Daily Deal Sites Push Premium Memberships

Are the new membership programs worth the money?

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As consumers tightened their purse strings during the recession, daily deal sites like Groupon.com and LivingSocial.com connected these budget-conscious consumers with deals at restaurants, spas, and other businesses. Market research company IBISWorld estimates that the daily deal industry's revenue could rise to nearly $2 billion this year. But as more sites enter the marketplace and consumers cope with voucher overload, these companies need new strategies to keep customers coming back.

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"Everyone is running a daily deal now," says Craig Agranoff, co-founder of interactive agency Gripd.com and author of several books on social media. "There's only so many times I need to have my varicose veins removed or try out that new lobster place, so companies are wondering, 'how are we going to keep retention?'"

Perhaps that's why several daily deals sites have expanded their business models to include premium loyalty programs. For instance, LivingSocial launched LivingSocial Plus in November, Groupon is testing Groupon VIP in several markets, and Saveology recently introduced Saveology Elite.

Here's an overview of what these programs offer:

• LivingSocial Plus: According to Brendan P. Lewis, director of corporate communications at LivingSocial, this monthly membership program is available in all of LivingSocial's markets for $20 a month and includes $25 in LivingSocial Deal Bucks, which can be applied to any deal that month (Deal Bucks do not roll over.) The program also offers a spot on the priority wait list for sold-out deals and early access to certain offers. For instance, LivingSocial recently offered tickets to a concert at its new event space, 918 F Street in Washington, D.C., and about a third of tickets sold to LivingSocial Plus members before they went on sale to the regular email subscribers.

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• Groupon VIP: Groupon recently offered a free three-month trial of Groupon VIP to certain subscribers in Chicago, Cleveland, Columbus, Ohio, Minneapolis, and Orange County, Calif. The program costs $29.99 per year after the trial and includes early access to deals, anytime exchanges of deals purchased as a member of the program for Groupon Bucks (credits toward the purchase of future Groupons), and access to Groupon's Deal Vault of closed and sold-out deals. Groupon spokesperson Nicholas Halliwell says the company has not announced when Groupon VIP will be available in other cities, but there is a wait list for consumers who'd like to be notified when it's available in their area.

• Saveology Elite: For $10 a month, Saveology customers can join Saveology Elite, which includes $15 Saveology dollars per month and a subscription to MyTechHelp's Gold Plus Plan. Up to $10 in unused Saveology Elite Dollars can roll over for up to a year, according to a company press release.

Are these membership programs worth the money? That depends on how many daily deals you typically buy and whether you shop regularly at one of the aforementioned sites or tend to be site-agnostic, shopping wherever there's a deal you want.

Peter Krasilovsky, vice president at the Chantilly, Va.-based media research firm BIA/Kelsey, compares these new loyalty programs to frequent flyer programs. "It encourages you to use one product when there are many programs out there," he says.

The average daily deal consumer actually buys only four deals per year, according to Krasilovsky, so unless you're a die-hard deal-seeker with a strong loyalty, you may be better off just buying the deals that catch your eye instead of paying extra for a loyalty program. Getting an even deeper discount through Saveology Elite Dollars or LivingSocial Deal Bucks may be enticing, but most of that money does not roll over from month to month.

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And as Agranoff points out, many of the merchants who offer discounts through daily deal sites work with multiple sites, so it's likely that a sold-out deal may show up elsewhere in a few weeks or months if you're willing to wait. With so many new deals filling up consumers' email boxes on a daily basis, the ability to shop sold-out deals may not serve much of a need.