Two Birds, One Stone

Rumours are floating around today that Groupon has been bought by Google pegging a valuation around $2.5B. Not bad for a company that didn’t exist a few years ago. Groupon is interesting, in that it presents ridiculous deals that people and companies are clamouring to get involved with. I have yet to buy a Groupon deal (mainly because they aren’t yet available in my small town, and I’m not in Vancouver enough to hit that scene). I like the idea though. My problem with it from a business point of view is how can I use Groupon to encourage new customers while keeping existing customers coming. What’s to stop my best customers from buying the Groupons and cutting into my margins? Some reports indicate some “not so hot” satisfaction among participating businesses. How can I make deals only for new customers? Enter, AppSumo.com. Now AppSumo doesn’t compete with Groupon and doesn’t even serve the same audience. It’s a deal site for web applications geared more towards startups and web users looking for deals on web services that they want to start using. Here’s why AppSumo makes sense:

• You can limit usage to new users only. Since it’s the web and we can control who uses our software, we can make the offers legit only for new users (or users upgrading to higher tiers). This doesn’t cut into margins on current customers.
• It’s a targeted audience. These are typically business apps for business users. We aren’t trying to sell steaks and jewelry and massages day after day.
• It’s habit forming. Web apps are usually structured on a pay-per-use or subscription system. You don’t just buy it once and use it forever. So the deal is like the old adage “the first one is free”, but then you are hooked (for one reason or another) and you now represent a recurring revenue stream with very little overhead. It also usually means that you are using a higher tier of the app with better/more features that you will become accustomed to and less likely to cancel.

For me, this has meant hundreds of dollars in savings and gives me a much more useful “try-before-you-buy” experience than the usual 30-day free trial or free account. Now, I don’t know how this could be applied to the offline world easily in a site like Groupon, but online AppSumo is killing it. Disclaimer: The link to AppSumo is a referral link giving me $10 credit if you buy one of their deals. This doesn’t affect my opinion of them.