter of targeting its older audience who read more books and magazines more effectively? Is Groupon chasing its younger audience when advertising in niche websites or is the game simply about achieving the lowest customer acquisition cost?

Another thought to ponder in this discussion might be whether these companies intially used these advertising channels because of their target audience or whether their choice of advertising channels has created their unique audience. I guess it is the case of the chicken or the egg…

Source: Online Media Post