Could Credit Card Companies be Groupon Killers?

by Odysseas Papadimitriou on July 22, 2011

credit card companies grouponConsumers have shown an obvious affinity for Groupon and its hundreds of copycats, but lost amidst their buzz is the notion that daily deals as we currently know them might not be the end-game for targeted local consumer marketing. The recent announcement of a partnership between American Express and Facebook to create “Link, Like, Love,” a deal-driven spending platform which takes advantage of the credit card company’s extensive customer base and purchase tracking capabilities as well as the social media giant’s unique reach into the lives of consumers, highlights the potential credit card companies have to change the game significantly. But, in the end, do credit card companies really have what it takes to be Groupon killers?

On Tuesday, American Express and Facebook launched Link, Like, Love and immediately became a serious contender to popular daily deal providers like Groupon and Living Social. The joint partnership allows consumers to link their American Express credit cards to their Facebook accounts and immediately access a virtual treasure trove of deals from leading national retailers and travel providers, including H&M, Dunkin’ Donuts, Sports Authority, Sheraton, Westin, Celebrity Cruises and Travelocity. Small businesses can also load their own deals through the service’s self-serve feature. Consumers simply select deals to load onto their Amex accounts, purchase the goods or services advertised, and automatically receive a statement credit.

So, what will distinguish the Amex/Facebook joint venture and its own inevitable copycats from the daily deals to which we’ve recently become accustomed?

Strategic consumer targeting: Daily deals are only beneficial to merchants if they attract the business of new customers; otherwise, already loyal consumers are simply paying less for goods they would have purchased regardless. While daily deals in their current form are generally incapable of targeting consumers based on their spending habits and providing an incentive for them to change the stores at which they currently shop, credit card companies would not have such a problem.

For example, your credit card company could easily analyze your purchase patterns, discover that you get coffee at Starbucks daily, and alert you to a coupon for Caribou Coffee. Caribou might thereby get a new convert and would begin providing its deals through the credit card company rather than an organization like Groupon.

A simplified redemption process: Consumers won’t have to carry around coupons under the Amex/Facebook system, and merchants will need no special training on redemption protocols. Deals are redeemed by making a standard credit card purchase and later receiving a corresponding statement credit.

Enhanced tracking of spending habits: One of the biggest obstacles faced by daily deal providers like Groupon is tracking how the deals impact consumer spending. Sure, you can figure out how many consumers take advantage of a particular deal, but you can’t determine whether or not they would have made such purchases anyway. More importantly, it’s impossible to track how the deal affects their future spending habits. Unless, of course, you’re American Express and you issue the credit cards and process the transactions they’re used to make.

Fraud reduction: The idea of a counterfeit coupon or a customer buying the same deal multiple times becomes obsolete when you bring credit card companies into the mix.

Seamless integration with loyalty programs: Not only can the Amex/Facebook program be used for the redemption of one-off deals, but it can also reward continued customer loyalty by providing additional discounts after a certain number of purchases made at a particular store, for example.

Credit card companies’ customer bases: According to Card Hub statistics, the top 5 credit card issuers control 62% of the market, each issuer has tens of millions of customers that interact with their cards on a daily basis, and they’re all household names. Merchants would certainly covet such massive customer bases.

Could anything prevent the success of this re-imagined daily deal platform?

Bureaucracy: Large corporations like American Express often find it difficult to quickly adapt and innovate. The very size, sophistication and power that serve as the driving forces in their entre into the daily deal space could very well therefore be their downfall.

An inability to facilitate product-specific deals: Imagine that a wine store wants to offer a daily deal for domestic wines. Such a deal might be feasible if offered through a traditional Coupon/Groupon, but it’s currently not possible for a credit card company to know the types of products included in a given purchase.

Conclusion

Ultimately, it appears as if companies like Groupon have their hands full. Their entire business is built upon the involvement of merchants, and once merchants realize that credit card companies can both help them better target deals in a way that garners new customers and analyze how these deals impact future consumer spending, they will gravitate en masse away from traditional daily deal providers. Credit card companies simply add a hard-to-match level of sophistication to the process, which allows businesses to easily determine whether or not daily deals make them any money. As a result, it certainly appears that the launch of the Amex/Facebook platform is a bad omen for daily deal providers.

Discussion

Uni Bul
I love the way card issuers are using social media these days. They are all looking for ways to give us incentives to use their cards and I have nothing against that. I understand that there is the risk of getting people who lack self-restraint to overspend by making card use more attractive, but that is always a possibility and not a good enough reason to interfere.
April 2 at 22:56 pm
Jackie Lambert
Interesting.......
November 7 at 18:24 pm
Amy winehouse
Amex go to rehab
July 23 at 20:35 pm
amy Wynehouse
Nice blog !
July 23 at 19:10 pm

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