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View transcript

The canny shopper is alive and kicking.

The canny shopper is alive and kicking

Twelve years ago, an article appeared in The Seattle Times under the heading 'Is frugality dead?' The piece, by Kathleen O'Brien, argued that 'the coupon-clipping, sale-seeking, thrift-store-shopping American is rapidly becoming an endangered species'. A robust economy, argued O'Brien, was making 'grandma's and grandpa's thrifty ways seem pointless and antiquated - a charming artefact'.

Fast-forward to 2011, and a company that could be the fastest-growing of all time is making its money...through coupons.

In the March 2011 issue of Bloomberg Businessweek, Stone and MacMillan explain that online couponing company Groupon sends deal-of-the-day e-mails to more than 70 million subscribers around the world. The e-mails promote discounts offered by local retailers 'on everything from meals to massages'. Customers pay, for example, $50 for a $100 coupon for sky-diving lessons. Groupon then splits the money with the merchant, taking up to half the amount paid.

The business is set to generate up to $4 billion in revenue this year, compared with $750 million in 2010.

The problem with the business model, say the authors, is that it is too easy to copy. The technology involved is not complicated. Imitators simply need a group of salespeople to cold-call merchants who might be interested in taking part. Groupon has almost 6,000 such employees and sends out more than 900 deals each day in 550 markets.

In an attempt to build something that is more difficult to replicate, Stone and MacMillan report that the company has introduced Groupon Now, with buttons for 'I'm hungry' and 'I'm bored'. The 'hungry' button gives access to deals from near-by restaurants offering discounts at specific times when they know that they will have empty tables. The 'bored' button links to, for example, a beauty parlour seeking someone to take up the appointment of a client who has cancelled.

Groupon Now is more technically advanced than the daily deals and, say the authors, the company is 'filing a patent around its method of serving up deals based on people's location and the time of day'. It is also seeking to patent its deal-of-the-day service. But potential competitors are circling for a share of the action.

One, for example, is Bluetooth proximity marketing - the localized wireless distribution of advertising content associated with a particular place. The process, described by Cockrill, Goode & White in Volume 51, Issue 1 of the Journal of Advertising Research, involves setting up Bluetooth 'broadcasting' equipment at a particular location and then sending information which can be text, images, audio or video - and so much more than simply coupons - to Bluetooth-enabled devices within range of the broadcast server.

The technology required to make this system work is quite complicated. For best results, Bluetooth must be able automatically to recognize phone models and deliver the proper content automatically. But on the face of it, Bluetooth proximity marketing would seem to offer more possibilities for fun and excitement than a purely coupon-based system.

One thing is certain; whether coupon-based or not, the market for promotions to shoppers on the move seems set to grow and grow. The canny shopper is unlikely to disappear from the high street any time soon.