Tuesday, November 22, 2011

LivingSocial - Shop, Go, Don't Slow Down

A friend applied for a communications job at LivingSocial recently, one of the daily deal juggernauts like Groupon that are invading cities all over the planet. Like the dot.com and social media booms, people are skeptical but can't help but jump on the bandwagon.

My friend "Katie," who is in her late 40s, submitted her resume and cover letter to LivingSocial in the morning. By mid-afternoon she got a note that said, thanks for applying, you're not what we're looking for, best of luck. That must be some sort of world record.

What impressed me about that note was its speed and that it left no room for further discusssion. In a very simple way they told her we're young, we're hungry and you'll slow us down. The average age at LivingSocial is 31 years-old.

I'm going as fast as I can

This understanding of LivingSocial and the business it operates in was reinforced by Alexandra Solomon, senior director of marketing, who gave a presentation last week to the Marketing Executives Networking Group (MENG) in DC. She spoke fast, rushed through and said a lot about growth (they are now in 21 countries, with 40 million members, and were named one of the top 50 places to work by Washingtonian magazine). Then she was out the door to talk to a company they had just bought on the other side of the planet.

LivingSocial's goal is to become the leader in international retail deals and they are buying companies like crazy overseas. They have a deal of the day, are introducing a gourmet group (for those who don't want to wait on line forever at an obscure ethnic restaurant that is suddenly flooded with patrons), and a variety of last minute, decent percentage off travel, dining, etc. packages.

Living Social Ads - Check out its new campaign.

The business model is strong but quite frankly we've seen it come and go in other recessions. Retailers cut prices, give away freebies and drag traffic into their places. Most, Solomon said, make a little bit of money or break even on the deal. What she did not say is that people have shown up at restaurants with their 50% off coupon, only to discover that they cannot get in - at all that day. Right now there's no cut off or control over usage. That will likely end soon.

Many of the European and Asian services are still branded under their own names, and often have existed for a couple of years already, so they come with followers. Although the ultimate goal is to make the LivingSocial brand prominent on everything - right now that's not an option. Bragging rights to becoming the largest global player in thes market are worth it.

I also don't know if the deals are all that good - so you get 50% off dinner in a restaurant you've never tried, but you end up spending 25% more than you would have anyway. But the bottom line for marketers and retailers is consumers like to feel as though they've gotten a bargain. They brag about it to friends. They become deal of the day junkies. It's harder to compete with that.

Local retailers can probably compete with LivingSocial through better service, deals that pamper rather than are fully based on saving money, and just developing strong repoire with their customers. But that's what they should do anyway, right?

Will the LivingSocial model survive? Probably but it's getting cluttered out there and there will be a lot of shake-out first. Like any new market that's growing faster than it can keep up with, the excitement is high and the value to its various players is all in being part of the game.


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