Do Daily Deal Providers Understand Marketing?

A couple of months ago I wrote a post called Stop Blaming Groupon. In that post we talked about how it's not enough to bring in new customers...you have to have a plan and strategy to retain them as well.   I thought that this must be on the radar of Groupon and the other daily deal sites as a huge opportunity.

So it surprised me this morning when I read an article in IBD of an interview with LivingSocial CEO Tim O'Shaughnessy with the title: LivingSocial Aim: Full Marketing Platform.  Pretty exciting title for me because I thought "these guys are finally getting it".   That was until I read this paragraph:

"Ultimately, whether you're using a voucher from LivingSocial or you're going to some local business because your friend told you to, whether you go back is going to be predominantly predicated on whether you enjoyed your time there. Did you like the food or whatever? Did you like this product or service?

So fundamentally, that is the biggest part. We can bring the customers to you, but it's on the business to provide a good service so that people want to come back. That's a core part of the role of our merchant partners.

The reliance is on them there, but I also think we're consistently trying to give tips to (our) customers, telling them who their customers are, where they're coming from, how much they're spending — all those types of things."

Is it just me or does this represent a fundamental lack of understanding with regard to retention marketing?  Perhaps a more positive spin might be: Does this represent a tremendous opportunity for some entrepreneur to build a business going in and developing a program for daily deal retention?

If the Daily Deal folks don't want this business then why not you?  Most businesses lose money on a new customer in the first transaction.   I've talked before about the dry-cleaning model that says you need three visits to start making money on a new customer.   (especially with a coupon).   In the SaaS business you usually don't make money on a new customer until into the second year.  (see Constant Contacts S1)

All companies have acquisition costs.  All advertising must be spread over the number of new customers in a given period...let's say a month.   Yellow Pages, Groupon, Newspaper, Signs, Social, TV....whatever.  Companies must take their total Marketing budget and divide it by the number of new customers.   Then they have to look at the total dollars spent by those new customers minus the cost of service.  

Do that math and you will see that for almost every business, new customers are money losers if they don't come back.  

This is where you need a retention strategy and to me it seems that this is a great business opportunity for the daily deal providers.   Like every other business, they invest a lot in building a relationship with that small business...do they then just "hope" the experience is good and that customer will reorder?  

Is there not an AMAZING opportunity to work with those local businesses on retention campaigns?