But what's in it for the merchant?

Group deals come with a built in Catch 22: What merchants want and what their deal promoting partners want are inherently at cross-purposes.

Both want revenues, of course. With a 50/50 or 60/40 split, their interests are aligned. Not so when it comes to the ownership of the data. 

Most deal providers simply assume that they will own all the data generated by the deal. Merchants are left to come up with their own separate data collection strategy.

At 80% off retail, and with huge numbers of responses packed into a too short time period, most deals don't really make money. The exception, of course is the ideal situation; think of an over-sized auditorium full of empty seats, which, if sold, will generate all incremental dollars.  But how often does that happen in the 220 days a year deals are offered? 

In reality,  the merchant partner is more likely to be a restaurant or salon, or horse back riding experience, with only so many seats and saddles.

What merchants are supposed to be getting is the long term value of that customer, right? In most cases they don't even get the email list they generated, or any other form of built-in data collection.

Yes, they can come up with their own loyalty program once the customer comes in, but the ugly truth is that Groupon, Living Social and the variety of media companies offering deals, keep the email opt-ins and the customer data. Thank you very much.

Why has this burgeoning industry largely ignored the needs of the merchants? Because it can. The brute force of Groupon's e-mail list already tops the circulation of the daily newspaper in four markets of substantial size and trumps merchant objections.

The last small publisher I talked to about group deals insisted that he could win merchants away from Living Social or Groupon by taking a smaller cut of the deal. Well, that might happen - but in highly competitive markets both deal giants are negotiating to match competitive rev/share splits, reducing margins across the board.

A better strategy that protects margins is to incorporate customer loyalty strategies that are baked into the sale. 

Here is our new Merchants Bill of Rights where deals are concerned:

Article 1
Merchants will be provided with a dashboard to control on-going deals, not just the mega-deal that sent their wait staff screaming from the room, ruffled the best customers, and barely broke even. Their dashboard will be able to perform more than one function so that ten dashboards are not needed to analyze marketing required to create a small revenue stream equivalent to one week of sales on a shelf at Walmart.

Article 2
Merchants are entitled to co-own any and all of the data created by their customers who either sign- up to purchase a discounted item or compete to win an item donated from their store, with the exception of charitable donations.

Article 3
Any high traffic promotion such as a group deal will include a customer loyalty program  so that that merchants receive the full benefit of the value they bring to the table through discounting their wares. This loyalty program can include a prize for favoriting, or requirement of a text opt-in, but will be fully and seemlessly integrated into the program.

Sound too extreme? Run this by a merchant and see how logical it really is.

Keep the merchants happy and you will get the deals. Get the best deals and you will get the customers, creating a vicious circle in which everybody wins. 

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