Instant Coupons Are Changing Discounts For Small Businesses

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LivingSocial, the largest daily deal site behind Groupon, has rolled out an interesting way to purchase your next burrito, yoga class, or massage appointment. It’s called LivingSocial Instant, modeled after Groupon’s Now coupons, which are served to mobile users for short periods of time. If you’re walking by an ice cream shop, for example, a LivingSocial Instant coupon could ping your mobile phone, via an app, that you have an hour to get 50 percent off a banana split.

For the time being, it seems LivingSocial is using its new Instant deals to unload deals from its regular service. This is bound to change however, as you can bet that both LivingSocial and Groupon understand that the instant deal is the future of mass coupons. Why?

First, an instant deal creates an impulse-buy environment for the potential buyer. If you’re walking by a café and see an instant deal for a latte on your smartphone, you’re much more likely to buy it than if the same coupon was emailed to you early in the morning. In this sense, the instant deal changes what works or doesn't work in the mass coupon world. So, while Mexican food and massages worked well for LivingSocial’s regular deals, something completely different will work for LivingSocial Instant.

Instant Coupon Changes Discounts for Small Businesses
The LivingSocial mobile app shows Instant deals.
Second, instant deal services offer much more control for the participating businesses. The traditional coupon model requires businesses to sign on and offer a given deal for an extended period of time--usually months. This gives the business little control over when coupon users will decide to cash in. If you’re a restaurant with packed weekends but slow weekdays, you can’t offer deals just for those slow days. With both LivingSocial Instant and Groupon Now, however, you’ll be able to.

I’ve written before about how mass coupon services aren’t a good deal for small business owners. My argument then was that small business owners don’t have control over when users will redeem their coupons--and that many, if not most users, simply use the coupon without purchasing anything additional at full price, or returning to do so at a later date.

With LivingSocial Instant and Groupon Now, business owners not only get much needed control over when users can redeem coupons, but there’s also a higher chance they’ll attract local users, who are more likely to return at a later date. This is because those instant deals are or will be served to users in the immediate vicinity of the business, where they probably live, work or play, and where they're more likely to return.

We’ll have to wait and see how the percentage splits shake out for instant coupon deals, but the new model could be just what small businesses need to begin getting their share of the pie in the daily deal world.

Meanwhile, LivingSocial has released its most popular categories from the second quarter. In its Food/Dining category, Mexican was the most popular; in the Fitness category, it was yoga; and for Beauty, it was massages.

Ilie Mitaru is a culture and business journalist and an occasional entrepreneur. You can follow him on Twitter at@iliemit.

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